All right, attorney Steve. >> Bob Voss, Kennedy & Graven. >> Fuel goal. >> All right, it's uh 6:30. And so we're going to call the City Council workshop for the City of Lake Elmo, October 8th, 2024 in session. And our uh item on uh this evening's agenda is franchise fees. I'm going to turn it over to Clarissa, finance director, lead off with this. >> Thank you, Mayor and Council. Um well, as you're aware, we've been working on implementation of franchise fees for gas and electric utilities and our roadways for a number of months. Um we're going to start this discussion first with a quick summary from and any questions we have for attorney Bob Voss. Mr. Voss is Kennedy & Graven's expert in franchise ordinances, among other things, uh with 30 years of experience in this area and has been assisting us with this implementation. Bob does have a hard stop at 6:50 to get to another council meeting, so we just want to keep that in mind as as he um answers questions. So, we'll pass it over to Bob on Zoom. >> Super. Uh Mayor and Council, you can hear me okay? >> Yes, sir. >> Very good. Sounds good. Yeah, Bob Voss, Kennedy & Graven's Sarah's uh colleague. So, um as as um staff has indicated to you, I think uh in the past, um uh we're moving down the road uh in Lake Elmo of having a franchise and having a franchise fee. I understand that that may be a new thing in relation to uh traditional utilities, gas and electric utilities. And so, I was asked to give a little background and sort of what uh utility franchises are. And they are unique animals. They're unique instruments in the world of city um city regulation. Uh they're unique because of this. They're both a contract. They're uh something that we negotiate with the utilities. In this case, Xcel, as I understand it, has both your electric and your gas uh services in a large amount or all of your city. So, they're both a contract uh that we negotiate with Xcel, but they're also something that we enact as an ordinance. Um and and the reason we enact uh franchises as an ordinance is that they contain a lot of regulatory requirements, things that we expect Xcel to do in your community. And if they don't do them, we want from the city side, from the city perspective, we want them to be ordinance requirements that we can enforce against Xcel as ordinance requirements uh with all of the normal uh enforcement tools that we have for ordinances. So, they're unique animals in that they're both contracts and they're ordinances. And um that that's significant uh about them. A little bit about the history of utility franchises um might be useful to you. So, prior to the late 1990s in Minnesota, prior to that time, uh there were no uh uh comprehensive state laws about how utilities could use city right-of-ways, city streets, and other rights-of-ways that cities controlled. There wasn't a comprehensive law that said how utilities could go about doing that. And so, the way cities that wanted to control that, wanted to have regulations with their utilities, the way they would do it is they would do it under their franchises. They would have franchises with the various utilities. This is going back 100 years or more ago. They would have franchises that were again negotiated agreements that would address all of the right-of-way usage issues. Here's how you can dig up our streets, here are the permits you need to pull, here's who you need to talk to, here's what you need to do if we need to relocate your facilities, here's what you have to do when you dig up Mrs. Johnson's yard. All of that was addressed in a franchise, not in an ordinance, not in a local city regulation. And so, that's historically why franchises were very very important to cities. We regulated the use of the right-of-way by utilities under our franchise agreements with those utilities. In the late '90s, the Minnesota legislature sort of frankly caught up to a lot of states around us and passed a law that gave cities comprehensive authority over rights-of-ways and said, "Cities, if you want to regulate your rights-of-ways, you adopt a comprehensive right-of-way ordinance." Lake Elmo has done that, you have done that, many many most cities I think in the metro, many cities around the state of Minnesota have adopted those right-of-way ordinances. They are quite similar across the state. The reason for that is the League of Cities had a model ordinance, model right-of-way ordinance that many cities used, Lake Elmo used. And so, cities across the state now have adopted ordinances that generally regulate the way utilities make access to your rights-of-ways. And so, the importance of franchises in that regard has gone down. And so, now my view of franchises, and I'll tell you what Xcel's view is is in a second, but my view of franchises is that really their value is to sort of interpret state law and your Lake Elmo's right-of-way ordinance, interpret any ambiguities, interpret any holes, as you will, in the state law or in your local ordinance, add to them, interpret them, fill in the gaps. That's really the value at this point of of franchises. The other value that's, I think, the purpose for your your conversation tonight is that unless you have a franchise, unless you have a contract with your utility, you can't impose a franchise fee on the utility. Excuse me. Franchise fees are increasingly common. I I They were not uncommon 50 years ago, but uh many, many more cities now have franchise fees with the various local utilities in their communities. And to have a franchise fee on your utility, you have to have a franchise in place. Uh and so that's the other importance of franchises. I have to say, I'm I'm heading into a meeting tomorrow, uh a quarterly uh the Suburban Rail Authority is one of our clients. It's a group of 30 cities in the metro area. Examples of those cities are Edina, Minnetonka, and Bloomington. So, some big metro area cities that are involved in the Suburban Rail Authority. They're meeting uh tomorrow and one of their topics for conversation, this joint powers group among these 30 cities, one of their topics for conversation is the what I would describe as change in position by Xcel, in particular, regarding franchises and regarding some of the issues that are commonly addressed in franchises. There is a growing, I think, concern among cities, maybe maybe mainly in the metro area where Xcel is predominant, about um some changes in the way Xcel is now uh dealing with its franchise negotiations. I guess it's yet to be seen in Lake whether these issues come up or not. I would say, and I think staff will share with you, you know, Excel has a model franchise document they provided to us. I've redlined it. I've made some changes to it. Our staff has sent it back to the company. It's yet to be seen if any of the issues that we on your side of the table, the staff side of the table, if any of the issues we've raised are going to be issues from them, but I would just say generally there's an increasing concern that Excel is um pushing back on more of the issues that are being raised typically in these franchises. Last comment, I haven't said it yet. Franchises, because of that late '90s law that gave cities authority over right-of-ways, because so many cities adopted nearly the same ordinance, the franchises that interpret