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HomeMy WebLinkAbout15.F.3. Xcel Energy Host Fee Agreement 15.f.3, CITY OF SHAKOPEE CONSENT Memorandum TO: Mayor and City Council FROM: Mark McNeill, City Administrator SUBJECT: Xcel Energy Host Fee Agreement DATE: March 25, 2005 INTRODUCTION: The Council is asked to authorize entering into an agreement with Xcel Energy (Xcel) for a "host fee" payment (payment in lieu oftaxes) for recent improvements to the Blue Lake Peaking Generating Plant in eastern Shakopee. BACKGROUND: For more than a year, Scott County, Xcel Energy, and the City of Shakopee have been negotiating a change in tax considerations for improvements which are currently underway at the Blue Lake Peaking Plant, located across U.S. 169 from the Southbridge development.- Xcel needs to make improvements to the plant to increase their ability to generate additional electrical power. It is adding two 160 megawatt natural gas-fired generators, which will produce fewer pollutants than the oil fired generators which are currently in place. In addition to the generators, a high pressure natural gas pipeline is being installed through Shakopee. There are also related substation and transmission line additions. This year, Xcel has had introduced a special law at the Minnesota Legislature that would exempt the new generators at the Plant from the payment of personal property taxes. This legislation is not without precedent - other electrical generation facilities which have recently been constructed throughout the State have been granted an exemption by the Legislature. As part of exemption, Xcel will make "host fee" payments to Scott County and to the City. The host fee payments are determined by the State's estimated tax of market value of the installed generating equipment. Personal property taxes that would have been payable on estimated taxable market value will form the basis of the host fee. The estimated taxable market value of this equipment is $60 million. The host fee based on this valuation is $364,000 per year, shared proportionally between Scott County ($189,000) and the City ($175,000). The exact host fee amount will be calculated after the State has assessed the new generating equipment; the host fee will increase or decrease, should the assessment exceed or fall below the estimated $60 million. After consideration ofXcel's required and allowed rate of return, and the City and County's desire for an accelerated payment of the host fee, an agreement has been reached regarding the accelerated payment. Through discounting the 20 year cash flow generated by the host fee, the County, City, and Xcel have agreed to five annual payments of$918,500 (again, depending upon the final value of the State's assessment). The annual payments will be split proportionately (with the City's $440,900 totaling $2,204,000 over five years). (The County will receive $2,388,000 over that same five year period). The first annual payment will be due May 15, 2006, assuming passage of the law by the Legislature. BUDGET IMPACT: It is recommended that the City's money be deposited into the Park Reserve Fund. The Park CIP budget has anticipated these monies, and will be used for replenishing the fund for the purchase of park properties, and development of various parks already owned. RECOMMENDATION: I recommend that the City authorize entering into the Host Fee Agreement with Xcel Energy. .\ ACTION REQUIRED: If the Council concurs, it should, by motion, authorize entering into the Host Fee Agreement (attached) with Xcel Energy and Scott County for payments in lieu of personal property taxes. 1UQ.Uw.wr Mark McNeill City Administrator MM:th HOST FEE AGREEMENT THIS HOST FEE AGREEMENT ("Agreement") is made and entered into this _ day of , 2005, by and between the County of Scott (hereinafter referred to as the "County"), the City of Shakopee (hereinafter referred to as the "City"), bodies corporate and politic existing under the laws of the State of Minnesota and - Northern States Power Company, d/b/a Xcel Energy, a Minnesota corporation, hereinafter referred to as "Xcel Energy." WITNESSETH: WHEREAS, the County and the City are the taxing authorities within their respective jurisdictions; WHEREAS, Xcel Energy is the owner of the Blue Lake Peaking Generating Plant (the "Plant") located within the City of Shakopee, which is currently assessed personal property taxes by both the County and the City; WHEREAS, Xcel Energy wishes to make improvements to the Plant to increase the ability to generate additional electrical power during peak use periods. Said improvements include adding two new 160-megawatt natural gas-fired generators, a high pressure natural gas line, and related substation and transmission line infrastructure. The existing oil-fired generators will remain in place. WHEREAS, the improvements to the Plant would result in increased personal property taxes due to the County and the City. WHEREAS, the County and the City recognize the environmental benefits to be realized from more efficient, cleaner burning generators. NOW THEREFORE, in consideration of the mutual promises and agreements herein, the parties do agree as follows: 1. The County and City shall support enactment of State legislation to exempt the new generators at the Plant from personal property taxes. 