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HomeMy WebLinkAbout2005-01-24 OPH Email to Steven Nyhus Forwarding 1-11-05 Draft Mtg. SummaryJL %A Nn , V.101 x v 8ric A. Johnson From= Steven W. Nyhus [swnyhus @flaherty- hood.com] Sent: Monday, January 24, 2005 1:12 PM To: Steven W. Nyhus Subject: GRAFT January 11 CUC Meeting Summary Attachments: 2005 Pre - Session Meeting Surnmary.doc Good afternoon, Attached please find the DRAFT meeting summary from the January 11, 2005 CUC Pre - Session Meeting. Please let me know of any comments, questions, additions or corrections. Marian, the tape ran out when you were discussing the Blandin Paper project so you might want to include some detail on that point, Item G on page 5. Thank you to everyone who came to the meeting, whether in person or eleotroh we will contact the membership again when the legislation is drafted and /or when a meeting with the counties is planned. Steven W. Nyhus, Associate Attorney Flaherty & Flood, P.A. 525 Park Street, Suite 470 St. Paul, MN 55103 Phone 551.225.8840 Fax 851 - 225 -0088 www NOTE: The information contained in this e-mail is confidential and intended only for use by the individual or entity named. If the reader of this message is not the intended recipient, or the employee or agent responsible to deliver to the intended recipient, you are hereby notified that any dissemination, distribution or copying of this communication is strictly prohibited. If you have received this communication in error, please immediately notify us by replying to this email and destroying the original email and any attachments thereto. 1/2412005 -sit V. " � SUBJECT TO APPROVAL AT NEXT MEETING Pre - Session Meeting Summary January 11, 2005 10:00 AM to 12:00 PM Offices 0f Flaherty & Hood, P.A., St. Paul Members Present City of Becker —Joe Rudberg City of Cohasset —Mayor Marian Barcus (by conference call) City of Granite Falls — City of Hoyt Lakes — City of Monticello —Rick Wolfsteller City of Oak Park Heights —Mayor David Beaudet, Eric Johnson City of Red Wing — Marshall Hallock (by conference call) Flaherty & Hood., P.A. — Tim Flaherty, Sara Grewing, Steve Nyhus I. Welcome and Introductions II. Review and A royal of June 23 2004 Annual Meetin Sumnlar Beaudet, OPH moved to approve the summary. wolfsteller, Monticello seconded. The motion prevailed and the summary was approved. III. Status Report on CUC Activities A. Becker/Elk River: GRE Peakiniz Plant The group reviewed the October 27, 2004 memorandum summarizing the meeting among CUC, the City of Becker and Sherburne C ounty. At issue was a new peaking plant being proposed by Great River Energy (GRE), the state's largest co-op, for the city of Elk River. The City of Elk River had indicated it would support a personal property tax exemption for the new facility and Sherburne County was discussing how it should approach the issue. Rudb erg indicated that after the October meeting, Sherburne County told GRE that it would not support an exemption, so the issue appears to have gone away for now. GRE is looking at an alternative site near Cambridge. [U905.1- W__1 B. Oak Park Hei MERP Kin Plant IM provernents There were no packet materials relative to this subject. Johnson said that the Cit had faced two issues in the past y ear with re to the improvements of the Kin plant: 1) the conditional use permit and 2 buildin permits. Johnson said the Cit primar concern with re to conditional use pennittin was makin sure Xcel g ot the appropriate permits for the expansion, especiall considerin the site is located in a shoreland zonin district. The CUP process took about three months. The Cit first proposed that all of the real and personal propert on the site would remain taxable. Xcel balked at this proposal so after about 30 da the CUP was re-drafted to provide that if there is an le chan an applicable sitin fees would appl retroactivel Xcel si the CUP and construction is now underwa As to buildin permits, Xcel first alle it did not need an buildin permits from the Cit The Cit contacted the Minnesota Department of Administration, which sided with the Cit in that buildin permits would be re for the foundations and footin if not other portions of the new construction. The Cit estimates the buildin pe=*t's value at about $10 million, with permit fees of rou $30,000 — $50,000. Johnson said that Xcel also re an air emission permit from the Minnesota Pollution Control A (MPCA) for the new construction. The Cit expressed concerns about public meetin on the permit bein held in Stillwater rather than Oak Park Hei but these were i b the MPCA. The Cit also asked that the permit lan be modified to preclude issuance