the holes in those ordinances or the ambiguities in those ordinances, those franchises have also become very standardized. And so, in your case, uh we've accepted the model franchise from Excel, and we've used that as the starting point, because it is very similar to any other starting point franchise that I might come up with or or someone else might come up with. They're very similar all of the franchises that are you're are you're seeing around the metro area. So, maybe that's kind of a flyover of uh franchises, utility franchises at a high level, and then I'll I'll stop there and and be happy to answer your questions or or talk about things you want to talk about. >> Questions for Bob? I guess I don't have any right off the get-go. You have something, Council member Holtz? >> Thank you for that overview. Um so, just as we're moving through this process, if hypothetically there is additional steps on this, would you and Sarah then be both together reviewing both the model that Excel has for the potential contract and also the best practices that you've seen. Well, we already have an ordinance and then bring that to our staff and that would be the what council would then see to help determine are there additional gaps or things that we need to clarify? So, I'll be honest, it's not my subject matter expertise, so I'm presuming it would it would be coming from you and Sarah to staff to us. >> Yeah, Aaron and council member, it's a great question and I I think I get the question. Um, the way I would intend to proceed and and please council tell me if this is not how you want to do it and tell your staff this is not how you want to do it. There's a lot of stuff that's in the model or the template ordinance franchise ordinance that Xcel has provided to you that has been accepted by many, many, many other cities around the metro area that are not really controversial, I guess I would say. Obviously, we want you to read the document when it comes to you for final approval, but most of the provisions in the document are really not very controversial because they've been through so many city councils and so many negotiations in the past. There are a few issues that I have redlined in or I've changed in the Xcel document [clears throat] that we've now sent back to the company and to the extent there's disagreement about those issues, I guess I would consider those to be the hot button issues that we would intend to inform you about if we can't work them out to the city's benefit through discussions. I mean, it seems to me that if if what I've said in their template document is perfectly acceptable to them and they don't push back on it, I'm not sure we need to point it out to you, but if there's some issue that we have to negotiate with them, I would think you'd want to know about that and you'd want to be informed about a particular contentious issue that we've had to deal with Xcel on and I would intend to inform you through the staff about those issues. >> Sounds appropriate. >> [clears throat] >> Thank you for that. Anyone else? >> Nope. >> Easy peasy. So, um we have also invited Mr. Michael, you might have to correct my pronunciation, Wilhelmy. Okay, from uh he's a community relations with Xcel, and we wanted to also just give him a couple minutes to introduce himself and answer any questions you might have for him regarding franchising with Xcel. I will also just make a quick mention that we do also need to work with CenterPoint. They have just a very, very few um number of uh gas customers in the city, so we have to have a uh sort of a matching um ordinance with them as well. So. >> Uh good evening, Mr. Mayor and council members. Mike Wilhelmy with Xcel Energy. Uh I wouldn't really have anything to add or or quibble with the explanation that you received from your council. Um these franchise agreements are are unique, but they're not uncommon. Uh it's pretty common throughout the metro, throughout Minnesota, that utilities and cities have these agreements. They're just They're simpler. Um It's basically uh we sort of pre-describe and explain how processes will work to to solve problems or challenges if somehow we wouldn't perform as we're supposed to. So, uh they're good for our utility, our business, we believe, and our ability to serve our customers, and good for the city as well, too. So, um I don't see any reason why we shouldn't be able to reach an agreement. Um There There were a couple of the the the one thing I'll I'll mention in particular, um he did mention that uh Xcel Energy was pushing back on agreements with cities. Uh we would we feel the other way. We feel like cities are being much more aggressive in some of their negotiation. Um things that we thought that were not complicated and and simple that cities are are asking to to be removed from agreements. So, again, I don't I we're going to have a a difficulty reaching agreement. >> What would be an example of some of those items? >> I [clears throat] honestly I I think what I take it offline if that's okay, Mr. Mayor. It's not They're not They're They're minor things, but they're important to us. So, I I that's how I describe it. >> Got it. >> Any questions from >> have a I mean in your area where you're a a community uh liaison, most of the communities in our area have franchise fees. Are there any notables that do not? >> Um it it really varies. So, every city is different how it's operated. Um and and cities change over time as well, too, uh how they might choose to do things. Um I am negotiating with one city in particular right now that's never had a franchise uh fee before, but we did have a franchise agreement with them. Um they've chosen to add fees, and we're working that through with them now, and I anticipate that they'll be We'll have action for them soon. Um other cities, they look at uh look at these fees annually. Uh you can come back and look at these fees annually if you wish, and we just have a discussion uh about that as well, too. So, that's something that that cities have the option to do as well, too. Um we have This is the other thing, too, that's important is that we have enough authority in statute to operate, obviously, to serve our customers. Um and you have authority, also, to regulate uh public right-of-way um for the to you know, protect the the the city's interests, as well, too. So, we don't need one. It's just better for all of us if we have one. >> Councilmember votes. Say it down the road 10 years, the council at the time and um Xcel at the time feels there's a need to renegotiate the contract itself, not the fees. Is that usually something where the contract says, "Hey, if you want to, it can happen once a year starting January"? Like, or is it just completely May 20th of any given year, a city reaches out to Xcel and say, "Hey, let's chat"? >> Absolutely. Yeah, Uh, Mr. Mayor, Councilmember, yes. Any Any time you wanted to kind of renegotiate this, we absolutely would be open to a a conversation about it. I would say anything we agree to is going to be the baseline for whatever discussion might happen next. Again, it it they're pretty simple. Um, the agreement there's not a lot there that that um I think either cities or our our our utility would find a reason to really quibble about once we have this in place. >> How how