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HomeMy WebLinkAboutCity Council Minutes 10-08-2013 SpecialAdopted Minutes Special Council Meeting October 8, 2013 Deputy Mayor Stein called a Special Meeting of the Plymouth City Council to order at 5:33 p.m. in the Medicine Lake Room, 3400 Plymouth Boulevard, on October 8, 2013. COUNCIL PRESENT: Deputy Mayor Stein, Councilmembers Wosje, Willis, Bildsoe, Johnson, and Prom. ABSENT: Mayor Slavik. STAFF PRESENT: City Manager Callister, Community Development Director Juetten, Public Works Director Cote, and Deputy City Clerk Baird. Franchise Fees City Manager Callister summarized the franchise fee staff report contained in the packet materials. He stated it has become a challenge to fund existing street improvement projects with rising inflation costs. The proposed franchise fee would pay for debt and infrastructure needs. It would also decrease reliance on property taxes for revenue. Other municipalities have enacted franchise fees and have had great success with the program. The City currently charges the utility companies for the use of City right-of-ways by obtaining a right-of-way (ROW) permit. The franchise agreements with Xcel Energy, Wright Hennepin Electric and CenterPoint Energy are currently in place and allow for implementation of a franchise fee with the utilities and adoption of a separate franchise fee ordinance. Staff has successfully negotiated franchise agreements with CenterPoint Energy and Wright Hennepin Electric. Xcel Energy's agreement is close to completion but they oppose a provision in the franchise fee agreement that allows the City to continue charging for ROW permits. The City averages $135,000 in annual ROW permit revenue. If these permits are discontinued, there could be a significant impact on future ROW permit fee revenue allocated to the general fund. Xcel Energy cannot pass on the ROW permit costs to users in the City. Those costs are distributed over their entire customer base in the Midwest. He stated advantages to a franchise fee are it would be a reliable source of revenue, contributions would be collected from tax exempt properties, the fee would assist in maintaining a stable tax rate, and go directly to help reduce the costs of street improvements where major projects are necessary. This would not eliminate special assessments for street projects. The disadvantage would be that it would be unpopular with certain property or user classes. It could be perceived as another form of taxation. Fees would be based on connections and would need to be adjusted periodically for inflation. Adopted Minutes 1 of 3 Special Meeting of October 8, 2013 He explained the franchise fee would be a flat fee per meter. It would be paid by the user on their utility bill. The fee could be for any purpose, however, staff recommends it be focused on street related projects. The fee could be in place 60 days after the utility companies receive their notice. Staff would also recommend that the City buildings, water towers and other City accounts be exempt from the fee. It's estimated that there are 33,500 electric and 28,000 gas connections that would pay the projected $2 per utility per month totaling $2 million in revenue. The Council should ultimately decide the fee structure and where revenues should go. He stated in regards to the proposed Vicksburg and Peony Lane projects, staff is suggesting either a property tax levy of 4.2% increase in 2015 or franchise fees to help cover the costs. There are only a few homes that have direct access to Vicksburg Lane. Therefore, special assessments will be limited in revenue for these projects. If there are no increased levies, or franchise fees, in 10 to 15 years the City will have a negative cash balance. Councilmember Willis stated that it is not fair to keep charging the same individuals that have already been assessed over the years. Councilmember Wosje asked what the projected cash balance gap will be. City Manager Callister replied $500,000 to $800,000 per year between revenue and spending. Public Works Director Cote added there are projects in the CIP that are driving the numbers, but there are other projects that will be coming that are not in the CIP including upcoming projects of County Road 47 or Interstate 494 expansion. Public Works Director Cote stated the Peony Lane project is estimated to cost $12.8 million in 2014 which is based on engineering estimates. The City would have to fund the project if the state could not. Other edge mill overlay road projects would not be affected. They are self funded with special assessments. Also, the entire state aid allocation was not used this past year and funds were set aside. He stated the Vicksburg Lane project will be a two-year construction project and inflation could play a factor in the $19.4 million cost estimate. Revenues are projected to be $17 million to complete this project with $8.5 million from state aid funding and $8.875 million from the issuance of bonds with repayment from a 4.2% increase in the tax levy or a franchise fee. The bonds could be issued in both years, however interest rates are rising. Staff is proposing to bid and start construction in 2015. Bonds would be issued within two to three months of that time. Agreements would be in place before bringing back to Council. Councilmember Bildsoe stated that there is a constant need for revenues to repair roads. The franchise fee could always be used for these two projects and then go back to special projects if necessary. He supports the proposed $2 franchise fee with a two year review. Councilmember Wosje agreed. Deputy Mayor Stein stated he supports a ROW permit fee and the franchise fee. Adopted Minutes 2 of 3 Special Meeting of October 8, 2013 Councilmember Johnson stated she supports the proposed franchise fee but then eliminate the ROW permit fee. Councilmember Prom stated he supports the proposed franchise fee as long as it assists in reducing the taxes. He requested the City communicate this information to the residents. Councilmember Willis stated he supports the franchise fee; however, he believes the projects will cost more and would support a higher franchise fee if necessary. Council directed staff to proceed with the $2 per month, per utility franchise fee effective the first quarter of 2014 which would be formally adopted at a future Council meeting. The Council also requested an educational piece be inserted in the City's newsletter before it goes into effect. Set Future Study Sessions The Council confirmed/scheduled the following study sessions: 1. November 5 at 8:00 p.m., time change for the budget study session. 2. November 19 at 4:30 p.m. to tour the Adult Correctional Facility. 3. December 3 at 6:00 p.m. for Board & Commission interviews. Adiournment The meeting adjourned at 6:55 p.m. Adopted Minutes 3 of 3 Special Meeting of October 8, 2013