Agenda - Council - 06/12/2012 - Laserfiche WebLink

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Councilmember Backous stated he has nothing against the franchise fee concept but would not support $14/month. He indicated it was his impression that the intention was $7/month and asked if a lower franchise fee could be considered. Mayor Ramsey stated he would not support a franchise fee but was not opposed to having a portion of the road project assessed, especially road reconstruction. Public Works Director Olson stated that has been the challenge with this issue, some feel assessments should be phased out and others support assessments. He noted there are benefits to a franchise fee beyond collecting from non-taxable because it also creates equity between residential units. However, an inequity is with residents not connected to natural gas since they would pay only one-half the franchise fee. Ultimately, it is the City Council's decision in how to come up with $3 million and whether with or without assessments. Public Works Director Olson stated the franchise fee was presented at $14/month and noted it could be phased out over five years with a 25% assessment for reconstruction. Councilmember Backous asked if reconstruction projects can be scaled back and/or put off another year or two. Public Works Director Olson stated he understands it is a difficult situation and decision to make, and projects could be scaled back but the Council still needs to solve the issue of additional funding sources. He pointed out that a 40-year design life capitalizes on the Anoka sand plain and maintenance of the roadway system in sealcoats and overlays will extend the pavement life. Public Works Olson noted staff had presented a conservative approach and spread cost over a 40-year time frame. However, 50% of the City's roads were built between 1975 and 1985 so delaying projects further will result in the reconstruction effort falling behind. Councilmember Elvig arrived at 5:24 p.m. Mayor Ramsey stated he would support a 40% tax capacity rate but when you add in the franchise fee, it is back up to about 52%. Councilmember Elvig noted the first goal was to pull down taxes to get a leaner environment by cutting back costs. Staff's recommended cuts reduce the budget by $1.4 million and the franchise fee would offset that reduction by raising $1.5 million, resulting in a zero net increase to taxes. Councilmember Elvig noted the franchise fee would allow the creation of a $1.5 million dedicated road fund supported by all utility users including non -profits. Finance Officer Lund corrected that adding the franchise fee would increase the tax capacity to 44%, not 52%. Mayor Ramsey stated he wants the tax capacity to be at 40%, noting the tax capacity was 44% last year and 39% the previous year. Councilmember Backous stated if the franchise fee is cut to $7/month, it brings the net tax capacity to 41%. He indicated he would support a franchise fee under $10/month. Finance Officer Lund advised that a $7/month franchise fee would generate $825,000. City Council Work Session / April 10, 2012 Page 3 of 13