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12-16-03 Special CITY COUNCIL MEETING MINUTES Richfield, Minnesota Special City Council Meeting December 16, 2003 The meeting was called to order by Mayor Kirsch at 6:03 p.m. Members Present: Martin Kirsch, Mayor; Susan Rosenberg; Gertrude Ulrich; John Enger; and Sue Sandahl. Staff Present: Samantha Orduno, City Manager; Steve Devich, Administrative Services Director; Mike Eastling, Public Works Director; Chris Regis, Finance Manager; Randy Hughes, Operations Superintendent; and Cheryl Krumholz, Recording Secretary. Item #1 City Manager Orduno addressed the City Council regarding a December 12, 2003 news item on KSTP Channel 5 regarding "Cheapest 'burbs". She said the results of a statistical survey of several Twin Cities suburbs deemed Richfield the most affordable. City Manager Orduno made a presentation regarding the proposed gas franchise fee on CenterPoint Energy Minnegasco gas service in Richfield and the proposed franchise fee on Northern States Power dba Xcel Energy electric service in Richfield, including information on the background, purpose, proposal, sources and uses, and legal authority (Clerk's File No. C-396). She stated the proposed gas and electric monthly fee of $1.45 per residential meter for each service for a full year cycle would result in an estimated $643,000. -I Special Council Meeting Minutes -2- December 16, 2003 City Manager Orduno corrected a statement made at a previous meeting related to the number of positions eliminated Qr not filled, th.e total is 23 not 21 positions. Public Works Director Eastling made .~ pre~entation regarding the street maintenance budget and program (Clerk's File No. C-396). Jim Strommen, Kennedy and Graven, made a presentation regarding the franchise fee legal authority (Clerk's File No. G-396). He stated the legal authority of the City Council to adopt the franchise fee is crear. The proposed rates are well within the permitted 5% of gross revenues for both utilities. The companies have agreed to a per meter fee, which is the option used by a majority of the cities because it is a predictable amount. He reviewed the other fee options. Mr. Strommen said each utility company has agreed to the proposed ordinance and collection should begin in February 2004. . Council Member Sandahl askeg Mr. Strommen how many years he has worked in the franchise field. Mr. Strommen stated that most of his years of law practice, which began in 1983, have been in the franchise field. He also.is a representative of the Suburban Rate Authority. Council Member Enger referenced materials received from Ernie Lindstrom related to the Country Joe, Inc. v. City of Eagan case and expressed concern that Richfield could be challenged on the legality of the franchise fees and lose the case. Mr. Strommen explained the Country Joe case is a development impact fee challenge because there is no legislative authority to implement such a fee. He added that Richfield would not lose if challenged on the franchise fees because9tatute 2168.36 clearly allows the City to implement the fees. Mr. Strommen stated there is currently a cable franchise fee which is granted by federal and State governments. Mayor Kirsch announced both public hearings would be held concurrently on the proposed gas and electric franchise fee ordinances. George Holter, 6424 Emerson Avenue, spoke against the franchise fees because of additional administrative costs and he would like revenue raised from other sources, such as an additional tax on City water. City Manager Orduno stated the administrative costs for the franchise fees would be negligible because the fees are collected by the utility companies and sent to the City. Council Member Sandahl added that the fees are received by the City on a quarterly basis which should reduce some administrative costs. Council Member Ulrich stated the utility companies will pass the administrative fees along to the customers. Ernie Lindstrom, 7406 Fremont Avenue, questioned the legality of the franchise fee revenue being dedicated for street maintenance, forestry and City Hall building repairs. He said there were ways to increase revenue through City water usage and street light fees. Special Council Meeting Minutes -3- December 16, 2003 Mr. Lindstrom said the City is a~Ritrc:lr,i1y telling the utility companies what to charge. He said it was not fair to charge the