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HomeMy WebLinkAboutA005 - Council Action Form dated June 5, 1984 ITEM # O �y DATE: JUNE 5, 1984 COUNCIL ACTION FORM SUBJECT: Request By Iowa Electric Light and Power Company to Renew Franchise Agreement an Additional 25 Years BACKGROUND: The City of Ames has received a request from the Iowa Electric Light and Power Company to renew its franchise agreement with the City of Ames for an additional 25-year period. The current 25-year franchise agreement expires in November 1985. Representatives from the Gas Company have informed the City that, in order to provide adequate lead time, they desire to hold a public referendum on this matter 15 months before the expiration date (July 1984) . In order to comply with this request the City Council would have to approve the attached franchise ordinance. One area the staff believes the City Council should seriously consider before approving the attached ordinance is the implementation of a franchise fee. A report by Bob Kindred, which is attached, explains how other Iowa municipali- ties have handled this franchise arrangement. It is important to note that the inclusion of a franchise fee to a city is a legally accepted principle which compensates a city for the franchisee's use of the streets, alleys, and public ways for its mains, underground conduits, pipes, and other gas utili- ties. You will note that the Cities of Des Moines and Sioux City both have incorporated a 2% gross receipts fee into franchise agreements with their gas utilities. Cedar Falls, which owns and operates its own gas utility, trans- fers approximately $162,000 into its General Fund from the gas utility as a payment in lieu of taxes. A conversation with the City Manager of Iowa City revealed that the City Council currently is negotiating with the gas utility located in that municipality to institute a franchise fee for the first time . ALTERNATIVES: 1 . Approve the attached ordinance from the Iowa Electric Light and Power Company to establish a 25-year franchise agreement. The approval of this ordinance will result in a referendum being conducted which will allow the public an opportunity to accept or reject this proposed franchise agreement. All associated costs with this election will be paid by Iowa Electric Light and Power Company.. 2. Approve the request by Iowa Electric Light and Power Company for a 25-year franchise agreement, but include a franchise fee. The amount of this fee will be determined after a two month study by City staff. Therefore, this matter will be tabled until additional information is provided. This alternative will delay the process somewhat but should allow the referendum to be held well in advance of the present agreement's expiration date. 3. Reject the proposed ordinance by Iowa Electric Light and Power Company and immediately investigate the possibility of the City purchasing the gas utility rights and operating this utility within the City of Ames. 4. Rather than enter into a 25-year franchise agreement with Iowa Electric Light and Power Company, approve the attached ordinance with a modification reducing the duration to perhaps 5 or 10 years. This alternative would recog- nize that a 25-year agreement does not allow flexibility to adjust to a chang- ing environment and would also allow an opportunity for the staff to study the feasibility of other viable options. MANAGER'S RECOMMENDED ACTION: The establishment of a franchise fee is consistent with recent City Council actions. Throughout our budget process, the Council has attempted to estab- lish realistic user fees. More recently, discussion has centered around the Electric Utility charging the actual cost for street lighting and the compan- ion issue whereby the City would collect a more substantial amount of funds from the Electric Utility as a payment in lieu of taxes. A 3% fee was included in the Cable TV franchise agreement. Finally, it has been common for the City Council to authorize payments for land easements to other property owners. It is important to note that although there are costs involved with the Gas Utility constructing in our right-of-ways and that this use does, therefore, have a definite value to the franchisee, the Gas Utility has not made payments to the City in the form of franchise fees nor payments in lieu of taxes. If the City Council concurs that the establishment of a franchise fee is a legitimate objective, then it is the recommendation of the City Manager that the approval of the attached ordinance be amended to include the establish- ment of a franchise fee. The actual amount of this franchise fee would be determined in the next few months upon completing a staff report on this matter. The final amended ordinance would be presented to the Council and ultimately to the citizenry well in advance of the expiration date of the current franchise agreement. It should be emphasized that this franchise fee would be passed on to the Gas Utility customers in the City of Ames. Therefore, if the initiation of a franchise fee is totally objectionable to the City Council , the attached ordinance should be approved at the June 5th meeting. The staff will then ask the Council to suspend the rules and pass this ordinance on its second and third reading on June 19th. The public referendum on this matter will then be scheduled for July 24, 1984. Given the facts that the City's revenue sources continue to erode and that the existence of a franchise fee is a legitimate additional revenue source consistent with previous Council actions, it is believed that Alternative #2 should be seriously considered by the City Council during the next few months. COUNCIL ACTION: