Agenda - Council - 11/12/1996 - Laserfiche WebLink

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INTRO~DUCTION OF UTILITY FRANCHISE FEE ORDINANCE By: Ryan R. Schroeder CASE Background: In each year (except 1995) since 1991, staff has proposed implementation of a Franchise Fee ordinance against revenues generated by the gas company and two electric companies within the City of Ramsey. 3~he two electric companies have not opposed implementation of such a fee. The gas company, altermtively has taken a long-standing position against implementation of franchise fees. In our area, Coon Rapids has had a franchise fee (gross earnings tax) since the 1970's. The City of Anoka just approved a fee charged against kilowatt hours (expected to result in revenues at ~ . about 3% of gross!earnings). Mounds View implemented a 3% fee two years ago. Minneapolis and St. Paul each h~ave franchise fees. Columbia Heights apparently has a 3% fee. Several other cities from around lhe state have also implemented franchise fees but we are not currently aware of others in our immddiate area. We currently charge the cable company a 5% fee which resulted in $45,309 in revenue to QCWV in 1995, and an exper:ted $50,000 in 1996. The stated rationale for implementation of franchise fees generally is 1) to provide a stable revenue source; 2) to be able to target from where these revenues are raised in a manner other than occurs with the general pfoperty tax; 3) to provide for reimbursement for the use of the rights-of-way that is donated without charge to the utilities; and 4) to provide for administration of services provided to the utility companies for such as curb and pavement cuts and other maintenance activities. In Ram~ey's case, we do not currently charge the utilities for any services although we continue to make them responsible to ensure pavement patches do not negatively impact the drive surface. At the end of 1995, the City owned 138.16 miles of right of way. At $0.50 per square foot, that results in a land vb. lue of $24,000,000. The pavement generally utilizes half of the right-of-way with the balance utilized for utility placement. Other than construction budgets, the Public Works maintenance budl~et, and the Public Improvement Revolving Fund are dedicated toward maintenance and ~pair of the right-of-way. The maintenance budget in 1996 is $652,617 of which $587,643 i~ specifically for street maintenance ($108,000 of which is for the sealcoating program). It seen~s clear that a significant portion of the City budget is for maintenance of our rights-of-way, a ~ortion of that includes services granted directly or indirectly to the utility operations (both p~blic and private). Further, the Public Improvement Revolving Fund supports deficits within project funds and provides for the street maintenance program City portion (and the float for the assessment portion until receipt of assessments). We have discussed in the past the possible desire to l~rovide an improved funding source for the public improvement revolving fund in order to enhanc~ the City participation in the sealcoating program and, more recently, in order to cover deficit project funds. Staff presented a recommendation on October 22, 1996, to levy a 3% franchise fee against the gross earnings derived from the residential customer base of the utility companies. Further, we recommended a ffiture discussion on dedication of the revenues raised in support of the street maintenance program (sealcoating portion). It was contemplated at that time that the fee should be set in an amount sufficient to cover the maintenance program through the year 2004. Enclosed for your review is the5 cash flow projection for the PIR fund which shows that a 1% fee against the residential gross r6venues are sufficient to cover sealcoating expenses through 2002. The program