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

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experiences significant cost increases in the years 2003 and 2004 and thus the prior recommendation. An alternative presented for your consideration at this time is setting the fee at a level of 1% 'of residential revenues. At the October 22 meeting, there was a desire expressed that commercial/industrial properties should share in the burden as well. A review of the PIR cash flow reveals that in effect, they already are. For the past few years, we have been dedicating the tax increment interest earnings toward the PIR fund (which then is used as revenue to pay for sealcoating). For the next five years, these revenues are projected to average roughly $98,000. The residential franchise fee is expected to raise $62,000. Nonetheless we have proposed a .3% fee against the commercial revenue base. The rationale is that the average commercial property pays taxes at a rate of 4.6% with the average residential customer paying at the rate of 1.37% (30% of the commercial rate). Therefore, the differing rates here even that playing field somewhat. The institutional customer is proposed at 1%. The cash flows contemplate receipt of these franchise revenues during 1997. Further, however, also contemplated is an elimination of the sealcoating assessment program as a result. Given that the assessment portion of the sealcoating program the next five or six years would otherwise be about $150,000 annually, that represents a nice trade to the benefit of the residential customer base. This benefit to the customer is only possible due to the TIF transfer and the fact that the PIR has sufficient funds through past and future projected revenues to provide revenues other than assessments. It should be noted, however, that if future revenues do not increase significantly above projections (or expenditures decrease) an increase in the franchise fee will need to occur prior to the year 2003. The City could levy a franchise fee for rent and maintenance of our rights-of-ways to the benefit of utility companies against the entire Ramsey customer base. However, if the revenues are, in fact, dedicated to the sealcoating program the commercial customer effectively will be subsidizing the residential program with minimal benefit (similar to a general tax levy). Therefore, the recommendation is that the fee be levied against the customer base which is the primary beneficiary of the maintenance expense experienced by the City. Regardless of the dedication of revenues (to sealcoating or some other purpose) the City should levy a charge against the utilities. As Council is aware, protection of municipal rights-of-way has become a major concern of the League of Cities and its statewide and national members. It is not prudent to provide the benefit of use of property to the utilities free of charge. The 5% charge against cable television revenues recognizes the huge benefit that industry has received by cities providing property for their infrastructure. The energy utilities are receiving the same benefits but, to date, have avoided a contribution toward this benefit within the City of Ramsey. The result of the above has the same impact upon the typical residential customer as a 5% tax decrease ($150,000 annual assessment - $62,000 franchise fee = $88,000 savings to the customer). Therefore, we are recommending this program as an effective tax reduction program. Committee Action: Motion to recommend Council introduce Ordinance ~P96- Franchise Fees. Establishing Electric and Gas Reviewed by: City Administrator Finance Officer City Engineer City Attorney FC: 10/22/96 /jmt