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Capital Funding Update - Recap <br />Attachment C <br />The City is exploring other financing options to fund future capital project needs. The financing options <br />under consideration are 1) a property tax levy increase and 2) adoption of a gas and/or electric franchise <br />fee that is administered by Xcel Energy. <br />What is a Franchise Agreement/Fee? <br />The franchise agreement specifies the period of service and a franchise fee is paid to the Arden Hills in <br />exchange for the franchise rights for use of the public right of ways. <br />These franchise fees are not related to the actual gas or electric usage/consumption. Additionally, these <br />franchise fees are not required for Xcel Energy to provide service to residents. <br />What is the impact of these financing options to a residential property owner - A) electric <br />only, B) gas & electric, C) property tax levy increase, or D) a combination of a franchise fee <br />and property tax levy increase? <br />The chart below shows 2 options for franchise fee and another option for a property tax levy increase. <br />For example, in order to generate $455,000 of revenue for the City, a $469,000 median residential <br />homeowner would see an increase of: <br />• $3.86 per month on their utility bill under an electric -only franchise fee scenario -or- <br />* $5 per month on their utility bill under both a gas & electric franchise fee scenario -or- <br />* $8.78 per month on their property tax bill under a bonding scenario, where property taxes are <br />levied to pay back the bond <br />Monthly Impact on Homeowners <br />Franchise Fee and/or Property Tax Increase <br />Home <br />Cost per Home <br />Market <br />Franchise Fee <br />C - Property <br />Tax <br />Value <br />A - Electric Only B - Gas & Electric <br />Increase' <br />$190, 300 <br />$ 3.86 $ 5.00 <br />$ <br />3.19 <br />$ 285, 500 <br />$ 3.86 $ 5.00 <br />$ <br />5.13 <br />$ 469, 000 <br />$ 3.86 $ 5.00 <br />$ <br />8.78 <br />$ 528, 700 <br />$ 3.86 $ 5.00 <br />$ <br />10.03 <br />$ 608, 000 <br />$ 3.86 $ 5.00 <br />$ <br />11.88 <br />$ 687, 300 <br />$ 3.86 $ 5.00 <br />$ <br />13.74 <br />Each monthly scenario would generate $455,000 annually <br />1: In a bonding scenario, the City would generate City revenues to pay back the bond. The payback <br />would include both principal and interest amounts. This bonding scenario assumes a $3.6M bond issued, <br />at a 3% interest rate, paid back over 10 years, with fixed annual payments of $455,000. Total cost to the <br />City is $4,172,034, which includes $572,034 of interest costs. <br />Other Minnesota Metro Cities that currently charge Franchise Fees <br />Most metro cities charge both a gas and electric franchise fee. The average residential gas and electric <br />monthly rate is $7.10 and Arden Hills' proposed rate of $3.86 electric -only or $5.00 gas & electric would <br />fall below the average. <br />Items to Consider <br />31% of the City's property values are tax-exempt. Under a franchise fee proposal, the fees would be <br />shared across all property owners and would include tax-exempt properties. <br />Under a property tax levy increase, there would be more volatility and an uneven share of taxes paid <br />across property owners. Tax-exempt properties are not impacted by a property tax levy increase. <br />Franchise Fees Page 1 <br />