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Councilors debate shifting utility pilot to percentage of gross receipts; staff asked for financial projections
Summary
City staff proposed moving the public utility pilot from a kilowatt‑hour mill-rate to a percentage of gross electric revenue; members discussed ranges used by peer cities (about 4–5% central region average) and asked the public utility director for projections and a phased approach rather than an immediate jump to 5%.
The committee spent the meeting’s final major agenda item discussing the formula and level for the public utility’s annual pilot payment (a payment in lieu of taxes).
City Administrator Nick Broy summarized recent pilots and peer-city practices, saying Brainerd’s recent pilot payments have been “in the high 700s” and that the 2026 budgeted pilot is $780,000. He presented 2024 electric revenue of $26.7 million and a 2025 projection of $30.4 million and summarized peer practices that included fixed-dollar pilots and gross‑receipts percentages (examples cited: several cities using 4–5% of gross electric receipts, some using a fixed annual amount). Broy said he recommended making the pilot independent of kilowatt‑hour billing (the current formula) and instead using a percentage of gross revenues to capture changes in rate and usage trends.
Some councilors said a jump to 5% would be a large revenue increase and urged caution; one member suggested scaling increases gradually (for example adding 1 percentage point per year or targeting 3% for 2026). Committee members asked Danny (public utilities finance lead) to provide revenue and expense projections, capital‑project plans and a study to show how different pilot percentages would affect rates and utility finances. Danny said he would include projections and that rate adjustments were already scheduled (recent increase June 1 and another on Jan. 1).
No formal motion was made at the committee meeting; staff will return with a projection and a proposal the council can act on before the preliminary levy deadline.
