City Council - Regular Meeting

timing this out of the way and I'm set go. All right, it's 7 o'clock. going to call the Hermiston uh December 8th city council meeting to order with a quorum. We have seven there's six members present currently. Uh councelor Roberts is attending also by by Zoom. Um and councelor uh Baron will be here late so we're we're good with that. So, at the moment, we're at six. Uh, with that, uh, can we please rise and join me in the flag salute? I pledge allegiance to the flag of the United States of America, and to the republic for which it stands, one nation under God, indivisible, with liberty and justice for all. Right. Mr. City Manager, do we have any changes to the agenda?

No changes.

Outstanding. All right. Two, three. Citizen input on non-aggenda items. Anyone wishing to, this is our first opportunity for citizen input. Uh, anyone wishing to bring anything before the council that is not on the agenda is asked to please do the following. Limit your con comments to not more than five minutes. State your name and address. and direct your comments to me. Do we have anybody that wishes to do so? Seeing none. All right. Next up, consent agenda items. We have A through F. Uh any council questions on consent agenda items A through F? Any public comment on consent agenda items A through F? All right. Uh, do we need to do we need to remove any items? Seeing none, uh, can I get a motion to approve consent agenda items A through F?

Approve. Second. Motion by everybody but Councelor McCarthy, who got the second. Uh, I guess we'll Oh, no. I tried. I guess uh well maybe not almost everybody uh we'll go with councelor Duron on because she's closest and I sound travels fast uh for the motion uh roll call. Yes. Yes. Yes. Yes. Yes. Yes. Council Roberts. Yes.

All right. Motion passes unanimously seven to zero and no items removed. Ordinances and resolutions. Ordinance 2377, Umatillaa Electric Cooperative Franchise. Uh, city attorney Tubby will now read the ordinance. Mayor and council members. So as we've been looking through our uh we've been working on charter review with the charter review committee and uh going through it uh we have looked through different sections and in our ordinance adoption section uh we have uh under the ordinance it can be adopted or should be adopted at two meetings by a vote of the majority of the council or can be adopted at a single meeting uh with a unanimous vote and to just streamline and get in in into the process of uh closer to the process of the charter. Uh I would say that we've always been operating uh lawfully under our charter the way that we've been doing in the past. But this way to kind of keep things moving forward uh in a process of either the two meetings or the one meeting. Uh what we've looked at in this process tonight is that we'll start with a reading of the title and then we'll be able to present the information through staff uh allow for comments from both the council, mayor, and public. And then we have some motions uh that the the mayor has uh that we can review. And so we we would ask that we could move forward in that fashion.

All right. See, manager Smith. Well, first he is gonna Oh, I see. Okay. Okay. I'm with you now. I went through all that and then I didn't read the title. Mr. Tubby,

mayor and council. Uh, ordinance number 2377, an ordinance repealing ordinance number 2111, and ordinance number 2248, and granting to Umatillaa Electric Cooperative, a cooperative corporation, and to its successors and assigns a non-exclusive license and franchise for a period of 20 years to construct, maintain, and operate in and on the present and future streets, alleys, bridges, and public places of the city of Hermiston electric power lines and pertinances for the purpose of supplying ing electricity and electric service to the city of Hermistston, the inhabitants thereof and others subject to the terms and conditions and to the making of the payments specified in the ordinance. Mr. Mayor. All right. Now that we've got the process figured out, right?

Yep. All right, Mr. Smith. Yeah. I'll turn this to Mr. Morgan. Mr. Morgan.

Yes, Mr. Mayor, members of the council. Uh, this evening will be discussing really a package of two actions this evening. So, I'm actually going to be walking through um both ordinance 2377 as well as resolution 2398 together just because although they are two completely separate and distinct actions, uh financially they are linked together. So, I think just for ease of your understanding, I'm going to present them both at the same time. But, uh you'll take action on ordinance 2377 first, but I'll present them both together. So, uh, in summary, uh, first off, the ordinance 2377, what this does is it grants a new franchise to UMTO electric cooperative. Uh, it could generally be considered as business as usual. Uh, so all of the terms, conditions, everything in uh, UEC's existing or previous franchise uh, remain the same. Uh, UC's been a great partner for us to work with for many years. Uh, we see no reason to make any changes. to how that system works. Uh the only change really of any substance at all is we're actually recommending to reduce uh the franchise fee uh that's included in the uh franchise agreement from 7% of their gross revenues down to 4% of their gross revenues. And so I'll get into that in a little bit. Uh first off, for anybody who's watching or or maybe new to the process, what is a franchise? Uh so a franchise is an agreement that allows utilities, not just electric utilities, could be telecoms uh or other utilities to use publicly owned rights of way uh to serve their customers. And so ultimately this really benefits our own residents uh because it allows them to get utilities. So, if we didn't allow electric utilities or telecoms or gas utilities uh to use our rights of way, it would be a lot harder for you to get electricity or internet or phone or all

those types of things. And so, so it really benefits the residents for us to allow them to use our our rights of way. Uh but by having these franchise agreements in place, it protects the public by really regulating who gets to use uh the rightway and how they get to use the rightway uh so that it doesn't just turn into a total uh free-for-all that ultimately ends up inhibiting uh the ability for different utilities to provide services to the to the residents. So that's what a franchise is and that's why we go through this process. Uh terms on this agreement, as I mentioned, identical uh to what they've been in the past. uh only change is we're recommending to reduce the franchise fee from 7% to 4%. Now the fees uh I generally refer to the the overall package just as simply the franchise fees. Uh but uh embedded within that overall 7% a portion is what would be technically referred to as a franchise fee. A portion of it is being referred to as an occupancy tax, a tax for occupying the right of way. uh taken together uh they total 7%. And so really uh they operate exactly like a sales tax really um because they're 7% of the utilities gross revenues. So uh for example, if you have a customer who purchased $100 worth of power um Electric knows that they have to turn over 7% of their revenues to us and so they also collect 7% in fees and taxes. Excuse me. So the customer's total bill comes out to $107 in that example. So uh let's see. Yeah. So that's from the customer side. Uh from the utility side of things, um you know, it's really contingent on the utility to to provide 7% of the revenues. And so if you were just looking at from the utility, if they had revenue from all of their customers totaling a million dollars, uh then they would ultimately owe to the city uh under the 7% franchise fee

