Lake Elmo council directs staff to finish utility franchise negotiations, eyes $500,000 annual fee to support parks or infrastructure

Lake Elmo City Council members on Oct. 8 directed staff to complete negotiations on utility franchise agreements and bring a negotiated contract and a separately adopted fee ordinance back for public hearing, after a workshop discussion about proposed fee levels and where the revenue should be dedicated.

Finance Director Clarissa told the council that Excel Energy provided fee scenarios intended to generate about $500,000 annually. She described one staff memo scenario that showed residential electric fees at about $3.75 per month and residential gas at $2 per month as an example of a combination that would hit the city’s revenue target. “Excel has provided fee scenarios based on our goal of bringing in around half a million dollars in revenue per year,” Clarissa said.

The council heard legal context from municipal attorney Bob Vos of Kennedy & Graven, who explained why cities use franchise agreements and ordinances. “They are both a contract… and they’re also something that we enact as an ordinance,” Vos said, adding that a franchise is the usual precondition for imposing a franchise fee because it establishes enforceable obligations in the right‑of‑way. Vos summarized Minnesota’s late‑1990s shift to statewide right‑of‑way authority and said modern franchises generally interpret gaps or ambiguities in state or local ordinances.

Mike Wilhelm, Excel Energy’s community relations representative, said he expects the city and utility to reach agreement. “I don’t see any reason why we shouldn’t be able to reach an agreement,” he told the council, noting that utilities and cities commonly work through these issues.

Council discussion focused on two decisions staff said were needed to continue: the fee levels themselves and where the revenue would be dedicated. Several council members emphasized a desire to dedicate proceeds to a discrete purpose rather than the general fund; the park reserve/capital fund drew substantial support because park‑dedication revenue from development has slowed. One council member proposed dedicating the money to Lake Elmo Avenue/Highway 36 work given that project’s large cost estimate. Staff also said municipal accounts would effectively pass the fee through to the city (the city would remit and receive the fee), and that Excel collects the fee on bills and remits 100% to the city.

Councilors pressed staff on data limits. Clarissa said Excel did not provide customer‑level lists, so the company modeled scenarios to meet the city’s revenue goal rather than staff calculating exact impacts from individual accounts. The staff memo estimated roughly 25–30 exempt (non‑taxable) properties totaling about $125 million in market value, but staff said they could not map those parcels into the utility rate classes without customer data.

Opponents raised equity concerns about the regressive impact of flat monthly fees on residents with fixed incomes; supporters countered that the fee would diversify revenue streams and provide a predictable source for capital needs. Multiple council members said they wanted clear, transparent rules about how revenue would be used before adopting a fee. The council did not vote at the workshop but gave staff direction to finish legal negotiations and to advertise a required public hearing; staff said the public hearing would likely be scheduled for the council’s second meeting in November after contracting and required publication.

Next steps: staff will continue negotiating franchise language with Excel Energy and CenterPoint, finalize a proposed franchise ordinance and a separate fee ordinance, and return to the council for a public hearing and final action. The workshop adjourned at 7:36 p.m.