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<br /> <br />City of Elk River <br />REQUEST FOR COUNCIL ACTION <br />Agenda Section Meeting Date <br />Administration Tuesda , Februa 20, 2007 <br />Item Description <br />Pro osal b Great River Ener lant <br /> <br />Item Number <br />7.1. <br /> <br />Prepared by <br />Lori ohnson, Administrator <br />Reviewed by <br />Lori ohnson, Administrator <br /> <br />Introduction <br />Great River Energy (GRE) is proposing to construct a peaking plant at its current site in Elk River. GRE <br />is requesting that Sherburne County and the City of Elk River support a legislative property tax <br />exemption for the plant. The support for the exemption is contingent upon the city entering into an <br />agreement that provides a benefit to the city for hosting the plant. Those include a payment in lieu of <br />taxes, conveyance of property for the waste water treatment plant expansion and an arrangement with <br />Elk River Municipal Utilities (ERMU) where GRE passes savings to ERMU to help reduce electric rates. <br /> <br />Discussion <br />Great River Energy (GRE) approached the city in mid-December with its proposal to construct a peaking <br />plant. GRE indicated that they were on a very tight timeline; therefore, they wanted Council approval as <br />soon as possible. We have met with GRE and Brian Bensen, Sherburne County Administrator and other <br />county representatives several times and have a proposal for Council and County Board consideration. <br /> <br />You may recall that GRE made a similar proposal several years ago, but decided to construct elsewhere <br />due in part to concerns related to the personal property exemption. Sherburne County staff has reviewed <br />GRE's current proposal and believes the county is now in a position to support GRE's request. Elk River <br />and Sherburne County have been working together in negotiating similar but separate agreements with <br />GRE. The city has additional conditions in the agreement because the plant will be located in the city. <br />The Sherburne County Board will be taking action on this item at its first meeting in March. <br /> <br />As you know, there has been recent legislation regarding property tax exemptions for personal property. <br />The majority of the peaking plant value is in personal property, not in real property. GRE is requesting <br />that both the city and the county support legislative action to exempt the personal property at the peaking <br />plant from taxation, but the plant would still pay property tax on the real property value of the plant. In <br />exchange for supporting the property tax exemption on the personal property, the city would receive <br />payments in lieu of taxes totaling $375,000 for five years. Sherburne County would receive $350,000 for <br />the first five years. <br /> <br />In addition, the agreement states that GRE will transfer enough land to the City of Elk River to facilitate <br />expansion of the waste water treatment plant. We are still working on the layout of the plant and the land <br />that would be conveyed; however, we are confident that we can come to an agreement with GRE to <br />convey that property in a timeframe that meets the requirements of the treatment plant expansion. In <br />order to facilitate that transaction, GRE is requesting that a piece of property it owns on the north side of <br />its site be re-zoned as industrial so that it can move the storage that is currendy taking place on the <br /> <br />s: \ Council\Lori \2007\ G RE peaking plant.doc <br />