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HomeMy WebLinkAbout2.D. Franchise Fee Discussion J.D. CITY OF SHAKO PEE Memorandum TO: Mayor and City Council and Shakopee Public Utilities Commission FROM: Mark McNeill, City Administrator SUBJECT: Franchise Fee Discussion DATE: September 6,2007 INTRODUCTION: The purpose of this memorandum is to provide general background information on implementation of a franchise fee in Shakopee, and to determine whether there is sufficient interest to pursue this further. BACKGROUND: In September, 2000, the City of Shakopee held a public information meeting regarding the possible implementation of a franchise fee which would be applied to all utilities operating within the City. At the meeting, several large users that are served by utilities other than SPUC made their case for this being an added cost of doing business which would reduce their competitiveness. The intent of the proposal was to be revenue neutral. In other words, if a franchise fee were enacted, SPUC would reduce their rates so that there would be no net change on SPUC users: SPUC was not able to make that commitment at the time. $875,000 was the amount that the franchise fee would raise; it would have reduced SPUC's transfer to $343,000 annually. However, it was noted during testimony at the 2000 meeting that 6 industries would have made up 50% of the difference (industries which had not been directly contributing previously). The City used Attorney Jim Strommen of Kennedy and Graven to assist in that research. I recently spoke with him to see if anything had changed in the industry over the past seven years regarding this issue. He said that at the time of the 2000 discussion, it was a very difficult time for implementation of franchise fees. While utilities are still not currently in favor of franchise fees, they were significantly more opposed to them at that time. This was in the era before Enron, and rolling power outages in California. The assumption of utilities, and the public at large in 2000 was that there would be "wheeling", and a general ability to purchase power anywhere; a franchise fee would raise overall rates. Obviously, the situation has changed since that time. In addition, Mr. Strommen also noted that because of reductions in State aids and other sources of funding, the public seems to be a bit more accepting of franchise fees as one of the components of the funding of government. Implementation: Whatever is enacted for one utility will need to be enacted for all utility users - in Shakopee, that would include Xce1 Energy, MVEC, and Centerpoint Energy. Shakopee is unique in that it has four providers, twice as many as is usual. Because a franchise fee needs to be negotiated with each utility, the process is more complex. There are two ways of enacting a franchise fee: 1. Meter Fee: This is a fixed charge, typically $1 to $2 per residential customer, and a higher flat fee for commerciaVindustrial users. 2. Percent of Gross Revenue: Typically 1 or 2% Commercial and industrial users (and the utility companies) prefer the meter fee - its more predictable, and generates less revenue than the percent of gross revenue. The percent of gross revenue is more complicated due to demand charges. Because these are a "pass-through" fee, the utilities typically will list these charges as a separate line item showing a "City Franchise Fee". In 2000, there were only a few major industrial users that would have been impacted by this, and according to testimony at the meeting, those "six" consumed as much energy as the rest ofSPUC's residential customers combined. That has changed somewhat with the subsequent growth of the residential component of Shakopee. It should also be noted that one of the companies with concerns in 2000 - Rahr Malting - might not be subject to large parts of a franchise fee (if at all) within the next year to due their KODA energy project. Other major users have rec;~tly had issues with bankruptcy. Another one was not opposed in 200D, but requested advance notice to build the franchise fee into their budget. ACTION REQUIRED: Following discussion, SPUC and City staff will ask for direction as to whether this is an issue that is of interest and more research is desired, or whether no action contemplated at this time. 'W ~..JJJ Mark McNeill City Administrator MM:th CITY OF SHAKOPEE Memorandum TO: Mayor and City Council FROM: Mark McNeill, City Administrator SUBJECT: Franchise Fee - Public Information Meeting DATE: August 31, 2000 INTRODUCTION: The Council has scheduled a public information meeting to consider the feasibility of the implementation of a franchise and a separate franchise fee ordinance applicable to Xce1 Energy (NSP), Reliant Energy Minnegasco and Minnesota Valley Electric Cooperative. At the meeting, an opportunity to comment will be given to utilities, customers, and others impacted by a potential decision. Action to adopt such ordinances is not recommended to take place at this time; the Council will be asked to give direction as to whether it wishes to proceed. BACKGROUND: For