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Boulder City Council to discuss franchise Tuesday
Staff recommends utility occupation tax instead of new franchise

The City of Boulder may ask voters to support a limited-term utility occupation tax instead of a franchise agreement with Xcel Energy.

Boulder City Manager Jane Brautigam will ask City Council on Tuesday, Aug. 3, to give the city more time to chart out its energy future, recommending that council decline to place a 20-year Xcel franchise agreement on the ballot this November. The staff recommendation follows months of analysis and negotiations with Xcel Energy.

The current franchise agreement was set to expire Aug. 3, and has been extended by Xcel through Dec. 31, 2010. The agreement gives the utility access to the city’s streets, alleys and other rights-of-way for the purpose of providing gas and electricity to Boulder consumers. In exchange for the rights-of-way, Xcel pays $3.9 million to the city.

Whether the city enters into a new franchise or not, Xcel Energy is required to continue to provide gas and electricity to Boulder customers. The city manager’s recommendation to go out of franchise will have no impact on the energy services provided by Xcel. However, the decision may result in a loss of $3.9 million to the city’s General Fund.

Without a franchise agreement, the utility will no longer be required to collect a 3 percent franchise fee from its customers. The money is used to help pay for core services, including police, fire, libraries, parks, human services and public works.

Brautigam said the franchise revenue could be replaced with a utility occupation tax on Xcel if council supports this option and voters approve it in November.

Brautigam is recommending that council place a five-year occupation tax on Xcel on the ballot for voter consideration on Nov. 2. The revenue measure is not a new tax on voters. The tax is on Xcel and replaces the franchise fee. The utility will likely pass the cost onto ratepayers as it does with the current franchise fee.

The measure maintains the integrity of the city’s budget and provides important funding for core services. The proposed tax expires in five years, providing the needed time to
study the best ways to meet Boulder’s renewable energy goals. In addition to replacing
the $3.9 million franchise fee, council will be asked to consider including $450,000 per year in the revenue measure to fund a decarbonization study that explores the city’s long-term energy options.

“Our voters have told us very clearly that they support alternative sources of energy and want Boulder to be a leader in moving toward a cleaner supply,” said Brautigam. “While we appreciate Xcel’s efforts and commend them for working with us during this process, the city is not prepared to enter into a 20-year agreement at this time. I am asking council to keep all of our options open and give city staff and outside experts time to examine where the industry is going and how we best can achieve the community’s goals.”

Brautigam emphasized that the recommendation does not rule out the possibility of a franchise agreement with Xcel Energy at some later date. That option, along with others, including municipalization, should remain under consideration.

“We value Xcel’s services and the partnerships we have formed with their employees,” Brautigam said.

Council will consider these recommendations at its regularly scheduled meeting at 6 p.m. on Tuesday, Aug. 3, in City Council Chambers, 1777 Broadway. A detailed memo to council will be available by the end of today at www.bouldercolorado.gov/energyfuture.