scenario, they would owe us $70,000. Uh but again just kind of making the point that um since it acts like a uh maybe there we go since it acts like a sales tax. If let's say the utilities revenues you know went up from a million to $10 million again our fee rate had remained unchanged. at 7% but now they owe us $700,000 rather than $70,000. And so in that instance, if the utilities revenue went from a million to $10 million, but our franchise fee was only 4% then we'd be bringing in $400,000. So simplistic math because it is really pretty simple. So uh we have seen a significant growth in uh electric power consumption within city limits uh over the past 18 months approximately. So uh in calendar year 2024 uh electric co-op's uh fees and taxes uh to the city in total uh was about $400,000 for the year. Uh but now in calendar year 2026, we project uh that if we were to drop the franchise fee from 7% to 4%, uh the total amount paid in fees and taxes to the city uh would still nearly quadruple uh to about $1.5 million. So, of course, this begs the question, why would we reduce uh the fees or taxes? So, you know, since 2024 to 2026, you know, or through calendar year 25, revenues have already tripled. Um, and so if we reduce the fees uh on the utility, um, the only way that the utility collects revenue is by collecting it from their customers,

which are our residents and our businesses. And so reducing these fees and taxes lowers costs on the residents and businesses. And so uh if we are to reduce our franchise fee from 7% to 4% uh that means it would be reducing uh that total bill on your typical household by 3% going from 7 to four. So that means that if you had a typical uh household in the community and their average monthly bill was about $150 a month, then reducing that by 3% means that that household would save about $4.50 50 cents per month or about $54 per year if we were to reduce the franchise fee from seven to four. So, uh also in terms of you know why would we reduce these fees and taxes because I think you know there's uh two different philosophies um in thinking through this. I think some folks would probably say well why would you reduce it um if the revenues are going up and the revenues are high for the city? uh why wouldn't the city just hold on to these revenues and put it in something like a rainy day fund? You know, build up a reserve and so when an emergency comes along um then you can, you know, tap that reserve. You know, the other philosophy in terms of how to address a rainy day is, you know, leave the money in the pockets of the residents and only raise revenue when you actually need it. Um and so I know that it's politically challenging uh to raise revenue. Nobody likes to to raise fees. Uh but I think it's also important to keep in mind that uh it's also it can be politically challenging um to just sit on a large rainy day fund. You know, if we were to just be uh building a large pile of cash um and calling that our rainy day fund, um I think you don't have to look very far in other, you know, state budgets and other government examples where, you know, you build up a large, you know, emergency fund or a large rainy day fund and suddenly everything starts to look like an

emergency or everything starts to look like rainy day. And so that's why I think our recommendation is simply uh you know I think we have a a long track record of operating a pretty lean organization. Um and so when we uh come across a need for additional revenues uh we will let you know and we will come to you and we will ask you for it. And so I think this is just kind of uh adding to that track record that uh we're recognizing that moving forward uh the revenues that would be coming in off of this would be very significant. And I think rather than building a large cash reserve, uh we're recommending to simply reduce that franchise fee, reduce the amount on all of the businesses and residents in the community, um and we'll still see a significant increase in revenues even uh with that reduction on the fee. So the recommendation uh for this ordinance would be to approve ordinance number 237. Now, I'll also get into um some background now on resolution 2398 to walk through a little bit more on the financial impacts of um approving that ordinance that drops it from 7 to 4.

Mr. Morgan, can I interrupt you for just a second? Yes. For the record, just want to let the record know that um Councelor Barone has made it and is part of the council now. Appreciate it, Mayor. Thank you. Got a question. Okay. So yeah, I would like to uh instead of going on to the next resolution, I would like to see uh we discuss this first one because I have some questions and

Yeah. So I have a I'm really positive that all of your questions are probably going to get answered in this uh upcoming piece. So, it's really intended to be presented as a a package together because um they do really play off of each other and so we can take questions at the end, but I I could take some questions now if you

uh see. So, with this resolution, uh resolution 2398 repeals resolution 2209. And so that was a bulk power incentive program uh which ultimately uh the only users of that bulk power incentive program are uh the data center industry. And we anticipate that by repealing that resolution um and by reducing the uh franchise fee on UMTO electric co-op from 7% to to 4% the combination of both of those actions uh the city will see a net increase in revenue of between$1 to2 million per year. uh projected every year through 2030. I'm only projecting through 2030 because um I think we anticipate significant increase beyond that um if the data center industry continues to grow. Um but based off of really what we know in the here and now um that's what we feel comfortable with through 2030. Uh but we'll see what what happens beyond then. So, a little bit of background. Uh, you got to remember data centers use a lot of electricity and as we mentioned, uh, the utility franchise fees are simply a percentage of utility revenue. And so, um, the city um, recognizing that fact, uh, back in 2022 was working with, uh, the data center industry um, and recognizing, you know, uh, some of the other communities uh, engaged in these types of incentive programs. uh we offered a bulk discount incentive uh that would ultimately yield more revenue for the city if we were to offer an incentive program for large electricity users in the community. So, the existing incentive, the way that it's structured and what was approved back in 2022 is that any customer in the city that purchases enough electric power in the city um to the point that they would in one calendar year pay more than $750,000

just in franchise fees alone that end up coming to the city. Uh then the city would uh after that customer comes in and proves, "Yep, here's how much I paid uh in franchise fees this past year," then the city would turn around and refund back to them uh every dollar beyond $750,000. So, um the floor would be $750,000. Um and so then everything beyond that would be refunded back, uh to the business that generated those dollars in the first place. So, uh the intention being, you know, we'd like to see additional revenue come in. So we'd like these large power customers to come in and so this would give them an incentive to do that. Uh we also indexed that threshold uh to inflation. So the 2025 threshold is now sits just a little bit under $800,000 and uh it's been successful very successful program. So uh this graph shows uh just the franchise fee revenues uh to the city of Hermiston only from electric co-op. And so you can see uh fiscal years 20 through 24 uh they were experiencing you know just kind of normal growth you know growth trajectory that we'd seen for many years you know we've been adding a lot of homes you know other business uh growth exists also every time um they increase their rates themselves then that increases their revenue. So so we were seeing you know growth from about $300,000 to $400,000 over the course of those five years. Uh but then beginning in fiscal year 25 uh we saw our franchise fees nearly double uh to almost $800,000. Now that coincides with the uh beginning of actual operations of the data center industry inside the city limits of Hermiston. Uh so then you know this graph actually doesn't look as um startling uh when you look at fiscal year 26. Uh and that's because we're only four months into fiscal year 26. Uh but that chart shows uh that were about $1.1 million in franchise fees received

