Loading...
HomeMy WebLinkAbout15.F.8. SXcel Energy-Blue Lake Generating Plant Tax Considerations IS: ~ f?, SHAKOPEE Memorandum TO: Mayor and City Council FROM: Mark McNeill, City Administrator SUBJECT: Xcel Energy - Blue Lake Generating Plant Tax Considerations DATE: April 30, 2004 INTRODUCTION: The purpose of this agenda item is to bring the Council up to date on negotiations between Xcel Energy, Scott County, and the City, regarding tax consideration for improvements being made by Xcel at the Blue Lake Peaking Plant in eastern Shakopee, and to request concurrence. BACKGROUND: Xcel Energy currently has a commitment to increase the ability to generate additional electrical power during peak use times (primarily hot summer use periods) at the Blue Lake Plant in eastern Shakopee. The Blue Lake Plant is located across U.S. 169 from the Southbridge Subdivision. Since it was constructed in the 1960's, four oil-fired turbines have powered the generators. Because of the need for more peak load capacity, Xcel is proposing to replace those oil-fired turbines with two more efficient natural gas-fired turbines, although the oil-fired turbines would remain in place and not be taken offline entirely. Also involved with the addition at the plant is the need to locate a 16" natural gas pipeline, to come through Jackson Township and the City of Shakopee mostly along existing rights of way. The Environmental Quality Board has public hearings scheduled for May 10th and May 1 ih at both City Hall and the Scott County Courthouse to consider environmental issues. CONSIDERATIONS: Xcel Energy approached the State Legislature to have the new generators exempted from the personal property tax under a policy passed by the state legislature in 1994. By their figures, Scott County currently receives $113,000 a year from property taxes, and the City of Shakopee $100,000 per year. With the addition, Scott County would receive an additional $70,000 per year, and the City of Shakopee $45,000 per year from the improvements. Those would be in perpetuity, but subject to changes in taxation rates. Like other new generating projects built since 1994, Xcel Energy approached both jurisdictions asking if the City and County would support a bill at the legislature that would exempt them from personal property taxes on the new generators. Both the City and County recognize the environmental advantages of having the gas-fired turbines, but had concerns about the financial impacts. What we countered to Xcel was to determine a series of up front payments to help with some immediate financial needs for both the City and County (the acquisition of parkland), in exchange for the ongoing taxation. Over the past several weeks, negotiations have proceeded. The most recent proposal from Xcel Energy is as follows: The City would receive $504,000 per year for each of the next five years, beginning in taxes payable 2006. The total payments to be received - $2.52 million. The County would receive $542,000 per year for each of the next five years, beginning in taxes payable 2006. Total payments to be $2.7 million. "" The City and County's payments differ, proportionate to the amount of property taxes that each would normally receive. Note that negotiations are continuing. In concept, staff from both the City and County feel that monies from this arrangement should go towards the purchase of park property - Scott County has negotiated the purchase of land in southern Scott County for a County park; the City has 3 potential large park sites in eastern Shakopee that would benefit from this funding. AGREEMENT: The advantages of the proposal are as follows: 1. Xcel Energy will make the City and County whole in that the "net present value" being paid over five years would equal what would have been received normally in personal property tax payments on the new generators over twenty years. 2. The payments would be identified as a "host fee". 3. It allows Xcel Energy to meet peaking capacity requirements in a timely manner. 4. It helps to address pressing needs for parkland acquisition and development for the City and County. S. The project will require little or no additional city services or costs. 6. The 2006 payment will be made earlier than when the generators would be fully taxable. These concepts will be part of the omnibus Tax Bill being considered by the legislature. There is a possibility that there will not be a tax bill coming out of the legislature this year (it being a "off year"), and if so, this discussion would be moot for thisyear. However, if the Tax Bill does take place, the legislators who are involved with this bill would like an agreement between the City, County, and Xcel Energy that this concept is agreeable to all. RECOMMENDATION: I recommend that Council concur with the negotiated points. ACTION REQUIRED: If the Council concurs, it should, by motion, direct staff to continue to negotiate, but to otherwise endorse the concept as presented. 1~~~ Mark McNeill City Administrator Mj\1:th