the past several months, staff has been researching the possibility of the city exercising its franchise authority and implementing a franchise fee ordinance. All franchised utilities and SPUC who serve customers in the City of Shakopee would then pay a fee to the City, based upon the utility's total operating revenues. At this time, that would impact Minnesota Valley Electric Cooperative (MVEC), Xcel Energy (NSP), Reliant Energy Minnegasco, and Shakopee Public Utilities Commission (SPUC). Staff was given the direction to determine a formula that would generate an amount comparable to what has historically been transferred by SPUC, averaged at $875,000. The $875,000 goes into the City's General Fund, and is used for the provision of general municipal services in the operating budget. City engaged the firm of Dahlen Berg as a rate consultant to examine options for implementation. It was determined that a fee of2.71 % of operating revenue within the City of Shakopee would generate the $875,000. The approximate annual dollars generated by 2.71 % for each utility, as determined by 1999 sales revenues are: SPUC NSP MVEC Minnegasco $343,000 $259,000 $ 580 $272,000 DISCUSSION: Since the direction was given from Council earlier this year, some changes have taken place in the energy industry which may affect the desirability of implementing this formula or other fee formula at this time: 1. There has been a spike in energy costs, especially in natural gas prices. Some customers report increases of as much as 80% for energy costs during the past year. 2. Deregulation of retail gas and electric service had been anticipated to be introduced beginning as early as 2002. However, those states in which deregulation pilot projects have been implemented (on the east and west coasts) have had mixed results, causing a loss of momentum to the movement. In Minnesota, it does not appear that deregulation of gas and electric service in the form of service territory competition and residential customer choice for such service will be introduced for several years. 3. It had been anticipated that SPUC would be reducing its rates to offset the transfers received from the City, so that it would be revenue neutral for both the City and SPUC. However, because of concerns about payment for electrical improvements to the SPUC infrastructure, SPUC has not made a final decision at this time. Therefore, we do not know what the net impact would be on SPUC customers if the above formula were adopted. Note that this franchise fee had originally been anticipated as an electrical franchise fee. However, because of the desire of electric utilities to be on a "level playing field" with gas utilities regarding franchise fees, if a fee is implemented, the $875,000 SPUC payment will be allocated among gas and electric utilities. Notices were sent to representatives of the affected utilities, and also to the large NSP users about the information meeting on September 5th. A presentation will be made by City Attorney Jim Strommen, and Al Bartsch of Dahlen Berg will be in attendance. Comments and some previous correspondence on the subject is attached. Note that MVEC has adopted a resolution concerning this subject, and is generally supportive. It asks only that it be treated equally to other franchised utilities, except for the establishment of rates (which as a cooperative does not go through the Public Utilities Commission, but are instead established by MVEC's Board of Directors). The bigger issue for MVEC, however, is a desire to retain its existing territory, and not lose any additional service territory to SPUC. Council should note that that is an issue for SPUC, and not the City Council. BUDGET IMPACT: The FY 2001 operating budget anticipates $875,000 in revenues from a utility fee. Council should be aware that if this is not implemented by January 1 st, there will be a shortfall in excess of $500,000, which will need to be accommodated through SPUC or expenditure changes. Note that this transfer from SPUC has been in place, to the best of our research, since the Public Utility was ehartered in Shakopee. It has been used to reduce property taxes for all property owners in Shakopee. RECOMMENDATION: The City Council should listen to the information presented at the public information meeting, and give direction to staff regarding the proper direction. Such options include but are not limited to: 1. Adopt the proposed franchises and impose franchise fees on the utilities in the manner described above. 2. Adopt the proposed franchises retaining the right to impose franchise fees during the term of the franchise, but maintain the status quo regarding utility fees, i.e., continue with SPUC payments only to achieve the targeted $875,000. 3. Adopt the proposed franchises and impose franchise fees using a different formula such as one offsetting the fees paid by Xcel and Reliant against their property tax payments directly to the City, or phasing in the fees to achieve the targeted $875,000. 