long are the contracts for? Is it a is it a a yearly contract that we do have to renew every year or I guess how does that work? >> Yeah, they're 20-year contracts. >> Okay. >> Um, and and typically they last 20 years. Sometimes cities will will choose and and the utility that they if they want to do something like substantial near the end of the contract and you know, the the base contract that we suggest does change over time a little bit. Um, so we may suggest, if we're like 3 years left on a 20-year agreement, we might ask that the city consider a new franchise, but again, we're talking 15, 17 years down the road. >> Is there kind of a >> Yeah. >> Is there a standard where cities come back and look at the rates? Is it every 2 years, 4 years? Is there kind of an average that Excel's aware of? >> There's absolutely no standard whatsoever, Mayor. Um, some cities look at it annually. I think that's pretty rare. Um, it's probably more common that cities set it and forget it. Um, but you know, there other cities like every 3 to 5 years where they maybe have a emerging public need um a piece of infrastructure or um they want to relieve pressure from the the property tax and they maybe have a different mix of taxable and non-taxable property. So, they might consider franchise fees for those reasons to pull in a different type of taxpayer. Um, the those are reasons and every city, as you might imagine, is organized differently, has a different community. So, they would they would make those decisions for themselves. >> So, maybe you just to kind of help >> Go ahead. >> Sorry. Sorry about that. >> That's right. hear you. >> The exchange there with with Xcel's representative. Just a couple of points there cuz they were great questions. Um you know, uh maybe this highlights a little bit of where we're we're working through um some uh seeing eye to eye issues. So, you know, uh utility franchises have always historically been typically 20 years. They're not required to be. I mean, that's a negotiable point. So, um there are some cities that prefer a 5-year franchise and that's perfectly legal. Uh and it's up to a city to decide how long the franchise you're granting is going to be. As to the idea that Xcel can operate without a franchise, that's incorrect. Uh state law says a city can require a franchise as doing as a as a condition of doing business. No city to my knowledge has done that in the history of Minnesota, but that's what the statute says. Uh and so, um that you know, that's worth at least noting. Um is the case and then um as to um rates and when you might uh periodically change your rates, that's entirely negotiable. Um Xcel uh requires or or asks that you agree that franchise fees be set via a separate ordinance. I know this gets confusing because the franchise that we're sitting here talking about, the instrument we're talking about is itself an ordinance. Xcel asks sort of demands that cities adopt a separate ordinance that establishes the fee. That's not required by law, but that's what they want and most cities agree to that. And that ordinance can be amended um whenever the city agrees, it can be amended. Uh and so, that's a negotiable point as well. So, I just want to be a counterpoint a little bit to what you're hearing from Xcel's representative. >> Is the reason for the the separate ordinance um just to keep it more clean since the the fees are something that are more likely to be negotiated on a year-to-year basis versus some of the other details are probably not going to change. Is that the reason behind wanting to earn this is for Xcel? >> Councilor, exactly correct. >> Okay. >> It's just simpler to change the fee by itself rather than have to go back into the franchise agreement. >> Okay. And so just to understand too, so then cuz again, I mean like I that's good to know that it it doesn't necessarily have to be a 20-year contract. That five or 10 could be worked out as well. But let's say it is a 20-year contract and um 10 years down the road we realize that we have a surplus and we we don't need as much um uh uh taxes or well, franchise fees. Um we would have that ability then each year to if we wanted to, we could do zero dollars of franchise fees. Is that correct? Okay. >> Sure. Yeah, Mayor Mayor Councilor, to be clear about that, I mean, in any given year a city could in theory uh simply cut off franchise fees. Just tell Xcel, "We're not electing to collect them this year. We're waving our right to collect them from you." There there's some administrative hassle with doing that. We'd have There's some timing issue about that. But a city doesn't have to continue collect franchise fees. The concern I will tell you in practice is that of course customers grow accustomed to certain fees added to their bills and having those fees changing continually becomes confusing to customers. So, I think Xcel has an interest in avoiding that. And you as a city of it but in interest in avoid avoiding that. So, but other than that, I mean, the city could change could could eliminate in any given year the franchise fee given the the timing requirements that Xcel Xcel basically has to go to the public utilities commission, the state agency that oversees them, and get permission to make changes to their bills. And that takes a little time. So, anytime they change their bill to a customer, that has to go through a process before that change happens. >> And to that point, excuse me. >> [clears throat] >> Pardon me. Uh to that point, too, the 100% of the fee will be paid to the city. So, our our customers pay this 100% of this, and Xcel Energy collects it, and and all the the city will receive all the money. We don't keep any of it. Yeah? >> Any more questions for Mr. Wilhemy? >> Thank you. >> Thank you. >> And I think Bob has to head out, so I'm just going to say a thank you to Bob Voigt for joining us this evening, and we'll be in touch with him. >> Great. >> [clears throat] >> Thanks, everybody. Have a good night. >> Thank you. >> Thank you. >> Thank you. >> Good night. Bye-bye. >> Um so, we have essentially two main decision points to discuss this evening, so that staff can con- continue with the um implementation this with this and and developing the documentation and and negotiating and such. Um and those two points are um what the fees will actually be, and then where we would like that revenue to be dedicated. Um so, for the fees, Xcel has provided fee scenarios based on our goal of bringing in around um half a million dollars in revenue per year. Um the scenario provided within my memo, um kind of in the text, gets us to that point with residential electric at $3.75, and residential gas at $2. Um Council can either provide support for these as presented, or we can certainly um massage each uh fee a little bit here and there. Um I'm sure everybody understands that that there's a lot more impact on uh with changes in residential just because of the distribution of residential properties versus commercial properties in the city. Um So, I guess Does anyone have any thoughts on fees? >> Mr. Mayor. Just have a question. I just want to take us back just a little bit in in the staff report to a reference to 2022. Are you able to to provide reference to which meeting in 2022 um that council gave direction to staff to