Review Draft Ordinance Proposing an Amendment to the City's Charter

Purpose:  To review and discuss a proposed amendment to Chapter 7 of the City's Charter.

Background:  Following Council discussion proposing implementation of a franchise fee to fund a long term road maintenance policy, the Charter Commission presented an amendment to the City Council relating to Chapter 10 (Franchises) of the City's Charter.  The amendment is as follows:  Section 10.4 Power of Regulation Reserved.  Subject to any applicable state statutes, the council may by ordinance regulate and control the exercise of any franchise, including the maximum rates, fares, or prices to be charged by the grantee, except that any franchise fees imposed under applicable state statutes must be limited to defraying increased municipal costs accruing as a result of utility operations and may not be used to raise general revenue.  No franchise value shall be included in the valuation of the grantee's property in regulating utility rates, fares, or prices under any applicable state or municipal law, or regulation, or in proceedings for municipal acquisition of the grantee's property by purchase or eminent domain.  The language proposed by the Charter Commission was to initiate discussion with the City Council relating to some limitations with regard to the charging of franchise fees. 

A joint meeting was held with the City Council and the Charter Commission to discuss pros and cons of funding options for a long term street maintenance plan and road reconstruction.  A consensus was reached that there were three viable options for funding road reconstruction - one of them being franchise fees.  The discussion with regard to the franchise fees centered around the need for parameters - such as a sunset term, the money had to be specifically dedicated for long term road maintenance, etc.  

The "original" proposed amendment (recommended prior to the joint meeting)  from the Charter Commission was not approved by Council during the public hearing of December 10.  The City Attorney recommended "denial" because the term to limit franchise fees to "defraying increased municipal costs accruing as a result of utility operations' is ambiguous and leaves open the question to future Councils and the public, subject to potential challenge via lawsuit or other action by residents.  The City Attorney stated that this amendment does not have the transparency or ability to define the limits as the Charter Commission had indicated it desires.  Council directed that staff draft alternate and refined Charter amendment language and open dialog with the Charter Commission for their review and comment.  

Draft language was discussed at a Council work session on January 14, 2014. Attorney Langel explained that based on Council input, language was "tweaked" for inclusion in Chapter 7, the taxation chapter, rather than a franchise fee chapter.  The draft ordinance is attached to this case.  Attorney Langel noted the first paragraph is original language with the exception of the underlined wording indicating the Council's authority is confined.  The following paragraphs get into the actual restrictions discussed by the Council and Charter Commission.  The first is a use restriction, using the funds solely for long-term street maintenance projects.  The second paragraph provides a duration of five years for franchise fee ordinances and the language coordinates the end of the period with the utility company's billing.  The third paragraph indicates that if there is a franchise fee, there would not be the ability to also have a special assessment against the same properties for road maintenance costs.  A rebate would be provided if an assessment is already in place when a franchise fee is adopted.  The fourth paragraph is an attempt at a limit to the total amount of franchise fees.  The final paragraph is a notice provision.

The following discussion ensued at the Council Work Session:  The Council felt the language needed to be refined so the intent is clearly stated and understood - tightened up so it is clear that if franchise fees are in place, there will be no special assessments. The Council talked about road construction versus road reconstruction/maintenance and whether or not road construction would be eligible for special assessments. It was suggested that the perception of the public is that if there is a franchise fee, there will be no assessment for roads whether new or reconstructed and the language and intent needs to be clear.  Attorney Langel stated the language can be refined to indicate a type of new road construction projects would be assessed and not part of the franchise fee rebate.  Discussion of the fee - whether a set fee or a percentage - was discussed.  It was suggested that this language be flagged so the Charter Commission can provide input relating to the Council's goal for an upper limit while still providing sustainable funding for road maintenance costs that have been based on assumptions.  It was pointed out that the fees would be established by ordinance and no numbers should be included in the Charter as the purpose of the Charter is governance.  A draft of the Council Work Session meeting minutes is attached. 

The draft ordinance was also presented at the regular Council meeting on January 14.  Mayor Strommen reviewed the Council's discussion at work session and noted the issues that would be presented to the Charter Commission for its consideration.  An excerpt of those minutes are attached to this case as well.

It should be noted that the draft ordinance being presented to the Charter Commission this evening is the same as was presented to the City Council.  No amendments were made based upon Council discussion as the thought was to gather feedback from Charter prior to incorporating any of the suggested amendments.

Staff is recommending review of the proposed Charter language.

Based upon discussion.