4. Completely maintain the status quo by not entering into franchise agreements with Xcel or Minnesota Valley and leaving the existing franchise with Reliant Energy unchanged, and charging no fees of these utilities. ACTION REQUIRED: The Council should hold a public information meeting, determine an appropriate course of action and give follow-up directions to staff accordingly. 1ft~M Mark McNeill City Administrator MM:th ~Reliant \" Energy Minnegasco 800 LaSalle Avenue PO. Box 59038 Minneapolis, MlIlnesota 55459-0038 Facts About Shakopee's Proposed Franchise Fee The City of Shako pee may enact a franchise fee on utility services to all natural gas and electric customers in the city. The following Q & A provides an overview of franchise fees and some specifics of Shako pee's proposed fee. Q: What is a franchise fee? A: A franchise fee is a tax that is charged by a municipality on the product delivered by utility companies to city residents and businesses. This includes gas, electric, or cable service in the community. The fee is collected by the utility from their customers and paid to the city. The fee can be used by the city to raise revenues or defray increased municipal costs accruing as a result of utility operations, or both. Q: Who will decide whether the City of Shakopee has a franchise fee? A: The Shakopee City Council will make the decision on whether or not to enact a franchise fee. Q: When will the City of Shakopee decide on the franchise fee? A: The City Council is holding a public information meeting at their regularz schedule council meeting on Tuesday September 5 . Following this information meeting, the council will vote to approve or disapprove the fee at their next city council meeting on September 19th. Ifapproved, the franchise fee will be added to customers' bills beginning January 151, 200 1. Q: Is the franchise fee an additional Reliant Energy Minnegasco charge? A: This proposed franchise fee is not an additional Reliant Energy Minnegasco charge. The franchise fee (tax) is collected from customers, is based on gas usage, and will appear as a separate line item on our billing statement. A check is then issued to the City of Shako pee for the fees collected. Reliant Energy Minnegasco makes no profit from the franchise fee. Q: H the City Council approves this fee, how much will the average resident or business pay? A: Reliant Energy Minnegasco customers in the City of Shakopee will pay, on average, the following franchise fees. These estimates are based on the city's proposed 2.71 % fee to be collected on gross gas revenues in Shakopee: Customer Tvpe Residential Commercial A CommerciallInd B CommerciallInd C Small Duel Fuel A Small Dual Fuel B Large Dual Fuel Monthlv Fee $ 1.38 $ 1.32 $ 4.43 $ 25.44 $ 51.43 $ 329.27 $1,439.22 Yearlv Total $ 16.54 $ 15.84 $ 53.19 $ 305.22 $ 617.20 $ 3,951.27 $17,270.66 Q: What is the average yearly amount of revenue the City of Shakopee will generate from a 2.71 % franchise fee on natural gas? A: Based on natural gas sale estimates for the year 2000, Reliant Energy Minnegasco will collect $401,130 dollars in franchise fees from Shakopee residential and commercial/industrial customers. This tax will be paid to the city on a quarterly basis. Q: Are all utility customers affected by these fees? A: Yes. The city is planning to impose franchise fees on all utilities that provide gas and electric service in Shakopee, including Reliant Energy Minnegasco, Excel (NSP), Minnesota Valley Electric, and Shakopee Public Utilities. Q: Where Can I get more information? A: For more information regarding this proposed franchise fee, you may call the City of Shakopee at 952-445-3650 or access the city's web site: www.ci.shakopee.mn.com ~"' Prir~ted on recycled paper with soy Ink "-41' 60~'u recycled and 30% post consumer waste 1999 RelicHlt Energy CO-2709 OFFICIAL PROCEEDINGS OF THE CITY COUNCIL REGULAR SESSION SHAKOPEE,MUNNESOTA SEPTEMBER 5, 2000 The meeting was called to order at 7:00 p.m. with Council members Morke, Link, Amundson, Sweeney and Mayor Brekke present. Also present: Bruce Loney, Public Works Director; Judith S. Cox, City Clerk; R. Michael Leek, Community Development Director; Jim Thomson, City Attorney; Mark McQuillan, Natural Resources Director; Gregg Voxland, Finance Director; Tracy Coenen, Management Assistant; and Dan Hughes, Police Chief The pledge of allegiance was recited. The following item was added to the agenda. 15.D.5 Surplus property disposal for the Police Department; 15.F. 6. Exemption for Lawful Gambling License for Big Dreams, and 15.EA- Hiring of another Tech. II for the Engineering Department. Link! Amundson moved to approve the agenda as modified. Motion carried unanimously_ The Mayor reported this evening that the agenda was very full and there was a full audience. Most of the audience was here for the proposed franchise fee ordinance. He hoped for a full and productive discussion on the franchise fee ordinance. The following items were added to the Consent Agenda. 