of the air permit until all local permits had been secured, but the MPCA refused. The Cit has filed a letter with the MPCA memorializin its objections. Beaudet added that the Kin plant's fl ash facilit will run out of space in 2010. Xcel is now lookin for new landfill space and has identified a site with no houses within 2000 feet — the existin facilit has houses within 400 feet. The new site is in a g ravel pit next to a visitors' center on 1-94. Xcel has indicated it onl wants to pa a tippin fee (an amount per truckload of fl ash deposited), pa to West Lakeland Township where the facilit would be located. At a public hearin virtuall all who attended said, in short, "not in m back y ard." Beaudet advised the township board that as soon as the facilit is operatin it will come off the township's tax rolls and the township will g et nothin West Lakeland currentl has the lowest tax rate of an local g ovennnent in the seven-count metropolitan area. He su to the board that the develop a pa in lieu of taxes ( PILT ) calculated b multipl the value of the site times twice the communit lev rate. The town board seemed lukewarm to the idea, as township residents simpl don't want 60 trucks ever week haulin throu their nei Barcus found it odd that the landfill would not be taxed. Beaudet pointed out that the landfill would readil q ualif y as "pollution control" under current law and would therefore be exempt from taxation. 2 Lam Wolfsteller asked for clarification as to whether xcel had agreed that the $300 - million -plus MERP improvements to the Ring plant would be taxable. Johnson said no, but in the City's opinion, the boiler and turbine (30% of the total) are taxable, and they have documentation to support this from documents filed by xcel with the City and with the MPUC, as well as written and verbal statements by xcel representatives. He added that xcel would undoubtedly make application to the MPCA to have some or all of this equipment exempted as pollution control equipment, but what classifies as "pollution control" is a designation only the MPCA can make. It was Johnson's opinion that it would be difficult for xcel to make this argument because xcel made statements in its MPUC documentation that a portion of the rate increase would be used to pay taxes on the new property — hardly what one would expect if the property were to be exempt. Johnson said that about $129 million of the improvements (reburners, filters, etc.) could legitimately be classified as pollution control. He expressed some surprise and disappointment that the MPCA showed no sympathy to the City's position. The MPCA's only excuse was that it was bound by EPA standards. C. Monticello: Monticello Nuclear Plant Re- Lice nsin There were no packet materials relative to this subject. Wolfsteller said that he had heard of no significant local opposition to the plant's relicensing, and utilities seemed to be treating is as a foregone conclusion. Since the fight in front of the Legislature had taken place in 2003, it was expected that most activity would take place in front of the Minnesota Public Utilities Co (MPUC). However, that does not preclude legislators from taking on the issue if they decide to do so. Postscript: The MPUC has opened a docket for consideration of dry cask storage at Monticello. The docket number is E- 0021CNW05 --123 and may be accessed on the MPUC's docket search page at htt :ll search. state. mp..usl ucl uer .html. D. Red Wing: Meeting with MDOR on Utility Valuation R.ulemakin The group reviewed the September 16, 2004 memorandum summarizing a meeting between CUC, the City of Red wing and Minnesota Department of Revenue Commissioner Dan Salomone and MDOR staff. The meeting was productive, and among other things highlighted the difference of opinion between CUC and MDOR on the degree to which utility property valuation issues and tax impacts issues commingle, CUC expressed the position that valuation must take impacts into account; MDOR. expressed a preference for keeping the issues separate. E. MDOR Utility Valuation Rulemaking and CUC Consultant The group reviewed the December 7, 2004 memorandum summarizing CUC's utility valuation consultant search. The most recent contact with MDOR staff (Alan Whipple) indicated that the draft report from Brent Eyre will not be released until the end of January. 