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HomeMy WebLinkAbout112105 Work Session16200 Eagle Creek Avenue S.E. Prior Lake, MN 55372-1714 Date: To: From: Subject: November 21, 2005 The Mayor and City Council _ k Frank Boyles, City Manag~r~ ~ / November 21, 2005, City C&ff[cil Workshop The City Council has previously discussed franchise fees. Fundamentally, the City is required to purchase and maintain right of way, which is used by the various utility companies to locate their distribution plant. The law provides that the City Council may initiate franchise fees to recover the cost of right of way administration from utility users. The City Attomey has prepared the attached memorandum responding to questions which were posed in May of this year. Also enclosed is a model Utility Franchise Ordinance. If the Council desires, a public hearing can be scheduled for December 19, 2005, to garner public input on this topic. Notice of the public hearing, in addition to being posted in the Prior Lake American, would also be sent out in the Wavelength and posted on the Website. I have distributed this packet to Councilmember-elect Dombush, Erickson and Millar. Each is encouraged to attend this City Council workshop. A light meal will be served. www.cityofpriorlake.com Phone 952.447.4230 / Fax 952.447.4245 TO: FROM: DATE: RE: halleland lewis nilan & johnson MEMORANDUM Frank Boyles, City Manager Suesan Lee Pace Rebecca H. Estelle July 20, 2005 Prior Lake Franchise Agreements Attorneys at Law/P.A. 600 U.S. Bank Plaza South 220 South Sixth Street Minneapolis, MN 55402-4501 Office: 612338.1838 Fax: 612.338.7858 www. halleland.com On May 16, 2005 there was a discussion about the potential use of franchise fees by the Prior Lake City Council to raise revenue. From this conversation five major questions emerged. First, which utilities may the City of Prior Lake impose a fi'anchise fee? Second, on what must the City base the amount of the fee imposed? Third, does the imposition of a franchise fee preclude the City from imposing an additional administrative fee for the utilities' use of the right of way? Fourth, does federal telecommunications law preempt the state's right of way statute, disallowing the imposition of fees for the telecommunications utilities' use of the right of way? Finally, will ' public hearings be required in order to adopt these agreements? Although more detailed answers have been provided below, the results of research into these issues can be summarized as follows. First, the City may impose a franchise fee upon gas, electric and cable utilities, as well as a number of others, but may not impose a franchise fee on telecommunications utilities. Second, franchise fees imposed on non-telecommunication utilities may be based on costs incurred or the revenue needs of the City. Third, the imposition of a franchise fee does not preclude the City fi.om imposing an additional administrative fee for the utilities' use of the right of way. Fourth, federal telecommunications law does not disallow the imposition of fees for the utilities' use of the right of way, but does require that those fees are fair and reasonable. Finally, public hearings are not required for agreements with most utilities, but it would be wise to include some form of public involvement in the standard franchise agreement process. First Question Presented On which utilities may the City of Prior Lake impose a franchise fee? First Brief Answer The City may impose a franchise fee upon gas, electric and cable service providers in the City as . well as a whole host of other public utilities not otherwise protected by Minnesota law. Although telecommunications may fit the general description of covered utilities, they are protected fi.om franchise fees by Minnesota's right of way statute (ROW). DN: 255810 Discussion Several Minnesota statutes grant cities authority to require franchise agreements from public utilities. Minnesota Statute 216B.36 grants general franchise authority, allowing municipalities to require agreements with utilities occupying "streets, highways, or other public property." Minn. Stat. § 216B.36. It also specifically includes those public utilities mentioned in 216B.02, including most gas and electric utilities. Id. Minnesota Statute 300.03 grants authority to require agreements with "corporations organized to construct, acquire, maintain, or operate internal improvements, including railways, street railways, telegraph and telephone lines, canals, slackwater, or other navigation, dams to create or improve a water supply or to furnish power for public use, and any work for supplying the public, by whatever means, with water, light, heat, or power, including all requisite subways, pipes, and other conduits, and tunnels for transportation of pedestrians." Minn. Stat. § 300.03. Minnesota Statute 238.08 grants franchise authority with respect to "cable communications systems providing services within the municipality." Minn. Stat. § 238.08. In addition to the franchise authority, the aforementioned statutes grant municipalities the power to impose a franchise fee on the covered public utilities in accordance with any franchise agreement entered into. See Minn. Stat. § 216B.36, Minn. Stat. § 300.03, Minn. Stat. § 238.08. Minnesota Statute 216B.36 states: "Under the license, permit, right or franchise, the utility may be obligated by any municipality to pay the municipality fees to raise revenue or defray increased municipal costs." Minn. Stat. § 216B.36. Similarly, statute 300.03 warns that none of the corporations described may operate railways, pipelines, tunnels or conduits without "first obtaining from the city a franchise conferring this right and compensating the city for it." Minn. Stat. § 300.03. Although not specifically granting the right to impose a fee, the cable statute asserts that "nothing in this chapter shall be construed to limit the power of any municipality to impose upon any person operating a cable communications system a fee, tax, or charge." Minn. Stat. 238.08(4). Despite the seemingly far-reaching grant of franchising and fee-imposition power found' collectively in 216B.36, 238.08 and 300.03, no franchise fee may be imposed on a telecommunications company due to the language found in the Minnesota ROW, which specifically prohibits a local government from requiring "a telecommunications right of way user to obtain a franchise or pay for the use of the right of way." Minn. Stat. § 237.163(6)(c)(4). The Minnesota Court of Appeals has agreed, stating that 237 "evidences a legislative intent to abolish the right of municipalities to require a franchise from a telephone company." U S West Communs. V. City of Redwood Falls, 558 N.W.2d 512 (Minn. 1997). Federal law does not similarly prohibit the imposition of franchise fees but does require that any barriers to entry - including franchise requirements and fees - be executed on a non-discriminatory basis. 