2. If such legislation is enacted by the legislature, Xcel Energy shall pay host fees on the two aforementioned generators and attached personal property, in lieu of personal property taxes thereon, to the County and the City as follows: $918,500.00 to be split proportionately between Scott County and the City of Shakopee per the normal property tax distribution ($477,600.00 to the County and $440,900.00 to the City) for each of the five (5) years beginning January 1, 2006, and ending in December 31, 2010. No additional personal property tax payments will be required by either the City or County on the two aforementioned generators and attached personal property after 2010. In addition, if said property taxes are determined to be lower or higher based on the actual final cost of the generators, payments after 2006 will be adjusted accordingly with approval of both parties. Said payments of $918,500.00 (or adjusted payments) shall be dueJon May 15 for the years 2006, 2007,. and 2008. Said payments (or adjusted payments) of $918,500.00 shall be due on October 15 for the years 2009 and 2010. 3. The personal property taxes on all other Xcel Energy electric and gas infrastructure in the County and in the City shall be assessed according to law, during and after the five (5) year period referenced in paragraph 2 above, including any additional or new plant capacity subject to personal property tax assessment unless exempted by a separate agreement. 4. This Agreement shall be effective as of the date first entered above. If the legislation referred to in paragraph 1 above is passed, this Agreement shall terminate on December 31, 2010. If such legislation is not passed, then this Agreement shall have no legal effect. 5. Pursuant to Minn. Stat. Section 16C.05, subd. 5, the books, records, documents, and accounting procedures and practices of Xcel Energy solely related.to this Agreement shall be subject to examination by the City, County and the State Auditor. Complete and accurate records of the work performed for the improvements to the Plant as described above shall be kept by Xcel Energy for a minimum of six (6) years following termination of this Agreement for such auditing purposes. The retention period shall be automatically extended during the course of any administrative or judicial action involving the County or City regarding matters to which the records are relevant. The retention period shall be automatically extended until the administrative or judicial action is finally completed or until the authorized agent of the County or City notifies Xcel Energy in writing that the records need no longer be kept. 6. This Agreement and all rights and obligations of the parties hereunder shall be governed by, and construed and interpreted under, the laws of the State of Minnesota. 7. The County, the City and Xcel Energy, respectively, bind themselves, their partners, successors, assigns, and legal representatives to the other parties to this Agreement and to the partners, successors, assigns, and legal representatives of the other parties with respect to all covenants of this Agreement. 8. The parties agree that no change or modification to this Agreement, or any attachments hereto, shall have any force or effect unless the change is reduced to writing, dated, and made part of this Agreement. The execution of the change shall be authorized and signed in the same manner as for this Agreement. 9. In the event any provision of this Agreement shall be held invalid and unen- forceable, the remaining provisions shall be valid and binding upon the parties unless such invalidity or non-enforceability would cause the Agreement to fail its purpose. One or more waivers by a party of any provision, term, condition or covenant shall not be construed by another party as a waiver of a subsequent breach of the same by a party. 10. It is understood and agreed that the entire agreement of the parties is contained herein and that this Agreement supersedes all oral agreements and negotiations between the parties relating to the subject matter hereof as well as any previous agreements presently in effect between the County, the City, and Xcel relating to the subject matter hereof. 2 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed, intending to be bound thereby. SCOTT COUNTY By: Attested to: Bob Vogel, Chair David J. Unmacht, County Board of Commissioners Scott County Administrator Dated: ,2005 Dated: ,2005 Approved as to form: Susan K. Mc Nellis Assistant County Attorney CITY OF SHAKO PEE By: By: John Schmitt, Mayor Mark McNeill, City of Shakopee Shakopee City Administrator Dated: ,2005 Dated: ,2005 By: Judy Cox Shakopee City Clerk NORTHERN STATES POWER COMPANY d/b/a/ XCEL ENERGY 3 . .l HOST FEE AGREEMENT THIS HOST FEE AGREEMENT ("Agreement") is made and entered into this _ day of , 2005, by and between the County of Scott (hereinafter referred to as the "County"), the City of Shakopee (hereinafter referred to as the "City"), bodies corporate and politic existing under the laws of the State of Minnesota and - Northern States Power Company, d/b/a Xcel Energy, a Minnesota corporation, hereinafter referred to as "Xcel Energy." WITNESSETH: WHEREAS, the County and the City are the taxing authorities within their respective jurisdictions; WHEREAS, Xcel Energy is the owner of the Blue Lake Peaking Generating Plant (the "Plant") located within the City of Shakopee, which is currently assessed personal property taxes by both the County and the City; WHEREAS, Xcel Energy wishes to make improvements to the Plant to increase the ability to generate additional electrical power during peak use periods. Said improvements include adding two new 160-megawatt natural gas-fired generators, a high pressure natural gas line, and related substation and transmission line infrastructure. The existing oil-fired generators will remain in place. WHEREAS, the improvements to the Plant would result in increased personal property taxes due to the County and the City. WHEREAS, the County and the City recognize the environmental benefits to be realized from more efficient, cleaner burning generators. NOW THEREFORE, in consideration of the mutual promises and agreements herein, the parties do agree as follows: 1. The County and City shall support enactment of State legislation to exempt the new generators at the Plant from personal property taxes. 