OPENPUBLICA · PUBLIC MEETING RECORD
Record of Proceedings

Rochester City Council Study Session - November 24, 2025

City Council — Tuesday, November 25, 2025
BodyRochester, Minnesota
SessionCity Council
DateTuesday, November 25, 2025
StatusFILED
Video Record
0:00 / 1:56:33

Transcript — Verbatim
0:34

Welcome everybody to our November 24th uh Rochester City Council study session.

0:41

And we have three items on our agenda this afternoon.

0:45

We will have a natural gas franchise fee engagement strategy report.

0:51

We'll have a DMC 20-year development plan update, and then we'll go into a closed session.

0:57

So with that, I will uh turn it over to Mr.

1:01

Tyler Neemeyer to present the uh natural gas franchise fee strategy.

1:07

Thank you, Council President.

1:09

Uh Council members, mayor.

1:10

Thanks for having us here today to talk about our proposal for the natural gas natural gas franchise fee engagement strategy.

1:19

Uh Kayla Betzold and I uh will be giving the presentation today.

1:23

We'll both stand for questions after a short presentation here.

1:26

So today again, we want to introduce our strategy for engaging the community on the concept of natural gas franchise fees.

1:35

Uh these fees are an option to create a stable local funding source for our sustainability efforts.

1:42

And this is a timely topic given the council's recent adoption of the strategic priority on responsible environmental stewardship.

1:53

So our specific purpose today again is to update council on natural gas franchise fee engagement strategy that we are going to approach the community with and the framework therein.

2:05

We're going to outline our approach for gathering that input through engagement activities and share a timeline for reporting back to all of you.

2:16

So first, let's quickly uh revisit what natural gas franchise fees are.

2:21

So franchise fees allow a city to collect a small steady fee from utilities.

2:26

In this case, we're talking about Minnesota Energy Resources.

2:30

Those franchise fees are you uh used to offset uh the utilities use of the right-of-way as part of their franchise agreement.

2:38

Um we do have a current agreement with Minnesota Energy Resources, um, and that includes a provision to implement franchise fees, but we have not exercised that provision to date.

2:50

Uh utilization of franchise fees is not unique to us and our peers or sorry to our peer cities.

2:57

Um other utilities also pay similar fees.

3:00

So we also collect a natural gas, or sorry, we collect a franchise fee on our cable utilities, and the city-owned utilities also pay a payment in lieu of taxes fee.

3:09

Uh the goal again here is to collect um collect the fees to support the city council strategic priorities and give us a more stable funding source.

3:21

That way we can plan uh better into the future and also have again a stable funding strategy uh to implement those efforts.

3:29

Um today, a lot of our sustainability efforts really rely on grants, which is in itself inherently unstable.

3:36

This would be uh much more stable funding source for us.

3:41

So, how do natural gas franchise fees work?

3:44

Merck would add a fee to their bills.

3:47

Uh, they'd collect those fees on our behalf and remit the fees over to the city.

3:52

Our current concept that you have in front of you in your packet would split those collected fees 50-50 between community efforts and more organizational efforts.

4:01

So, examples of um community efforts might be things like weatherization of houses or cost shares on energy efficiency investments that people could make in their homes.

4:13

Uh organizational efforts might focus on our, for example, transition to uh electric vehicles in our fleet.

4:21

So franchise fees are also a visible funding source.

4:25

So they're clearly identified on Merck's bills or would be as well as the council takes specific action on these items so people can see a direct connection between collection of these fees and what they're used for.

4:38

We brought in WSB, a local consultant to help us uh with this engagement strategy.

4:43

Uh WSB has a lot of experience with uh helping municipalities propose these fees to their communities as well as implement them through programs.

4:53

So going forward with positive feedback tonight from the council.

5:00

After further development of our engagement strategy with WSB, we would enter into an engagement period between January and March of 2026 and come back to council with a full recommendation for implementation for your consideration in April.

5:17

I'll give it over to Kayla here, and she'll walk through more of the specifics of the engagement strategy.

5:24

Thanks, Tyler.

5:26

Hi, City Council members, council president, mayor.

5:28

I'm Kayla Betzel, I'm the sustainability coordinator, and I will talk a little bit about the engagement strategy that we're kind of thinking through.

5:37

So really it's kind of built around three main goals.

5:39

First is providing you know transparent and accessible information to the community about what we're thinking about or what we're proposing.

5:47

Next is really listening to residents and business owners and community stakeholders.

5:52

So first, is there interest in this type of fee?

5:55

If so, you know, what type of fee, what fee level, what type of fee structure.

6:00

I think there are a lot of you know different options for not only fee structure, but also the level of fee, and then of course the use of the revenue.

6:08

And so what kind of community programs might be of most interest to our stakeholders.

6:14

And then third, we want to make sure that the recommendation that we bring back to you all really includes all of that feedback that we hear from the community throughout the engagement period.

6:22

So we're really working to kind of summarize all of the feedback, identify common themes, and then share those findings publicly and with you when we would come back with a final recommendation.

6:33

Looking at the IAP2 spectrum of engagement, most of our efforts are in the consult level.

