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/::C. CAS # I INTRODUCTION OF UTILITY FRANCHISE FEE By: Ryan R. $chroeder, City Administrator Background: This item appeared on the agendas for both October 22 and November 12,1996. At the November meeting, Council requested consideration of dedicating by ordinance the proceeds on any franchise fees received. The enclosed ordinance, by Subdivision 6, states that "all revenues collected pursuant to this section shall be dedicated exclusively for funding of the City's street maintenance programs." Proposed to Council is that revenues be directed to the Public Improvement Revolving Fund in order to eliminate the property assessment portion of the sealcoating program. As presented at the last meeting, the revenues into this fund will be sufficient to pay all sealcoating costs (with adoption of the franchise fee as presented) through the year 2002. In our cash flows, we have not projected receipt of interest earnings from the TIF fund, receipt of year-end excess general fund revenues, or increases in revenues from franchise fees due to new construction. As these revenues are realized, our ability to fund the sealcoating program without running a single year deficit improves. Even if these revenues are not realized, we can still fund the program for years 2003 and 2004. However, the deficits in those years are currently projected to be significant (absent the above) but the fund will still have a positive balance after 2004 of just under $1,000,000 given the above. The average homeowner impact of the proposed fee is $14/year. The average sealcoating assessment currently is $150. On average, implementation of the franchise fee saves the residential customer money. It is also proposed, with adoption of this fee, that the elimination of the sealcoating assessment be immediate (effective with the 1997 program). This resuks in a secondary benefit of savings in staff time, postage and publication costs. The case memorandum from the previous meeting is enclosed for your reference. It should be emphasized, however, that implementation of this fee is in recognition that the utilities are currently utilizing our rights-of-way at no charge, a use for which there should be a charge. The franchise fee is a method to impose this charge. It should also be pointed out that, while it is expected that for the next 12 years the TIF districts will pay for most commercial/industrial street maintenance, there is a C/I levy of the franchise fee proposed in addition to that upon residential utility revenues. Council Action: Motion to introduce Ordinance 96- XX entitled "Electric and Gas Franchise Fees". Reviewed by: City Administrator City Attorney FC: 11/26/96 /jmt