uh through the first four months of fiscal year 26. So all the other years that's an entire 12 months. Uh that's only showing uh the first four months. So very successful in generating additional franchise fee revenue. So uh why end the program? Uh well number one uh eliminating the program would increase revenue for the city. Additionally, it would uh mitigate some financial uncertainty on the city's part. So, um we would be sitting on a large pile of franchise fee revenue uh that any uh anyone that generated that revenue um and exceeded $750,000 at any time during that ensuing time frame could come in and ask for their refund. So, we would be we'd be bringing in a lot of uh revenue that we probably wouldn't feel comfortable touching because we have an obligation to to be able to refund it back to the folks that generated it. Uh and then finally, we started talking with the the cloud computing industry really back in about over a year ago, uh really in mid 2024, uh recognizing that this was coming and recognizing that they probably wouldn't be interested in actually utilizing this program. And so, uh, the industry itself that's located inside the city, they've actually indicated a preference to just go ahead and eliminate the program. They would prefer to just rather eliminate the program and reduce the franchise fee across the board to all customers in the community uh rather than participate in in the incentive program. So, sorry, I keep having to go back and double check because I'm concerned that I'm going to skip a slide because it's so sensitive to me. Um so if we look at uh what this will end up doing so under the current scenario uh what we project for calendar year 2025. So calendar year 2025 we project that just

UEC's franchise fee revenues alone uh should come in about $1.6 million. Uh now if we were you know still operating the the program as it is now uh out of that $1.6 6 million in revenue. Uh we would probably have to refund about $400,000 of that to the cloud computing industry. Uh so our net revenue would end up being about $1.2 million. You know, that's still about three times what our annual revenue was in 2022. So a significant increase. Uh but we would have that expense of about $400,000 uh to go back out as part of the incentive program. Drive me crazy. Okay, as I mentioned, the uh industry prefers to eliminate the incentive program. Uh now, this absolutely will increase costs on the data center industry. So, uh right now uh for their operations, um they're, you know, they would be capped essentially at $800,000 per year if they were to avail themselves of the program and ask for a refund. So, it's just a shade under $800,000 is what they would be paying. Um, but if they were to completely eliminate the program, uh, we generally estimate that they would probably be paying somewhere in the range of around $2 million a year in franchise fees if we were to eliminate the program and set the franchise fee at 4% for all customers across the city. So under this scenario, eliminating the incentive program and reducing the citywide franchise fee from 7% to 4% means that the data center company themselves would pay an additional $1.2 million per year more than what they otherwise would be paying. Now, why would they do this? Uh it's because um their electric usage is uh an important trade secret in the data center world. And so, um, if they were to come in and request the refund under the the program

as it is now, we as a public agency would have to show, well, here's how much we paid out. And so, it wouldn't take uh a forensic accountant much work to just reverse engineer how much we paid out. And ultimately, you'd be able to pretty quickly arrive at a number of how much uh electricity they used. And so, they have a financial interest and they would prefer to pay us $1.2 million a year more. um just uh to go through that process. So, uh just kind of in general, an acrosstheboard 4% fee rather than a 7% fee. Your typical household is going to save somewhere between $40 and $60 a year. Uh the data center industry is going to be paying an extra $1 to $2 million per year. Uh so the net to the city means that city revenues will increase between about$1 and $2 million a year. Uh now finally uh something else to keep in mind is you know what's really the market uh what are other communities doing with these things. So our current franchise fee on UEC is 7%. We're proposing to bring it down to 4%. Um other cities across Oregon uh their franchise fees on electric utilities range from 3% all the way up to 9%. Uh I would say the bulk of the market most of the other cities are in you know that range a lot closer to 5%. Uh there's a handful that are down at 3%. Uh some like City of Firmston are at 7% currently. Uh there's one outlier up there at 9%. But so 4% certainly has us, you know, in the market uh of where an appropriate franchise fee would be set. Also important to keep in mind and this just kind of goes to a competitiveness standpoint u in terms of being economically competitive for the data center industry and those types of things. You know without even looking into other states um it's important to keep in mind that um if a data center is to locate on land that is outside of an incorporated city in Oregon if it

locates somewhere out in unincorporated um county their franchise rate is zero. Um, so counties in Oregon are expressly procluded from charging franchise fees. So, um, that's, I think, important to keep in mind. Uh, also, you know, uh, we didn't arrive at this in a a vacuum. So, we've worked closely with our, uh, partners at the city of Umatillaa for many years on on our franchise strategy. Now, back in the early days of the data center industry, at least in uh Umatillaa County, circa 2008 2009 time frame, uh the city of Umatila at the time implemented a citywide cap on all of their electric franchise fees at a million dollars per year. And so what that meant was as soon as um an electric utility collected a million dollars in the year, then they stopped collecting um franchise fees from all their customers everywhere in the city entirely. And so that was a hard cap. It didn't index up um but it made sense um for the city of Umatillaa at the time. Uh but by 2021 they had done some work to modify that upward uh with the expansion of some additional data center development in the community. And so that was uh around the same time that we began discussing with them our incentive program. Um going through this process with the the regional cloud computing operator. Um city of Matillaa had their um existing franchise fee strategy was set to expire at the end of 2029. Uh so the program that city council and Hermiston adopted, we also set to expire in 2029. so that um when the time comes to renegotiate any of those things, we'd be in more of a regionally powerful position, we wouldn't be able to be played off of each other. So, so we've been working closely with City of Matillaa on on these strategies for quite some time. And then additionally, you know, from a a statewide market uh standpoint, you know, I mentioned um the different communities in the state that have

