04-23-2003 Council Agenda - Laserfiche WebLink

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3. A sunset clause that will require the fee be evaluated/reconsidered by the city every three or five years. 4. Relative equality in application of franchise fee to various customer types to ensure on group does not bear a disproportionate burden. (They don't want commercial accounts to become overburdened and make our area less competitive from an economic development standpoint. • A 2.5% franchise fee on electric service would generate $134,500 annually. • A 2.5% franchise fee on gas service would generate $95,100 annually. ▪ Xcel needs the City to tell them how much we are attempting to raise in order to provide examples of structuring the fee. • We asked if they had the ability to provide an exemption for low- income customers. Ms. Jurek informed me that Xcel's preference is to not build too many exemptions into this process due to the costs associated with programming. A key question we must answer if we are to attempt to analyze a fee structure is: "How much money do we need to raise on an annual basis ?" Attachment G is an updated projection of the State's budget deficit impact on our General Fund. (Please note that it has improved since our last discussion due to the discovery of additional State dollars associated with market value reductions in multiple family properties. We received an additional $67,997 at the end of 2002 that was unknown at the time of the budget preparation process. It appears this amount will be similar in 2003 and beyond subject to the caveat that the money is coming from the State of Minnesota! We have also update the 2004 projection to reflect the projected increase in the Sheriff's contract in addition to lowering the inflation assumption to 3.0 %.) At 2005, we will be short $approximately 181,000 after allowing for inflation. Other factors that could impact the amount we need are: A. Impact beyond 2005 if deficit still exists. Based on inflation alone, this could add another 90,000 in 2006. B. If we turnover our water system to St. Paul, we will have to ensure we cover approximately $225,000 in costs that will continue. We can surcharge the St. Paul water rates to offset the bulk of this amount. (A 30% surcharge will generate about $210,000 and still yield a reduction in water costs to our residents — See Attachment H.) Our negotiations may also generate some savings we have not accounted for in this calculation. We could surcharge a higher amount, but we create the problem of our water costs not being competitive. Furthermore, by lowering the water rates, especially to lower volume users due to the elimination of the fixed, quarterly charge, we help offset the impact of the franchise fees on gas and electric. C. Completion of the trail system will need to be provided for if we are not successful with other major funding sources (grants and donations) and we want to complete connections in the near term. A rough estimate is it will take about $100,000 per year to retire a $1,200,000 bond issue over 20 years at 5.5 %. To cover the current shortfall for 2005 of $181,000 plus an inflationary factor of $90,000 for 2006, we need $271,000. A 3.5% franchise fee on both gas and electric would raise approximately $321,400. This gives us a margin of about $50,000 to address B & C above and represents staff's initial recommendation for a minimum amount to collect. This percentage is very close to the mid -point of the fees charged by other jurisdictions as indicated on Attachments D & E. 'The Council will need to discuss this matter and provide direction to staff as to how they would like to proceed. 2