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CITY OF NEW BRIGHTON REQUEST FOR COUNCIL CONSIDERATION Agenda Section: VI11-1 Report Number: 00-273 Report Date: November 14, 2000 ITEM DESCRIPTION: CONSIDERATION OF UTILITY FRANCHISE FEE DEPT. HEAD'S APPROVAL: MANAGER'S REVIEW/RECOMMENDATION: No comments to supplement this report Comments attached EXPLANATION: At the City Council's October 10, 2000 meeting, a public discussion was initiated regarding the potential implementation of a utility franchise fee for Xcel Energy's use of the City's rights-of-way. The City Council initiated and proceeded through a series of public informational meetings to discuss the franchise fee concept with the general public. The City Council also discussed this matter further at its October 24'" meeting. Pusuant to the schedule, the Council has indicated its intent to decide on this matter at its meeting on November 14. Most of the feedback received during the public discussion was against the implementation of the franchise fee. The reasons for these opinions were numerous, but in large part pertained to simply the change in how the city derives revenues for its general operations. A prominent theme within these discussions was the desire to continue to use the property tax for generating the revenues necessary for general use operations. Based on the negative input received and Council feedback during this public discussion period, it appears that it is not timely to consider the implementation of a utility franchise fee. One of the existing trends within our municipal budget is the increasing reliance on the property tax for financing general municipal operations. Staff also believes there is an increasing sensitivity to any increase in the property tax levy. These budget pressures require an ongoing effort to consider various alternatives in order to remain sensitive to these community concerns. Unless current service levels are changed or modified in some manner, increasing costs for the delivery of public services will require that the City consider appropriate financing mechanisms, including raising the property tax levy. The City should continue to consider possible alternative non -levy revenue sources in order to reduce the ongoing reliance on the general property tax. The Council may want to consider a specific project to more formally consider alternative non -property tax levy revenue sources that might be considered within the 2002 budgetary process. This effort might include the establishment and use of a Citizen Task force to assist in the review of possible alternatives in order to keep in mind community sensitivities. RECOMMENDATION: THE STAFF RECOMMENDS THAT THE FRANCHISE FEE NOT BE IMPLEMENTED AT THE CURRENT TIME BUT THE CITY COUNCIL INITIATE AN EFFORT TO REVIEW AND EXPLORE POSSIBLE OPTIONS REGARDING ALTERNATIVE NON -LEVY REVENUE SOURCES AND/OR SERVICE LEVEL CHANGES THAT WILL ASSIST IN REDUCING THE PRESSURE ON FUTURE PROPERTY TAX LEVIES. Mad Fulton, City Manager I:\SHARED\COUNCIL\REPORTS\2000\Utility Franchise Feempd