47 U.S.C. § 153, 253 (1996). Fees are allowed, but only if they are "fair and reasonable." Id. It does not otherwise abrogate the municipal right to manage the right of way or impose a franchise fee. Id. Conclusion Municipalities can generally impose a franchise fee on most public utilities telecommunication utilities as protected by the right of way statute. other than DN: 255810 2 Second Question Presented On what must the City base the amount of the fee imposed? Second Brief Answer There are two basic sets of rules for what a city may base its fee on: one for protected telecommunications utilities and one for other public utilities. Fees imposed on telecommunications utilities must be based on the actual cost incurred by the city for the utility's use of the right of way. Fees imposed on other utilities can be based on costs incurred or on the revenue needs of the city. Discussion Minnesota law provides different requirements for the basis of the franchise fee, depending on what kind of public utility is being charged. Minnesota Statute 300.03 describes a franchise fee as "compensation" to the city for its consent to issue a franchise to the utility and its use of the city right-of-way to serve utility customers. Minn. Stat. § 300.03. For most utilities, 216B.36 allows a municipality to charge fees to "raise revenue or defray increased municipal costs accruing as a result of the utility operations, or both." Minn. Stat. § 216B.36. Although the right-of-way statute anticipates and allows fee collection to cover right- of-way management costs, the right-of-way statute does not limit fees to the cost of management, under most circumstances and allows a fee simply for use. Minn. Stat. § 237.163(6)(a). 216B.36 suggests that the fee might include "a sum of money based upon gross operating revenues or gross earnings from its operations in the municipality," but makes clear that fees are not limited to these sums. Minn. Stat. § 216B.36. Where, however, the utility is a protected telecommunications utility, fees must be limited to the cost incurred as a result of the actions or inactions of the right-of-way user. Minn. Stat. § 237.163(6)(a). The right-of-way statute also makes clear that a telecommunications utility may not be charged for the costs caused by another entity's use of the right-of-way. Id. Minnesota law further makes clear that no local government can require a telecommunications user to pay simply for using the right of way. Minn. Stat. § 237.163(7)(4). Conclusion Whereas fees imposed on telecommunications utilities must be based on the costs incurred by the city from the particular utility's use, fees imposed upon other utilities need not be based on the costs of the particular utility's activities. Third Question Presented Does the imposition of a franchise fee preclude the City from imposing an additional administrative fee for the utilities' use of the right of way? DN: 255810 3 Third Brief Answer No. The imposition of a franchise fee does not preclude the City from imposing an additional administrative fee for the utilities' use of the right of way. In the case of telecommunications, imposition of such a fee may be precluded by the ROW. Discussion Minn. Stat. § 216B.36, provides "Under the license, permit, right, or franchise, the utility may be obligated by any municipality to pay to the municipality fees to raise revenue or defray increased municipal costs accruing as a result of utility operations, or both." Although it does not expressly assert a right to impose a franchise fee and an administrative fee, the language supports imposition of both franchise and administrative fees. The revenue raising fee is akin to the franchise fee, while the administrative fee is akin to the municipal cost or "use" fee. This contention is supported both by case law and general principles of statutory interpretation. Northern States Power Co. v. City of Oakdale, 588 N.W.2d 534 (Minn. 1998); Minn. Stat. § 645.17(1). The Minnesota Court of Appeals, in fact, specifically held "the statute can be read to allow for a revenue-generating fee from a franchise and a separate fee for a permit to defray administrative costs." Northem States Power, 588 N.W.2d at 541. In doing so, it cited Minn. Stat. § 645.17 (Presumptions in ascertaining legislative intent). In the case of telecommunications utilities, no franchise fee may be imposed for the purpose of revenue creation, but a fee to cover the cost of the utility's particular use of the right-of-way is always acceptable. Minn. Stat. § 237.163(6)(a). It would depend on whether the administrative fee was dependant on the particular utility's use of the right-of-way or whether it would be charged regardless of any cost to the City. Id. If it were charged in the absence of any cost to the City, the local government would be recovering the costs of other users of the right-of-way, in violation of Minn. Stat. 237.163(6)(a). Conclusion The imposition of a franchise fee would not preclude the City from imposing an additional administrative fee, but in the case of telecommunications utilities, certain administrative fees - if recovering the costs caused by other utilities - would be independently violative of the right-of- way statute. Fourth Question Presented Does federal telecommunications law preempt the state's right of way statute, disallowing the imposition of fees for the utilities' use of the right of way? Fourth Brief Answer Probably not. Although the Federal Telecommunications Act of 1996 does place some restrictions on municipalities' ability to manage their rights-of-way, it does not prevent them fi:om imposing fees for the utilities' use of rights-of-way. What it does do, however, is require that any fees levied on telecommunications utilities for use be fair and reasonable. DN: 255810 4 Discussion The Federal Telecommunications Act of 1996 generally prevents barriers to entry to telecommunications markets. 