same for e'ach h3sidencebecause there are various sizes of homes and levels of usage. He cautioned the City Council not to spend the funds and later find out that the franchise fees were not legal. He suggested the City take the conservative route and request an opinion from the Attorney General's office regarding the legality of the franchise fees. Council Member Sandahl, referencing the Country Joe case, stated there is a distinction between a public utility and road connection fee. She said Richfield clearly has legal authority regarding the franchise fees. Council Member Sandahl asked how long franchise fees have been in place in other cities, such as Minneapolis and St. Paul. Mr. Strommen explained that franchise fees in those two cities have been in place many years. Cary Schmidt, 1016 Mildred Drive, spoke in opposition to the franchise fees because they have nothing to do with the cost of utilities in the City. He suggested that the City collect revenues directly by using the water utility because the money is going to the municipal government. He said not to balance the budget on franchise fees - if the City is incurring the cost, the City should generate the revenue. Larry Wozniczka, 6744 Wentworth Avenue, spoke in opposition to the franchise fees because the 2003 and 2004 budgets already include funds for street sealcoating and believes the franchise fees to be an additional charge for this service. He stated the franchise fee is just a pass-through assessment of Richfield's citizens. He added the fee structure appears to be unfair when the gas charges are primarily from residential homes. Mr. Wozniczka questioned the intent of the Charter Section 11.02 regarding utilities not be used as revenue producing agencies. He said the franchise fees are grossly unfair because they appear to affect the needy the most. Mr. Wozniczka suggested the City be more open with the operation and administrative costs related to the franchise fees and requested a public disclosure of the attorney costs of preparing the proposed ordinances. Marv Bjl,lgan, Richfield Chamber of Commerce Chair, representing the Chamber Board, presented the Board's position that the franchise fee ordinances ensure the funds would be directed to a dedicated source. He added the Board had concerns regarding the lack of sunset language in Subd. 8 Fee Review and requested an amendment to have the City Council re-enact the ordinances in two years. He said the Chamber hoped the franchise fees would no longer be necessary after 2005. M/Rosenberg, S/Sandahl to close the public hearinQ. Motion carried 5-0. Council Member Rosenberg stated agreement with a water utility fee because the revenue would come to the City directly instead of through another entity. She asked why this type of fee was not an option. Public Works Director Eastling explained the water fee is not an authorized use for street maintenance. He said there has been legislation for the past 10 years for a street utility fee but it has not passed. Special Cauncil Meeting Minutes -4- December 16, 2003 Cauncil M~mber Enger stated street maintenanc;e has been included in the budget annually and asked how many years since there has been funding far se9lcaating. Public Works DitectarEa~iUngexplainedthe funding priar to, 2003 and that a five-year cycle far the entire Citywas completed then. He stated there has been uneven funding sinee that time. Operations Superintendent Hughes said there has been no, sealcaating funding si'hce the eally 1'990s. COl:Jneil Member Enger asked about the life expectancy ef the streets built in the 19705. Public Werks Directer Eastling explaine~d the expectancy cauld be 30 years and due to, the stable seil, the streets ceuld remain in good shape with a sealcaating program. He added~thatthe streets are en the leng side ef life expectancy fot blacktep. . Ceuncil Member Enger asked if the apartmehtcO,mplexes are charged the $1.45 per manth pe(rtlefer':alse. City Manager Ordlme explained the feE! is based upon tl:te size and v.alume efthe meter; it is not an acress the beard fee. Ceuncil Member Enger asked if there ceuld be an apartment cemplex with 20er 30 units with ane gas meter. Cennie Hargest, CenterPeint representat~ve, said yes and explained an apartment camplex cauld have a large meter, which has a $10 fee. She said the fee is a separate line item en the bill fer the apartment but she wasn't