Minutes - Council Work Session - 08/27/2013

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Finance Director Lund stated the City receives MSA of about $1 million but there are two bonds related to Armstrong Boulevard and Sunfish Boulevard so those funds will not be available until after 2022. City Engineer Westby stated there are other funding options such as public /private partnerships, toll charges, tax levy against all properties in the City, grants, franchise fees, and special legislation. He stated for a SMP, it is best to have a dedicated and secured funding source that is available year after year. City Engineer Westby presented the option of franchise fees and explained the process to institute such a fee. He stated if the City Council wants to move away from special assessments, it can consider franchise fees, General Fund revenues, and /or bonding. City Engineer Westby noted Blaine and Champlin use special assessments on overlay and street reconstruction projects as well as bonding, general levy funds, and MSA funds. Champlin also has a franchise fee in the amount of $2.50 per month per each of their four utilities. Elk River no longer uses special assessments since adopting franchise fees this spring for their electric and gas utilities. Fees vary by property classification. Ham Lake funds street rehabilitation projects from the Revolving Street Fund, which is an internal fund supported by the general tax levy. Ham Lake has not assessed benefiting parcels for rehabilitation projects for approximately ten years. He stated the estimate is about $2.2 million for street maintenance projects so if budgeting $500,000 from the general levy, the shortfall is $1.7 million. City Engineer Westby stated staff recommends moving away from the use of special assessments as a funding source for the City's long -term SMP because of the difficulty in proving benefit, the City's Charter providing additional measures for challenge, and when challenged the resulting delay in completing the project. City Engineer Westby stated with franchise fees, if charging $5 per month per utility for residential properties it would collect $1 million annually. To collect $1.5 million in franchise fees annually, the monthly fee would need to be $7 per month per utility. He stated one consideration is the inequity of instituting a franchise fee when some residents are still paying a street assessment. To address that inequity, Elk River rebates franchise fees back to their residents that are still paying an assessment. City Engineer Westby explained if the City Council directs staff to pursue the use of franchise fees, staff will draft a franchise fee ordinaie for each gas and electric utility (Anoka Electric, CenterPoint Energy, and Connexus Energy) utilizing public rights -of -way. City Engineer Westby stated as part of the process, staff will contact and work with each utility to assist them in drafting language to be added to their invoices to alert their customers to the fact that the franchise fees are a pass through expense initiated by the City to help pay for its SMP. If approved, he estimated it would be January of 2014 before franchise fee revenue would be received by the City. City Engineer Westby stated staff recommends utilizing franchise fees to fund the City's long- term SMP. He acknowledged that franchise fees are essentially taxes; however, the term "franchise fee" follows State Statute language so staff recommends using that language to avoid any confusion by the public. City Engineer Westby requested City Council direction regarding City Council Work Session / August 27, 2013 Page 4 of 6