franchise fees and what those are. Um but not all cities have uh large electric users or or large data centers. And so uh we began back in around March, April of this year. Um we started to reach out to other what I would call data center impacted communities. And so uh really we have an aim for data sharing, knowledge sharing, making sure that that we're really maximizing our market power um in dealing with the data center industry. And so, uh, we've pulled together this collaborative alliance for regional technology and economic leadership. Um, and really it has representatives from city Hermiston, city Hillsboro, the Dallas, Prineville, Boardman, Umatillaa, Arlington, Madress, Stanfield, Echo, Pendleton, and the Confederated Tribes of the Warm Springs Indian Reservation. And so that's been a really u positive group. Uh, we've met several times here over the past year. And so meeting with that group also makes me feel very confident that we're right in the market with a good figure. um if we were to bring our citywide franchise fee rate down to 4% and eliminate that economic development incentive for the data center industry. So just in summary really there's two actions before you this evening. Ordinance 2377 that is required in order for UEC to continue operating in the city. Um so that is a uh franchise agreement renews on the same terms for 20 years but we are choosing to reduce that fee from 7% to 4%. And then resolution 2398 that eliminates our incentive program uh for data centers that's really just between the city and the potential data center uh industry. So together uh we anticipate seeing a net increase in city revenues of between$1 million and $2 million per year. We anticipate more with potentially additional growth in the data center industry. And then also this would be reducing costs by 3% on all of our other uh users in the city with your typical residential customer

uh in UEC's territory uh seeing a savings of around $50 per year. So that was an awful lot of numbers flying around and I'm sure there's questions. So okay uh now questions on ordinance 23. Well, we can just do questions for both of them, can't we? Okay. So, questions from the council on either one of those or all the stuff that's out there? I'm just going to say potential conflict of interest on 2398. I'm just putting it out there just in case. Okay. Noted. Okay. Questions, Council Linton.

Okay. I'm just want to make sure that I'm understanding what's going on with this. Um as the changes lures franchise fees and occupancy taxes from 7% of gross operating revenue to 4%. Please explain uh a little more detail like I'm in kindergarten if you please all my questions. Thank you. Um how demand of electricity growth within the community directly from the data center industry explain. I'm sorry. Can you repeat that? Yes, I can. Like I'm a kindergartener.

Okay. Okay. Explain uh how the demand of electricity growth within the community directly from the data center industry. Yeah. So we know that the data center industry is a large electric user. We know when they began operating and we know when we started to see that significant growth in in revenues. And so it's really following exactly what we expected to see. And so that's where we saw the revenue growth for UEC. If I may get back to it, I guess the the the the tripling in franchise fee revenues match up exactly with what we expected from the beginning of the operation of the data center industry.

Okay. Is the reduction in fees to compensate the increase in data centers using more electricity? No. Okay. Uh can you explain who the economic development incentive program was benefiting? It was for any large um power user. So it did it did not specifically name any individual user. Um nobody has availed themselves of it yet. It would probably be the data center industry, probably the one that's operating in the community currently. Uh but any large very large electric user could have used it.

Okay. Um the Can you explain please the 2026 revenues increased 1.5 million when 2024 was 400,000 when franchise fees decreased. Yeah. So um as I explained, we anticipate that because of the significant increase in power consumption from the data center industry, even if we drop that, um percentage that we're charging from 7% to 4%. Even with that, there's so much more power being consumed. That's what's driving that increase in revenue.

I just have a couple more questions. Okay, just keep it under five minutes. Oh, is that been is that a new rule now? It's been a rule. Yes, ma'am. Okay. Is that also with comments? I just want to I want to It's just with rules. Just just with questions at the moment.

Oh, okay. Okay. The repeal uh ordinance number 2111 and number 2248. It would have been nice if copies of these two ordinances were included. So, I'm asking that next time uh when there's some that's combined if you could put them in our notes so we can go over those as well. Make it easier. And under question four on ordinance 2209 the rebate of 1.5 million is the re is the revenue increase under ordinance 2377. Is that correct? Because it looks like a swap to me.

Yeah. So they're tied together. So when I'm talking about the net increase in revenues, it's a combination of elimination of the incentive program and the change on the fee in the ordinance. That's why I presented them together. All right. Thank you. Council Broom. Thank you, Mr. Mayor. I had two questions. Uh the first of which was how many programs or I guess entities uh businesses qualified for the incentive?

We don't know yet. We can guess that there's one, but nobody has applied for it yet. My assumption is that you're not sure because the business didn't request a reimbursement. Correct. Gotcha. So, from this program, no entity has requested a reimbursement. Correct. Thank you. I just have one.

Okay. Um, if the county charges no franchise fees, why would they not be a bigger draw? That's a good question. Out in the county though, you know, that's part of Oregon's land use regulations. It's harder to build out there because it's, you know, different uh land use regulations, but also they don't have the other utilities like water and sewer and some of those things. So, okay. But those can be overcome. I mean, there's examples. So, there's a data center out right by the freeway interchange that's completely out in the county. Yeah. That's why I was wondering if there's no franchise fees, why that wouldn't possibly be a bigger draw.

Yep. Yeah, I get I But that could be overcome. Not cheaply, but can't. Other council questions? Council Roberts, you have any questions? I do, Mr. Mayor. Um, I am curious. Um, you know, we recently have been talking about curbside recycling and needing money for defense attorney work. This increased revenue, is it going to be limited in use or is it going to be general fund uh dollars that we can put toward things like that? We chose not to get into discussion about how it would be spent, but is that really seem more like a budget discussion? So there's no

I guess my question though is it will it go into the general fund or is it specifically tied back to having to use it for utilities I guess is a better way to put that. Yeah, it goes back into the general fund. And so if we maintained at 7% and eliminated the incentive um we would be looking at potentially a revenue of about 2.6 million. Is that somewhat correct?

Correct. Okay. For reducing fees on the constituents, but I just wanted a whole picture about inions are as far as uh these. So, I appreciate that. Thank you. Any other council questions? Okay. Uh any public comment on either? All right. Council comments on We'll start with 2377. Councelor Broom.