move forward with a utility franchise fee? >> I have >> Was it the April 2022 workshop? >> That sounds correct. >> So, in that meeting council did not give direction to move forward with a franchise fee. We actually um the finance director was to come back at the budget time and provide scenarios for what how it might impact, but we did not as a group agree to move forward with franchise fees. So, I just want to clarify that point. >> that. Thank you. >> Well, is it you know, I I personally I don't I don't see any [clears throat] issue what with what staff has presented as potentials um I do understand that yeah, so residential's on the you're just kind of going off of some averages little less than averages from what I can gather, right? >> Well, [clears throat] and actually so um, Excel um doesn't really get give you much option as far as um, the different scenarios we want to run. They don't provide any of their customer information. So, we literally just tell them we're looking for a goal of half a million dollars. Can you provide me with a few scenarios? And so, um, he gave us some. I came back with a kind of a counter to make sure we we looked at something that was closer to the averages. And then he pointed out that the combination of option two and option three actually got us to that half a million dollars mark. Um and so, that seemed like a fairly straightforward place to start. >> [clears throat] >> And I'm I'm hesitant to say this out loud, but I This might get us left, but I believe there's language in the contract that says that we can have more information that they have to provide us information about the development or the the um, fees that are generated. So, we might be able to sort of have a better idea of and and fine-tune these later on if we wanted to. >> Yeah. So, I have a question on um on I think it's page three. I don't know what's here now. Um just want to double check. Sorry, page two. So, just right at the top where you're talking about um, the using County GIS data, staff estimates between 25 to 30 exempt properties totaling around 125 million estimated market value. And I just I bring that up cuz I remember Council Member Dragicevich, that was one of the when we were having the discussion at previous workshop, that was one of the the big items that he brought up that hey, like this is a way that we can um be bringing in some money from properties that otherwise would not be paying taxes. So, I guess if you can just help me kind of connect with this 25 to 30 exempt properties, where would they fit in in that rate classification? Are those all going to be large C&I, medium and large interrupt interruptible? I guess what >> Without having access to that customer data, I I wouldn't be able to say for sure. Um but Jen, I mean is anybody on their church board? Maybe you. >> [laughter] >> Um I would imagine most of them are in that like small commercial and industrial range. Either not 9:00 a.m. or demand or >> large commercial and industrial? I mean, again, is that like we don't know? They did not define what that is. >> Mm, no. I could probably look it up quick, but it's like we, I believe, are like this building, I believe, is under small commercial and industrial demand. >> No, just a commercial >> So, I guess part of my assumption, and maybe I'm right or incorrect in this, is that demand means something that you need to have something 24/7, such as our fire department, uh running, where maybe a church is they're closed down from 9:00 at night till 7:00 in the morning or something like that, or large C&I, commercial would be like a what? Like a Tesla showroom, or uh Enterprise Rent-A-Car, where they have lights on, a factory with three shifts. Right. >> So, were you able to provide um a calculation of the gain? Um I is that something that I I know I brought up before, and and to uh Council Member Hearns' point, um, one of the the driving forces or cases for this change is um, that those not being proper property taxes in the city would then be contributing towards city expenses. And so, what is the gain um, from these 15 total taking the city [clears throat] out of it, the 15 properties? >> Again, without knowing exactly which property like what what type of um, property they are. >> So, assuming that they're a large C&I, what's the gain on 15 properties? I mean, $175 >> $175 per month times >> Okay, actually so sorry. Can I ask about this too? So, I was confused there too. Is the 15 properties, is that saying 15 city-owned properties or there's 15 remaining after the city? Or maybe I'm completely off I was having a hard time with this paragraph. >> Oh, good point. I made the assumption it was >> I was just struggling a little bit there. So, I cuz I mean like you know, cuz I guess yeah, like if you calculate all 30 properties at the highest amount, if they were both if they were all large C&I and medium and large uninterruptible, that would be 120 126,000. But it's not going to be >> that going to be that. >> from the sounds of it. But then I I guess my other kind of follow up with that too is what happens with um, cuz like with the the property, right? Like that would be not taxed currently. So, then there's going to be franchise fees on the city-owned properties. Is that correct? >> Well, anybody that pays a that well, sorry. There is a municipal um, hold on. There's municipal pumping. But we are as commercial So, we would essentially pay our own franchise fee. It would just pass through. So we we'd pay it and then we'd get it right back. Um back to the point of the question about like what is the impact? I I don't know that I would call it significant, but if it's $2,000 per year for you know, half of the properties so seven, you know, it might be $20,000. >> Okay. >> But I'm totally guessing at that. >> Okay. But yeah, I don't know that's helpful. Just kind of have an idea. What is um under property category the last one, T E miscellaneous? C O D 3 the non-taxable. >> County district T E. I'm not sure. >> Yeah. Everything else kind of seemed self-explanatory. >> So do we think that the gain is enough to do this? I mean again, we're trying to do this because we we want to other everyone to contribute toward the city, but are we punishing tax-paying property owners to gather a little bit of extra income or revenue? >> I guess I I wasn't under the impression that that was a main driver. My my directive, I guess when I when I was um you know, we did goal setting with Christina before she left, um and it was kind of on on the list and it was more about diversification of revenue um than it was trying to make up from from these untaxed properties. So whether you're charging fees or charging property taxes, it that's a policy decision and it's it's up to council. >> There [snorts] There was an item that I recall we were we were looking at as diverse diversification of revenue for the city and the strikes is one that falls within that category. One, the other one was selling off uh non-used city properties um was another item in that bucket. Um I'm I think this is something that sets something pretty standard as we grow our uh mixed-use business park areas if those increase, that could definitely um help out this fund where um you know, it's it's cities are ever demanding to try and create amenities