HomeMy WebLinkAboutItem 13 SUB PILOTAGENDA ITEM SUMMARY
Meeting Date: 1/3/2022
Meeting Type:
Regular Meeting
Staff Contact/Dept.:
Nathan Bell
Staff Phone No:
541-726-2364
Estimated Time:
15 Minutes
SPRINGFIELD Council Goals:
Provide Financially
CITY COUNCIL
Responsible and
FINANCIAL
Innovative Government
IMPACT:
Services
ITEM TITLE: SPRINGFIELD UTILITY BOARD PAYMENT IN LIEU OF TAXES
AGREEMENT
ACTION
Authorize the City Manager to execute the Payment in Lieu of Taxes (PILOT)
REQUESTED:
Agreement with the Springfield Utility Board (SUB).
ISSUE
City staff have reached a tentative agreement with SUB on an updated PILOT
STATEMENT:
Agreement.
ATTACHMENTS:
Attachment 1: SUB PILOT Agreement
DISCUSSION/
In early 2021, City staff engaged SUB staff in conversation on updating the PILOT
FINANCIAL
agreement between the two organizations. In conversations prior to that, there was
IMPACT:
a mutual recognition that there was a misalignment with SUB's PILOT payment to
the City regarding its intended purpose. The methodology for the payment was last
negotiated in 2003 and resulted in a PILOT payment that worked out to be roughly
4.5% of SUB's gross electric retail revenue. Since that time, that same
methodology has resulted in a payment that has decreased as a percent of gross
electric retail revenue to roughly 3.4% today. Additionally, the methodology is
overly complex and outside standard of how PILOT payments are typically
calculated by the City's peers. City staff have reached a tentative agreement with
SUB on an updated PILOT agreement with a new methodology for calculating the
PILOT based on a flat 5% of gross electric sales revenue. Under the old
methodology, SUB's PILOT payment was $1.8 million in FY21. Under the new
methodology, that same payment would have been approximately $2.7 million.
The SUB board authorized the SUB General Manager to sign the updated PILOT
agreement on December 8, 2021.
INTERGOVERNMENTAL AGREEMENT BETWEEN THE CITY OF SPRINGFIELD &
SPRINGFIELD UTILITY BOARD
REGARDING PAYMENTS IN LIEU OF TAXES
RECITALS:
A. Section 42 of the Springfield Charter sets forth the authority and responsibilities of
Springfield Utility Board (SUB) related to utilities and as relevant to this
Intergovernmental Agreement (IGA) and statutory in lieu of tax payments.
B. The City of Springfield (City) and SUB are parties to a Payment In Lieu of Tax
Agreement (PILOT Agreement) pursuant to ORS 225.270, effective January 1, 2003.
C. ORS 225.270 provides that a municipal electric utility shall pay to the City not less than
three percent of the annual gross operating revenue of such utility for the purpose of
reducing general property taxes.
D. City and SUB, individually referred to as a "Party" in this Agreement, believe it is in their
best interest to update the methodology for the payments under the PILOT Agreement
to create more stable and predictable payment amount.
NOW, THEREFORE, in consideration of the foregoing, City and SUB agree to the following:
Term. This Agreement is effective January 1, 2022, and shall last for a minimum of five
years, through December 31, 2026. The first PILOT payment will be in February 2022
for gross electric sales revenues (described in Section 2 Methodology) in January 2022.
After the initial five-year period, this agreement shall continue for successive one-year
periods unless terminated in writing as per this Agreement with a minimum of 6 month
notice prior to the end of the then -current calendar year (e.g. end of calendar year 2028
is December 31, 2028).
2. Methodology. SUB shall pay to City 5% of gross electric sale revenues less any PILOT
or franchise fee paid to Lane County for the use of Lane County's right of ways within
the Urban Growth Boundary. For the purposes of this Agreement gross electric sale
revenues are defined as any and all revenues in whatever form excluding environmental
attributes that are not bundled with a retail energy product, from any source received by
SUB from the sale of electricity to retail customers within the City of Springfield's Urban
Growth Boundary.
3. No Other Franchise Fee or PILOT. SUB shall not be obligated to pay the City any
franchise fee or PILOT for associated utility services beyond the payment in this
Agreement unless there is a statutory change to ORS 225.270 or to the payment of
franchise fees or the payment in lieu of taxes for other utility services during the term of
this agreement. If such change occurs, the Parties agree to renegotiate this Agreement
consistent with the change in law. The Parties further understand that this section may
be renegotiated in subsequent Agreements.
INTERGOVERNMENTAL AGREEMENT (PAYMENT IN LIEU OF TAXES) — Page 1 {00021543:7}
Attachment 1, Page 1 of 3
4. Timing of Payments. SUB shall remit the PILOT payments to City on a monthly basis
with a detailed calculation report prior to the end of each month for the prior month's
activity.
Reporting and Auditing. SUB's fiscal year is a calendar year. SUB shall prepare an
annual reconciliation setting out the revenues subject to this agreement and the
calculation of PILOT payments on those revenues. This reconciliation will be provided
within 30 days after the finalization of the annual audit of SUB's financial report.
Finalization occurs when the audit is presented to the SUB Board and the Board
acknowledges the audit (typically in April of each year). The annual reconciliation will
show the electric system revenue that is subject to PILOT payments as well as revenue
that is outside the PILOT payment formula. The electric system revenues included in
the annual report shall reconcile to the audited sales of energy total included in the
Statement of Revenues, Expenses, and Changes in Net Position for the electric system
as set out in SUB's audited annual financial report. The City shall have access to SUB
accounting records and individual power sales contracts for large customers as required
to verify accuracy of payments for a period of one year from the date of the
independent auditor's report included in the Annual Financial Report. Payments received
shall not be subject to challenge after one year from the date of the independent
auditor's report included in SUB's annual financial audit.
6. Severability/Jurisdiction. If any provision of this agreement shall be deemed
unenforceable or invalid, such enforceability or invalidity shall not affect the
enforceability or validity of any other provision of this agreement. The validity,
meaning, enforceability, and effect of the agreement and the rights and liabilities of
each the City and SUB hereto shall be determined in accordance with the laws of the
State of Oregon.
7. Entire Agreement. This Agreement supersedes the existing Agreement executed in
2003 and embodies the entire agreement of the parties. There are no promises, terms,
conditions or obligations other than those contained herein. This Agreement shall
supersede all prior communications, representations or agreements, either oral or
written, between the parties, including the 2003 PILOT Agreement.
8. Amendments. This Agreement may only be amended or terminated by the agreement
of both parties in writing, or as otherwise provide in Section 1 of this Agreement.
THE PARTIES, by execution of this Agreement, hereby acknowledge that their signing
representatives have read this Agreement, understand it, and agree to its terms and conditions.
CITY OF SPRINGFIELD:
Nancy Newton
City Manager
SPRINGFIELD UTILITY BOARD:
Jeff Nelson
General Manager
INTERGOVERNMENTAL AGREEMENT (PAYMENT IN LIEU OF TAXES) — Page 2 {00021543:7}
Attachment 1, Page 2 of 3
Date:
City Contact:
Nancy Newton, City Manager
City of Springfield
225 Fifth Street
Springfield, OR 97477
(541) 726-3700
Date:
SUB Contact:
Jeff Nelson, General Manager
Springfield Utility Board
250 A Street
Springfield, OR 97477
(541) 744-3603
INTERGOVERNMENTAL AGREEMENT (PAYMENT IN LIEU OF TAXES) — Page 3 {00021543:7}
Attachment 1, Page 3 of 3