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Franchises When utilities and other industries use city property to distribute their services, cities are permitted by law to col- lect rental fees, also known as 'franchise' fees, for the use of public property. Franchise fees are calculated by various methods, depending on industry type. Permits and Fees Cities may collect fees for issuing permits for building construction, environmental regulation, and for other services. Because cities incur costs to regulate in these areas, the permit fees must be tied to the cost of provid- ing the service. Court Fines A city that operates a municipal court may impose fines for violations of traffic laws and city ordinances. Maximum fines typically range from $200 for traffic vio- lations, up to $2,000 for city ordinance violations relating to health and safety. Much of a city's fine revenue offsets the costs of law enforcement and operation of the munic- ipal court system. Interest Earnings When a city invests its funds, it must closely follow the mandates of the Public Funds Investment Act. Because of the twin concerns of safety and liquidity, investment income is a relatively small source of city revenue. Transfers from Other Funds Many cities operate utilities and other optional services that generate substantial gross revenues. By law, the fees for such services must closely offset the cost of pro- viding the service. In addition to the cost factor, cities are permitted to retain a reasonable "return" which can then be transferred to the general fund. This return amounts to less than six percent of overall city revenue. Other Sources City revenue can take various other forms, including user fees for some services, amusement taxes, and hotel occupancy taxes. The Bottom Line The state could put municipal revenue at risk in at least two ways. First, the state could increasingly look to cities for revenue to fund state programs. When a state provides direct financial assistance to its cities, such trading of revenue might be work- able. Texas is not such a state. Texas cities receive virtually no direct funding from the state, and cannot afford to fund the state's obligations. Second, the state could erode the statutory authori- ty under which cities raise their own revenue. While cities are indeed subservient to the state, city officials hope that the respectful nature of the fiscal relationship between Texas cities and the state will continue for years to come. For More Information Contact TEXAS MUNICIPAL LEAGUE Texas Municipal League 1821 Rutherford Lane, Suite 400 Austin, TX 78754 512-231-7400 (phone) 512-231-7490 (fax) www.tml.org Section 305.027, Government Code, requires legislative adverfising to disck~e certain infor- mation, A persoe who kne~ngly enters into a contract ~ other agreement to print, publish, or broadcast legislative advertising that does no{ contain lhe tnformatio~ reguimd under that sec- eon commits an offense that is a Class A miademeano~. Mi** Sturzl represents the member cities of the Texas Municipal League. His address is 1821 Rutherford Lane, Suite 400, Austin, Texas 78754-5128. Januaf-/2004.