surE! hew this fee was disbursed to, the apartment tenants. Ceuncil Membek Enger asked what fee is charged to the apartment cemplexes with ane meter. Ms. Hargest explained the types af meters and level af fees whic;h will vary frem camplex to, complex. Ceuncil Member Enger stated he believed the franchise fees to, be unfair because it is an artificial burden en single family hemes censidering the apartment cemplex meter differences. He said many seniars are living en a fixed inceme in their single-family hemes and they're being charged mere than the apartment cemplexes en a per unit basis. City Manager Orduno stated mest ef Richfield's lew-inceme residents live in the apartment cornptexes 50, th~rblltdeflisnot placed there. Ceuncil Member Enger stated it was mentiened earlier that the franchise fees are mare fair if they're based upen usage, which is net as much af a burden en single family hemeawners. Ms. Hargest stated CenterPeint believes the fairest methed is the per meter fee with the ameunt determined by the City Ceuncil. She said, generally, the persans least able to, afferd to, pay are hit the hardest with the velume basis. The flat rate methed allews fer budgeting because the ameunt is the same per menth. She added the cempany is net abligated to, change their billing system to, accemmadate the franchise fee since it is set far the eptien af a percentage ef revenue and per meter. She said CenterPeint recemmends the per meter flat rate. Special Council Meeting Minutes -5- DecembE;lr 16, 2003 Council Member Ulrich stated tp~;9ity Council changed from the street light fee to franchise fees partially because of correspondenceffOm the utility companies. She said the franchise fees are a fair mechanism for raising revenue. Pat Cline, Xcel representative, stated apartment complexes typically have individual electric meters so the fee is '$1.45 per meter per month but there is the master meter option also. Council Member Enger asked how many apartment buildings there are in Richfield. Council Member Rosenberg said 5,000. Council Member Sandahl stated support for the gas and electric proposed ordinances because the franchise fees accomplish the City Council goal of an alternative sources of revenue so the City is not dependent upon State aids. She said one of the first items cut from the budget are maintenance-related and the franchise fees give continuing revenue for a good infrastructure. She stated the fee structure may not be perfectly fair, but it will be monitored as needed. Council Member Ulrich stated she is familiar with franchise fees through her experience with the cable franchise agreement and fee. If the franchise fees are not legal, then cable companies would have found a way to subvert their fee. She said she is not aware of any challenged or failed franchise fee ordinances in the State. Council Member Ulrich stated she hears comments from residents like "don't cut what I'm interested in" but with further discussion, the residents appear to understand the financial problems faCing tlt}$S. Council Member Ulrich addressed the Chamber of Commerce concern regarding an amendment to re-enact the franchise fees in two years. She said she is an advocate of the review of the fees but that they are reviewed on an annual basis through the budget process and did not see the purpose of this amendment to the ordinances. Mayor Kirsch stated support for the franchise fees because it all comes down to State aid cuts and the need to raise revenue to maintain quality services and stave off major expenditures. He said the pioneers of the community indicated these services were important so they need to be continued for the good of the community. Council Member Rosenberg stated the metropolitan median income is $73,000 and Richfield's is $45,000. She said the franchise fee total of $2.90 per month for gas and electric meters is significant to some residents, especially the low income, but the revenue generated needs to be considered an investment in the community. , Council Member Rosenberg asked the City Council to consider seeking the Attorney General's opinion on the legality of the franchise fees since two attorneys, Mr. Strommen and Mr. Lindstrom, disagree on this issue. Mayor Kirsch asked if there was a fee for the Attorney General's opinion. City Manager Orduno said no. Council Member Sandahl said there is probably no need for an Attorney General's