Thank you, Mr. Mayor. Um, my only comments on this is, uh, I have a couple words of what this whole, uh, process makes me feel about the the city coming back full circle. uh a couple years ago, we passed the franchise fees. And so I I feel like this makes me feel like the city is being transparent, honest, and creative in in its solutions a couple years ago. And just uh like Mr. Morgan pointed out earlier, uh we there was a need we set we set the need at a certain percentage. That's what the council did. And so for it to come full circle a couple years later and for there to be a proposal of elimination of an incentive program along with a discount really for for our constituents I think is is is a is a great idea. It's very creative. Uh it comes full circle and I think it's very transparent on the city's part uh to know that hey there is a surplus here. There is a way that we can uh benefit both businesses and constituents. So I I think it's a great idea. Uh so hats off to to the city for coming back to this uh full circle. Um and even from the proposal at the very beginning, I think the incentive program uh did its part. I think the sounds like the city came up on top on that uh specifically because nobody ever ended up claiming a rebate. So, it sounds like the city was able to keep uh the money that it kept and and so now that it understands uh its financial position to be able to to give a discount to for the for that idea to come from city staff and for it to be proposed in a council meeting and for it to be discussed and flushed out like it is today, I think is is kudos to the city. So, thank you very much to city staff for your leadership on that. Other council comments, council council.

Yeah, I think this is a great opportunity. Um, this is a win-winwin scenario. The data centers get to keep their trade secrets. Um, but they continue to pay the franchise fees. Our residents get to pay a lower um a lower fee, which is great, and the city gets increased revenue. It's hard to see where we go wrong by passing this. Thank you. Other council comments. Okay, my turn. Roberts. Oh, council Roberts. Yes. Council Roberts, do you have any comment? Uh, no comment. Thank you.

All right. So, I I tend to be on the same same page as what councelor Kelso and councelor Bron had said that, you know, it's not often that we get to sit up here and honestly look our constituents in the eye and say, "Hey, we're going to cut something. It's going to cut cost you less on at least one thing." And today we're today potentially we're able to do that to give money back and get more by doing it.

And well, we're going to sounds like we're going to get it more anyway, but the the bottom line is is that, you know, we're going to be we're going to be cutting cutting some if nothing else. And so by by a cost cutting a cost-savings measure to to uh one of our partners being able to save money is I I feel like I said a win-winwin on this one. So yay for us if nothing else can be said. Okay. Uh motion. Okay. We have two op two options. Motion uh num option number one is to adopt ordinance 2377 at a single meeting and become effective 30 days after adoption by city council or if we have if it is not unanimous then we have to do a second meeting and a second uh yeah then this we'll have to have a second reading at a second meeting as we used to do.

I motion for option one. Okay. So, you're making a motion to have a uh to approve ordinance 2377. Okay. All right. Second. Okay. Second by councelor Hayward. All right. Roll call. Yes. Yes. Yes. Yes. Yes. Yes. Yes. Councilor Roberts. Yes. Motion passes unanimously. Done deal. So, uh, we don't have to have a second reading or we have a second reading here.

No, that motion will will, uh, get us to where we need to be. And I appreciate the council and working through the process with us on this one. Yeah, a little bit newer than different than what we've been doing, but it, you know, it it's we're we're we're adapting to changes and getting streamlining the process. And so I appreciate everybody's patience with me on getting through this as well. So all right, next up is uh 2398 eliminate economic development incentive program related to electric utility franchise fees and repeal. City manager Smith,

we've talked about it. So if there's any additional comments or questions. Okay, council, any other uh questions? None. Okay. Public comment. Nope. Okay. Council comments. Council Roberts, do you want to weigh in on any of this? I'm good. Thank you, sir. Okay. Don't want to leave you hanging there, sir. Okay. Uh, can I get a motion to adopt resolution 2398 and lay upon the record? So, moved. Second. Uh coun moved by councelor Duron, seconded by councelor uh Meyer. Roll call.

Yes. Yes. Yes. Yes. Yes. Yes. Yes. Council Roberts. Yes.

Motion passes unanimously. 80 80. Okay. Well, there we go. We've done a we've done a a thing that where we're able to uh save our constituents some money. I cannot I cannot thank you guys enough for waiting through this process the way we did. Um we should I'm I'm proud of y'all and Mr. Morgan and Mr. Smith. Thank you so much for your hard work in making this accomplishment. So next up, resolution 2399, airport agricultural ground lease. Mr. Smith.

Yeah, Mr. Morgan. Again,

Mr. Morgan. All right, Mr. Mayor, members of the council. I promise this will be quicker. So, uh, so in general, this is, uh, just simply a one-year lease on 140 acres of farmland up by the airport. uh in total or generating revenue about $63,000. A little bit of background. Uh that red outlined box is the 140 acres that we're discussing. It's off the east end of the airport uh immediately adjacent to EOTech uh next to Hot Road. Uh so originally uh the entire concept of this is to allow the airport to extend uh its runway off to the east. In 2017 is when we formally began the process. in February of 2017. Um the FAA moves slowly though. So finally in 2025 is when we purchased the 140 acres for about $2.1 million. Uh we were fortunate uh to continue to receive a little bit of bump from some CO dollars. FA actually funded the purchase of that at 95% of the purchase price. Uh the city funded portion also includes some uh city uh investments in redoing some of the irrigation infrastructure. So total cost out of pocket for the city came down to about $153,000. Uh some of you may also remember uh when we were purchasing the property, we included a provision to allow the existing owners to lease back the property. Uh after multiple offers or requests, they declined to lease back the property. So that put us into a position a little bit behind the eightball timing wise to to get it advertised for this uh 2026 year for utilization. Uh but I'm happy with how it things turned out for us. Maybe. There we go. So, uh, in June, we had the property appraised for lease. Uh, that came back with a range, as appraisals do, of between $55,000 a year and $80,000 a year. Uh, that higherend

portion of the appraisal was uh specifically more for uh long-term leases, uh, three and fiveyear leases. So, uh, it was indicated in the appraisal that shorter leases, you know, more like on the length of one year, uh, would likely end up at the lower end of that lease, uh, appraised range. Uh, so we set about marketing the property. So, we physically mailed, um, flyers to 23 of the existing neighboring farms up in that vicinity. Uh also we installed large signs on the field uh directly on Highland extension and on road and also did some digital advertising to make sure that uh folks who would be uh qualified were aware that it was available. And then ultimately we opened bids uh on December 2nd last Tuesday. Uh and I was happy that we received uh three bids from uh otherwise qualified um local farmers. All of them local farmers. All of them qualified to to farm the land. Uh, and all three actually came in within that appraised range. Uh, which is good. So, uh, we're recommending that we, uh, direct staff to enter into negotiations to execute a a lease agreement with bidder B, who offered to pay us $63,000 to lease and farm the land next year. But with that, I'd stand for any questions. Council questions. Seeing none. Uh public comment. Nope. Okay. Uh council comments. I guess I'll say something. So $63,000 and we have $153,000 into it. So basically in three years any money after three years at approximately that rate is all pure for the good of the order.

