Agenda Packets - 1992/08/24 - Laserfiche WebLink

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STAFF REPORT AUGUST 24, 1992 PAGE TWO General Fund programs, but rather replaces property tax revenue with utility revenue to pay the electric costs for the City's street lights. Revenue from the street light utility cannot be used for any General Fund expenditure. The franchise fee, which was always presented as a form of taxation, would have raised approximately $260,000 annually and also could have been used to offset property taxes by funding police, fire and other essential General Fund programs. The franchise fee was not adopted. One of the reasons was that the franchise agreements provided only for a one-time annual payment after a one year time period. Members of the Council and many residents objected to the fact that the franchise fees would be collected over a one year period but the City would not receive the revenues nor any interest gained from the monies for an additional year. Such an arrangement was deemed unacceptable by the City Council. In 1992 another factor was added to the eight precipitating factors previously outlined -- imposition by the State onto cities of the 6.5% sales tax. The result was a projected $35, 000 to $40, 000 non- budgeted increase in operational costs for the City in 1992 and a projected operational increase of $80, 000 for budget year 1993 . While levy limits were lifted, the potential threats to future LGA reductions still loom into the future for budget year 1993 and beyond. A crystal ball does not exist anywhere that can foretell the degree to which cities will lose promised revenue from the State, the economy will begin visible recovery and property values will end their decline. What we do know is that resident expectations and demands for services continue to increase and the City's operating budget-is far below-the-rate of inflation. The-1992-General Fund operating budget is almost 2% below the 1991 budget. Inflation for 1992 is between 3 .8 and 4%. On June 1, 1992 the City began paying 6.5% sales tax on all specified expenditures -- this was not a budgeted item and, in effect, further decreased the City's operating budget. Earlier this year, staff was directed to negotiate a new franchise agreement with Northern States Power which would incorporate a provision for a monthly payment of franchise fees effective after only a 30-90 day period. This timeframe is required to allow the Public Utilities Commission to give the necessary approval. A new franchise agreement was negotiated with NSP which provided for the monthly payment of franchise fees.