47 U.S.C. § 153, 253 (1996). It also provides, however, that nothing in that section affects the "authority of a state or local government to manage the public rights-of-way. Id. Section 253 adds that thc section does not prevent municipalities from requiring "fair and reasonable compensation" for use of the ROW. Id. In other words, the statute does not prohibit the imposition of fees for use unless they are unreasonable or unfair. Id. As was mentioned above, the telecommunications sections of Minn. Stat. § 237.163 (Minnesota ROW) already serve to prohibit the imposition of fccs simply for use (whether fair and reasonable or not). Minn. Stat. § 237.163(7)(4). As such, the "fair and reasonable" standard would not likely come into play because thc prohibition in 237.163 bans all "use" fees and is therefore more protective than is required by federal law. Conclusion The Federal Telecommunications Act of 1996 will likely not limit the imposition of fees for use in Minnesota beyond what the right-of-way statute has already done, because the Minnesota ROW's ban on use fees is more protective than the "fair and reasonable" requirement found in the act. Fifth Question Presented Will public hearings be required before these agreements can be adopted? Fifth Brief Answer No. For most utilities, including telecommunications utilities, no public hearing will be required. Agreements involving Cable providers, however, will require public hearings. Although public hearings aren't required for most utilities, the City may want to consider involving the public in its standard fi:anchise agreement process. Discussion In Minnesota, ordinance passage is governed by Minn. Stat. § 415.01 and Minn. Stat. § 365. 125. Minnesota law provides that, in order to pass an ordinance, a town must meet certain formalities, including majority vote, publication, posting and recording. Minn. stat. § 365.125. The statutes clarify that the laws applying to towns in chapter 365 also apply to cities. Minn. Stat. § 415.01. Nothing in these or other Minnesota statutes require a public hearing for the passage of a franchise ordinance. Similarly, nothing in the City Code of Prior Lake places any public hearing requirement on the passage of ordinances. In the case of franchise agreements with Cable utilities, however, Minnesota does require a public hearing. Minn. Stat. § 238.081(6). Chapter 238 provides that a required element of the franchise procedure is "a public hearing before the franchise authority affording reasonable notice and a reasonable opportunity to be heard with respect to all applications for the franchise." Id. The section adds that the public hearing must be completed at least seven days before the adoption of the franchise ordinance. Id. In addition to the public hearing requirement, Chapter 238 also provides a number of other procedural requirements and items that must be included in an adopted ordinance. Id__~. DN: 255810 5 Although public hearings are not required for the passage of most franchise ordinances, the City may want to consider including some form of public involvement in the franchise agreement process, especially where revenue generating fees will be imposed. The City plans to use the agreements to impose franchise fees on certain utilities, which will be passed on to the public in the form of increased utility bills. Engaging the public in the process would allow the City to explain why a fee is being imposed and how the revenue generated will be used to improve the City. This is especially important because the utilities, who are likely to be opposed to a fee, would have a more difficult time mobilizing opposition to the fees if the public were made aware of its benefits early on. Conclusion Unless the City is adopting a Cable franchise ordinance, no public hearing is required by law. However, from a strategic standpoint, the City should consider engaging the public so as to minimize opposition to the fee. DN: 255810 6 Model Standard Utility Franchise Ordinance ORDINANCE NO. . CITY OF PRIOR LAKE, SCOTT COUNTY, MINNESOTA AN ORDINANCE GRANTING NAME OF COMPANY, KIND 01' UTILITY, STATE OF INCORPORATION, ITS SUCCESSORS AND ASSIGNS A NONEXCLUSIVE FRANCHISE TO WHAT ARE 'D.]EY ALLOWED TO DO AND TO USE THE PUBLIC GROUND OF THE CiTY OF PRIOR LAKE, MINNESOTA, FOR SUCH PURPOSE; AND PRESCRIBING CERTAIN CONDITIONS THEREOF. THE CITY COUNCIL OF THE CITY OF PRIOR LAKE, SCOTT COUNTY, MINNESOTA ORDAINS: SECTION 1: DEFINITIONS. For purposes of this Ordinance, the following capitalized terms listed in alphabetical order shall have the following meanings: 1.1 City: The City of Prior Lake, County of Scott, State of Minnesota. 1.2 City Utility System: Facilities used for providing public utility service owned or operated by City or agency thereof, including sewer, storm sewer, water service, street lighting and traffic signals but excluding facilities for providing heating, lighting or other forms of energy. 1.3 Commission: The Minnesota Public Utilities Commission, or any successor agency or agencies, including any agency of the federal government, which preempts all or part of the authority to regulate SUBJECT OF ORD1NACE rates now vested in the Minnesota Public Utilities Commission. 1.4 Company: NAML (')F COMPAN , its successors and assigns including all successors or assigns that own or operate any part or parts oftbe UTILITY subject to this franchise. 1.5 Notice: A writing served by any party or parties on any other party or parties. Notice to Company shall be mailed to NAME OF COMPANY, CHOSEN CONTA(:T, COMPANY AI)I_)RI.SSS. Notice to the City shall be mailed to CITY OF PRIOR L:'\I~, CHOSEN C'.ONTACT: CON'I'AC"I" ADDRESS. Any party may change its respective address for the purpose of this Ordinance by written notice to the other parties. 1.6 Ordinance: Ordinance means this Ordinance and all modifications and amendments thereto. 1.7 Public Way: Any street, alley or other public right-of-way within the City. 1.8 Public Ground: Land owned or otherwise controlled by the City for Park, open space or similar purpose, which is held for use in common by the public. ADD ADDITIONAI..DEFINITt()NS AS RF.I.I!\:ANT TO YHE PAIYY[CULAR ORDINANCE. SECTION 2: ADOPTION OF FRANCHISE. 2.1 Grant of Franchise. City hereby grants company, for a period of NUMBER years from the date this ordinance is passed the right to RIGHTS I_3qDER ORDINANCE within and through the limits of the City as its boundaries now exist or as they may be extended in the future. For these purposes, and in order to maintain the integrity and efficient operation of the Company's (!T'[UYY in the City and other areas served by the Company, the Company is granted the right to construct, operate, repair and maintain UTILITY facilities and equipment in, on, over under and across the public ground and public ways of the City. Company may do all things necessary or customary to accomplish these purposes, subject to zoning ordinances, other applicable ordinances, permit procedures, customary practices and the provisions of this franchise. 