City Council Meeting - FINAL

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Meeting Date: 09/01/2020  
From: Stacy Saltzburg, City Clerk

Consideration and Adoption of Ordinance No. 2020-22: An ordinance granting to UNS Gas, Inc. an Arizona Public Service Corporation, its legal representatives, successors, lessees and assigns, certain powers, licenses, rights-of-way, privileges and franchise to construct, operate and maintain in the City of Flagstaff, State of Arizona, as now or hereafter constituted, works, systems and plans for the handling, production, manufacturing, transporting, storing, sale and distribution of gas into, out of, and through said municipality, and for the distribution and sale of such gas to said municipality, its inhabitants and others, including customers inside, beyond, and outside of the limits of said municipality; and to use the streets, avenues, easements, rights-of-way, alleys, highways, sidewalks, bridges and other structures and places and public grounds in said municipality for a period of twenty-five (25) years; and prescribing in connection therewith certain rights, duties, terms and conditions herein mentioned; and providing for the payment to said municipality of a percentage of certain revenues of grantee from its operations therein; and declaring an emergency
1) Read Ordinance No. 2020-22 by title only for the final time
2) City Clerk reads Ordinance No. 2020-22 by title only (if approved above)
3) Adopt Ordinance No. 2020-22
Executive Summary:
UNS Gas is a natural gas company and an Arizona public service corporation. UNS is regulated by the Arizona Corporation Commission, per the Arizona Constitution, Art. 15, Section 3. UNS has a franchise to use City right-of-way (ROW) and public utility easements (PUEs) for its natural gas transmission and distribution pipelines and facilities. The existing franchise is expiring in October 2020.

The Arizona Constitution provides that only voters may approve a franchise.  At the August 4, 2020 Special Election, UniSource presented a new franchise agreement for voter approval (Proposition 434). Voters approved Proposition 434 and the City Council must enact the agreement by ordinance.

The approved franchise includes the following:
  • grant to use ROW and PUE for gas pipelines and transmission facilities;
  • provisions outlining when City vs. UNS Gas pays for utility relocation costs for capital projects;
  • requirements that UNS Gas comply with City permitting and engineering standards for work in ROW and PUE;
  • indemnification and insurance requirements;
  • rates and charges to be established by the Arizona Corporation Commission;
  • franchise fee equal to 2% of revenues, excluding regularly assessments and taxes;
  • fee is in lieu of payment of permits for work in ROW for the gas pipelines and transmission facilities;
  • 25-year term.
Financial Impact:
UNS Gas pays a franchise fee of 2% of its gross receipts for gas sold in Flagstaff. UNS Gas also collects and remits local transaction privilege (sales) tax under the utilities category.  As such, UNS Gas is a revenue resource for the City.
Policy Impact:
Connection to PBB Key Community Priorities/Objectives & Regional Plan:
Inclusive & Engaged Community
Foster community pride and civic engagement

Sustainable, Innovative Infrastructure
Deliver outstanding services to residents through a healthy, well maintained infrastructure system
Has There Been Previous Council Decision on This:
There was a Work Session on March 10 that provided Council and public with information about the proposed franchise.
Council called the Election by Resolution on April 10, 2020, upon making a finding that the proposed franchise agreement would benefit the community.
Ord. 2020-22


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