AGENDA TITLE:
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Receive Information and Update of Lodi Electric Utility Economic Development Rate Discount Program (EU)
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MEETING DATE:
September 4, 2024
PREPARED BY:
Astrida Trupovnieks, Key Accounts and Customer Programs Specialist
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RECOMMENDED ACTION:
Receive information and an update of the Lodi Electric Utility (LEU) Economic Development Rate (EDR) Discount Program.
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BACKGROUND INFORMATION:
LEU offers its commercial and industrial customers a discount on monthly energy charges ranging from two to eight percent depending on the number of net, new full-time positions added annually.
Known as the EDR Discount Program, this incentive decreases the cost of doing business by lowering power costs, and increases business competitiveness of Lodi-based businesses - both effective economic development tools for the City and LEU. The program is fully funded and administered by LEU.
Each year, businesses provide staff with a list of net, new full-time funded positions compared to the previous year. The information is verified by LEU’s Key Accounts and Customer Programs Specialist who provides the business with program requirements and an application form. Businesses receiving the discount must undergo an audit of the number of net, new full-time positions funded six months from the start of the annual EDR Discount Program year. The number of net, new full-time positions must not fall below the number of positions which qualified the business at the start of the EDR Discount Program year.
The current standard EDR Discount Program offers a discount for a period of one year based on the table below:
|
2 percent |
1-3 new jobs |
|
4 percent |
4-6 new jobs |
|
6 percent |
7-9 new jobs |
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8 percent |
10 or more new jobs |
In 2021, City Council approved expansion of the discount to increase incentives for businesses adding more than 20 new positions. While the discount remains at eight percent, the EDR Discount Program established in 2021 qualifies businesses for the eight percent discount for a maximum of five years. The extended time period allows businesses to plan operating budgets over a longer planning horizon than one year with the discount applied as listed in the table below:
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# of new jobs |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
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10-20 |
8% |
|
|
|
|
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21-30 |
8% |
8% |
|
|
|
|
31-40 |
8% |
8% |
8% |
|
|
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41-50 |
8% |
8% |
8% |
8% |
|
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>50 |
8% |
8% |
8% |
8% |
8% |
The EDR Discount Program helps fulfill City Council’s strategic vision of attracting tech and non-agriculture jobs. While any commercial or industrial customer is eligible for the discount if they meet program requirements, most are in the manufacturing sector employing machine operators, production assistants, warehouse workers, and tooling specialists. Administrative positions are also frequently added. Over the past 3 program years, 568 net, new positions have been added by 8 different customers - 428 of those positions were added after the EDR Discount Program was approved for expansion by City Council.
Every six months, a desk audit is performed by LEU to ensure the number of full-time positions has not fallen below the number which qualified the business for the program at the time of program approval. The audit requires businesses to provide both a base year list and a comparison year list of funded, full-time positions, hire dates, termination dates, and whether the hires are replacements or net, new full-time positions. Non-compliance occurs if the number of positions in the comparison year list fall below those positions reflected in the base year list.
For businesses in a one-year program, discounts are terminated going forward until the end of the program year in the event of non-compliance. For businesses in a multi-year program, non-compliance reduces the term of the EDR Discount Program to the corresponding number of new jobs remaining.
Following this program year’s audit, three of the five qualifying businesses were deemed able to maintain the EDR Discount for the remainder of the year. Two businesses dropped in number of net, new full-time positions from the start of the program year, and the discounts were discontinued.
The new EDR program year begins September 1, 2024. Businesses have already been notified to compile information to determine this year’s program eligibility. One response has been received. Staff is checking with others in the current program regarding their submission of required information. Businesses can join the program after the start date of September 1, 2024. Late starts reduces the number of months the discount is in effect.
LEU will continue to provide an annual update to City Council regarding the EDR Discount Program.
STRATEGIC VISION:
2G. Economic Development: Attracting tech and non-agriculture jobs.
FISCAL IMPACT:
In Fiscal Year 2023, the total cost of the EDR Discount Program was approximately $667,000 which represents less than one percent of total annual revenue for LEU.
FUNDING AVAILABLE:
The EDR Discount Program is fully funded by LEU operating funds.
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Jeff Berkheimer
Electric Utility Director
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Scott R. Carney
City Manager