for their residents. And um one thing obviously is is trying to get business in place, but this is another for me another um stream that that can help deliver some of that. >> Councilor Rhodes. >> Well, and one of the other questions was if we move forward, where to have it to would it be a specific place? My thoughts would be in the park the park reserve fund. And I I just offer that and we have a couple choices here, you know, the city center capital fund, street maintenance, infrastructure. I err on the side of the parks fund in that we know we just did the new parks master plan. Obviously, that requires a ton of work to even get the ball rolling. There's hypothetically millions of dollars there of things that have been identified as needs and obviously there's still a long process to go on that. We also know that development is slowing and that is the main source for funds currently in that park dedication fund. So, I would err on the side of putting it here because this structure allows for a consistent and stable revenue stream. And I I I agree with the comments from the mayor in that one advantage of this as a source of revenue is that it's predictable and consistent and also diversifies the revenue streams. I I find that to be a advantageous. We we can have a thorough discussion as to whether it should be a dollar, two dollars, three You know, I I don't think there's necessarily a perfect right or wrong as to those amounts. I think we try to set a goal as to what the what the revenue site is and work from there, but I think in terms of something that our residents value tremendously is our parks. And we know there are future costs coming up with a revenue stream that is slowing. I think it'd be responsible of us to make sure that we have a stable revenue fund for those um topics as they come up. >> May May Sorry, just to bring it back to the fees for a second and I agree like I think we need to decide on $4 versus $4.05, but maybe just like more of like a general theme and I I don't know if this is right cuz maybe this has the wrong um This might have issues with it as well, but just looking at more from like, okay, the residential we're currently above the average for at least for electricity. Um where for the by 75% or 25% where for the others for the businesses, the small non-demand, small C&I demand, large C&I, where we're sitting around the average. So, I guess where I'm going is like, do we want a trend where we say for non-residential, those fees are actually a little bit higher where we can tend cuz those are going to be the properties that, you You again, going back to the conversation of if we're trying to not I I know it's not taxing, but I I guess I see it that way of raising um funds from people who otherwise wouldn't be that's how we're going to do it. And if we don't want to further tax the residents is that a conversation that we want to have? Is do we want to trend to have those a little bit higher for the the business users? >> My understanding Larissa, is that you set a base for the residential and then it's a trickle to the commercial the Excel has a formula that they use, no? >> Okay. >> No, we you can you can set the fees where wherever you'd like. Um essential I mean, within reason obviously. I'm sure we'd dispute it at certain levels, but >> It's part of the negotiation, right? >> Yeah. Yeah. And so again, kind of going back to this process, you know, all I was able to do I of course wanted all the data. Like just give me the information and I'll make the decision, >> Yeah. [laughter] >> right? And and they say, "No, just tell us how much you want to you want to bring in and we'll put together some options." >> So okay, maybe that's a better way to say is we want 500 if the 500,000 is the number that the city thinks it needs, can we go back to Excel and say we want 75% of this coming from that that's way too much, but x% coming from residential, x% coming from non-residential. >> Yeah, I want I wonder if that's hard to even say though given that we don't have any of that information. Like we don't know the impact. >> with some sort of data they have. They just don't want to share that. >> Right. Yeah. So we just don't know like we wouldn't be able to tell them that cuz we wouldn't know what the impact is going to be, right? It might just kind of throw us all like completely off whack. But if we're trying to get I mean, if we're trying to massage this, if we're trying to get closer to average for everyone, I guess I would my suggestion would be you get you get your business stuff towards average and then alter have them alter residential until you get to that point where you're in that half million dollars-ish. So, you're essentially starting with the commercial and then you know, bringing residential down as much as you can without cutting that revenue significantly. >> Feels like we're punishing commercial. >> That's the downside. >> want to attract businesses. We want to get commercial in here, but now we want to institute a $175 fee for electric on a on a large commercial business. To me, that doesn't feel like it's being very business-friendly. I get that that there's people on council that want a consistent revenue stream and I understand diversifying revenue. When we talked about this in April 2022, we did talk about diversifying revenue, but it was um ideally reducing the tax levy and placing um a franchise fee in place to to make up that difference. So, then tax rates were actually being lowered. Um we're not lowering our tax rate. We're we're keeping that um going forward at at our 2% and now we've decided we need $500,000 to start putting away in a fund for something that we've not even defined, which is not transparent at all to the public. Um I don't I I just think this is a really bad idea and it just because others are doing it doesn't mean we should be doing it. Um and and again reflecting back on the original conversation in 2022, um Council Member Holtz raised a number of concerns about um the um how did he put it? I wrote it down. Um the regressive nature of this. So, are we no longer concerned about the regressive nature of uh franchise fees and the impact to our Simeron residents, which was talked about a fair amount um in that meeting. So, I mean, are we no longer worried about our our residents on fixed incomes and given inflation right now and and rent prices going up, is that um are are we in a better place where that's no longer a concern? >> So, back to the question on hand. So, Council Member Hearn, I I do agree in regards to like what I'd be curious if everything was set just the average. I'd be curious to know what Xcel would say, "Well, that would produce X amount." I I think both those would be get good data points as if this were to move forward to know, "Hey, cuz residential for gas is 223 for the average, and we actually have it set a little bit lower. So, if that was set at the average, and then residential electricity is average is 308. Right now, it's set at four. Hypothetically, if each one was just set at the average, and looking at this, I'm going to hypothesize it'd probably be less than what we currently have budgeted because almost every single one of them is slightly above the average, nowhere near the highs. Um but I would I would just be