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ARDEN HILLS CITY COUNCIL—FEBRUARY 24, 2014 5 used for City improvement projects. Due to the near zero balance in the Park Reserve Fund the Council has been considering options to fund park and trail improvements. These options include increasing property taxes, a park referendum, or franchise fees. After discussing these options,the Council wanted to further explore franchise fees as a source for additional revenues. City Administrator Klaers stated that franchise fees are allowed by State law, and if approved, the City would work with Xcel Energy to implement the program. It was noted that the Council met with an Xcel representative three times in work sessions last year. He reported that a number of cities in the metro area have instituted franchise fees to make up for the loss of LGA or to finance capital, street, or park projects. He discussed the number of cities currently collecting franchise fees, noting Mounds View, New Brighton, Shoreview, Forest Lake and Maplewood all have franchise fees. City Administrator Klaers reviewed the benefits of franchise fees noting that all utility customers would be impacted which provides for a broader base of revenue collection for the City than what is covered by property taxes. He reported that 43% of the City is made up of tax exempt properties and the franchise fees would diversify the City's revenue sources. He commented that franchise fees were a flat fee and were not based on use. He discussed the disadvantages of franchise fees stating that the fees can be viewed as regressive in nature and are not tax deductible. Director of Finance and Administrative Services Iverson reviewed the differences between a levy or property tax increase as compared to the proposed franchise fee. She then broke down the percentages of residential, commercial and tax exempt properties in the City and explained how a property tax increase would impact these properties. City Administrator Klaers explained that the proposed franchise fee rates would generate $439,000 annually. Staff reviewed the franchise fee rates for commercial and industrial properties along with how a property tax increase would more adversely impact property owners. He commented that Xcel is willing to work with the City to establish fair and equitable franchise fee rates for local business owners. He explained that if the franchise fees were approved by the Council, the program would not go into effect until 2015. He noted that all of the information presented this evening is available on the City's website. Mayor Grant opened the public hearing at 7:54 p.m. Dorothy McClung, 4370 North Snelling Avenue, noted that she has lived in Arden Hills for 42 years and she is opposed to franchise fees. She appreciated the Council's efforts in looking to diversify its revenue streams. She understood these were difficult discussions. While she enjoys the City's parks and amenities she does not believe these parks and trails are essential services. She does not believe the City needs to charge its residents franchise fees in order to gain$439,000 a year, every year going into the future. She does not feel it is wise to spend $500,000 for a mile of trails. She recommended the City reconsider its needs and that the Council look to improve Old Snelling prior to considering park improvements. She believes the franchise fees are regressive and are not the right decision for Arden Hills.