6:40

So we're actively seeking community uh input, documenting what we hear, and then using that input to kind of shape our final recommendation, like I just mentioned.

6:49

Some of our efforts also do fall into the inform and the involve category.

6:53

So at the inform level, like I mentioned, we will have information that's available to the public, and I'll talk a little bit more about those tools in a in a few moments.

7:02

And then on the involved level level, we do plan to kind of consult or involve with certain stakeholder groups like housing groups or business focused groups as they kind of represent multiple stakeholders, and I think you know, have some specific needs and perspectives that they might be able to share with us.

7:20

So overall, we're consulting, but we're also informing and involving certain groups more directly.

7:26

So this kind of gives an overview of the key audiences that we're thinking through for engagement.

Discussion Breakdown — Share of Meeting
Economic Development██████████████████████████████30%
Public Engagement███████████████████████████27%
Sustainability Initiatives████████████12%
Destination Medical Center█████████9%
Fiscal Sustainability████████8%
Affordable Housing██████6%
Energy Independence███3%
Public Safety███3%
Community Engagement██2%
Summary of Proceedings

Rochester City Council Study Session - November 24, 2025

The Rochester City Council convened a study session to review three primary agenda items: a proposed engagement strategy for natural gas franchise fees, a 20-year update to the Destination Medical Center (DMC) development plan, and a closed session for the city administrator's performance review. Presenters from the City of Rochester and DMC outlined strategies to generate stable funding for sustainability and health innovation while seeking community input on controversial fees and urban development priorities.

Consent Calendar

  • No items were placed on the consent calendar for this session.

Public Comments & Testimony

  • Councilmember Fredericks: Expressed the position that the process is vital for statewide economic health but voiced a specific concern that residents often only pay attention to such issues when they encounter the fees directly on their bills, suggesting a need for robust public awareness campaigns.
  • Councilmember Palmer: Stated strong opposition to the addition of franchise fees, characterizing them as regressive taxes that burden lower-income residents. He expressed that the community is already overtaxed and noted that existing rebates (like Conserve and Save) are already underutilized by many.
  • Councilmember Keene: Noted that the community's feedback and engagement were necessary to move forward but questioned the fairness of the mechanism, suggesting it functions more as a tax than a fee, particularly because natural gas is an essential utility rather than an optional service like cable.

Discussion Items

  • Natural Gas Franchise Fee Engagement Strategy

    • Staff Presentation: Officials presented a strategy to gather community input on natural gas franchise fees, noting that 50% of proposed revenue would fund community programs (e.g., weatherization, energy efficiency) and 50% would fund organizational efforts (e.g., municipal fleet electrification). The engagement period is planned for January–March 2026, with a recommendation for implementation to be brought back in April.
    • Councilmember Miller: Stated support for the engagement process but expressed concern regarding the trade-off between environmental stewardship and affordable living. He noted that new housing stock built after 1990 is already energy-efficient and questioned the program's utility for owners of newer homes, though he acknowledged a gap in capacity for retrofitting older homes.
    • Councilmember Palmer: Expressed concern that the proposal ignores the reality of existing energy efficiency programs and argued that adding fees to residents who are already financially strained would not be effective or equitable. He requested that discussions on the fee be halted until the property tax situation can be addressed.
    • Councilmember Fredericks: Articulated the position that a franchise fee on natural gas is a "regressive tax" that disproportionately impacts low-income households who cannot easily reduce gas usage. He argued that essential utilities should not be subject to fees, citing the lack of taxation on clothing and food as a parallel.
    • Mayor Norton: Expressed comfort with the proposed engagement process, rejecting the characterization of the fee as inherently regressive by arguing that usage-based fees are commensurate with consumption. He emphasized that the fee structure allows residents to control their costs by reducing usage, unlike flat taxes.
    • Councilmember Wall: Requested clarification on whether the engagement was seeking permission to implement a fee or if the fee was a foregone conclusion, noting that previous presentations had been more detailed. He argued that because residents cannot opt out of gas usage, the fee effectively acts as a tax.
    • Councilmember Doring: Expressed support for the proposal's potential to incentivize environmental sustainability in older homes but sought more details on how the funds would specifically support equity and affordable housing.

  • DMC 20-Year Development Plan Update

    • Staff Presentation: DMC representatives presented a 178-page update focusing on three strategic priorities: accelerating health innovation, designing for well-being, and driving purposeful growth. The plan serves as a strategic framework rather than a project-specific document.
    • Councilmember Miller: Expressed appreciation for the plan's alignment with community needs, particularly regarding anti-displacement strategies and the unique needs of students. He emphasized the need for programs that allow renters to build equity and wealth.
    • Councilmember Palmer: Expressed frustration over the lack of home ownership incentives in the plan, citing data on the wealth disparity between owners and renters. He questioned the absence of condominiums and noted that the report failed to acknowledge City contributions to bringing UMR to Rochester. He also raised concerns about empty storefronts and the potential loss of tree canopy during road reconstruction.
    • Councilmember Doring: Critiqued the document for a lack of humility, stating it failed to acknowledge mistakes or failures from the first decade of DMC, and requested that future iterations include lessons learned from setbacks.
    • Mayor Norton: Clarified that the DMC initiative was legally and financially distinct from housing and general city safety, which are the City's responsibility. He expressed frustration that the community often scapegoats DMC for general city issues like safety and housing shortages, emphasizing that the funding was legally designated for infrastructure and cannot be diverted to solve unrelated statewide problems.
    • Councilmember Keene: Supported the shift in language to "drive purposeful growth" and emphasized that DMC is a partner to the city, not a separate entity, noting that all development ultimately benefits the broader community.