curious to see what that would look like. Um yeah, it's not 200, obviously, but is it closer to four? Is it closer to 420? And then I think that would give a give us a a picture as to, again, where's that where's that good uh position in the middle? Cuz I I agree with Council Member Hearn, that obviously being somewhere in that middle ground is probably the more responsible place to be. Um but I I I'm still not going to quibble about two pennies. I, I would prefer that we focus on what is the uh, the goal for the stream itself. >> So, we're not concerned about the regressive nature of the sitting longer? >> I I guess when I look at it, uh, Council member Baxter, I don't I don't find the regressive nature something that's dead set in and people can budget for that. When I look at when we're we're looking at the, um, the play sets that have been in multiple parks, whether it's Demontreville, Tablin, uh, Reed, and the aging nature of those and getting those replaced, um, we do have declining, uh, revenues going into the park fund. Um, this is something that could make sure that we stay up-to-date in safety standards for the people that are using those parks into the future. And it it creates a stable platform as opposed to continually adjusting that 2% and and like you said, um, regarding to inflation, you you never really know which way that's going. Um, it's been stabilized out a little bit here over the past few months, but we all know it goes up and down a little bit depending on what the economy is doing. Um, this just creates that ability to then, in my mind, plan accordingly down the road and not say, "Well, you know, we can't replace the, the, um, play set in Carriage Station, um, in order to maintain a 2% um, uh, levy." But, with this we'll be able to make some of those decisions a lot easier. >> So, am I clear that the 500,000 that we're going to be collecting from the franchise fee is going into a park fund for parks? >> Well, that's that hasn't been determined. It doesn't necessarily have to go to any particular thing. That is something that Councilmember Holtz suggested. You could put it into infrastructure. You could put it put it into uh we just heard um Chief Kaelas come to us and asked for an order in a in for a fire truck that is going to be what was it? 24 to 30 months out and rising costs for those as as we all saw after COVID this the price of steel and materials and labor going up. Uh the price of those things to help run city services, plows, um all of those items, con- con- contracted services for street sweeping or landscaping uh are part of those. So, >> Isn't that part of our regular budgeting in our vehicle fund and all the things that we have in place? I guess again I'm trying to understand uh how to justify this when I I can understand if we have a project in mind that is $500,000 that we need this franchise fee uh revenue for and we have very clearly identified what the need is. Um we haven't done that. To me it's all wishy-washy and well, we could put it here, we could put it there, we could use it here. To me that's not fair to our residents and and those we're going to be adding this fee to to not say, "Here's why we need this franchise fee because we want to replace the uh playground equipment or we want to make sure that our infrastructure is set up, or I mean, or is for our our water treatment facility, whatever those may be. But, to me is is is is a bit dishonest to say we want to collect all this money, but we don't really know how we're going to use it yet. >> Well, that's the main part where [clears throat] you could dedicate it, and then it is it is set for that. Um I don't think it's wishy-washy at all to talk about the $4.5 million that the city's going to be costing for Lake Como Avenue and 36th was a high crash incident area. And without proper budgeting that goes into that, you got to take the money from somewhere else. So, we take that away from getting a new fire truck, do we take that away from getting uh a new snow plow? Um this allows us to dedicate the money again to a decreasing value if you choose parks and rec. Uh where we get park dedication fees from developments, and if developments are slowing down, the indication is that they are, statistically speaking, then then you can maintain those facilities for your residents at the level to which they're used to doing, and you don't have equipment breaking down. Um >> Or we could just cut back. I mean, what what normal people do when they budget and they don't have enough money? You have to look at what you're spending on and cut back. We don't seem to want to cut back. We want to just keep coming up with new projects to spend more and more money, and then we need more revenue. So, to me we should be looking at our budget and saying we we don't need all these playgrounds out there. Cut back on the equipment. >> Is that Is that fair to the residents that have been accustomed to the playgrounds? I mean, >> Yes, playgrounds are >> provides provides necessary infrastructures, public safety, parks and rec to the residents. So, yes, budgeting is a part of that. So, what are you going to cut back from the residents that don't have it? We we keep things fairly slim and trim on the city is my belief. And so, to keep it at 2% and still be the city that has one other city less than it in the county with a lower tax rate, I think it's great. Um So, I I The The notion of you can do more with less, I think it's hogwash. >> Yeah, that's not what I'm saying, either. Um but I mean I Obviously, this decision was made a made a long time ago and because um it was clearly stated in the meeting in 2022 that this was something that the mayor requested staff look into, I I can't imagine that we're going to vote it down since we already have lawyers working on negotiating contracts, uh which to me seems like you're awfully far down the road without having these conversations about whether this is really the right thing. But, um I know I'm the lone voice in in pushing up against this and certainly not going to win this one, but um I feel it's wrong. It's It's It's wrong. So. >> So, I think I think this is another situation where it's again, it's unfortunate that you have to bring that up because I I don't think you're alone. I I have concerns with this as well. Um and I guess we're at at this point, yes, I agree that it may be heading in that direction. So, what I want to do is try to figure out how we can make this work as best as possible. So, with this situation specifically, with these different funds as far as where do we want this money to go? I think that was that was a big concern of mine. I know at the last workshop that I brought up that my thought was, well, if this is going to move forward then I do want this to be as transparent as possible about where these funds are going. So, yes, I still may not love this idea of the franchise fee and I may vote against that. But if we are going to go down that road then I do think that this is important that we have some sort of transparency with it. Now, is it going to still be um some ambiguit- ambiguity to that? Yes, but I think there's going to be less. And so I you know, I guess that's where I just I would say like maybe don't place this all unnecessarily in that cuz I I I don't think that's