03/06/1989 Meeting - Laserfiche WebLink

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e Manager to enter into the agreement that has been developed. She added that a few minor changes may be made to the draft agreement; if any of these turn out to be significant, the issue will be brought before the City Council again. In response to a question, City Attorney Tim Sercombe said a dispute between EWEB and LEC still remains regarding paragraph eight of the agreement. LEC wants the agreement to state explicitly that EWEB will be committed to pay eight percent, regardless of any changes that are made to the surplus earnings agreement between the City and EWEB. EWEB's position is that this commitment is already implicit in the agreement. Mr. Sercombe did not think that any wording changes resulting from the resolution of this dispute would affect the City's interests in the agreement. Mr. Boles said that if the agreement is made, EWEB customers in the Willow Creek area will pay a higher rate than other EWEB customers. City Manager Mike Gleason said this was true; however, Willow Creek customers will pay less to EWEB than they would have paid if LEC were to remain the service provider. He said a crucial part of the whole agreement was the fact that all of the parties--the City, EWEB, LEC, and the Willow Creek customers-- sacrificed something. Mr. Bennett said the payment of eight percent of future electric revenues is not meant to compensate for current assets in the Willow Creek area; rather, it is meant, in some sense, to compensate LEC for a lost opportunity (that is, the lost opportunity of serving the Willow Creek area in the future). Ms. Brody said this was correct. e Mr. Bennett said the eight percent payment seemed rather high, and the duration of the payments (20 years) seemed rather long. He asked about the average rate of return on utilities. Mr. Gleason said rates of return could range from 4 to 20 percent, but the industry standard is probably about 10 to 12 percent. Mr. Bennett said this seemed to be a case of two public entities acting as if they were parochial, private suppliers. He also asked if the City made a prudent exchange--that is, avoiding the costs of taking this issue to court by foregoing half of the in-lieu-of-tax payments that it would receive from the Willow Creek area over the next 20 years. Mr. Gleason said staff believes the eight percent payment is probably at the outer limit of what would be a prudent exchange for the City; but the outer limit is probably the place at which most tough deals are made, each party sacrificing something in order to make a deal work. Mr. Gleason said he believes that the deal ;s fair; however, he could not recommend that the City should have sacrificed any more ;n order to avoid taking the issue to court. In response to a question, Ms. Brody said eight percent of electric revenues for the next 20 years from the Willow Creek area is projected to be from $4.7 million to $7.4 million, depending on how much economic development occurs. - MINUTES--Eugene City Council Work Session March 6, 1989 Page 4