HomeMy WebLinkAboutA005 - Council Action form dated August 25, 2009 c
ITEM #
Date 08-25-09
COUNCIL ACTION FORM
SUBJECT: GAS FRANCHISE WITH INTERSTATE POWER AND LIGHT COMPANY
BACKGROUND:
The City of Ames has enjoyed a long and amicable relationship with the Interstate
Power and Light Company (IPLC) as the provider of gas service to the residents of the
City of Ames. Our current, twenty-five year franchise agreement with IPLC expired this
month. Both parties have agreed to abide by the provisions of the previous franchise
ordinance until the end of September in an effort to provide enough time to work out the
details of a new ordinance.
As the Council is aware, the hearing on a proposed new gas franchise ordinance has
been delayed on a number of occasions because we were at an impasse regarding
three critical issues: eminent domain, indemnification, and relocation. The negotiations
between the City and IPLC have been very challenging since the goals of the parties
are quite different. Because the language reflected in the previous ordinance
regarding the three outstanding issues is quite advantageous to the City, it is our
desire to maintain the language as it currently exists. IPLC officials, on the other
hand, would like to change the language associated with these three issues to
make it more favorable to their company and more in keeping with what they have
accepted in other communities. In satisfying our desires, they don't want to establish
a precedent that will be expected by other cities in which they have franchises.
Last Tuesday, August 18t", staff provided company officials with our latest proposal to
eliminate our impasse. A counterproposal from the company was received yesterday,
August 24thIPLC representatives and City staff have reached agreement on a proposed
franchise ordinance (See Attachment ll). In order to accomplish this agreement, we are
proposing significant modifications to the recently expired franchise language.
Attachment I highlights the proposed changes to the recently expired franchise
ordinance. In addition, a summary of the major changes is provided below.
Section Three: Relocation
The City will retain its authority to require IPLC to remove, at its own expense, their gas
equipment and facilities if they interfere or obstruct the construction, reconstruction, or
repair of any municipal facilities or public improvements. However, language has been
added that will require the City to attempt to give IPLC as much advance notice of the
removal requirement as the City deems possible. This removal authority is critical to
the City and must be retained!
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Section Five: Condemnation
The language included in this section grants to IPLC the power of condemnation of
property on a case by case basis only after: the franchisee has established the
necessity for taking of private property, the City Council has approved the request for
the granting of condemnation authority to IPLC by resolution, and the owners of the
property to be condemned have been provided at least ten days notice prior to the
Council taking action on the condemnation request.
Section Six: Indemnification
The alteration of the indemnification language in the expired franchise ordinance
was the top priority of IPLC. Without significant changes, the company indicated
they could not accept a franchise.
In order to reach an agreement, the indemnification language reflected in this section is
in keeping with the language that is included in the franchise ordinances with other
cities in which they do business.
While the new proposed indemnification language is typical of other franchise
ordinances, the Council should understand that it is a major shift from the liability
language that previously benefitted the City. As you can see from Section Six, IPLC
has been liable for the damage caused by the City to the franchisee's distribution
system. Given the close proximity of the gas equipment to our other utility lines in City's
right-of-way, it was important to us that we not be penalized by our willingness to allow
IPLC in our property as we work on our lines.
A compromise has been reached that requires a separate agreement with IPLC that will
still absolve the City for any responsibility to pay for any damage done by City
employees to [PLC's facilities or equipment as long as the damage we cause is not
intentional, the City complies with Iowa Code Chapter 480 (One Call), and promptly
notifies IPLC after any damage becomes apparent to the City. (See Attachment II)
This approach to have a separate agreement will not set a precedent in the franchise
ordinance that other cities might also expect from IPLC and will, at least, relieve the
City of any financial responsibility to repair damage caused by our employees to the
gas facilities as we maintain our utility facilities.
Section Ten: Franchise Fee
This section provides for the enactment of a franchise fee for the City of Ames. Other
cities throughout the state have come to rely on this source of revenue to finance their
operations. Fortunately, we have not reached the point where this revenue source is
needed. However, given the fact that this agreement will last twenty-five years, it is
essential that we not preclude this revenue source as an option for future Councils.
Therefore, the proposed language reflects a 0% franchise fee, but allows the City to
require IPLC to collect a franchise fee for the City's benefit up to the maximum allowed
by Iowa law by providing a six month notification. The ordinance also allows IPLC to
charge a .06% administration fee to cover the costs associated with collecting the
franchise fee. It should be emphasized that the City has not verified whether or
not this proposed administration fee covers their actual costs.
ALTERNATIVES:
1. The City Council can approve the proposed franchise with the recommended
changes on the first reading with the understanding that the separate agreement
(Attachment II) related to absolving the City from any costs to repair gas facilities if
damaged by our employees be signed by the company and approved by the Council
prior to the third reading of the franchise ordinance.
2. The City Council can decide not to approve the proposed franchise ordinance in its
proposed form and direct the staff to continue negotiations with IPCL to modify
certain specified sections of the proposed ordinance. This option would be selected
if the Council believes the staff's proposed language in the franchise ordinance
diminishes the benefit to the City to a point where it can not be supported as
proposed.
3. The City Council can decide not to approve the proposed franchise ordinance. If this
option is selected, IPLC facilities will be able to continue to exist in our rights-of-way
subject to the provisions of our Right-Of-Way ordinance (Chapter 22A).
MANAGER'S RECOMMENDED ACTION:
The negotiations involving a gas franchise ordinance were very difficult because the
staff is attempting to maintain the favorable language reflected in the recently expired
twenty-five year franchise, while IPLC officials are striving to modify the language to be
more favorable to their interests.
In an effort to reach an agreement between the parties, the staff is recommending that
the indemnification section be modified to represent what is now the more common
language required of a franchisee, along with a separate agreement that protects the
City from any financial liability to fix any of the (PLC's facilities should they be damaged
by City employees. The majority of the remaining language is similar to the previous
ordinance and/or meets the needs of the City.
Therefore, it is the recommendation of the City Manager that the City Council
Support Alternative #1 by approving the proposed franchise with the
recommended changes on the first reading with the understanding that the
separate agreement (Attachment II) related to absolving the City from any costs
to repair gas facilities if damaged by our employees be signed by the company
and approved by the Council prior to the third reading of the franchise ordinance.
Should the City Council believe that the proposal goes too far in altering the liability of
the City, then Alternative #3 should be supported. In the absence of a franchise
ordinance, IPLC's existing and future equipment and facilities would still be allowed to
utilize the City' rights-of-way, subject to the requirements specified in Chapter 22A of
the Municipal Code. While the City will not have the benefit of contractual
indemnification, the right-of-way ordinance does require the utility to post insurance
protecting the City from liability as a result of their actions on City property. We have
learned at least one city, Waterloo, does not have a franchise ordinance in place for its
gas service provider which continues to carry on its operation in that city.
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