true and um I think we need to keep having the discussions with that. And with this I I still personally would like to see it go towards one of those five. You know, I think one of the conversation points that we had last time is like if we can pick something that's the least political as possible, that that's a good option. I think all five of these can be good options for that. Um so I don't know if I necessarily have a a top pick for this. I just think it's very important that we still stick with that versus getting rid of it and just saying it's going to go to the general fund. That's still my stance on it at least. >> I would agree with you on on that Councilmember Herndon. And I I mentioned before is just and the way I see it is with the parks fund, that's the only one of those five where we have a current source of external revenue that we know is declining. That goes for that purpose. All all those are as you said fantastic ones and I fully agree with the mayor. We have certain costs we know that are coming up. Highway 36 and Lake Como. That's 4 and 1/2 million. Only by the grace of God is it not 20 million. Like our cost share actually was supposed to be drastically higher until the legislature found 20 million for us. The cost share should have literally put a massive gaping hole in our budget. So, we're very fortunate that's only 4 and 1/2 million. But those are the things that will continue to come up. But in this case, we know the parks the park fund has a revenue stream that we use that is declining and will continue to decline. Some would prefer no development at all, in which that parks fund would then stop. Now, I think we know that's not the case, but we know revenue will slow. And I I for one as one who appreciates living in a community that values, you know, having various types of families, whether it's seniors, whether it's 55 and older in those housing, whether it's houses with kids and neighborhoods with kids. I appreciate that families have the option to use facilities. And I don't feel comfortable saying, "Well, you know what? This park had a playground for the last 30 years, but gosh golly, we just can't afford it anymore." That's a choice, and it's the wrong choice. And I I think we we owe it to our residents to make sure that those services are maintained. But again, I think some of this is getting into a future conversation. Your questions for tonight were, if we want it, yes or no, what about the fee structure, do we like or not dislike, and then do we have a preference for where. Some of these questions are for a debate as to a yes or no vote. >> Our our goal tonight was really to to put the finishing touches on some of these decision maker these decisions so that we can bring completed documentation for approval. You will recall that we that I at the budget workshop asked council if this is something that we wanted to continue. Obviously, we don't vote at workshops, but there's the general consensus that this was something that we were moving forward to, and that we didn't want it in the general fund. So, that's the the direction that we're heading. If we're not doing this, then we would all love to not spend the money on attorneys and stop tonight. So, my goal tonight is really to button down these fees as best we can. Um and if we're not sure if we if we think we want to get towards average and then massage it a little bit, I can certainly come up with that. And we can have that final debate later on. Um and then yes, obviously what where we want to to have the funds dedicated is is the other question. Um just a a quick note on that. Um I I don't recall how much I talked about it at the budget workshop but or if you recall from the CIP discussion but you'll recall that we moved from a 5-year to a 10-year CIP last year. And in that process, I mean we're still developing that CIP and obviously we're adding things and I can totally appreciate the the fact that that we are adding amenities and and that has a cost. But just the the things that we have, the things that we're adding to that CIP are existing services are currently underfunded with the taxes that we are currently charging. So my recommendation in order to create a more sustainable um financial outlook for the city long-term is definitely to get that tax rate up to to something similar to other cities our size um or uh add these these diversified revenue streams in some way. >> Well, I'll just say that um when I you know, I'll I'll agree with uh park capital reserve as opposed to infrastructure reserve fund, that's kind of where my my heart tends to be but there's other avenues such as state legislature bonding bills to help fund those down the road and as far as the structure in which you've uh presented, I am I am perfectly fine with that. >> I'd like to see if we're going to do this um which I don't support, 100% don't support, but uh if rest of council wants to do this, then I think the $500,000 needs to go into a fund for the 36 Lake Elmo interchange, since that seems to be a big ticket item that's been referenced several times tonight, and certainly makes it very clear to the residents and those that are going to be paying these fees that that's where the money's going. >> [clears throat] >> Is that Would Would that still have to just go to the street fund then? >> We would just create a a separate fund for that. >> Separate fund for it. >> Certainly a possibility. >> And are you standing by your earlier comments Councilmember Holds as far as some direction to staff? >> What do we have in the park reserve fund right now? >> In the park dedication or the park reserve? >> Well, let's start with the park dedication. >> Uh park dedication I think was might have been around 3 million. >> And our plan for the Lake Elmo interchange is we are It's in the CIP. And right now we're just going to be taking that out with bonds as I recall. >> Um, currently. So So the the whole funding structure of um the streets CIP specifically um is a little up in the air just because of like are we Are we loving for it? Are we Are we using um franchise revenues, etc., etc.? But yes, the that that those projects are largely almost 100% funded by uh bonds at this at this time. >> Yeah, I still stand on that. >> Okay. Can we hear from you, Council Member Hearn? >> Um yeah, I'm I'm still not a huge fan of uh the franchise fees just in general. Um yeah, I think at the last workshop, there was some very fair arguments um for why to do it, you know, including the as a way to collect money from entities that otherwise wouldn't be as a way to make it more um transparent where that money is going. I guess I I think the transparency is there. I don't think as far as using it as a way to collect money from other entities that wouldn't otherwise be um paying taxes, I I just I don't see it being a huge difference there. Um I guess maybe a point tonight that was brought up more is this diversified use or diversified um funds. Um I I guess it's unfortunate that Council Member Dreisch isn't here cuz I think that might give you more direction, too. I guess just from our last conversation. Um So, maybe I'll just raise that point that, you know, generally I'm not a huge fan of this still at this point. Um But, if I had to take a guess, I I think that there is probably