3 B arcus asked whether any public meetings had occurred, as the September 16 memorandum indicated a public meeting was anticipated for November 2004. No public meetings have yet occurred and none are anticipated before the report is released. wolfsteller put the question to the group as to whether the delay is more beneficial to xcel; he said it was his impression from discussions with xcel staff that xcel is treating it as a foregone conclusion that plant values will decrease. Nyhus said that in his discussions with other consultants, it has been their experience that Eyre's analyses have tended to increase property values, not decrease then. He wondered if perhaps MDOR had seen an initial draft of the report and sent it back to Eyre for revisions. Flaherty pointed out that we may never know what influence, if any, political considerations might have on the report's contents. He felt the delay is probably not a good thing and CUC should prepare for an unfavorable report. Beaudet asked whether initial drafts of the report that have not been released to the public are discoverable. The group believed these would be publicly available documents, but MDOR might not give them up willingly. Johnson asked whether CUC had ever received a document with the parameters for the study. Nyhus said no; all CUC has to go on are the very general parameters contained in the MDOR.'s Informal Solicitation. It was his understanding that once a consultant was hired, MDOR and the consultant would coordinate on the specific questions to be answered. Johnson asked whether the consultant would be required to identify assumptions, etc. used in the report. The group said it would be difficult not to identify assumptions, as the report should be sufficiently clear to allow third parties to "back into" the consultant's numbers. Beaudet said there must be a memorandum of understanding or some document memorializing what the consultant had corm - pitted to study. Nyhus said if such a document exists, it would be difficult to obtain from MDOR, Flaherty suggested that a Freedom of Information Act (FOIA) request to MDOR may be in order [note Minnesota's version of FOIA is the Minnesota Data Practices Act (MDPA)]. F. Research on Pollution Control Exemption The group reviewed the January 7, 2005 memorandum. from Sara Grewing discussing the pollution control equipment exemption, the types of exemptions that exist in other states, and possible legislative options for tightening the exemption. Rudberg recounted the problems the City of Becher and Sherburne County have had with a coal storage facility at Sherco that is classified as pollution control under the Minnesota Supreme Court's broad interpretation of Minn. Stat. § 272.01. Beaudet asked whether the exemption could be restructured as a tax credit, paid for by the state. Flaherty opined that it was a good idea, but there is little chance of any state tax increases this year because of the pledges Governor Pawlenty and other legislators had taken to not raise taxes. There may not even be a gas tax increase, which a majority of legislators support and iii campaigned for. Flaherty suggested that the other pertinent question is whether the exemption should exist at all. Many other states do not exempt pollution control equipment, and their environmental protection standards may be as strict as Minnesota's. Pollution control equipment is required by other law and really has nothing to do with tax policy at all. If the exemption is taken away, the cost is passed along to the customer. After looking at the research, Flaherty came to the conclusion that a good bill would eliminate the land pollution control exemption completely and restrict the other exemptions to property used exclusively for pollution control (as opposed to "primarily" as in current law), combining Options 3 and 4 attached to the memorandum. Flaherty mentioned the counties having expressed a renewed interest in collaboration and a desire to meet with the cities soon. The counties have raised money for a consultant and are interested in collaborating on that issue as well; he suggested putting this legislation on the agenda for the forthcoming meeting. Johnson asked how this would operate for refuse - derived fuel (RDF) facilities. Rudberg pointed out that although the Sherburne County RDF plant is in Elk River, the ash disposal facility is in Becker. Johnson said their local facility is located in Newport and serves Ramsey and Washington Counties. Hallock said the Red wing RDF plant's ash disposal facility is in Hastings. Grewin.g mentioned that in her drafts of potential legislation, the RDF exemption was completely eliminated. Flaherty mentioned that RDF's are voluntary and it might be wise to leave that exemption in, to encourage these types of facilities. Hallock offered that pollution control is required, regardless of the type of facility; therefore it should be left out. Johnson pointed out that with regard to CUC's 2004 legislation