Yep. We're pretty excited about this. So just as a in a I mean this is probably a budgetary thing but uh my my thoughts on this is that you know at some point in time that we're going to be improving that or using the creating you know an extension for the airport and such. Um I don't know whether we can create a a uh um silo basically for that money to basically go into for that project.

Yeah. So I think maybe for a sense of scale. So this will be generating around $63,000 in revenue. Um right now um the city's general fund subsidizes the operations of the airport depending on the year in the range of around $100,000 a year. So, this will go a long ways toward closing that subsidy. Um, also just kind of for a sense of scale, um, all of our other leases, so we rent out individual hangers. We also rent out some of the land at the airport that some large box hangers sit on. Uh, in total, those currently generate around $100,000 a year in revenue. And then the the net profit that we receive from the fuel sales, that's really our only other revenue source up at the airport, is around $30,000 a year. So between the existing lease revenue and the fuel sales, we generate net positive revenue of about $130,000 a year. So this is equivalent to increasing our revenue by about 50% just with this. And and the intention is um we set it to a one-year lease because there was still some questions about um how back in the summer, there were still some questions about how we would go about um severing this property's irrigation system from the parent parcel that we acquired it from. Uh so we're working through that. That's some of the additional cost. Um, but so we wanted to to get it out there for a one-year lease and then once those irrigation questions are are finalized, uh, then we'd like to just rotate it into a longerterm lease, which will probably generate higher uh, revenue per acre. But so we we wanted to to get in and get a leie uh, earlier rather than later.

Okay. Well, my my thought was is that any any profit that that we make off this that we set aside basically for when the time comes that we have to do our work on the airport, whether it's the ex, you know, the extension of the runway and and the dog leg that we're going to have to create with road that we have that money set aside as opposed to trying to come up with the money when that time comes. So, just a just a thought for for future planning. So, okay. Um, with that, um, can I get a motion to adopt resolution 2399 lay upon the record? Motion to adopt. Second. Been moved by councelor Hayward, seconded by councelor McCarthy. Roll call. Yes.

Yes. Yes. Yes. Yes. Yes. Councelor McCarthy, would you like? I would like. Okay. Thank you. It's a yes. It's all right. He paused. He totally paused. Councelor Roberts. Yes. Okay. Motion passes unanimously. 800 motion resolution 2400 adoption of the IGA for IT services with the Umatillaa Hospital District. Manager Smith.

Yes, Mr. Mayor, members of the council. We um continue uh in in a good way to make friends and and uh our IT department is doing a good job and that word gets passed around. So um the Umatillaa hospital district uh came and approached us um interested in IT services. They don't have a lot of needs for it. Uh they have one computer and uh a few board members. So uh this is a very limited contract but they are interested in having some stability in their services. So, uh, the contract before you is for $6,200 a year, and that that's at a rate of $130 per hour. And it also includes what we're putting standard in all of our contracts, a 3% inflationary increase each year. So, be happy to answer any questions.

Council questions. Councelor Linton, will we need to hire an another individual or can the OT handle? The current staffing should be able to handle this because it's not a lot of load. We do have a an open position that was approved in the budget, but we have not filled it due to uh we we don't have a a contract need for any additional staff at this time. All right. Thank you. Other council questions? Public comment. None. Uh, council comments. Councelor Kelso.

Thank you. I just want to take this opportunity as a fellow IT guy to praise our city's IT department. They're a great group of guys, great group of people to work with, and they're very professional, and they do a great job in my opinion. So, thank you to the IT department. Excellent. Any other council comments, council dur. Okay. Uh yeah, what he said our guys do a really good job down there and it's obvious the uh we're we're the we're the pe to go for uh public public service in IT department. So, um I I don't need to say a whole lot more than that. Uh motion to adopt resolution 2400 and lay upon the record.

Motion to adopt. Second. Uh been moved by councelor Hayward, seconded by councelor Meyer. Roll call. Yes. Yes. Yes. Yes. Yes. Yes. Yes. Council Roberts. Yes.

All right. Motion passes unanimously. 80 November monthly financial report. Mr. Pouse, good evening, mayor and counselors. Uh before you tonight is the monthly financial reports for the month of November 2025. Um the Hermiston Urban Renewal Agency, we are uh currently still on wait mode for the North Hermiston Urban Renewal Area project that's going um we still anticipate bidding before the end of the winter or by the end of the winter for this project. The general fund, we are fifth month into the fiscal year, 42% 41.7% into the the current fiscal year. monthly revenues ended projections over projections by about $1.2 million primarily due to the timing of the receipt of the property taxes for fiscal year 2026. Um we have received 83% of budgeted property taxes through the end of November and approximates past the past three fiscal years which were 87 87 and 82% or 85% on average respectively. So, that's good news. Monthly expenses were over projections by $1.3 million. Um, because of the timing of the presentation of these reports, um, there's not much difference between this month and last month as reporting for November and October. Uh still the $2.7 million that we transferred for uh to the building the newly created building fund um resulted in that $2.7 million and is impacting that $1.31 million uh over projection for expenses. Um city council airport and non-EP departmental for uh non-EP departmental for just what