2.2 Effective Date; Written Acceptance. This franchise shall be in force and effect from and after its passage and publication as required by law, and its acceptance by the Company in writing filed with the Municipal Clerk. If the Company does not file a written acceptance with the City within N[..IMI-tER days after the City Council's adoption of the ordinance, the City Council by resolution may revoke this franchise or seek its enforcement in a court of competent jurisdiction. 2.3 Nonexclusive Franchise. This is not an exclusive franchise. If the City intends to grant a franchise to another KIND OF '[.?FILITY utility, the City shall notify the Company in writing at least NIJMB|(R days before granting the franchise. 2.4 UTII.ITV Rates. The service to be provided and the rates to be charged by the Company for UTILITY in City are subject to the jurisdiction of the Commission. 2.5 Ordinance. Publication Expense. Company shall pay the expense of publication of this 2.6 Default. If the Company is in default in the performance of any material part of this franchise for more than NUMBER days after receiving written notice from the City of such default, the City Council may, by ordinance, terminate all fights granted in the present ordinance to the Company. If the Company is in default as to any of this franchise, the City may, after giving notice to the Company, take such action as may be reasonably necessary to abate the condition caused by the default, and the Company agrees to reimburse the City for all of its reasonable costs. Nothing in this section shall bar the Company from challenging the City's claim of default. In the event of a disagreement over the existence of a default, the burden of proving the EXISTENCE (')R NONEXISTENCE of the default is on the CITY O.R COMPANY. 2 SECTION 3: LOCATION AND CONDITIONS OF USE. 3.1 Location of Facilities and Equipment. ! ?1'11.I'1"¥ facilities and equipment shall be located, constructed and maintained so as not to interfere with the usual and customary traffic, travel and use of Public Ground and so as not to disrupt the normal operation of the City Utility System. 1.1TLITY facilities may be located on public grounds as determined by the City. Company's construction, reconstruction, operation, repair, maintenance, location and relocation of [.~TILITY facilities shall be subject to other reasonable regulations of the City consistent with the authority granted the City to manage its Public Ways and Public Grounds under state law. 3.2 Disturbing Surface of Public Ways or Public Grounds. Company shall not open or disturb the surface of any Public Way or Public Ground for any purpose without first having obtained a permit from the City, if required by a separate ordinance, for which the City may impose a reasonable fee. Permit conditions imposed on Company shall not be more burdensome than those imposed on other utilities for similar facilities or work. Company may, however, open and disturb the surface of any Public Way or Public Ground without a permit if (i.) there is an emergency requiring the immediate repair of U'I'iIL.[I~Y facilities and (ii.) Company gives telephone, email or similar notice to the City before commencement of the emergency repair, if reasonably possible. Within NU?x~[{ER business days after commencing the repair, Company shall apply for any required permits and pay any required fees. 3.3 Restoration of Public Ways and Public Ground. Restoration of the Public Way shall be subject to City Code R.OW. Upon completion of any work requiring the opening of any Public Ground, the Company shall restore the opening to as good condition as formerly existed in accordance with Minnesota Rules, part 7819.1100 and applicable City ordinances. Company shall also maintain the surface in good condition for N'UI~.'IBER months thereafter. The restoration shall be completed as promptly as weather permits, but if the Company shall not promptly perform and complete the work, the City shall have the fight to do so at the expense of the Company. The Company shall upon demand, pay to the City the reasonable cost of the work performed by the City. 3.4 Avoid Damage to UTILITY Facilities. The Company must take reasonable measures to prevent the U~I"ILI.'.I'Y facilities from causing damage to persons or property. The Company must take reasonable measures to protect the U'I"ILI'¥~' facilities from damage that could be inflicted on the facilities by persons, property, or the elements. The Company must take protective measures when the City performs work near the U'['~LII'Y facilities, if given reasonable notice by the City of such work prior to its commencement. 3.5 Notice of Improvements to Streets. The City will give Company reasonable written notice of plans for improvements to Public Ways where the City has reason to believe that UT1LI'I'¥ facilities may affect or be affected by the improvement. The notice will contain: (i.) the nature and character of the improvements, (ii.) the Public Ways upon which the improvements are to be made, (iii,) the extent of the improvements, (iv.) the time when the City will start the work, and (v) if more than one Public Way is involved, the order in which the work is to proceed. The notice will be given to Company a sufficient length of time, considering seasonal working conditions, in advance of the actual commencement of the work to permit 3 Company to make any additions, alterations or repairs to its UTILITY facilities the Company deems necessary. However, Company shall be responsible for any costs incurred by City for construction delays in City's project caused by Company's work on its UTII.tTY facilities. 3.6 Mapping Information. The Company must promptly provide complete and accurate mapping information for any of its UT~I.II'Y facilities in accordance with the requirements of Minnesota Rules Parts 7819.4000 and 7819.4100. SECTION 4: RELOCATIONS. 4.1 Relocation in Public Ways. The Company shall comply with Minnesota Rules, part 7819.3100 and applicable City ordinances consistent with law. 4.2 Relocation in Public Grounds. City may require Company at Company's expense to relocate its facilities from Public Ground upon a finding that the facilities have become or will become a substantial impairment to the existing or proposed public use of the Public Ground. Relocation shall comply with applicable City ordinances consistent with law. 4.3 Projects with Federal Funding. Relocation, removal, or rearrangement of any Company UTI[.YYY facilities made necessary because of the extension into or through City of a federally-aided highway project shall be governed by thc provisions of Minnesota Statutes Section 161.46. SECTION 5: INDEMNIFICATION. 5.1 Indemnity of the Ci~. The Company shall indemnify, keep and hold the City, its elected officials, officers, employees and agents free and harmless from any and ail claims and actions on account of injury or death of persons or damage to property occasioned by the construction, maintenance, repair, inspection, the issuance of permits, or the operation of the UTILITY facilities located in the Public Ways and Public Grounds. 