VII.1. Proposed Franchise Fee Increase; Bishop
CITY OF HOPKINS
Memorandum
To: Honorable Mayor and Council Members
Mike Mornson, City Manager
From: Nick Bishop, Finance Director
Date: June 20, 2023
Subject: Proposed Franchise Fee Increase
_____________________________________________________________________
PURPOSE
To seek guidance on gas and electric franchise fee increases beginning on January 1,
2024. For administrative purposes, City Staff needs an agreement on the amount of
franchise fees by July 14th. Staff is also looking for guidance on the proposed uses of
franchise fees, however that decision can be made during the 2024 budget process.
INFORMATION
The City of Hopkins adopted two franchise fee ordinances beginning on 1/1/2019 with
five year terms. They both expire at the end of 2023. Residential customers pay $3.50
monthly for electric service to Xcel Energy and $3.50 monthly for natural gas to
Centerpoint Energy. Commercial and industrial customers pay higher rates based on
type and size of meter.
City Council met and discussed gas and electric franchise fees on May 9, 2023. Staff is
proposing a rate increase of $1.50 monthly for gas and electric for residential
customers, or $3.00 combined per month. The total paid by a residential househol d
would be $10.00 per month or $120.00 per year. A chart showing the detailed analysis
proposed rates paid by type and number of customers is attached.
Franchise fees represent a small portion of
the total utility bills paid by residents. The
average monthly cost of gas and electric
service is $131, compared to $10 per
month of proposed franchise fees.
Finance Department
Franchise fees can be used for any public purpose. The proposal continues to subsidize
the general fund and support the parks and capital improvement funds. The additional
revenue is estimated at $427,101 with proposed uses for sustainability and parks.
Sustainability investments have been shown to drive cost savings. The City is in the
process of finalizing a Park System Master plan which has identified needs in the park
system. The following chart shows the proposed uses of current and increased
franchise fees:
Proposed Uses of Franchise Fees
Current Uses (No Change)
General Fund 295,489
Parks Fund 292,394
Capital Fund 350,042
937,925
2024 Increase
Climate Solution Fund - Grants 202,101
Sustainability - Staffing, Consulting Etc.175,000
Parks Fund 50,000
427,101
Total Proposed Uses 1,365,026
Different users pay different amounts when levying taxes or collecting franchise fees. In
order to collect $427,101 of revenue a median value home ($361,000) would pay taxes
of $56.29 per year compared to franchise fees of $36.00.
SUPPORTING INFORMATION
• 2024 Franchise Increase Proposal
• Monthly Franchise Fee Comparison
FUTURE ACTION
Gas and electric franchise fees are each establish ed by separate ordinance. Xcel and
Centerpoint each need to be provided with a written notice of proposed ordinances
before July 14th. The first reading and second reading/adoption could occur on
September 19th and October 3rd.
City of Hopkins
2024 Franchise Increase Proposal
June 20, 2023
Residential
Small C&I
Non
Small C&I
Demand Large C&I Residential
Commercial
A
Commercial
B
Commercial/
Industrial C
Small Dual
Fuel A
Small Dual
Fuel B
Large
Volume
Dual Fuel Total
Brooklyn Center 1.65 4.25 22.75 103.00 1.66 1.74 5.63 22.50 56.23 107.96 107.96
Edina 2.90 4.90 13.68 58.32 2.90 4.90 13.68 58.32 58.32 58.32 58.32
Champlin 3.62 9.80 41.21 144.24 3.98 3.98 10.78 45.33 90.67 158.66 158.66
Richfield 4.10 12.50 30.00 185.00 4.10 4.10 12.50 30.00 30.00 30.00 185.00
Minnetonka 4.50 4.50 13.50 45.00 4.50 4.50 13.50 45.00 45.00 45.00 45.00
Chanhassen 5.00 14.00 40.00 290.00 5.00 5.00 9.00 20.00 90.00 90.00 90.00
Golden Valley 6.00 6.00 30.00 258.00 6.00 7.50 30.00 30.00 258.00 258.00 258.00
Saint Louis Park 6.75 12.00 48.50 148.50 6.75 6.75 12.00 48.50 48.50 48.50 148.50
Hopkins - Current 3.50 6.15 24.70 170.50 3.50 3.50 8.75 24.70 48.55 170.50 170.50
67th Percentile 5.00 12.00 40.00 185.22 5.00 5.01 13.50 45.34 90.00 108.11 158.74
Proposed Rates 5.00 12.00 40.00 185.22 5.00 5.01 13.50 45.34 90.00 170.50 170.50
(67th Percentile
or current)
$ Increase 1.5000 5.85 15.30 14.72 1.50 1.51 4.75 20.64 41.45 0.00 0.00
% Increase 42.86%95.12%61.94%8.63%42.86%43.14%54.29%83.56%85.38%0.00%0.00%
# of Customers 8,441 674 303 68 5,073 0 200 202 15 0 1
Projected Collections 506,460 97,056 145,440 151,140 304,380 0 32,400 109,904 16,200 0 2,046 1,365,026
$ Increase 151,938 47,315 55,631 12,012 91,314 0 11,400 50,031 7,461 0 0 427,101
Xcel Energy Centerpoint Energy
City of Hopkins
Monthly Franchise Fee Comparison
June 20, 2023
City Electric Gas Total Purpose
Brooklyn Center 1.65 1.66 3.31 Street Improvements
Edina 2.90 2.90 5.80 Pedestrian and cyclist safety, conservation and sustainability
Champlin 3.62 3.98 7.60 City infrastructure
Richfield 4.10 4.10 8.20 Street maintenance - mill & overlay, curb & gutter, sealcoating
Minnetonka 4.50 4.50 9.00 Undergrounding electrical wires, street light improvements and trails
Hopkins (Proposed)5.00 5.00 10.00 General fund, parks, municipal buildings, sustainability
Chanhassen 5.00 5.00 10.00 Pavement Maintenance Program
Golden Valley 6.00 6.00 12.00 Water, sewer, storms water and street infrastructure
Saint Louis Park 6.75 6.75 13.50 Pavement Management
Comparable Cities without Franchise Fees: Columbia Heights, Crystal, Fridley & Roseville
Shakopee collects 3% for both gas and electric