was mentioned uh prior are over budget due to the LLC membership that's paid annually. capital outlay in the airport for some hanger projects and then the transfer to the building inspection fund. Parks and pool, I'm glad to report that there was four departments that were over budget all related to recreation. Um parks and pool are the only ones that have remained over budget at at the end of November. Um pool I think is over by about 8% parks is over approximately 2%. So, we're streaming back into into alignment. And again, that's due to seasonal activities, special revenue funds, EOTech, uh the revenues in the um in the EOTech fund and the financial reports do not reflect any reimbursement from the campground project. Um those are actually we should start to see some of that in December. So, so that's good news. Uh the street fund is $60,000 below projection for revenues. This is strictly due to timing of the federal for gas tax turnovers. Uh this is they arrive in January or February. So we anticipate getting those aid just on an annual basis. H funded expenditures were approximately about $518,000 over projection. They have an annual debt service that we pay in November. So that's onetime debt service for that for this fiscal year. So that's reflected in this month's uh reports. Regional water fund is approximately $42,000 over projections and this was due to uh ongoing transfers for future maintenance and or capital projects that we have slated in the future. So or other maintenance projects so that we're saving money for those repairs. Um I will let Mr. Morgan address this.

Yes. So, a lot of the projects are moving forward. Gear Harper project uh we anticipate putting out to bid here the end of winter, early spring for construction in 26. Uh regional water system backup generators still in design. Long lead times on those. Uh well number six chlorination structure should be putting out to bid here in the winter. Uh lift station number should be seven uh is uh going to be going out to bid here in the winter as well. East a East Evelyn uh sewer line uh that'll probably be going out to bid more like the spring. Um Orchard Avenue waterline replacement uh will have a big impact uh here next construction season, but that'll be going out to bid uh here in the next couple of months as well. And then the Dogwood Northwest Second Street um designs actually begun already and that should be going out to bid here in the winter as well. So, uh these things kind of follow a timeline and so we get into design with a lot of these projects in the fall, but a lot of them out to bid here in the winter time. So, that's why lots of these are going to be heading out the door and you should be awarding a lot of contracts here in probably February, March time frame for a lot of construction to take place in the summer and fall. Uh the aquifer storage and recovery project um is continuing to move along. They're starting to erect the building to go over the top of of that well. And then well number four controls project is continuing to move forward and uh they should have that wrapped up before the irrigation season 2026. And the southeast end street bridge project um is moving along. um I mentioned last time uh that one's going to be kind of counteryclical to our typical construction process because we'll have to be doing all of that work or most of that construction work during the winter time when there's not water in the irrigation canal. Uh also up at the airport hanger, um the building should be getting its

certificate of occupancy very soon. So that's what I've got to report. All right, the library uh they were they're in this week finalizing we hope uh the remainder of the punch list items. Sherman Park will be following the um schedule that Mark outlined as far as going out to bid here in the winter for hopefully a a 2026 summer construction. And the public safety center continues to um be on target for an end of February, early March completion. And I believe that's all for that.

Okay. Council questions. Mr. Linton on the report on page nine. Um, I'm just not following that. So, it's with EOTech and it's a lot of red and then it says it's a total expenses of 81%. So, um,

so um, included in the EOTech budget this year is a construction of the RV park and, um, we just submitted paperwork. We just received the final paperwork from Amazon and submitted for our first reimbursement. And so that's why it's in the red because um we haven't received that revenue, but yet we've been spending money on uh design for that project. So uh once we get that first payment, the the red should be equalized. Thank you. Oops. I didn't even have my mic. Council Burm.

Thank you, Mayor. Um, I apologize if you mentioned this earlier, but the right of way on First Place, uh, and the sidewalk. Can you give me an update on that again? Sorry if you mentioned it already. I wish I had a better update, but it's still hanging with the railroad.

Any other council questions? Seeing none, uh, public comment. Seeing none, council comments on the financial report. Okay. Can I get a motion to accept the November monthly financial report? So move. Second. Has been moved by councelor Linton, seconded by councelor McCarthy. Roll call. Yes. Yes. Yes. Yes. Yes. Yes. Yes. Councelor Roberts. Yes.

Motion passes unanimously. Committee reports. Let's see here. Do we have any committee reports? Talk about the You can go right ahead. We had our public infrastructure committee meeting just before this. Um I think probably the most notable thing to mention is that our regional water system now has a master plan in place. We've basically, I'm trying to remember how Mark put it, basically been operating off of some documents from the '9s, um, which were fine for the time, but now we actually have some proper direction. I know some of you were here for that. Um, so that's exciting. And don't feel like I'm missing anything else really of note, but now we have some direction. looking at other options where for supply.

Um, and we were apprised at, you know, who the that the basically the the direction that it's going and how it how far how far we've come and where we're what we're working towards. You know, the master plan is going to take care of a bunch of things. And so, Mr. Morgan's been working hard at getting that thing whooped into shape, so to speak. So to be complimemented on that. Any other parts of that? Not that I can think of off the top of my head. Okay. Any other council committees? That's the room.

We have postponed or tabled our EOTech committee meeting. We did not have a quorum for this month. Although councelor uh Kelso and I were ready to be there when did not have a quorum. So, we'll be uh meeting at our next regularly scheduled EOTech meeting. Okay. Any others?

Okay. Well, um I do have one. Uh we had the charter review committee here uh last week and got through all of uh section seven all the way through to section seven. So, we're actually moving right along on that on the process. And there's a very strong likelihood we'll have a finished product to you to show to the council um within a short amount of time. I think we I don't know that we can make the the May election, but uh it's it's if you hold your breath and hold your mouth just right, it's possible. But uh you know for all intents and purposes uh the product that that you know what we're what what's been going on at that meeting and and you know everybody's putting some really thoughtful insight into it and I have to have to say that the committee has been doing a fantastic job at getting us you know a good good base to operate from as as a council and I think I think the city is getting good going to have some good uh direction from this. So, um I the next meeting I believe is on January 3rd 8th and if you have the opportunity to attend, I think it would be a good uh a good chance to to you know weigh in and hear what hear what they're talking about. So, um aside from that,

um where is that located at? Right here at least. Right here. Yeah. Question. Yeah. When when do we anticipate then it potentially coming on the ballot? Well, the with I would say with a with fairly certainty it'll be it'll be able to make it on the November ballot of next year of 26. However, you know, like I said, if if if we get through it as fast as we have at this point, there's a possibility of getting it to the council, but I don't know. It's Okay. So, this upcoming November then? Yeah. Okay.