to remove the pollution control equipment exemption, the school district supported the City's position but Washington County did not. The County is responsible for transporting and accepting refuse, and at least in theory that subsidizes the tipping fee for the average county resident. Hallock said Red wing's dynamic is entirely different, because the RDF material is generated in the metro area and then hauled down to Red Wing's plant. Rudberg added that RDF plants are peckers, not baseload. After further discussion, the members decided to leave the RDF exemption in place. As for the rest of the potential legislation, Flaherty mused whether it may be beneficial to give a credit to local governments from the state, reimbursed by the utilities. Johnson suggested putting the effective date of the legislation a couple years into the future to skirt the current budget crisis. G. [not on agenda] Blandin Paper, Cohasset Barcus reported hearing from a reputable source in the community that Minnesota Power is looking to expand. Blandin Corporation is doing a feasibility study for a seven --line paper machine that is looking fairly positive. The expanded paper operation would require additional energy from Minnesota Power. 5 IV. Review of CUC Positions and Strategy for 2005 Session The group reviewed the three pieces of legislation CUC had sponsored in 2004: 1) delaying the effective date of new or amended utility valuation rules until a legislative session had intervened; 2) removing the pollution control exemption; and 3) increasing the class rate on utility personal property in the event of a precipitous drop in plant value as the result of rulemaking. The first and second bills (the second restructured as a study of the pollution control exemption) made it into the first engrossment of the Senate tax bill, S.F. 2302 (Pogemiller), but the bill never went to conference committee as the 2004 session ended in a stalemate. The pollution control exemption bill having already been discussed, Flaherty recommended pursuing at least the delay bill again, so the local governments do not get caught napping in case MDOR delays any rulemaking activity until after the legislative session has concluded. If the valuation report does not show up by the end of February, he would "smell a rat" and pursue the legislation. So long as the bill gets in before the committee deadlines in March, it has a chance of passing. Hallock supported this idea and Flaherty asked how he felt about the class rate increase bill. Hallock said that although the legislation did not get much traction, Senator Pogerniller had suggested a broader version of the same idea to help resolve the last deficit. A. Discussion of 2004 Election. Results The group reviewed the January 11, 2005 Issues Update memorandum. The Senate was not up for election. Due in part to the 2004 "do- nothing" session, the House Republican majority lost 13 seats, reducing the 81 -53 majority to a razor -thin 68 to 66. B. 2005 House and Senate Committees The group reviewed the updated rosters of the House Taxes, House Property Tax Division, House Regulated Industries, Senate Taxes, and Senate Jobs, Energy and Coinmunity Development Committees. Flaherty said the House Tax committee would be difficult to work with and would likely not be sympathetic to the needs of host communities. Nonetheless, Flaherty thought it would be a good idea to at least meet with the chair of the Committee sometime in February to discuss the MDOR report and its impact on host communities. Johnson reported that the Oak Park Heights delegation had already met with CUC's only freshman legislator, Rep. Mike Charron (R -- Woodbury) with CUC's policy position and data on tax relief enjoyed by the IOU's since 1992. He seemed open to CUC's concerns. Flaherty asked what committees CUC could expect the pollution control exemption bills to go to, whether the House Regulated Industries or Environment committees might want to see there. Nyhus opined that since last year's bill went straight to Taxes, this year's bills would probably go the same route. However, it might be worth a meeting with the administrators of the other two committees to check on this. It would be preferable to keep the bills on as short a route as I on r WWI possible. Flaherty suggested introducing the pollution control exemption bills as soon as possible, without waiting for the MINOR. valuation report. C. Consideration of Communications from xcel Ener The group reviewed a December 28, 2004 letter from Laura McCarten, Community Relations Director for xcel Energy, Rudberg explained that Becker, Monticello and Red wing had been approached by xcel with