5.2 Defense of City. In the event a suit is brought against the city under circumstances where this agreement to indemnify applies, Company at its sole cost and expense shall defend the City in such suit if written notice thereof is promptly given to Company within a period wherein Company is not prejudiced by lack of such notice. If Company is required to indemnify and defend, it will thereafter have control of such litigation, but Company may not settle such litigation without the consent of the City. The City's consent shall not be unreasonably withheld. This section is not, as to third parties, a waiver of any defense or immunity otherwise available to the City. The Company, in defending any action on behalf of the City, shall be entitled to assert every defense or immunity that the City could assert on its own behalf. This franchise agreement shall not be interpreted to constitute a waiver by the City of any of its defenses of immunity or limitations on liability under Minnesota Statutes, Chapter 466. SECTION 6: ASSIGNMENT. 4 The Company, upon notice to the City shall have the rights conferred upon it by this franchise to any person. The assignee of such rights, by accepting such assignment, shall become subject to the terms and provisions of this franchise. SECTION 7: VACATION OF PUBLIC WAYS. The City shall give Company at least two weeks prior written notice of a proposed vacation of a Public Way. The City and the Company shall comply with Minnesota Rules, 7819.3200 and applicable ordinances consistent with law. SECTION 8: CHANGE IN GOVERNMENT. Any change in the form of government of the City shall not affect the validity of this Ordinance. Any governmental unit succeeding the City shall, without the consent of Company, succeed to all of the rights and obligations of the City provided in this Ordinance. SECTION 9A: FRANCHISE FEE (Reserved right f0.r future imposition) 9.1A Imposition of Fee. The City reserves its fight under Minnesota Statutes 216.B to impose a franchise fee, for the purposes of raising revenue or defraying the increased City costs accruing as a result of the U'I'I LII'Y operations or both, in addition to any permit fees imposed. 9.2A Form of the Fee. The amount of the fee may be based on (i.) a percentage of gross revenues received by the Company for its operations within the City, or (ii.) a fiat fee per customer based on metered service to retail customers within the City, or (iii.) a fee based on units of energy delivered to any class of retail customers within the corporate limits of the City. The method of imposing the franchise fec, the percentage of thc revenue rate, or the fiat rate based on metered service may differ for each customer class or combine the methods described in (i.)-(iii.) above in assessing thc fee. Thc City shall seek to use a formula that provides a stable and predictable amount of fees, without placing thc Company at a competitive disadvantage. If the Company claims that the City required fee formula is discriminatory or otherwise places thc Company at a competitive disadvantage, the Company shall provide a formula that will produce a substantially similar fee mount to the City and reimburse the City's reasonable fees and costs in reviewing and implementing the formula. The City will attempt to accommodate the Company but is under no franchise obligation to adopt the Company but is under no franchise obligation to adopt the Company-proposed franchise fee formula and each review will not delay the implementation of the City-imposed fee. 9.3A Separate Ordinance. The franchise fee shall be imposed by separate ordinance duly adopted by City Council, which ordinance shall not be adopted until at least (3) days after written notice enclosing such proposed ordinance has been served upon the Company. The fee shall become effective N[J'N'II3/~R days after written notice enclosing such adopted ordinance has been served upon the Company by MANNER OF SFRVICI~!.. 9.4 Condition of Fee. The separate ordinance imposing thc fee shall not be effective against the Company unless it lawfully imposes a fee of the same or substantially similar amount on the sale of U'['ILI*I'Y I'I~()Dt.iCT within the City by any other t.:I1Lt'I"Y supplier, provided that, as to such supplier, the City has the authority or contractual right to require a franchise fee or similar fee through a previously agreed upon franchise. 9.5 Collection of Fee. The franchise fee shall be payable not less than quarterly during complete billing months of the period for which payment is to be made. The franchise fee formula may be changed from time to time, however, the change shall meet the same notice requirements and the fee may not be changed more ot~en than annually. Such fee shall not exceed any amount that the Company may legally charge to its customers prior to payment to the City. Such fee is subject to subsequent reductions to account for uncollectables and customer refunds incurred by the Company. The Company agrees to make available for inspection by the City at reasonable times all records necessary to audit the Company's determination of the franchise payments. 9.6 Continuation of Franchise Fee. If this franchise expires and the City and the Company are unable to agree upon terms of a new franchise, the franchise fee, if any being imposed by the City at the time this franchise expires, will remain in effect until a new franchise is agreed upon. SECTION 9B: FRANCHISE FEE (to be imposed upon uassageL 9. lB Imposition of Fee. The City, asserting its right under Minnesota Statutes 216.B to impose a franchise fee for the purposes of raising revenue, hereby imposes a franchise fee on the Company. 9.2B Form of the Fee. The amount of the fee will be based on I'ICK ONE OF THE FOLLOWING: (1.) A. t'ERCENI'AGE OF GROSS REVE'XIJES R[~C'EIVED BY TI-ti:. COMPANY F(){~ I'TS OPERATI(~NS W'[TI-{I'N Tt-llr-~ CITY. OR (II.it A FLAT FEF PER CUSTOMI.