Agenda - Council - 07/08/2003 - Laserfiche WebLink

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Case #3: Public Hearing: Introduce Ordinances Implementing a Gas Franchise Fee on CenterPoint Energy, Minncgasco, a Division of CenterPoint Energy Resources Corp., a Delaware Corporation, for Providing Gas Energy Service within the City of Ramscy, and Implementing an Electric Franchise Fee on Connexus Energy, a Minnesota Cooperative, and the City of Anoka, a Municipal Electric Distributor, for Providing Electric Energy Service within the City of Ramsey, Minnesota Mayor Gamec called the public hearing to order at 7:24 p.m. Presentation Finance Officer Lund stated that ordinances were presented to the City Council for review and discussion at their regular meeting of May 27, 2003. Since that time, information regarding franchise fees has been submitted to the public in the Ramsey Resident. The effected companies of Connexus Energy, City of Anoka, and CenterPoint Energy, Minnegasco were mailed copies of the City's proposed ordinances. In dealing with the revenue shortfalls placed upon the City by State aid cuts and levy limits, the City is proposing the adoption of a franchise fee as a possible revenue source. Franchise ordinances currently exist with Connexus Energy, City of Anoka Electric, and Midwest Gas (now known as CenterPoint Energy). Within the electric ordinance there is a fee provision in consideration of the rights granted to the electric distributors under the ordinance. The Midwest Gas (CenterPoint Energy) ordinance was silent on a possible franchise fee and a revised ordinance was introduced to include language regarding franchise fees. The gas franchise will need to be adopted prior to the adoption of the franchise fee ordinance. Franchise fees can be set in three ways: a percent of the utility's gross revenues within the City; a charge per unit of energy used; or a flat money fee for every meter or property in the City. The franchise fees that have been discussed with all companies is a percentage of gross revenues. After the franchise fee programs are in place, the companies will make quarterly payments to the City. The City of Ramsey was proposing a franchise fee of 4.5 percent of gross revenues on all users. At 4.5 percent, the City would receive approximately $525,000 in franchise fee revenue per year. Franchise fee revenues would be used for the City share of street maintenance costs and the labor associated with the maintenance and repair of City streets. Staff feels that using a percentage rate on all users would be more equitable than a flat rate for every property in the City or a per-unit charge of energy used. A comparison of what franchise fees may mean to the typical resident versus a property tax adjustment is difficult to make due to the variation in home valuations. Franchise fees will relate specifically to each individual homeowners' use and lifestyle. However, for information and discussion purposes, an "average" homeowner may pay $75 per year for gas and electric franchise fees. If the amount were levied to the property taxes it would cost a homeowner $103 per year if their house was assessed at $150,000. Citizen Input Gary Reimann, 18008 Waco Street NW, Ramsey, stated that he understood that the State of Minnesota has cut the amount of money the City receives but adding a franchise fee is a taxation without representation. He stated that franchise fees are a hidden tax and it was unfair to the City City Council/June 24, 2003 Page 9 of 37