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CHARTERED <br />James M. Strommen <br />470 US Bank Plaza <br />200 South Sixth Street <br />Minneapolis MN 55402 <br />(612) 337 -9233 telephone <br />(612) 337 -9310 fax <br />jstrommen@kennedy-graven.com <br />MEMORANDUM <br />TO: City of Lino Lakes Mayor and City Council <br />CC: Gordon Heitke, City Administrator <br />FROM: Jim Strommen <br />DATE: June 19, 2008 <br />RE: Alternative Approaches to Gas and Electric Franchise Fees <br />INTRODUCTION <br />You have asked for a discussion on the alternative franchise fee designs available when a <br />city exercises its right to impose franchise fees on the gas or electric utility(ies) serving the <br />city. I am available for any questions that may arise out of this memorandum. <br />There are three possible methods of imposing franchise fees under Minnesota law and <br />customary practice: percentage of gross revenue fees, meter fees, and usage fees. Though <br />percentage of gross revenue and usage fees are similar, they have certain distinctions <br />described below. The meter fee is the most commonly used currently and is the least <br />objectionable to utilities. The most significant pros and cons of each are discussed below. <br />BACKGROUND <br />A. Nature of the Fee and Limits <br />Statutory Authority <br />A city's right to impose a franchise fee on either a gas or electric utility is governed by <br />Minnesota Statutes, Section 216B.36, enacted in 1974 when the Public Utilities Commission <br />(PUC) was created. There is also an older franchise statute that has some relevance to the <br />335300v1 JMS LN140 -105 <br />