opinion and that she agreed with the expert in the field, Jim Strommen, and the other expert, Council Member Ulrich. Special Council Meeting Minutes -6- December 16, 2003 Council MemberUlrich 9$k~d'about the timeframe to obtain an Attorney General's opinion anc;! the cost ef a Clelay in .implementing the fra~nchiS.e fees. Mr. Strommeli stated the Attorney General's opinion could be obtained following the adoptiOJ'lof the ordinances or the Gl!Y COliIDCiI cOI,Jlg Wiait {gr the opinion prior to approving the ordinances; the opinion should be received in a couple months. He suggested considering the adoption oHMe ordinances anc! requesting the Attorney General's opinion cOR'currently. He added that the specter of a lawsuit is a concern and anyone can bring suit with an injunction to collect the fees. However, the City Council cOl:Jld move forward in gooo f;;iith. Mr. Strommen stated the Atforney Seh'eral's opinion is not a legal opinion. CouncfFMember-Ultfchaskedto hear from the Chamber of Commerce again. Council Member Ro.senberg stated the public hearing was closed. Mr. Strommen stated th~re an~ no cases and no Attorney General's opinion on this issue because the City Council's authority is clear. Council Member Rosenberg ih'(ited Mr. l.indstrom to address the Council again. Mr. Lindstr9m stated he i.s ~l1der the impressi9n the City Council wrll approve the ordinances and he'did not mean tdcause a delay in th'e addj;>tioR. He s;:iidit eostsnothing other th'an thEfattorn'ey feasto obtain th~ Attorney General's epinion. , .'. Mc;iyor Kirsch suggested the action be concurrent on the adoption of ordinances and obtalningtrle 'AttbmeYGener~Ps 98inion. Council Member Ulrich stated the Ghamper of Commerce should be permitted to speak to the Council again, since Mr. Lindstrom was permitted tg speak again. Steve Lindgren, Chamber of Commerce President, c.larified the Chamber's earlier comment regarding Subd 8. He said the Board's request was to remove the current language of reviewing the franchise fees and consider replacement language of terminating and re-enacting the franchise fees at the end of two years. ' M/Sandahl, S/Ulrich that this constitutes the second readinq of Bill No. 2003-24 implementinq a G.as Franchise Fee ,on CenterPoint Enerqv Minneqasco for providinq qas service withIn th'e 'Citv of Richfield. that it be published in the official newspaper and that it be made part of these minutes: and that the foUowinq resolution be adopted. that it be spread in the resolution book and that it be made part of these minutes: RESOLUTION NO. 9418 RESOLUTION APPROVING SUMMARY PUBLICATION OF AN ORDINANCE AMENDMENT TO APPENDIX E OF THE RICHFIELD CITY CODE WHICH PERTAINS TO THE FRANCHISE ORDINANCE. Motion carried 4-1. (Enger opposed.) This resolution appears as Resolution No. 9418 in Resolution Book No. 75. M/Sandahl, S/Ulrich that this constitutes the second readinq of Bill No. 2003-25 implementinq an Electric Franchise Fee on Northern States Power D/B/A Xcel Enerqy for providinq electric service within the City of Richfield, that it be published in the official newspaper and that it Special Council Meeting Minutes -7- December 16, 2003 be made part of these minutes:andthatt~e.foIlOwinQ resolution be adopted. that it be spread in the resolution book and that it be made(parfof these minutes: RESOLUTION NO. 9419 RESOLUTION APPROVING SUMMARY PUBLICATION OF AN ORDINANCE AMENDMENT TO APPENDIX E OF THE RICHFIEI,.D CITY CODE WHICH PERTAINS TO THE FRANCHISE ORQINANCE. Motion carried 4-1. (Enger opposed.) This resolution appears as Resolution No. 9419 in Resolution Book No. 75. M/Rosenberg; S/Kirsch to direct staff to seek the Attorney General's opinion reQardinQ the leQality of the franchise fees concurrently with approval of the Qas and electric franchise fee ordinances. . Council Member Sandahl suggested the Attorney General's opinion regarding the legality of the franchise fees be a friendly amendment. Council Member Rosenberg agreed to a friendly amendment. Council Member Sandahl stated she did not think seeking the Attorney General's opinion was necessary. Motion carried 4-1. (Sandahl opposed.) The City Council requested notification of the implementation of the franchise fees be conducted through a full billing cycle of the City's utility bill. The meeting was adjourned by unanimous consent at 8:14 p.m. Date Approved: January 13, 2004 c~~M Recording Secretary