Agenda - Council Work Session - 01/14/2014

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On October 21, the Charter Commission called a meeting to discuss the provision of the Charter that pertains to funding sources for the City (i.e. franchise fees, general levy, special assessments) and to determine whether applicable Charter amendments should be considered. Following discussion, the Charter made the motion to request that the City Council review and provide feedback regarding a possible amendment to Charter Chapter 10, Section 10.4, line 4, "Power of regulation reserved," as follows: " ... except that any franchise fees imposed under applicable State Statutes must be limited to defray increased municipal costs accrued as a result of utility operations and my not be used to raise general operating revenue." The franchise agreement and franchise fee ordinances were brought to the City Council for introduction on October 22. Council introduced the franchise ordinances with Anoka Municipal Utility and Connexus (adopted November 12). Also at the October 22 meeting, Council was presented with the proposed Charter amendment language pertaining to alternative funding sources, in particular, the use of franchise fees as a funding source. Council voted to indefinitely table consideration of the franchise fee ordinances with Anoka Municipal Utility, CenterPoint Energy and Connexus Energy, and to schedule a joint work session with the Charter Commission to discuss the franchise fee language. On November 19, Council and the Charter met in joint work session to review funding alternatives and to identify pros and cons of those alternatives. The Council and the Charter Commission focused on three viable funding alternatives and discussed the possible solutions associated with each - franchise fees, special assessments, and general property tax levy. The City Attorney summarized the time line as follows: The City Council received the Charter Commission's recommendation on October 22, and a public hearing is scheduled for December 10. The City Council would vote on the proposal at their first regular meeting in January 2014. During the December 10 Council work session, discussion ensued relating to alternative language for a proposed Charter Amendment to Chapter 10. It was noted that there is a desire to have some limits to the franchise fee and how it is applied, which was addressed in the draft alternatives. The alternatives address dedicating all franchise fee revenues to long -term street maintenance program projects; a five -year sunset term for any new franchise fee ordinance; assessments shall not be used for road maintenance projects while franchise fees are in effect; franchise fee revenues shall be limited to a percentage of the annual tax levy; and public notification to assure transparency. It was felt that putting this language within the Charter will provide extra protection but the current amendment language does not well define the limitation (capping as a percentage of the levy) and other issues. Also on December 10, at the regular City Council meeting, a public hearing was held to introduce the ordinance amending Chapter 10 (Franchises) of the City Charter as recommended by the Charter Commission. Attorney Langel reported that staffs recommendation was to deny this amendment because the term to limit franchise fees to "defraying increased municipal costs accruing as a result of utility operations" is ambiguous and leaves open the question to future Councils and the public, subject to potential challenge via lawsuit or other action by residents. He stated this amendment does not have the transparency or ability to define the limits as the Charter Commission has indicated it desires. Staff recommended the Council consider alternative language that outlines the terms and limitations for franchise fees. Council voted to not introduce the ordinance amending Chapter 10 of the Charter and directed staff to draft alternative Charter amendment language and open a dialog with the Charter Commission to obtain their review and comment. This brings us to the present. Attached for Council review is the draft language for a proposed Charter amendment as per Council's direction. Please note that the proposed fee cap, which is based on a percentage of the previous year's tax levy, may require a new fee ordinance each year and will be logistically difficult to administer. The Council may wish to consider a simple flat rate. If there is a Council consensus, this language will be forwarded to the City Council tonight for public discussion and possible transmission to the Charter Commission. The Charter Commission has scheduled a meeting for January 27, in anticipation of reviewing the Charter amendment language forwarded by the City Council. Timeframe: Approximately 30 minutes.