HomeMy WebLinkAboutOrdinance - 2008-O0096 - Amending Section 2-484; Chapter 2, Article XVIII; Defnition Of Reserves; Formula - 11/06/2008First Reading
November 6. 2008
Itea Mo. 6.2
ORDINANCE NO. 2008-o0096
Second Reading
November 20, 2008
Itea No. 5.21
AN ORDINANCE AMENDING SECTION 2-484 OF CHAPTER 2, ARTICLE
XVIII OF THE CODE OF ORDINANCES OF THE CITY OF LUBBOCK BY
CLARIFYING THE DEFINITION OF RESERVES AND BY EST ABLISING A
FORMULA FOR DETERMINING THE AMOUNT TRANSFERRED AS A FEE
EQUIVALENT TO A FRANCHISE FEE; PROVIDING A SAVINGS CLAUSE AND
PROVIDING FOR PUBLICATION.
WHEREAS, Ordinance Number 2004-00140 passed by the City Council of the City of
Lubbock on December 16, 2004, as amended and as found in Chapter 2, Article XVlll of the
Code of Ordinances of Lubbock, details the procedure for disbursing net revenues of the City's
municipally owned electric utility; and
WHEREAS, the Electric Utility Board has consistently built cash reserves for the City of
Lubbock's municipally owned electric utility, Lubbock Power & Light ("LP&L"), in order to
protect LP&L from unforeseen and unexpected increases in operational expenses, to stabilize the
rates of LP&L and to meet unforeseen and rapid increases in electric demand due to economic
growth; and
WHEREAS, the Electric Utility Board believes that it would be in the best interest of the
LP&L to further define reserves and the level of cash reserves to be maintained by LP&L; and
\VHEREAS, the Electric Utility Board believes that it would be in the best interest of
LP&L to establish and follow a formula for determining the amount transferred to the City of
Lubbock as a franchise fee equivalent; and
WHEREAS, the Electric Utility Board recommends to the City Council that Section 2·
484 of Chapter 2, Article XVIII of the Lubbock Code of Ordinances be amended to further
define cash reserves and to establish a formula for determining the amount transferred to the City
of Lubbock as a franchise fee equivalent; and
WHEREAS, pursuant to Section 2-485 of Chapter 2, Article XVIII of the Lubbock Code
of Ordinances this amendment has been published in a newspaper of general circulation meeting
the definition contained therein at least once a week for three consecutive weeks and was
published at least thirty days prior to the date of the public hearing as required therein;
WHEREAS, the City Council of the City of Lubbock has conducted a public hearing in
accordance with the requirements and provisions of Section 2-485 of Chapter 2, Article XVIII of
the Lubbock Code of Ordinances; and
\VHEREAS, the City Council of the City of Lubbock deems that the recommendations of
the Electric Utility Board are well founded and that it would be in the best interest of the City of
Lubbock and its municipally owned electric utility, Lubbock Power & Light, to accept the
recommendation of the Electric Utility Board and amend the Code of Ordinances of the City of
Lubbock in such manner; NOW THEREFORE:
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK
SECTION 1: THAT Section 2-484 of Chapter 2, Article XVIII of the Code of
Ordinances, City of Lubbock, Texas, is hereby amended to read as follows:
Sec. 2-484. Disbursement of Net Revenues
(a) Subject to Section 2-484(g), prior to paying any fee equivalent to a
franchise fee, making any payment in lieu of taxes, and prior to disbursing any net
operating revenues of the City's electric utility, the Board shall first fully meet all
bond reserve or fund obligations defined in any bond covenant for the City's electric
utility.
(b) Subject to Section 2-484(g), after providing for sufficient funds to
meet the obligations contained in Section 2-484(a) above, the Board shall fund the
following items:
( 1) The Board shall maintain sufficient operating cash to satisfy all current
accounts payable (including any current purchase power accounts that
are payable); and
(2) A General Reserve equal to the greater of four months gross retail
electric revenue as determined by taking the average monthly gross
retail electric revenue from the previous fiscal year or fifty million
dollars ($50,000,000.00). This General Reserve shall be used for
operational purposes, rate stabilization and for meeting the electric
utility demand of any rapid or unforeseen increase in residential and/or
commercial development.