15.D.5 Surplus property disposal for the Police Department; 15.EA. Hiring of another Tech. II for the Engineering Department, and15.F. 6. Exemption of Lawful Gambling License for Big Dreams. Sweeney/Morke moved to approve the Consent Agenda as modified. Motion carried unanimously. Mayor Brekke asked if there were any citizens present in the audience who wished to address any item not on the agenda. There was no response. Sweeneyl Amundson moved to approve the meeting minutes for July 5, 2000. Motion carried unanimously. Link/Sweeney moved to approve the bills in the amount of$694,365.88. In this amount were various refunds, returns, and pass throughs in the amount of $162, 156.94. The actual net expense amount is $532,208.94. (Motion carried under the Consent Agenda.) Mayor Brekke stated how he wanted to proceed with the information meeting of the franchise fee ordinance this evening. First there would be a presentation from Jim Strommen, attorney from Kennedy and Gravin, working with the City on the issues surrounding the franchise fee ordinance. There will be questions from the Council directed to Mr. Stommen. Following these questions to Mr. Stommen and any of the representatives he has, there will be public input taken from the audience. Official Proceedings of the Shakopee City Council September 5, 2000 Page 2 Mr. Strommen, attorney with Kennedy and Gravin, approached the podium and gave a presentation to the Council. He had been asked to advise the Council on gas and electric utilities franchise matters. The Council has the authority to propose a franchise ordinance for the purpose of reallocating utilities fees. Right now these utilities fees are only paid by Shakopee Public Utilities (SPUC) in the fonn of a contribution. A franchise is a special privilege granted by a city to a public utility to serve and use public right-of-way to serve the citizens. The City of Shakopee is served by four utilities. Three are electric utilities and the fourth utility is one public utility serving gas. Only electric utilities are assigned service territories under state law. The City has different franchise authority over each utility. Xcel Energy (NSP) and Reliant Energy Minnegasco are investor owned utilities and the City has direct franchise authority including franchise fee authority over these utilities. However, the rates and services of Xcel and Reliant are regulated by the Minnesota Public Utilities Commission. Minnesota Valley Electric Cooperative is a cooperative and their rates and services are regulated by the members. The City does have franchise authority over Minnesota Valley Electric Cooperative (MVEC) and they are charged a fee. SPUC is a municipal utility whose rates and services are regulated by a three- person commission appointed by the Council. There is no franchise authority between the City and its municipal utility. The municipal utility is subject to the right-of-way ordinance. Currently Xcel and MVEC are operating in the City without a franchise. Reliant has a franchise at this time, but the franchise expires in 200S. Reliant has agreed to enter into negotiations for a new franchise. SPUC is not required to have a franchise in the City of Shakopee. The franchise fees are for the privilege of using the right-of-way and servicing customers. Only SPUC is paying for the use of the right-of-way at this time in the form of a contribution to the City. They are paying a percentage of gross revenue. This contribution goes into the general fund to help pay for City services across the entire City. Earlier this year Council directed staff to pursue the franchise authority and to look at reallocating SPUC's contribution equally among all utilities. The City retained a rate consultant, Dahlen Berg, to examine options for rate implementation. In attendance at the meeting to answer any questions regarding rates is Mr. Allen Barsch. There was an analysis done to determine the equal percentage of SPU contributions distributed equally among all four utilities. In July a letter was sent to representatives of all four utilities. MVEC has returned a letter with minor comments; Reliant/Minnegasco has reviewed this letter but has asked for more time to comment. ReliantlMinnegasco are concerned about the issue of Bypass. NSP has objected to many terms in the franchise as well as objecting to the fee. NSP pointed out they pay taxes and SPUC does not. Rahr Malting objects to its increase in expenses that would result from a franchise fee. The issue of deregulation is relevant and will be taken up in the legislature in 200 I. There is no recommendation this evening, this only an infonnational meeting to hear views. The franchise fee and franchise document are separable. One can be acted upon without the other. The right-of-way ordinance is a freestanding ordinance that is applicable to all utilities operating in the City. Mayor Brekke stated that he had not been involved with this issue prior to this evening based on advise from the City Attorney because of his job relationship with one of the utilities. After further analysis of the legal issues there is no financial conflict of interest and, therefore, he has the duty to participate in this process. Official Proceedings of the Shakopee City Council