Franchise fees, utility rates and access to gyms discussed

by Beth Balmanno

Contributing Writer

Franchise fees, utility rates, and a possible school district partnership were discussed at a work session for Otsego City Council and city staff, held before and after the March 9 City Council meeting.

The city is considering franchise fees for utility providers, most notably gas and electric. Franchise fees would provide another source of revenue for the city beyond property taxes and is something neighboring cities currently charge their utility providers. Discussion centered on implementation of franchise fees, terms of potential agreements, and if earmarking the revenue for road projects and improvements was an option. Council also expressed concern about utility providers choosing to simply pass on the franchise fees to consumers, but staff pointed out that there was no way for the city to predict or control this. If franchise fees are approved, the city could see collection of this revenue as soon as 2021.

City staff and council also spoke about partnering with the Elk River Area School District for gym space at the soon-to-be constructed middle school near the existing Prairie View Elementary/Middle School. The city is exploring ways to provide gym space and classes for city programs, and partnering with the school district was an option floated to address the recreational needs of residents. The school will have three gyms and a weight room, and the school district expressed interest in creating a financial partnership with the city to allow for use of those facilities.

However, after meeting with Superintendent Daniel Bittman and other school district staff, city staff and council determined that access to gym facilities at the school site might be too limiting. In addition, the turnaround time for a decision to partner with the district is tight, and council concluded that they should explore other options that might better suit the city’s needs. Field space was also discussed, as this was another popular request from residents identified in the city’s Master Plan, and staff and council will continue to explore options for providing fields for city-sponsored recreation.

A utility rate study for water and sewer was also discussed, with two companies offering proposals to conduct the study. City Administrator Adam Flaherty indicated that city staff is looking to get council direction “on some of the inputs and design of the study.” He said Ehlers, one of the companies submitting a proposal, conducted the previous study in 2012 and 2013 and, while they provided valuable data and tools, a new study is needed due to the changes the city has experienced over the last several years.

“Customer base has increased. Our usage, both in sanitary and water, has increased,” he said. In addition, he said, “as part of the water master plan, we ran into the Minnesota DNR and the water permitting on usage and what they set as guidelines for water usage in the city.”

City staff recommended a study that considers a three-tier setup, with a base rate and then additional rates based on usage. The city currently has a two-tier rate.

“We have a base rate that everyone gets charged based on the size of your meter,” Flaherty said. “All gallons per thousand are charged at the same rate up to 10,000 gallons. Above and beyond that, it’s charged at a slightly higher rate.”

The study can help identify cutoffs for a three-tier setup.

“It’s partially revenue generation and partially philosophical,” Flaherty said when asked how those determinations will be made, indicating that heavy users might be charged more under a three-tier system. Water usage is a concern, especially since Otsego is exceeding the DNR’s criteria of gallons per user, and a three-tier setup could reward residents who practice water conservation with lower rates.

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