Shakopee City Council discussed possible legal action against Shakopee Public Utilities behind closed doors this week.
The specific legal action outlined in the council’s Feb. 18 agenda was not specified, but the memo to council members states it is regarding an action the Shakopee Public Utilities made at its Dec. 16 meeting.
At that meeting, SPUC changed its payment in lieu of taxes to the city, or PILOT, to 4.4% of its electric sales and 4.4% of its water sales — a change Shakopee Finance Director Nathan Reinhardt said would have amounted to an average of $22,000 less per year based on SPUC’s last five years of contributions.
Shakopee Public Utilities is a municipality and, historically, instead of paying taxes to the city each year, it has contributed 2.71% of its gross electric sales and 23.77% of its gross water sales to the city’s general fund budget. That payment has existed since 2001, when the city paid for a financial study and the two entities discussed the change, although technically the official decision was not a joint one, Shakopee City Attorney James Thomson said.
City Administrator Bill Reynolds said the fewer dollars SPUC contributes to the city, the more taxpayers have to pay to make up for it. SPUC Utilities Manager John Crooks said this new calculation prevents SPUC from having to raise its water rates, and that based on the trends SPUC is projecting — residents using more electricity and less water — the city could actually come out ahead on the deal. But money, Reynolds and some Shakopee City Council members voiced, isn’t the only issue.
Reynolds said he has long believed the city and SPUC should come together to talk about a renegotiation for what he agreed was an outdated PILOT.
“I’m not exactly sure why those rates were what they were,” Reynolds said in an interview when asked about the high percentage of water sales and low percentage of electric sales SPUC gave to the city under its 2001 PILOT contract.
Reynolds said he tried to initiate a conversation about revisiting the PILOT calculation in June 2019 but was met with no show of interest from the commission. Reynolds referred to the commission’s recent formula change as a “unilateral decision” that caught staff and members of council off guard last month.
“I think it’s right for the two entities to sit down and lower the water rate and adjust the electric rate,” Reynolds said. “I’m making a plea to SPUC in general. Come to the table.”
Crooks said because the city council designates a liaison — council member Matt Lehman — to attend SPUC meetings, and since its meeting agendas are open to the public, the commission did not feel the need to explicitly notify the city of the change.
“That’s how we’ve communicated for years and years,” Crooks said. “Our position is that it’s the liaison’s duty, because we always discuss these matters before they’re implemented.”
Thomson, the city’s attorney, said statute requires SPUC to notify the city when changes to the PILOT are being made, and this time around, the city was technically notified through Lehman.
“The 2001 resolution by SPUC does mention discussion with council, but there was no separate resolution adopted by the council,” Thomson said.