~;R BASEl) ON ME'£ERED SERVICE TO I~TAIL CUSTOMERS WI'I"HIN 'I'HE CITY, ()R (Ill.)A FEE BASED ON UN[I'S OF ENERGY DELIVERED TO ANY CLASS OF RETAII. C. USTOMI~RS WITI-tlN THE C()RPORATE LIMITS O1~ TN['~ CITY. 9.3B Changing the Form of the Fee. The City reserves the right to change the form of the fee by an ordinance duly adopted by City Council detailing a different method for determining the fee amount. The City agrees not to change the fee more often than annually. The City may decide to base the fee upon (i.) a percentage of gross revenues received by the Company for its operations within the City, or (ii.) a flat fee per customer based on metered service to retail customers within the City, or (iii.) a fee based on units of energy delivered to any class of retail customers within the corporate limits of the City. The fee shall become effective N [.! MBER days after written notice enclosing such adopted ordinance has been served upon the Company by 'MANNER OF SERVICE. The City shall seek to use a formula that provides a stable and predictable mount of fees, without placing the Company at a competitive disadvantage. If the Company claims that the City required fee formula is discriminatory or 6 otherwise places the Company at a competitive disadvantage, the Company shall provide a formula that will produce a substantially similar fee amount to the City and reimburse the City's reasonable fees and costs in reviewing and implementing the formula. The City will attempt to accommodate the Company but is under no franchise obligation to adopt the Company Company-proposed franchise fee formula and each review will not delay the implementation of the City-imposed fee. 9.4 Condition of Fee. The separate ordinance imposing the fee shall not be effective against the Company unless it lawfully imposes a fee of the same or substantially similar amount on the sale of UTI[.ITY 'PR.ODUCT within the City by any other UTILITY supplier, provided that, as to such supplier, the City has the authority or contractual right to require a franchise fee or similar fee through a previously agreed upon franchise. 9.5 Collection of Fee. The franchise fcc shall be payable not less than quarterly during complete billing months of thc period for which payment is to be made. Such fee shall not exceed any amount that the Company may legally charge to its customers prior to payment to the City. Such fee is subject to subsequent reductions to account for uncollectables and customer refunds incurred by the Company. The Company agrees to make available for inspection by thc City at reasonable times all records necessary to audit the Company's determination of thc franchise payments. 9.6 Continuation of Franchise Fee. If this franchise expires and the City and the Company are unable to agree upon terms of a new franchise, the franchise fee, if any being imposed by the City at the time this franchise expires, will remain in effect until a new franchise is agreed upon. SECTION 10: ABANDONED FACILITIES. The Company shall comply with City ordinances, Minnesota Statutes, Section 216D.01 et seq. and Minnesota Rules Part 7819.3300, as they may be amended from time to time. The Company shall maintain records describing the exact location of all abandoned and retired facilities within the City, produce such records at the city's request and comply with the location requirements of 216D.04 with respect to all facilities, including abandoned and retired facilities. SECTION 11: PROVISIONS OF ORDINANCE. 11.1 Notice. Notice to Company shall be mailed to NAME OF COMPANY, CHOSEN CONTACT. COMPANY ADI)R}'~SS. Notice to the City shall be mailed to CITY OF 'I~RIOR LAKE. CIIOSEN CON'IA(!T, CON'FAC;I' ADDRI:~SS_ Any party may change its respective address for the purpose of this Ordinance by written notice to the other parties. 11.2 Severability. Every section, provision, or part of this Ordinance is declared separate from every other section, provision or part. If any section, provision, or part shall be held invalid, it shall not affect any other section, provision, or part. Where a provision of any other City ordinance conflicts with the provisions of this Ordinance, the provisions of this Ordinance shall prevail. 7 11.3 Limitation on Applicability. This Ordinance constitutes a franchise agreement between the City and the Company as the only parties and no provision of this franchise shall in any way inure to the benefit of any third person (including thc public at large) so as to constitute any such person as a third party beneficiary of the agreement or of any one ore more terms of the agreemem, or otherwise give rise to a cause of action in any person not a party hereto. SECTION 12: AMENDMENT PROCEDURE. Either party to this franchise agreement may at any time propose that the agreement be amended. This Ordinance may be amended at any time by the City passing a subsequent Ordinance declaring the provisions of the amendment, The amendatory ordinance shall become effective upon the filing of Company's written consent thereto with the City Clerk within NUMBER days after the effective date of the amendatory ordinance. Model Telecommunications Utility Franchise Ordinance ORDINANCE NO. . CITY OF PRIOR LAKE, SCOTT COUNTY, MINNESOTA AN ORDINANCE GRANTING NAN,~ OF COMPANY. A TELECOMMUNICATIONS UTILITY, STATE O1: INCOR'PORATION, ITS SUCCESSORS AND ASSIGNS A NONEXCLUSIVE FRANCHISE TO CONSTRUCT, OPERATE, REPAIR AND MAINTAIN FACILITIES AND EQUIPMENT FOR THE PROVISION OF TELECOMMUNICATIONS SERVICES FOR PUBLIC AND PRIVATE USE AND TO USE THE PUBLIC GROUND OF THE CITY OF PRIOR LAKE, MINNESOTA, FOR SUCH PURPOSE; AND PRESCRIBING CERTAIN CONDITIONS THEREOF. THE CITY COUNCIL OF THE CITY OF PRIOR LAKE, SCOTT COUNTY, MINNESOTA ORDAINS: SECTION 1: DEFINITIONS. For purposes of this Ordinance, the following capitalized terms listed in alphabetical order shall have the following meanings: 1.1 City: The City of Prior Lake, coUnty of Scott, State of Minnesota. 1.2 Ciiy Utility System: Facilities used for providing public utility service owned or operated by City or agency thereof, including sewer, storm sewer, water service, street lighting and traffic signals but excluding facilities for providing heating, lighting or other forms of energy. t.3 Commission: The Minnesota Public Utilities Commission, or any successor agency or agencies, including any agency of the federal government, which preempts all or part of the authority to regulate telecommunication services rates now vested in the Minnesota Public Utilities Commission. 1.4 Company: NAME OF COMPANY, its successors and assigns including all successors or assigns that own or operate any part or parts of the telecommunications facilities subject to this franchise. 1.5 Equipment: The poles, wires, electrical conductors, conduits, subways, manholes, fixtures, appliances and appurtenances that are used to provide telecommunications services. 1.6 Notice: A writing served by any party or parties on any other party or parties. Notice to Company shall be mailed to NAMI:.!; Ot.: COMPANY, CH()SliN ('ON'I'ACT, COMPANY ADDR[!SS. Notice to the City shall be mailed to City of Prior Lake, ('HOSEN CONTACT.. UON'[ AC'I' Al)DRESS. Any party may change its respective address for the purpose of this Ordinance by written notice to the other parties. 1.7 Ordinance: Ordinance means this Ordinance and all modifications and amendments thereto. 