(c) Beginning with fiscal year 2009-2010, the Board shall transfer to the
City a fee equivalent to a franchise fee and payment in lieu of taxes (the "FFE") as
outlined below:
(I) The lesser of five percent ( 5%) of the gross revenue generated from all
retail electric sales (the "GRR") or fifty percent (50%) of change in net
assets (as stated in the Statement of Revenues, Expenses and Changes in
Fund Net Assets in the latest Comprehensive Annual Financial Report
("CAFR") adding back any FFE transfer), once the General Reserve
reaches fifty million dollars ($50,000,000.00); or
(2) In the event the General Reserve is less than fifty million dollars
(<$50,000,000.00), then the lesser of fifty percent (50%) of the change
in net assets (as stated in the Statement of Revenues, Expenses and
Changes in Fund Net Assets in the latest CAFR adding back any FFE
transfer) or in accordance with the following formula:
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[(actual reserve level divided by fifty million dollars) multiplied
times five percent] multiplied times the gross revenue generated
from all retail electric sales. This formula can also be expressed as
follows: FFE =[(actual reserve/$50,000,000.00) x .05] x GRR
(3) Beginning with fiscal year 2008-2009, on or before April 1st of each
year, the Board shall report to the City Council their estimate of the
reserve, the GRR and the resulting FFE that will be transferred to the
City for the upcoming fiscal year. In the subsequent fiscal year, the
Board shall adjust the next FFE transfer by an amount equal to the
difference between the FFE transfer based on the estimated values of the
General Reserve and the GRR and the FFE based on the actual values of
the General Reserve and the GRR. Any such adjustment made by the
Board will be reflected in the April 1st report made by the Board to the
City Council as required herein.
(d) Subject to the approval of the Board, any net operating revenues
remaining shall be refunded to the ratepayers of the City's electric utility within six
months following the fiscal year in which the net revenues are realized. Nothing
contained in Section 2-484(g) shall be construed as a cap or limit on the refund
outlined in this Section 2-484( d).
(e) This section shall be included in and become a part of each annual
budget ordinance of the City of Lubbock.
(f) The General Reserve shall be based on assets classified in the latest
CAFR as cash and cash equivalents and investments of the City's electric utility fund
(but it does not include accounts receivable, restricted assets or other non-cash
assets).
(g) Beginning with fiscal year 2006 -2007 and subject to the approval of
the Board, the City's electric utility may refund up to one million dollars and no/100
dollars ($1,000,000.00) to the ratepayers of the City's electric utility for marketing
and competitive purposes as solely determined by the Board.
(h) For fiscal year 2007-2008, the Board shall transfer to the City a FFE of
one million and no/100 dollars ($1,000,000.00). Furthermore, for fiscal year 2008-
2009, the Board shall transfer to the City a FFE of five million and no/100 dollars
($5,000,000.00). Following fiscal year 2008-2009, the Board shall pay to the City a
FFE in accordance with the tenns of Section 2-484( c) above.
SECTION 2: THAT any and all provisions not specifically amended herein remain in
full force and effect.
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SECTION 3: THAT the City Council finds and declares that pursuant to Section 2-485
of Chapter 2, Article XVIII of the Code of Ordinances of the City of Lubbock, this amendment
has been published in a newspaper of general circulation meeting the definition contained therein
at least once a week for three consecutive weeks and was published at least thirty days prior to
the date of the public hearing as required therein;
SECTION 4: THAT, the City Council of the City of Lubbock has conducted a public
hearing in accordance with the requirements and provisions of Section 2-485 of Chapter 2,
Article XVIII of the Code of Ordinances of the City of Lubbock;
SECTIONS: THAT the City Council finds and declares that sufficient written notice of
the date, hour, place and subject of this meeting of the Council was posted at a designated place
convenient to the public at the City Hall for the time required by law preceding this meeting, that
such place of posting was readily accessible at all times to the general public, and that all of the
foregoing was done as required by law at all times during which this Ordinance and the subject
matter thereof has been discussed, considered and formally acted upon.
The City Council further ratifies, approves and confirms such written notice and the
contents of posting thereof.
SECTION 6: THAT should any paragraph, sentence, clause, phrase, or word of this
Ordinance be declared unconstitutional or invalid for any reason, the remainder of this Ordinance
shall not be affected thereby.
SECTION 7: THAT the City Secretary is hereby authorized and directed to cause
publication of the descriptive caption of this Ordinance as an alternative method of publication
provided by law.
AND IT IS SO ORDERED
Passed by the City Council on the first reading on this 6th day of November
Passed by the City Council on the second reading on this 20th day of November
TOM MARTIN, MAYOR
ATTEST:
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'2008.
, 2008.
APPROVED AS TO CONTENT:
Lee &; Dumbauld, City Manager
APPROVED AS TO FORM:
ade, General Counsel-LP&L
mw/ccdocs!Ordinance Amendment 2008City C<luncil 093008
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