03/05/2012 Council Packet - Laserfiche WebLink

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WS — Item 4 WORK SESSION STAFF REPORT Work Session Item 4 Date: March 5, 2012 To: City Council From: Jeff Karlson Re: Centennial Utilities Franchise Ordinance Background I recently met with Circle Pines City Administrator Jim Keinath to review Centennial Utilities' proposed franchise renewal. The 25 -year franchise ordinance with Centennial Utilities (City of Circle Pines) expires March 31, 2012. The agreement gives Centennial Utilities the right to operate and maintain a gas utility in Lino Lakes. I raised this issue with the Council last November, but no action was taken. Currently, the City of Circle Pines pays an annual franchise fee of seven percent to Lino Lakes from the sale of gas to its 947 customers residing in Lino Lakes. Last year the City received $93,956.37 for franchise fees collected in 2010. This coming May we are expected to receive around $92,000. Because the new franchise recommendation contains substantive changes, I asked City Attorney Joe Langel to review the proposed franchise ordinance. In particular, Section 7, Subsection 7.4 states that Centennial Utilities will stop collecting a franchise fee if Lino Lakes does not collect "a fee or tax of the same or greater percentage of the receipts" for energy sales. The proposal also caps the franchise fee at five percent. Mr. Langel stated that the Utility Commission's threat to unilaterally stop collecting the franchise fee is without any legal basis. The franchise is a contract, the terms of which would continue until both parties agree to change the agreement. Joe recommends that if the Council wants to retain the franchise fee, then the Council should take official action. It comes down to contract negotiation and how far each side is willing to go. Another change in the agreement is that Lino Lakes would no longer have a commission member represented on the Centennial Utilities Commission. Lino Lakes has one representative on the Commission. There are three entities that own and operate gas distribution systems in Lino Lakes pursuant to City franchise ordinances: Centennial Utilities, CenterPoint (formerly Minnegasco), and Xcel Energy (formerly NSP). CenterPoint and Xcel Energy do not currently pay a franchise fee. The franchise agreement with CenterPoint also expires March 31, 2012.