City approves 25-year utility and service agreements with Redding Rancheria, including $3.25 million upfront payment

The City of Redding authorized the mayor to sign a 25-year master services agreement and a distribution/utility service agreement with the Redding Rancheria, and determined the action exempt from review under the California Environmental Quality Act. The council approved the agreements by voice vote with all members present voting in favor.

The agreements package includes a $3,250,000 upfront payment characterized in the contract as a “payment in lieu of taxes,” a roughly $600,000 connection fee tied to development, and an annual $100,000 service-impact payment that staff said would be paid quarterly and would end if the Rancheria’s operations moved to the Strawberry Fields development. City staff said the $3.25 million figure was calculated by estimating the impact fees the project would have owed to the city if it were on city property — led by traffic impact fees — and that the Rancheria offered that lump-sum as an alternative. As City staff explained, “the 3,250,000.00, that comes from the traffic impact fee,” and the fire and parks fees account for the remainder of that total.

City staff and the city attorney told council that the contract language matters for how the money can be used: payments characterized as “in lieu of taxes” are unrestricted general fund revenue, while impact fees collected under a regulatory approval would normally be restricted to specific program uses. As the city attorney put it during the meeting, the legal consequence differs because the Rancheria is a sovereign entity and not subject to the same permitting or fee requirements as development on city land.

Council members asked where the $3.25 million would be recorded and how it would be appropriated. Finance staff said the money will be booked as general fund revenue when received and that any spending would require a subsequent budget appropriation by council. Staff also explained that the Rancheria’s current annual payment for municipal utility services will be reduced from about $138 per year to $100 under the new master services agreement, with the upfront payment effectively converting some long-term annual payments into a lump sum.

The contract also includes utility interties and coordination between the city’s electric utility and the Rancheria’s utility corporation for water, wastewater and electric services. Council members and staff emphasized the agreements are negotiated offers that provide immediate cash to the general fund while leaving future appropriations to later council decisions.

Mayor and council authorized staff to execute the agreements and directed that any future appropriation of the funds be returned to council for formal action. The city attorney advised that, because the money would be recorded as general fund revenue when received, council would need to adopt any spending plan later through the budget process.