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ARDEN HILLS CITY COUNCIL — OCTOBER 28, 2024 5 Finance Director Yang indicated during the May 13, 2024 Work Session, staff shared the survey results. There were 73 residential survey responses, with approximately 54% choosing a franchise fee option (22% - electric only; 32% - gas and electric), approximately 30% choosing a property tax levy option, and approximately 17% choosing the combination of property tax levy and franchise fee option. For those respondents who chose any combination of a franchise fee option, approximately 64% indicated the City should consider dedicating the fees for a specific purpose. Some common themes included bike lanes, park and trail improvements; structures and road maintenance; storm water system maintenance and utility infrastructure; fire station. Respondents also provided their concerns and additional comments for Council consideration. Some common concerns shared is that an increase to property taxes would burden taxpayers and would remain in effect indefinitely. Additionally, some respondents shared that non -profits should be assessed a fee in lieu of taxes, which would mean assessing a levy increase on residents and imposing a franchise fee on nonresidential and non-profit organizations. Council's consensus was in favor of implementing electric franchise fees, to be directed towards the LJFD new station. Staff commented further on the franchise fee process. Finance Director Yang commented at the July 22 budget work session, and included in the 2025-2029 CIP budget, are franchise fee assumptions of $375,000 annually, estimated to start in 2025 to offset debt service for the new fire station. Per the August 19 budget work session, Council directed staff to work with the City's financial advisor, Ehler's, to determine the timing and structure of a bond issuance to occur in the spring of 2025, in order to align with the anticipated development of the new fire station. Staff and Ehler's recommend that the City issue bonds independently of one overarching project bond, as this will allow the City to take advantage of more favorable interest rates through the issuance of Bank Qualified (BQ) bonds (less than $10 million of tax-exempt bonds). At the September 23 work session, Council discussed at length, the cost of the new fire station in conjunction with debt service and franchise fees. Finance Director Yang stated at the October 14 work session, Council discussed the various electric franchise fee rate structure scenarios provided by Xcel Energy. Council directed Xcel to provide rate options for a revenue target of $435,000, which would be a 10% revenue cushion above the $395,000, 15- year annual debt service payment. This would allow the City to meet its annual debt service obligation, with any excess collected to be directed towards paying down the principal balance. With the debt service payments expected to occur in February 2026, staff recommends adoption of the franchise fee rate structure no later than November 2024. This timing is crucial to allow Xcel Energy time to meet the Public Utilities Commission's requirements. Finance Director Yang reported Xcel Energy is the natural gas and electric service provider to properties in the City of Arden Hills. Ordinance 2009-014, electric distribution and transmission franchise ordinance, and Ordinance 2009-015, the natural gas franchise ordinance, were approved by the City on November 30, 2009. Both ordinances have twenty-year terms that expire on November 30, 2029. City staff and the City Attorney have been working with Xcel to prepare updated franchise ordinances for review. While the franchise agreement is structured as an ordinance, it is legally considered a contract that requires approval from both parties. According to the League of Minnesota Cities, the primary purpose of these franchise ordinances is to provide uniform provisions that incorporates the broad municipal statutory franchise rights that exist in Minnesota Statues and rules from the Minnesota Public Utilities Commission (MPUC) into an ordinance or agreement for each service. The franchise agreements also provide the City an