1.8 Public Way: Any street, alley or other public right-of-way within the City. 1.9 Public Ground: Land owned or otherwise controlled by the City for Park, open space or similar purpose, which is held for use in common by the public. 1.10 Telecommunications: The transmission, between or among points specified by the user, of information of the user's choosing, without change in the form or content of the information as sent and received. 1.11 Telecommunications Services: The offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used. The term "telecommunications services" shall not include cable services. 1.12 Tdecommunications System: The plant, equipment, real property (including interests in real property), tangible and intangible personal property, buildings, offices, furniture, customer lists, cable, wires, optical fibers amplifier, antenna, and all other electronic devices, equipment and facilities used to provide telecommunications services. SECTION 2: ADOPTION OF FRANCHISE. 2.1 Grant of Franchise. City hereby grants company, for a period of 'NUMBER years from the date this ordinance is passed the right to provide telecommunications services for public and private use within and through the limits of the City as its boundaries now exist or as they may be extended in the future. For these purposes, and in order to maintain the integrity and efficient operation of the Company's telecommunications services in the City and other areas served by the Company, the Company is granted the right to construct, operate, repair and maintain telecommunications facilities and equipment in, on, over under and across the public ground and public ways of the City. Company may do all things necessary or customary to accomplish these purposes, subject to zoning ordinances, other applicable ordinances, permit procedures, customary practices and the provisions of this franchise. 2.2 Effective Date; Written Acceptance. This franchise shall be in force and effect from and after its passage and publication as required by law, and its acceptance by the Company in writing filed with the Municipal Clerk. If the Company does not file a written acceptance with the City within NUMBEt*, days after the City Council's adoption of the ordinance, the City Council by resolution may revoke this franchise or seek its enforcement in a court of competent jurisdiction. 2 2.3 Nonexclusive Franchise. This is not an exclusive franchise. If the City intends to grant a franchise to another telecommunications utility, the City shall notify the Company in writing at least N UMBER days before granting the franchise. 2.4 Telecommunications Rates. The service to be provided and the rates to be charged by the Company for telecommunications services in City are subject to the jurisdiction of the Commission. 2.5 Ordinance. Publication Expense. Company shall pay the expense of publication of this 2.6 Default. If the Company is in default in the performance of any material part of this franchise for more than NUMBF. R days after receiving written notice from the City of such default, the City Council may, by ordinance, terminate all fights granted in the present ordinance to the Company. If the Company is in default as to any of this franchise, the City may, after giving notice to the Company, take such action as may be reasonably necessary to abate the condition caused by the default, and the Company agrees to reimburse the City for all of its reasonable costs. Nothing in this section shall bar the Company from challenging the City's claim of default. In the event of a disagreement over the existence of a default, the burden of proving the EXISI'ENCF. OR NONEXISTENCE of the default is on the CITY OR COMPANY. SECTION 3: LOCATION AND CONDITIONS OF USE. 3.1 Location of Facilities and Equipment. Telecommunications facilities and equipment shall be located, constructed and maintained so as not to interfere with the usual and customary traffic, travel and use of Public Ground and so as not to disrupt the normal operation of the City Utility System. Telecommunications facilities may be located on public grounds as determined by the City. Company's construction, reconstruction, operation, repair, maintenance, location and relocation of telecommunications facilities shall be subject to other reasonable regulations of the City consistem with the authority granted the City to manage its Public Ways and Public Grounds under state law. 3.2 Disturbing Surface of Public Ways or Public Grounds. Company shall not open or disturb the surface of any Public Way or Public Ground for any purpose without first having obtained a permit fi.om the City, if required by a separate ordinance, for which the City may impose a reasonable fee. Permit conditions imposed on Company shall not be more burdensome than those imposed on other utilities for similar facilities or work. Company may, however, open and disturb the surface of any Public Way or Public Ground without a permit if (i.) there is an emergency requiring the immediate repair of telecommunications facilities and (ii.) Company gives telephone, email or similar notice to the City before commencement of the emergency repair, if reasonably possible. Within NU Mi!~I:~P, business days after commencing the repair, Company shall apply for any required permits and pay any required fees. 3.3 Restoration of Public Ways and Public Ground. Restoration of the Public Way shall be subject to City Code Section 701.700, Upon completion of any work requiring the opening of any Public Ground, the Company shall restore the opening to as good condition as 3 formerly existed in accordance with Minnesota Rules, part 7819.1100 and applicable City ordinances. Company shall also maintain the surface in good condition for N[.J¢.IBER months thereafter. The restoration shall be completed as promptly as weather permits, but if the Company shall not promptly perform and complete the work, the City shall have the right to do so at the expense of the Company. The Company shall upon demand, pay to the City the reasonable cost of the work performed by the City. 3.4 Avoid Damage to Telecommunications Facilities. The Company must take reasonable measures to prevent the telecommunications facilities from causing damage to persons or property. The Company must take reasonable measures to protect the telecommunications facilities from damage that could be inflicted on the facilities by persons, property, or the elements. Thc Company must take protective measures when the City performs work near the telecommunications facilities, if given reasonable notice by the City of such work prior to its commencement. 