September 5,2000 Page 3 Mayor Brekke said what we are dealing here with tonight is a historical contribution from SPUC (our City owned public utility) of $875,000 to the City's General fund. Where are these dollars going to come from: budget cuts, still come from contributions from SPUC, a franchise fee or from the general levy in the form of taxes. We need to deal with some policy decisions of where this money will come from in a fair and equitable way to generate or not generate these funds. The Council was now asked to direct questions to Mr. Strommen. Cncl. Amundson had a question for Mr. Strommen on the $875,000 contribution by SPUc. How is this number arrived at each year? Mr. Sweeney replied this figure is 23.77 % of gross Margin. Gross margin is revenue minus the cost of purchased electricity. Mr. Strommen added the $875,000 figure is based on a projection at this time. This formula as varied at times but SPUC has always made a contribution to the City general fund. Cncl. Morke wanted to know the reason this change is proposed now. Many years ago there was an attempt to get into a franchise agreement by the City of Shakopee with NSP and that franchise fee met with strong opposition by NSP and by the large industries which continue to purchase power from NSP not SPUc. The currently proposed franchise fee is an attempt to equal out the monies for services between the utilities. The $875,000 comes from all classes of customers, residential, commercial, industrial, etc. Mayor Brekke would like this figure broken down into which customers use what amount so the Council could use that information, when they make a decision on the franchise fee issue. Public Utilities can provide this information. Cncl. Link asked if Western Gas was a utility in the City of Shako pee. Mr. Strommen said it appears Western Gas is not a distribution Company operating in the City of Shakopee. There are contractors for Rahr Malting. Won't this be passed on to the customer? According to Mr. Sweeney, right now it is the residential customers who are primarily paying this 23.77%. According to Mayor Brekke, SPUC is purchasing their power from Great River Energies. He clarified Great River Energies is a cooperative owned by 29 electric cooperatives and MVEC is one of the owners. This franchise fee would have a positive impact on SPUC's rates and a commitment from SPUC needs to be made that they will adjust their rates to the residents before a decision is made. This is a question of distribution. Mayor Brekke stated this is a public information meeting and the audience was now given a turn to express their comments and ask questions. Rogers Behrens, attorney with Faegre and Benson, representing Rahr Malting and speaking for many other customers of electric companies and other businesses, approached the podium and addressed the Council on the utility franchise fee. The Council is proposing to add a fee when the government is already concerned about the burden of the high cost of natural gas and is repealing Official Proceedings of the Shakopee City Council September 5,2000 Page 4 some of their taxes. Energy costs are going up. The 2.71 % increase created by the franchise fee on natural gas and electricity could severely impact Shakopee business. This fee could stagnate the growth of business in Shakopee; then taxes would be affected. 50% of this fee would be paid by six businesses in Shakopee. Another argument used by the utility companies is that they pay taxes and this additional fee would be unfair to them because SPUC pays no taxes. Cncl. Morke said Excel Energy is asking the legislature to give them a tax-free status. Cncl. Sweeney questioned Mr. Behrens on a couple of the numbers. Pat Klein, manager of community government relations for Excel Energy in this area, approached the podium. Excel Energy has submitted a letter to Mark McNeill stating their position on the franchise fee. According to Pat Klein, the City has the right to impose the fee. He did hope there would be another way to impose the franchise fee rather than impose it on the gross earnings. Excel energy did make available to Mark McNeill the breakdown of numbers by revenue class. If the 2.71 % franchise fee is imposed Excel Energy could very well be put in a non-competitive state when the electric utilities are deregulated. Excel has a very small service area in Shakopee_ He would like the City to get together with the large utilities and discuss this issue. Excel Energy is willing to negotiate_ Mayor Brekke questioned Mr. Klein on Excel's peaking plant that is located in Shakopee. This probably is the largest percentage in the cost of their taxes. Mayor Brekke also wanted to know the geographic area that this peaking plant services. Russ Bartol, General Manager of Anchor Glass, approached the podium and said Anchor Glass was not in favor of the franchise fee. He felt this franchise fee was unfair and inequitable. He wanted to know what the money generated from the franchise fee was going to be used for. Mayor Brekke addressed Mr. Bartol's question as to want the money in the general