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<br /> <br />Issue Summary / Update <br /> <br />TO: Mayor and Council <br />FROM: Clarissa Hadler, Finance Director <br />AGENDA ITEM: Utility Franchise Fees <br /> <br />Utility Franchise Fees are used by many cities to cover increasing costs of providing important services. <br />These fees would result in higher utility bills for Lake Elmo residents and businesses. <br /> <br />In 2022, city staff had received direction from Council to move forward with utility franchise fees to <br />generate additional revenues for the city. Soon after that, there was staff turnover, and the project was set <br />aside. Staff again asked about it briefly at the July 2024 workshop, and council members seemed generally <br />supportive of pursuing the additional revenue stream. <br /> <br />Staff looked at the fee estimates that were evaluated in 2022, long-term financial goals of the city, including <br />tax rate goals, and started with a goal of $500,000 in franchise revenue. Xcel has done a preliminary <br />analysis and determined we will be able to have franchise fees set at no more than $4.00 for residential <br />electric and no more than $2.00 for residential gas, in order to reach that revenue goal. (It appears $4 was <br />the estimate used in 2022, as well.) <br /> <br />Due to the necessary time for adoption and implementation, for the 2025 Budget we have assumed that we <br />would not be implemented until March 1, leaving us with around $416,000 in revenue for that year. <br /> <br />The table below shows the high/low/averages electrical and gas franchise fees for all MN cities (flat rates <br />only). <br /> <br />Franchise Fees - Electricity <br /> <br />Residential Small C&I <br />Non-Demand <br />Small C&I <br />Demand <br />Large C&I <br />Average $ 3.08 $ 5.52 $ 20.60 $ 123.79 <br />High $ 7.00 $ 21.94 $ 63.00 $ 990.00 <br />Low $ 0.50 $ 0.50 $ 0.50 $ 0.50 <br />Lake Elmo <br />Estimate ≤ $ 4.00 ≤ 6.00 ≤ 20.00 ≤ $ 125.00 <br />Number of Cities 83 82 83 82 <br /> <br />Franchise Fees - Gas <br /> <br />Residential Commercial - Firm - <br />Non-demand <br />Commercial - Firm - <br />Demand <br />Small Interruptible <br />Average $ 2.23 $ 8.37 $ 57.16 $ 45.02 <br />High $ 6.69 $ 24.57 $ 485.00 $ 131.08 <br />Low $ 0.50 $ 1.00 $ 1.00 $ 1.00 <br />Lake Elmo <br />Estimate ≤ $ 2.00 ≤ $ 8.50 ≤ $ 57.00 ≤ $ 45.00 <br />Number of Cities 37 37 32 33 <br /> <br />