an offer to pay them the difference between the value of new equipment and what the cities currently get, in exchange for the cities not fighting xcel on the MDOR. rule changes. xcel wanted to specifically exclude oak Park Heights because they felt the city would get a "cash cow" from the King improvements. All three cities had been contacted by their local xcel representatives by phone. The three city administrators put together a list of advantages and disadvantages, and sent a joint letter back to xcel asking for a specific written proposal. The December 28 letter constituted xcel's response. Rudberg said that Becker's city council did not want to abandon CUC, and felt that if something were going to be done it should involve all the utility cities and all the IOU's. wolfsteller said that his mayor and one city council member wanted to know more details about what xcel would offer, and they would look at it. It was his impression that xcel would be fine with striking a deal with any one of the three cities, it wouldn't necessarily have to involve all three. Hallock said that Red wing would be meeting with xcel in the next few days. Barcus mentioned that an "all -- utility" solution would be a challenge, since xcel and Minnesota Power are competitors and probably do not communicate with each other very much. It was her feeling that if a community can negotiate an adequate recovery with its resident utility that does not necessarily a "sellout," but there is more than one way to approach the issue. The key question is, what is the bottom line -- what is the real benefit to cities and counties. Beaudet suggested the possibility that the offer is being made in anticipation of an 11 DOR report that may be bad for IOU's, but at the same time a report would not get very far if it is indefensible. This felt a lot like the "lump sum" legislation negotiated in 2001 that went nowhere. Johnson felt xcel's offer was offensive. Flaherty felt it was a smart move on the part of xcel to neutralize the opposition. Rudberg said he told his local representative that xcel's timing was impeccably poor, and in his opinion there was nothing really to talk about. Flaherty said CUC and Flaherty & Hood, P.A. would both also need to keep their eyes open to watch for potential conflicts. He suggested that action at this point may be premature, but could be considered once xcel puts a firm. offer on the table. Johnson said that when an offer is made to a city, the city has an obligation to present that offer to its council and discuss it, but a firm decision does not have to be made on the offer at that time. Beaudet suggest that CUC send a letter back to xcel and ask why a similar offer was not made to CUC's other xcel communities (Oak Park Heights and Granite Falls) and the two Minnesota Power cities. wolfsteller speculated that, much like settling a case, this arrangement V might look appealing to an IOU who can achieve peace on the issue while walking away with half of what they originally wanted. Johnson pointed out that the lobbying costs for the CUC participants are relatively small. The group further discussed possible motivations behind the offer. Johnson asked about CUC's history and recommended that any offers be taken under advisement for more careful consideration. Rudberg explained that CUC originally began with Becker, Monticello and Red Wing, and the other cities were invited in for broader representation. wolfsteller speculated that if xcel could knock out the "big three," the rest of CUC might disband because not enough was at stake for the other cities. Barcus expressed support for the CUC members hanging together, at least until more is learned about the situation. V. New Business Beaudet, OPH moved to adopt the 2004 Policy Positions for 2005, without any changes. Barcus, Cohasset seconded. The motion prevailed and the Positions were adopted. Beaudet, OPH moved to direct Flaherty & Hood, P.A. to draft the following pieces of legislation for consideration by CUC: 1. Limiting the pollution control exemption to property used exclusively for the abatement of air or water pollution 2. Restructuring the pollution control exemption from an above-the-line exemption to a below - the -line credit 3. Revive the rulernaking delay legislation from 2004 4. Revive the class rate increase legislation from 2004 Hallock, Red wing seconded. The motion prevailed. Barcus commended CUC for the use of the conference call feature as allowing CUC's more remote members a better opportunity to participate in CUC discussions. VI. Adj our m - nen t There being no further business, Rudbberg, Becker adjourned the meeting at 12:15 PM. �J