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Possible Uses I have noted some possible priority uses for franchise fees in previous memos and in the CIP memo that is in this Council work session packet. I believe that it is most appropriate to have franchise fees used for capital projects. In Arden Hills, franchise fees could be used for the construction of new trails, part of the City share of the PMP projects, and for park improvements. While I do believe that franchise fees should be used for capital improvements, the City does have an operating budget issue that should be addressed. This issue relates to moving the street seal coating and crack sealing and the trail rehabilitation expenses out of the Capital PIR fund and into the General fund operating budget. If part of the franchise fees were used for part or the entire City share of the PMP projects, then the General fund would not need to transfer money to the PIR fund and the street and trail maintenance expenses could be moved into the General fund. The City has some long range plans for park improvements and trail development and ideally, the City trail system will be connected to a regional system and to trails in neighboring communities. However, one of the challenges is that, as everyone already knows, trails are very expensive. For example, based on a 2008 study, a trail on Old Snelling/Old Hwy 10 from TH 51 to Highway 96 is estimated to be around $2.2 million. To use franchise fees on City parks and trail improvements would be a visible and popular capital improvement that will provide some very real long-term benefits to the citizens. The only funds currently available for park and trail improvements are the PIR funds and this puts pressure on the funding of PMP projects. Using franchise fees to fund a park and trail improvement program may be preferable to a bond referendum or a tax levy increase. From a financial point of view, without a bond referendum or a tax levy increase or franchise fees, it is hard to imagine the City trail plan being fully implemented. The Council could generally agree to use the franchise fees for capital improvements to streets, parks, and trails and could decide not to spend any franchise fee revenue until 2015 or 2016. With this approach, a detailed plan on the priority uses for the fees could be worked on in 2014 and/or 2015. Amount to be Collected Attached for your information is part of the report from the September franchise fee agenda item. This material includes three scenarios as prepared by Xcel and the projected impact of these scenarios on residential properties (please note that the projected impacts were prepared by me and not by Xcel). If the Council does not go with scenario three, for both the electric and gas utilities, then I would recommend that the Council keep scenario three for electric and look at scenario two or one for the gas, as the gas utility generates less revenue than the electric utility.