fund generated by the franchise fee would be used for. This would be used for general governmental purposes i.e. police officers, firemen, snow plowing, etc. This is just a replacement for all the money that SPUC is contributing. Ron Jabbs, community relation's specialist for Minnesota Valley Electric Coop (MVEC) brought along Tom Graham, Chair of the Public Relations and Legislative Committee for MVEC Board of Directors, and approached the podium to address the Council. MVEC met with staff in regards to the franchise fee and the ordinance; they want to work with the City on the finer details of the franchise fee and ordinance. Tom Graham, MVEC board member read the resolution the MVEC board developed because this presented their position on the franchise fee. Copies were distributed to all council members. This franchise fee can be a win-win situation for all. They want everyone to have a fair opportunity. Mr. Michaletti, Representative of Rahr Malting Company, approached the podium and addressed the Council on Rahr Malting Company's opposition to the franchise fee. He submitted a letter from the union representing Rah Malting that stated the union's opposition to the franchise fee. Official Proceedings of the Shakopee City Council This is not fair and not equitable. September 5,2000 Page 5 Larry Farrell, 2093 Austin Circle and union president local 129 representing Anchor Glass, approached the podium and addressed the Council. He felt this franchise fee would come back to the residents. Anchor Glass needs to be competitive. Connie Hargest, Reliant Energy, approached the podium to reiterate a few points of Pat Klein from Excel Energy. The franchise fee would be an additional cost to the customers as well as the increase in natural gas. She felt this was a regressive tax. This franchise fee will impact their customers significantly. However, Reliant Energy will support the Council if they decide to implement a franchise fee in some way. Lou Van Hout, Utility Manager of Shakopee Utilities, was not aware of many of the details of the franchise fee. Some issues have merit and need to be addressed. We do not have a generating plant here. We buy our power from Great River Energy. SPUC's property taxes are in our rates. We are paying our fair share. He would like to compare SPUC's equipment with NSP's equipment piece by piece. Lou Van Hout felt this was a relevant comparison to make. He felt the franchise fee had been negotiated already. Pat Klein had a concern about SPUC making improvements and increasing their gro\Nth at the expense of the other utility companies. He was uncertain about Mr. Van Hout's comment regarding NSP' s property taxes being included in NSP rates. They would be adamantly opposed to a franchise fee if it were intended to make improvements to SPUc. Mayor Brekke wanted the services performed by the City (police, fire, public works) spread as equitably among the users of these City services as possible. He is concerned about the balance between the pay for the services and the services used. The franchise fee proposal needs work. He wanted this issue put on the table. Cncl. Sweeney felt perhaps when the written comments were received regarding the franchise fee, then that would be a good time to discuss, look at options and collect the information that Mayor Brekke indicated would be important to collect. He was not sure that you could equate the number of dollars in taxes paid by the utilities to the contribution of SPUc. He felt this evening was not a good time to try and figure out how to equate the franchise fee. Cncl. Sweeney wanted to direct staff to look into the information requested and then come back for discussion when that information is available. Mayor Brekke felt more options on the table were needed. Perhaps a ceiling on the franchise fee percentage. Cncl. Amundson said in the present form she could not support this franchise fee. She felt the City was raising money at the expense of a few utilities. She did have a few questions and she did not like the percentage of gross revenue being the way of calculating the fee. She could support this if we were moving toward deregulation. Official Proceedings of the Shakopee City Council September 5,2000 Page 6 Cnd. Morke said he would see an increase in his utility bill with this franchise fee. We need to see what is going to happen here. This does not need to be determined this evening. He was not comfortable why this change needed to take place at all. Cnd. Link wanted the City to watch what they did to the large electric users in the City. Mayor Brekke wanted the cultural, historical and social value of a business in the community examined also. Mayor Brekke stated that the Shakopee Public Utilities is a separate entity from the City. They are owned by the City but are run and managed by a three-member board of commissioners that are appointed by the City Council to a three-year term. Cncl. Sweeney pointed out that many City's have municipal utilities, however most of those utilities are run by the City Council. Mr. Strommen commended the City on