2. If such legislation is enacted by the legislature, Xcel Energy shall pay host fees on the two aforementioned generators and attached personal property, in lieu of personal property taxes thereon, to the County and the City as follows: $918,500.00 to be split proportionately between Scott County and the City of Shakopee per the normal property tax distribution ($477,600.00 to the County and $440,900.00 to the City) for each of the five (5) years beginning January 1, 2006, and ending in December 31,2010. No additional personal property tax payments will be required by either the City or County on the two aforementioned generators and attached personal property after 2010. In addition, if said property taxes are determined to be lower or higher based on the actual final cost of the generators, payments after 2006 will be adjusted accordingly with approval of both parties. Said payments of $918,500.00 (or adjusted payments) shall be due on May 15 for the years 2006, 2007, and 2008. Said payments (or adjusted payments) of $918,500.00 shall be due on October 15 for the years 2009 and 2010. ~ '- 3. The personal property taxes on all other Xcel Energy electric and gas infrastructure in the County and in the City shall be assessed according to law, during and after the five (5) year period referenced in paragraph 2 above, including any additional or new plant capacity subject to personal property tax assessment unless exempted by a separate agreement. 4. This Agreement shall be effective as of the date first entered above. If the legislation referred to in paragraph 1 above is passed, this Agreement shall terminate on December 31, 2010. If such legislation is not passed, then this Agreement shall have no legal effect. 5. Pursuant to Minn. Stat. Section 16C.05, subd. 5,the books, records, documents, and accounting procedures and practices of Xcel Energy solely related to this Agreement shall be subject to examination by the City, County and the State Auditor. Complete and accurate records of the work performed for the improvements to the PI,ant as described above shall be kept by Xcel Energy for a minimum of six (6) years following termination of this Agreement for such auditing purposes. The retention period shall be automatically extended during the course of any administrative or judicial action involving the County or City regarding matters to which the records are relevant. The retention period shall be automatically extended until the administrative or judicial action is finally completed or until the authorized agent of the County or City notifies Xcel Energy in writing that the records need no longer be kept. 6. This Agreement and all rights and obligations of the parties hereunder shall be governed by, and construed and interpreted under, the laws of the State of Minnesota. 7. The County, the City and Xcel Energy, respectively, bind themselves, their partners, successors, assigns, and legal representatives to the other parties to this Agreement and to the partners, successors, assigns, and legal representatives of the other parties with respect to all covenants of this Agreement. 8. The parties agree that no change or modification to this Agreement, or any attachments hereto, shall have any force or effect unless the change is reduced to writing, dated, and made part of this Agreement. The execution of the change shall be authorized and signed in the same manner as for this Agreement. 9. In the event any provision of this Agreement shall be held invalid and unen- forceable, the remaining provisions shall be valid and binding upon the parties unless such invalidity or non-enforceability would cause the Agreement to fail its purpose. One or more waivers by a party of any provision, term, condition or covenant shall not be construed by another party as a waiver of a subsequent breach of the same by a party. 10. It is understood and agreed that the entire agreement of the parties is contained herein and that this Agreement supersedes all oral agreements and negotiations between the parties relating to the subject matter hereof as well as any previous agreements presently in effect between the County, the City, and Xcel relating to the subject matter hereof. 2 . -, IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed, intending to be bound thereby. SCOTT COUNTY By: Attested to: Bob Vogel, Chair David J. Unmacht, County Board of Commissioners Scott County Administrator Dated: ,2005 Dated: ,2005 Approved as to form: Susan K. Mc Nellis Assistant County Attorney CITY OF SHAKOPEE By: By: John Schmitt, Mayor Mark McNeill, City of Shakopee Shakopee City Administrator Dated: ,2005 Dated: ,2005 By: Judy Cox Shakopee City Clerk NORTHERN STATES POWER COMPANY d!b!a! XCEL ENERGY 3