Agenda Packets - 1997/09/29 - Laserfiche WebLink

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• City of Mounds View Staff Report III To: Chuck Whiting, City Clerk-Administrator From: Bruce A. Kessel, Finance Director Item Title/Subject: Franchise Fee information Date of Report: September 26, 1997 Over the past several years, there has been discussion relating to the franchise fee the City currently imposes on electricity and natural gas sold in Mounds View, and its impact on residential and commercial customers. The franchise fee generates approximately $235,000 per year and is set to expire on December 31st of this year; if property taxes were increased to make up this amount, they would need to increase by 15.1% ($235,000 divided by$1,552,704 General Fund 1997 property tax levy). Earlier this year, the State enacted levy limits which prohibit our ability to increase property taxes more than approximately 5.9% or$90,000. If the franchise fee is not renewed, the City will have to use a combination of increasing revenues,reducing outlays and/or reducing reserves to address the loss of this revenue source. Another option that has been discussed is to reinstate the franchise fee under a program that would gradually reduce the fee over several years to allow time to modify operations (fees charged, services provided, methods used to provide services, etc.). Comments have been made in the past relating to the impact of the franchise fee on various • clasof property. I have been in contact with NSP to obtain additional information relating to ses some of these issues. (Note: NSP is able to provide information based upon their rate classes, which do not always correspond to our property classifications,therefore, additional analysis was required.) Single Family Residences NSP's closest rate category is residential which includes apartments, etc. Based upon 1995 data, the average franchise fee for residential customers was $16.88 on electricity and $15.99 on natural gas usage for a total annual franchise fee of$32.87. As noted above, these averages include apartments, therefore additional analysis was warranted. I contacted our Community Development Department to obtain addresses on a number of "average" single family housing units in Mounds View. These addresses were then provided to NSP which provided summary data to use (Note: due to data privacy issues, the information was provided in a format that did not allow us to correlate the data to the associated properties). Based upon this information, it appears that the average single family house pays a franchise fee of approximately$23.08 on electricity and$18.60 on natural gas, for a total of$41.68 per year. For 1997, the average single family house in Mounds View had a estimated market value of$89,400 which resulted in$267.66 in property taxes payable to the City. If the City did not have the franchise fee and wished to raise the same amount from property taxes, it III would have needed to raise property taxes 15.6% ($41.68 divided by $267.66) for single family residences.