Agenda - Council - 12/10/1996 - Laserfiche WebLink

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I I I I I I I I i I I I I I I I I INTRODUCTION OF UTILITY FRANCHISE FEE ORDINANCE By: Ryan R. Schroeder Background: In each year (except 1995) since 1991, sm_ff has proposed hnplemcnafion of a Franchise Fcc ordinance against revenues generated by thc gas company and two electric companies with/n the City of Ramgey. '~The two electric companies have not opposed implementation of such a fee. The gas company, alternatively has taken a long-standing position against implementation of franchise fees. In our area, Coon Rapicls has had a franchise fee (gross earnings tax) since the 1970's. The City of Anoka just approved a fee charged agaSnst idlowatt 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 have franchise fees. Columbia Heights apparently has a 3% fee. Several other cities from around' the sate have also implemented franchise fees but we are not currently aware of others in our knm '..e~liate area. We currently charge the cable company a 5% fcc which resulted in $45,309 in revenue to QCTV in 1995, and an expected $50,000 in 1996. The stated rational~ for implementation of franchise fees generally is 1) to provide a sable revenue source; 2) to be al~le to target from where these revenues are raised in a manner other than occurs with the general property tax; 3) to provide for reimbursement for the use of the rights-of-way that is donated witl)out charge to the utilities; and 4) to provide for administration of services provided to the uti[i~ companies for such as curb and pavement cuts and other maintenance activities. In Ramsl~y s case, we do not currently charge the utilities for any services although we continue to make th~m responsible to ensure pavement patches do not negatively impact the drive surface. At the end of 1995, ~e City owned 138.16 miles of right of way. At $0.50 per square foot, that results in a land valtae of $24,000,000. The pavement generally ufi157es half of the right-of-way wi.th the balance utiLiced for utility placement. Other than construction budgets, the Public Works mmntenance budge[ .and the Public Improvement'Revolving Fund are dedicated toward -maintenance and rep3u: of the fight-of-way. The maintenance budget in 1996 is $652,617 of .. Which $587,643 is spedfically for street maintenance ($108,000 of which is for the sealcoating program). It seems clear that a significant portion of the City budget is for maintenance of our rights-of-way, a po~on of that includes services granted directly or indirectly to the utility operations (both pubiSc and private). Further, the Public Improvement Revolving Fund supports deficits within projec~ 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 proYide an improved funding source for the public improvement revolving fund m order to enhance th~ City participation in the sealcoafing 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 future 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 the cash flow projection for the PIR fund which shows that a 1% fee against the residential gross revenues are sufficient to cover sealcoating expenses through 2002. The program