Key Outcomes

  • Natural Gas Franchise Fee: The Council did not vote to implement the fee. The consensus was to proceed with the proposed community engagement strategy (January–March 2026) to determine community interest, desired fee levels, and program uses. Staff were directed to refine metrics and reporting on equity impacts prior to returning in April.
  • DMC Plan: The Council received the update and requested further detail on success metrics, specifically regarding housing diversity (ownership models), safety initiatives, and anti-displacement strategies. No action was taken to formally approve the plan; it is scheduled to return to the Council for action in February 2026 after further community input.
  • Closed Session: The Council adjourned to a closed session at 5:35 PM in Room 104 pursuant to Minnesota Statute 13D.05 subdivision 3A for the performance review of the City Administrator.
  • Next Meeting: The first study session of 2026 is scheduled for January 12, 2026, covering transit and sustainability.

Meeting Transcript

Welcome everybody to our November 24th uh Rochester City Council study session. And we have three items on our agenda this afternoon. We will have a natural gas franchise fee engagement strategy report. We'll have a DMC 20-year development plan update, and then we'll go into a closed session. So with that, I will uh turn it over to Mr. Tyler Neemeyer to present the uh natural gas franchise fee strategy. Thank you, Council President. Uh Council members, mayor. Thanks for having us here today to talk about our proposal for the natural gas natural gas franchise fee engagement strategy. Uh Kayla Betzold and I uh will be giving the presentation today. We'll both stand for questions after a short presentation here. So today again, we want to introduce our strategy for engaging the community on the concept of natural gas franchise fees. Uh these fees are an option to create a stable local funding source for our sustainability efforts. And this is a timely topic given the council's recent adoption of the strategic priority on responsible environmental stewardship. So our specific purpose today again is to update council on natural gas franchise fee engagement strategy that we are going to approach the community with and the framework therein. We're going to outline our approach for gathering that input through engagement activities and share a timeline for reporting back to all of you. So first, let's quickly uh revisit what natural gas franchise fees are. So franchise fees allow a city to collect a small steady fee from utilities. In this case, we're talking about Minnesota Energy Resources. Those franchise fees are you uh used to offset uh the utilities use of the right-of-way as part of their franchise agreement. Um we do have a current agreement with Minnesota Energy Resources, um, and that includes a provision to implement franchise fees, but we have not exercised that provision to date. Uh utilization of franchise fees is not unique to us and our peers or sorry to our peer cities. Um other utilities also pay similar fees. So we also collect a natural gas, or sorry, we collect a franchise fee on our cable utilities, and the city-owned utilities also pay a payment in lieu of taxes fee. Uh the goal again here is to collect um collect the fees to support the city council strategic priorities and give us a more stable funding source. That way we can plan uh better into the future and also have again a stable funding strategy uh to implement those efforts. Um today, a lot of our sustainability efforts really rely on grants, which is in itself inherently unstable. This would be uh much more stable funding source for us. So, how do natural gas franchise fees work? Merck would add a fee to their bills. Uh, they'd collect those fees on our behalf and remit the fees over to the city. Our current concept that you have in front of you in your packet would split those collected fees 50-50 between community efforts and more organizational efforts. So, examples of um community efforts might be things like weatherization of houses or cost shares on energy efficiency investments that people could make in their homes. Uh organizational efforts might focus on our, for example, transition to uh electric vehicles in our fleet. So franchise fees are also a visible funding source. So they're clearly identified on Merck's bills or would be as well as the council takes specific action on these items so people can see a direct connection between collection of these fees and what they're used for. We brought in WSB, a local consultant to help us uh with this engagement strategy. Uh WSB has a lot of experience with uh helping municipalities propose these fees to their communities as well as implement them through programs. So going forward with positive feedback tonight from the council. After further development of our engagement strategy with WSB, we would enter into an engagement period between January and March of 2026 and come back to council with a full recommendation for implementation for your consideration in April. I'll give it over to Kayla here, and she'll walk through more of the specifics of the engagement strategy. Thanks, Tyler. Hi, City Council members, council president, mayor. I'm Kayla Betzel, I'm the sustainability coordinator, and I will talk a little bit about the engagement strategy that we're kind of thinking through. So really it's kind of built around three main goals. First is providing you know transparent and accessible information to the community about what we're thinking about or what we're proposing. Next is really listening to residents and business owners and community stakeholders. So first, is there interest in this type of fee? If so, you know, what type of fee, what fee level, what type of fee structure. I think there are a lot of you know different options for not only fee structure, but also the level of fee, and then of course the use of the revenue.

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