3.5 Notice of Improvements to Streets. The City will give Company reasonable written notice of plans for improvements to Public Ways where the City has reason to believe that telecommunications facilities may affect or be affected by the improvement. The notice will contain: (i.) the nature and character of the improvements, (ii.) the Public Ways upon which the improvements arc to be made, (iii.) the extent of the improvements, (iv.) the time when the City will start the work, and (v) if more than one Public Way is involved, the order in which the work is to proceed. Thc notice will be given to Company a sufficient length of time, considering seasonal working conditions, in advance of the actual commencement of the work to permit Company to make any additions, alterations or repairs to its telecommunications facilities the Company deems necessary. However, Company shall be responsible for any costs incurred by City for construction delays in City's project caused by Company's work on its telecommunications facilities. 3.6 Mapping Information. The Company must promptly provide complete and accurate mapping information for any of its telecommunications facilities in accordance w/th the requirements of Mirmesota Rules Parts 7819.4000 and 7819.4100. SECTION 4: RELOCATIONS. 4.1 Relocation in Public Ways. The Company shall comply with Minnesota Rules, part 7819.3100 and applicable City ordinances consistent with law. 4.2 Relocation in Public Grounds. City may require Company at Company's expense to relocate its facilities from Public Ground upon a finding that the facilities have become or will become a substantial impairment to the existing or proposed public use of the Public Ground. Relocation shall comply with applicable City ordinances consistent with law. 4.3 Projects with Federal Funding. Relocation, removal, or rearrangement of any Company telecommunications facilities made necessary because of the extension into or through City of a federally-aided highway project shall be governed by thc provisions of Minnesota Statutes Section 161.46. SECTION 5: INDEMNIFICATION. 5.1 Indemnity of the City. The Company shall indemnify, keep and hold the City, its elected officials, officers, employees and agents free and harmless from any and all claims and actions on account of injury or death of persons or damage to property occasioned by tho construction, maintenance, repair, inspection, the issuance of permits, or the operation of the UTILITY facilities located in the Public Ways and Public Grounds. ~ 5.2 Defense of City. In the event a suit is brought against the city under circumstances where this agreement to indemnify applies, Company at its sole cost and expense shall defend the City in such suit if written notice thereof is promptly given to Company within a period wherein Company is not prejudiced by lack of such notice. If Company is required to indemnify and defend, it will thereafter have control of such litigation, but Company may not settle such litigation without the consent of the City. The City's consent shall not be unreasonably withheld. This section is not, as to third parties, a waiver of any defense or immunity otherwise available to the City. The Company, in defending any action on behalf of the City, shall be entitled to assert every defense or immunity that the City could assert on its own behalf. This franchise agreement shall not be interpreted to constitute a waiver by the City of any of its defenses of immunity or limitations on liability under Minnesota Statutes, Chapter 466. SECTION 6: ASSIGNMENT. The Company, upon notice to the City shall have the rights conferred upon it by this franchise to any person. The assignee of such rights, by accepting such assignment, shall become subject to the terms and provisions of this franchise. SECTION 7: VACATION OF PUBLIC WAYS. The City shall give Company at least two weeks prior written notice of a proposed vacation of a Public Way. The City and the Company shall comply with Minnesota Rules, 7819.3200 and applicable ordinances consistent with law. SECTION 8: CHANGE IN GOVERNMENT. Any change in the form of government of the City shall not affect the validity of this Ordinance. Any governmental unit succeeding the City shall, without the consent of Company, succeed to all of the rights and obligations of the City provided in this Ordinance. SECTION 9: IMPOSITION OF FEES ON COMPANY. The City shall not impose a franchise fee upon Company but reserves its right under 237.163 to impose a fair and reasonable fee to cover expenses incurred by the City due to the Company's own use of the City's right of way. 5 SECTION 10: ABANDONED FACILITIES. The Company shall comply with City ordinances, Minnesota Statutes, Section 216D.01 et seq. and Minnesota Rules Part 7819.3300, as they may be amended from time to time. The Company shall maintain records describing the exact location of all abandoned and retired facilities within the City, produce such records at the city's request and comply with the location requirements of 216D.04 with respect to all facilities, including abandoned and retired facilities. SECTION 11: PROVISIONS OF ORDINANCE. 11.1 Notice. Notice to Company shall be mailed to NAME 01.; COMPANY, CHOSEN C()NI'ACT, COM?ANY ADDRESS. Notice to the City shall be mailed to CITY OF PR]OR I_.AK}i. CHOSEN CONTACT, CONTAC']' ADDRESSr Any party may change its respective address for the purpose of this Ordinance by written notice to the other parties. 11.2 Severability. Every section, provision, or part of this Ordinance is declared separate from every other section, provision or part. If any section, provision, or part shall be held invalid, it shall not affect any other section, provision, or part. Where a provision of any other City ordinance conflicts .with the provisions of this Ordinance, the provisions of this Ordinance shall prevail. 11.3 Limitation on Applicability. This Ordinance constitutes a franchise agreement between the City and the Company as the only parties and no provision of this franchise shall in any way inure to the benefit of any third person (including the public at large) so as to constitute any such person as a third party beneficiary of the agreement or of any one ore more terms of the agreement, or otherwise give rise to a cause of action in any person not a party hereto. SECTION 12: AMENDMENT PROCEDURE. Either party to this franchise agreement may at any time propose that the agreement be amended. This Ordinance may be amended at any time by the City passing a subsequent Ordinance declaring the provisions of the amendment. The amendatory ordinance shall become effective upon the filing of Company's written consent thereto with the City Clerk within NUMBER days after the effective date of the amendatory ordinance.