2023.05.09 CC Packet - Laserfiche WebLink

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Council Worksession April 25, 2023 5:00 pm Present: Mayor Kari Niedfeldt-Thomas Councilmember Abdullahi Abdulle Councilmember Graeme Allen Councilmember Emily Dunsworth Absent: Councilmember Pam Axberg Staff in Attendance: Devin Massopust, Craig Schlichting, Gina Foschi Guests in Attendance: Michael Wilhelmy, Xcel Energy Xcel Franchise Fees Massopust explained Director Schlichting would do the bulk of the presentation on franchise fees, along with Director Foschi. He noted Michael Wilhelmy from Xcel Energy was also in attendance. Schlichting stated the purpose of a franchise fee is to grant Xcel Energy permission to construct, operate, repair and maintain a gas and electric distribution utility in the public ways and public grounds of the City. Xcel Energy is the sole provider of natural gas and electricity in the City. Their gas and electric utility s ystems occupy an estimated 84 acres of City street right-of-way and they benefit from the all-weather access afforded by the City streets that are repaired and maintained by the City taxpayers. The benefit of franchise fees to pay for City services versus property taxes is franchise fees are paid by all Xcel Energy customers. Non-profits such as churches, local governments, and school districts do not pay property taxes, yet use and receive services provided by the City. Michael Wilhelmy, Community Relations Manager for Xcel Energy, commented on how Xcel views demand and non-demand users. He stated if users have a backup power source, they receive a better rate from Xcel. Schlichting reported in November of 2015 the City Council updated gas and electric franchise fees to be based on use (per kW or Therm). This agreement expired in 2022 with an administrative extension by Xcel for coverage in 2023. Staff noted a new agreement had to be put in place by June of 2023. The City recommended a change in rate structure to provide for additional funding to address Climate Action Plan initiatives. It was noted agreements indicate that future rates collected can be addressed on an annual basis. Staff commented further on the proposed franchise fees for gas and electric and requested feedback from the Council on how to proceed. Mayor Niedfeldt-Thomas asked why the franchise fee rates have not been adjusted since 2015. Schlichting reported this was a City decision and the funds collected were meeting the City’s needs. He explained because the contract had expired, the City was now taking a look at the fees being collected. Mr. Wilhelmy stated City’s do not adjust their franchise fees very often.