enough support for it. >> Yeah. >> Sorry to make that unclear for you. >> [laughter] >> Guys are super fun sometimes. >> [laughter] >> So, >> Go ahead. >> We're just going to try and get some clarification. Is that what you were going to follow >> Yeah. >> Yeah. So, I would took some notes. So, I'm just either we're moving forward with changing it to average fees or keeping it the way it is. Also, two talked about Park Reserve and one talked about Lake Elmo Avenue. So, what is uh trying to get some consensus what we're supposed to come back with. >> I'm based on revenue streams. I'm going to side with Parks and Rec. >> I'll go with if we're going forward with it, leaving the structure as you had it. And I'm sorry, I just I don't feel, I guess um I I honestly, if I had to pick if I had to pick a fund from there, it would be the street maintenance fund. But it it You guys can correct me if I'm wrong in my thinking on that, is Did I hear you say because of a lot of the state aid, that that might be something that we wouldn't want? Was I hearing that correct? >> Oftentimes, so we have Minnesota state aid assistance, and we have so we have MSA roads, and then the county has county state aid highways. So, there are funding mechanisms via the gas tax that are dedicated to roadways. Washington County, as shown by 36 and uh Lake Elmo Avenues, has been very good uh along with some marketing to There's a There's a group in the legislature that goes around the state to look at projects that are trying to get state aid funds for um design and construction. And Washington County as a as a staff as an entity does a very good job at making sure that our high crash areas, much like 36 and Lake Elmo, I think there was what? Three crashes there in the month of September. What I read in the in the police report. So, um I don't know that that's That's something we planned on. It's going to be less than we originally planned on. But but the funding mechanisms for that tend to be more fluid. Um and uh they're going to start designing construction on that Ideal Avenue south of Keats 14, kind of by the Oakdale Target. That's another thing we'll have cost participation in. It goes over the UP Railroad down to Stillwater Boulevard. So, uh funding structures for that come from state aid needs assessment as uh Jack has indicated some of our uh municipal state aid roadways or MSAs, we do get funding from the gas tax for those as well. Um It's It's That's more of a structured funding, so you know how much you're getting and when. And then you can dedicate those funds like we did for >> Hudson >> Hudson Boulevard or Avenue >> [snorts] >> um down near the Holiday Inn and and Eagle Point Business Park. >> So, the idea behind the park is with that one it's much more dependent on um development that's going on and if if there isn't development, then that fund is much less uh um stable. It's going to be way more fluid. It's It's much less stable. Is Am I understanding that right? That >> I mean, that was my intent >> Yeah, that was my intent. And then Yeah, I mean, every one of those is is a good choice. That was just That was the one where I feel the the current usage of revenues are highly fluid and we know are going down. >> How much of the parks fund that you're collecting is going to go to your ball fields? >> We have no idea where we'd go at this time. I do know that when we resurfaced Tablin and Pebble Creek Park. It was a Was that a $450,000 expenditure for those. We also know that the uh ice rink that's currently in Lions Park, uh which also houses uh pickleball courts, is in disrepair and cracks due to the heat and cooling and moisture that gets sucked up in there. So, there's going to be costs to that. Um Yeah, many can point to a number of things >> Mhm. >> where that money can be used. >> It's a lot of money for parks. >> Well, I think what do we have? 20-something parks in the city? >> Mhm. >> Yeah. I mean, just using uh when I first came on the council, the amount of time it takes public works to just do trash collection in our parks, I was amazed by. Just going around and doing the trash collection is a is an all-day activity for one to two staff members. >> But shouldn't we be looking at that when we're putting parks in, the long-term costs of adding a park? So, with each development that we require a park go in, um that adds to our infrastructure costs. It costs our maintenance, which was why we wanted that 10-year plan for our parks to understand the the long-term costs on that. So, >> we have. I mean, the parks that are going in, we've decreased those and we've we've increased the amount of uh park dedication fees from developments as opposed to having every develop- development have their own park. Do you have your feedback? >> Do we get a final answer from Councilmember Hearn? Did you I >> He did not give a final answer. [laughter] >> I mean, I again, I hate to even I don't want to make this more confusing, but again if if I'm the only one that feels that this is the way to go. I mean, if you guys actually feel that it would be better to not have this go towards any fund. You know, I I guess I'm just >> You know, it has to go to a fund. >> I think early on and even even at one time in the previous council when council member Dorscher was here you know, it was I think I think we do need to be transparent about where those funds go and how they're going to be expended. Um so that so that it does have a have have a mark on it and it's not just um goes into the general fund and gets mixed up. I think it also allows uh I would think for easier budgeting knowing where that money's going to right away as opposed to well, we could put some of it in the general fund, we could put some of it in this levy, we could put some of it in the um distribution for for vehicle maintenance or, you know, I I think it does create some transparency. Council member Hurd. >> Well, then yeah, then I'm I mean, I can like I said, I I think there's benefit to any five of those just from the transparency standpoint. So, if if park does seem to be where the majority want to go, I'm fine with that. I still feel like street even though there are funding options for that, I feel like that could be a a good option for it as well. Um but I would again, I guess I would err on the side of if it's going to go forward, I would like that transparency then as well. And if that's parks, then I'm okay with that as well. >> All right. >> And so the the fee structure we're looking at just whatever I put in my uh in my memo is the option two and option three. It adds up to $502 thousand. Okay. All right, then I think we have our direction. So, again, our next steps would be to bring back um unless there's an issue with negotiations with Excel, which we don't expect there to be, um we would bring back the fully negotiated contract with um likely with both Excel and CenterPoint. Um there is a public hearing necessary for this. So, um given the the um need to finish negotiating and to to advertise that public hearing, we'd probably be looking at at least the second meeting in November for that. Um and we will keep you updated. >> Thank you. So, at the next work session uh workshop, we'll be discussing cannabis ordinance. And with that, we can adjourn the meeting at uh 7:36. Thank you.