Yeah. Yeah, it's for sure. I'm I I I I can say with pretty pretty fair certainty that it'll make the no that no the November election, but you know, my hope is is that it we move along and get to even sooner than that. But we'll see. That's good. My my thought was going to if it was next year, it's usually a non-election cycle for us. So, it would be I think the city would have to pay a little bit of money to run that election, but since it's joining the other elections, it's correct. Going to be That's a good deal. That's good. Thank you.

Yeah. save us money in that respect, I guess. But, uh, no, it's a it's the the the folks, everybody that's involved with it is very very much, uh, taking taking the the thought to heart and asking good questions and providing, you know, we're getting good feedback amongst amongst everybody present and, uh, uh, Mr. Dzman, Dr. Dzman is doing a good job of leading the leading the process. So, that's about it. All right. So, no other council committees. Mayor's report. My turn. I get to continue talking, which is yay. Um, just as a reminder, uh, this is the only meeting uh for the city council is this is today and there is the the next one has been cancelled by council request at the last meeting. Just so everybody is is aware of that. Um so because of that you know and because of what the reason we have Christmas coming up so uh we have a lot of things going on and as it relates to Christmas in in the city um I decided to be a little festive today so any case

love the pan yeah well that's fine um so uh we had just had the tree lighting on on Thursday uh I I was able I was Yeah. So unable to make it as the mayor. I was the mayor was not there. Um but I do do hear that Santa made an appearance and so he was I was the bell of the ball for a little bit. Anyway,

uh the uh tree, if you haven't had a chance when you when you as you exit, take a look down the street here and see what we got going on. It's looks very nice. changed it up a little bit on the the manner that it was done and I think that this way worked a little bit better. Personal opinion. Um it looks it looks like it it worked out really well. We also have uh the city has pancakes with Santa coming up on the 13th and uh EOTech has the lights light show and the uh tallest Santa in the Pacific Northwest up there at 50 feet tall. That's bigger than That's bigger than a lot of things. I think that's the biggest thing in the county city right now. Uh, aside from that, um, we What's that?

It doesn't

It doesn't get too windy. Yeah. Um, also as a just as a side note, um, as as it relates to elections that we talked about here a little bit ago, uh, I have noted that we now have candidates for every ward who have signed up. So, uh, we have a, you know, there's still plenty of time to sign up. Um, I've, I know it's been said, I think believe it's Councelor Linton that always mentions the fact that, you know, having more than one person on the ballot is a good thing. It creates a little bit of uh, a little bit of uh, not necessarily competition, but, you know, it gets people to talking so that you can hear what people have to say. So, uh, if there's any others that are still thinking about running, please put your name in. We look forward to seeing you. You might have to sit up here with us. Have to

with some of us. Well, with some of you. Okay. Uh, council president report. Thank you, mayor. um echoing on the 13th and I know um the mayor talked about Land of Lights which was going on basically all through December but they do very specifically also on the 13th have the holiday market at Candy Village. Uh at that time also will be announcing the winner of the home lighting uh we received as far as I can tell no businesses entered the lighting contest but we'll have judging announced for the Hermiston home lighted contest on the 13th as well. That it. That's it. Well, and then Christmas is coming up. So, merry Christmas.

I'll take my moment to say that. Santa Claus is coming to town. All right. Uh, council reports. Council L. Not a report. But first, I'm going to start off by thanking the uh police department for the cards. I just noticed that was from the police department. Thank you very much for that. That's very nice. But I would I would like to see the uh formal um documentation or ordinance or where it says that you uh city councilors are limited to five minutes of asking questions. I would like to see that. Actually, I'd have like a copy of it, please. I don't know if that would be you, city manager.

Yeah, I believe that's the council rules. I'll send you a link. Thank you very much. Okay. I think it's a direct attack. Oh, excuse me. Okay. The event that was um for the tree lighting and the parade was really really spectacular. Ma'am, you're out of order. Pardon me. Go ahead.

Um was really spectacular and they had, you know, participation from a lot of different groups and it was really nice to see. On that note, I gotta say Park and Wreck did an amazing job. A lot of people came up to me and said, "Man, they loved it. It was great the way it lay out and everything. Just got to pass it off. Park Recre, you hit it out of the park." Yeah. Any others? Councel,

thank you. Um, I would just like to say that on Saturday we had our 30th anniversary of the uh the Festival of Trees and it was a successful event to remind everybody that's a fundraiser uh for the hospital foundation and for the Kowanas Club. Everyone had a great time. I'd like to thank all of the volunteers who put many many hours into that project and the people who showed up and and bought things uh to raise money. Um, and I'd like to also thank Parks and Rec. They did a fantastic job of getting the building ready for us. And um I'd also like to thank councelor McCarthy for saving my bacon on a microphone malfunction and he figured it out. So thank you councelor. But that's all I have. Council Brun.

It's good to be back. Uh thank you for holding down the fort. Last one I was uh very sick so I wasn't feeling well. So, I do want to say uh happy belated Thanksgiving and uh happy early Christmas. Uh so to each and every one of you guys and I'll see you guys next year. Okay, it's a school joke. Any others? City or youth advisory? Youth advisor, do you have anything for us? Um, thank you, mayor. Um, I don't have anything, but um, I did have a speech and debate tournament on the 6th

and um, it was really fun. Excellent. Were you a part of it? Yeah. And how'd you do? Um, I think I did well. Excellent. Yeah. Congratulations. Thank you. And um if were you in debate or in the speech? That was probably me. Were you in debate or speech portion? Debate. Lincoln Douglas. What was your topic?

Roy, that's awesome. I was in speech in a debate when I was in school. I think that's awesome. So, that's cool. Thank you for sharing.

All right, Mr. City Manager. I just um wanted to have you look in your email in the next day or so for you can participate and be a part of judging those uh um the houses that have been decorated and picking the the winner. So, we'll send out the form, you can return it, and then any but you're if you don't, it's okay as well. there'll be a group that'll do it, but you can have a part of choosing the the h the winning house if you would like. So, I'll be out later this week and I have no other items. All right, it sounds like that's it. So, we are adjourned.