Agenda - Council - 05/27/2003 - Laserfiche WebLink

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CONSIDER PROPOSED ORDINANCES IMPLEMENTING AN ELECTRIC FRANCHISE FEE ON CONNEXUS ENERGY AND CITY OF ANOKA ELECTRIC FOR PROVIDING ELECTRIC SERVICE WITHIN THE CITY OF RAMSEY AND IMPLEMENTING A GAS FRANCHISE FEE ON CENTERPOINT ENERGY FOR PROVIDING GAS SERVICE WITHIN THE CITY OF RAMSEY By: Diana Lurid, Finance Officer Background: For the past several years, cities have been restricted to varying State mandated levy limitations. This has resulted in severe restrictions on operations of growing cities Such as Ramsey. During this current period of rapid growth within the City, Ramsey is being faced with levy limits and total loss of Local Government Aid and the-Market Value Homestead Credit. Not taking into account the constrictions levy limits place on the City, the City is foreseeing a total of $765,000 in cuts in local government aids. It should be noted, that the State is not allowing cities to levy back their lost'aid. This means that the City of Ramsey needs to find alternative revenue sources to "make up" for the lost aid. Levy limits force a larger burden on the City. Under levy limit restrictions for 2004, it is estimated that the City would be allowed to levy an additional $150,000 over the 2003 final levy. In comparison, for 2003, personnel costs alone increased over $350,000. The City will need to address ever-increasing health costs and inflationary costs in 2004. This does not even address the issue of the costs associated with a growing community. In dealing with the revenue shortfalls placed upon the City, the City is proposing the adoption of a franchise fee as a possible revenue source. Franchise ordinances currently exist with Connexus Energy, City of Anoka Electric, and Midwest Gas (now known as Centerpoint Energy). Within the electric ordinance there is a fee provision in consideration of the fights granted to the electric distributors under the ordinance. The Midwest Gas (Centerpoint Energy) ordinance is silent on a possible franchise fee and a revised ordinance will be introduced to include language regarding franchise fees. The Gas Ordinance needs to be adopted prior to the adoption of the franchise fee ordinance. The City of Ramsey is proposing a franchise fee of 4.5% of gross revenues on all users. At 4.5%, the City would receive approximately $525,000 in franchise fee revenue per year. Franchise fee revenues would be used for the City share of Street Maintenance costs and the labor associated with the maintenance and repair of City streets. Staff feel~ that using a percentage rate on all users would be more equitable than a flat rate for every property in the City or a per-unit charge of energy used. It is anticipated that the average homeowner may pay $80 per year for gas and electric franchise fees. -219-