all of the work they had done towards this franchise fee issue. This franchise fee is not a way for the City to make money; it is a re-allocation of the money SPUC has been contributing for some time. Mr. Farrell, Anchor Glass, directed a question to Cncl. Sweeney. He was concerned about the number of people working for certain companies. Rick Reick, 1015 Jackson Street, employed by Rahr, approached the podium and addressed the Council. He wanted the Council to watch the tax base of commercial and industrial users. Just make sure what you do is fair to all. Mayor Brekke said the City needed to certify their maximum levy to the County Auditor by September 15th. This $875,000 figure is part of that picture. SPUC has been relied upon for this figure for a number of years. We will go ahead with the budget and assume no change for the 2001 budget. Perhaps there will be an implementation of a franchise fee in time for the 2002 budget. Cncl. Sweeney stated the City could request from SPUC a contribution of $875,000 or City services totaling $875,000 can be cut from the budget. Mayor Brekke wanted everyone to understand that $875,000 is anticipated in the budget and if it is not coming in, then the City needs to make some cuts. Cncl. Morke was unclear. Is this $875,000 going away after all this time. He was informed by Cncl. Sweeney that SPUC informed him that they would pay a maximum of $725,000 of electric revenues plus for water revenues_ Mayor Brekke stated that the Council needed to follow this meeting up with communications with SPUC as to their expectations of a contribution to the City in terms of the budget. Their Official Proceedings of the Shakopee City Council September 5,2000 Page 7 expectations of a contribution will affect the rate changes that they make. By next year, perhaps we will have a more fair franchise fee proposal. The long-term decision of the franchise fee needs to be fair to all. Staff will evaluate the options and ideas available to see how equitability can be achieved. Mayor Brekke thanked the audience for a respectful exchange of information this evening. A recess was taken at 9: 15 p. m. The meeting was re-convened at 9:25 p.m. Michael Leek, Community Development director, approached the podium and reported to the Council on the Preliminary Plat of Pheasant Run 6th addition, located north of Valley View Road, east of CSAH 17, and south of 17th Avenue. This preliminary plat includes 10 acres that have been reserved or the community park on the north side. This plat includes six acres for park dedication requirements. The engineering department recommended that Teal Street be connected east to west. In the originally submitted plat this street was not connected_ With this street connection, two lots north of the connection will be acquired for purposes of a neighborhood park. The recommendation of the Planning Commission was to make this street connection. If the street connection were made then land for a neighborhood park would need to be acquired by purchase from the developer. The proposed plat is approximately 160 single-family residential lots. These single-family homes would be similar in character to what is now in the present Pheasant Run Additions. There are some modifications to the preliminary plat of Pheasant Run 6th Addition; there will be sidewalks and sidewalk connections, trails and a neighborhood park along with a community park. There are three additional conditions attached to the preliminary plat of Pheasant Run 6th Addition from the Planning Commission. These additional conditions are: that outlot B be deeded to the adjacent property owner to the east. The Planning Commission requested that the language be inserted pertaining to SPUC of the water supply when this development comes on line. Thirdly, the Planning Commission recommended that Teal Street be connected. The Planning Commission reviewed the plat at their August 17 meeting. After a public hearing on the preliminary plat, they recommended approval after the three additional conditions were added. Michael Leek wanted to draw the Council's attention to one other condition regarding the drainage to the west to the MnDOT drainage ponds. This storm water drainage requires MnDOT approval and this approval has not been received at this time. If MnDOT does not give their approval on this storm water drainage, then modifications would need to be made to facilitate the storm water drainage to the east. Cncl. Sweeney wanted to know why we needed a discussion with MnDOT on storm water drainage in to the linear pond, which the City has paid $1,200,000 for. Bruce Loney responded to this question. He stated this was one of the conditions that the City agreed to when we signed the agreement with MnDOT for the linear pond construction. Cncl. Morke inquired why the Planning Commission recommended the Teal Street connection. SPUC Transfers to City Electric Water 1999 $782,767 $266,224 2000 $767,207 $562,590 2001 $791,592 $446,723 2002 $542,133 $515,014 2003 $588,326 $534,029 2004 $633,613 $552,638 2005 $708,282 $584,849 2006 $908,980 $677,999