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HomeMy WebLinkAboutCity Council - 11/16/2021 - Workshop APPROVED MINUTES CITY COUNCIL WORKSHOP & OPEN PODIUM TUESDAY, NOVEMBER 16, 2021 CITY CENTER 5:00 – 6:25 PM, HERITAGE ROOMS 6:30 – 7:00 PM, COUNCIL CHAMBER CITY COUNCIL: Mayor Ron Case, Council Members Kathy Nelson, Mark Freiberg, PG Narayanan, and Lisa Toomey CITY STAFF: City Manager Rick Getschow, Police Chief Matt Sackett, Fire Chief Scott Gerber, Public Works Director Robert Ellis, Community Development Director Julie Klima, Parks and Recreation Director Jay Lotthammer, Administrative Services/HR Director Alecia Rose, Communications Manager Joyce Lorenz, City Attorney Dan Gregerson, and Recorder Katie O’Connor Workshop - Heritage Rooms I and II (5:30) I. BUDGET ENTERPRISE FUNDS Council Members Narayanan and Nelson were not in attendance. Tammy Wilson, Finance Manager, presented a review of the goals, utility system rate structure, and the 2022-23 budgets. The history of the conservation rate approach began in 2010. Prior to 2010, the City charged a flat rate. In 2010 the City conducted its first utility rate structure survey. Based off the survey, the City adopted a five tier rate structure in 2011. After conducting an updated study the City did some modifications in 2014 to the tiers to further promote conservation. In 2017, there was an additional rate study and an updated financial plan for utilities addressing conservation impacts and the continued conservation approach. Case inquired if the conservation approach is working and the City is seeing results. Wilson replied yes and there will be further information in the presentation. Wilson reviewed the history of the rate ranges. In 2014 there was a recommendation to promote conservation within the pricing and tiers. The pricing of tier one from 2013 to 2014 remained the same but there was a reduction of gallons from 36,000 to 24,000. In the winter the average consumption was between 14,000-15,000 gallons. Tier two was reduced from 48,000 to 40,000 gallons, and there was a reduction in price from $2.90 to $2.50. In 2018 there were conversations to promote more conservation, and the average consumption in the winter had decreased to 12,000 gallons. Case inquired what percentage of households exceed 61,000 gallons in the summer months. Wilson replied there will be more details further in the presentation. Toomey inquired what the average summer consumption is. Wilson stated in 2020 the average consumption annually was about 18,000 gallons. There will be further details provided on summer consumption. Ellis added about ten years ago the average daily use was 126 gallons per City Council Workshop Minutes November 16, 2021 Page 2 resident per day. Last year’s usage was about 70 gallons per resident per day. The conservation rate structure and technology have contributed to these decreases. Case added it would be beneficial to analyze the data more and attach more specific causation. Wilson stated after further studies, the City moved to a four tier system in 2018 to be comparable to other cities. Case inquired if the amount of gallons is similar per tier in other cities. Ellis replied it varies. The water you need to live is provided at very affordable rates. Once you get to tier four the rates are a little higher in comparison. Case inquired if the rates are available for other cities. Ellis stated sometimes the data is misrepresented a little from city to city as there is a tremendous amount of pressure on suburb cities with larger lot sizes to reduce their water usage. Wilson stated in the winter quarters 91 percent of customers fall into tier one, 9 percent in tier two, one percent in tier three, and less than one percent reach tier four. In the spring quarters 86 percent are tier one, 14 percent tier two, two percent tier three, and still less than one percent in tier four. In summer quarters 57 percent are in tier one, 23 percent tier two, ten percent tier three, and ten percent tier four. In the fall quarters 67 percent are tier one, 20 percent tier two, eight percent tier three, and six percent tier four. In the summer about 1,500 residential homes were tier four. Every year AE2S does a study of the rates of cities. In 2021, Eden Prairie was considered in the lowest half of cities for rates including water, wastewater, and stormwater. Ellis added comparing water alone, the City ranks 13th lowest of 27 cities. Wilson stated for 2022-23 Staff are proposing a rate increase of three percent across all user services. The City still anticipates being in the lower half of pricing compared to other cities. Case clarified if this is due to infrastructure updates. Ellis noted it is because of the ongoing capital. Wilson stated the average utility bill based on rates for 2022 would see an increase of about five dollars per quarter. In 2023 the average utility bill would again increase about five dollar per quarter. Case clarified if utility bills are still sent out to empty lots due to stormwater usage. Ellis responded yes there is a stormwater charge to retain infrastructure for run off, treatment, and managing of stormwater. Wilson stated the utility rates study is utilized to project the budgets. In the 2020 study, there was a projection for 7.1 million dollars for water flow based off consumption. The actual was 6.9 million dollars. The base fee was budgeted at 2.1 million, and the actual was on budget. For wastewater the budgeted was 5.1 million dollars and the actual was 4.8 million dollars, about 94 percent of the budget. Case noted in 2021 Staff are anticipating higher revenues for both. Ellis replied yes. For a number of years sales and revenue have been low, but with the increase in water sales it is paying for the delayed infrastructure such as the ground storage reservoir and a new well. Without the dry summers the City would not have built a new well, but it is necessary for the dry years. There are less water restrictions due to having this City Council Workshop Minutes November 16, 2021 Page 3 infrastructure in place. Toomey added water consumption is also going up due to people being home more often. She inquired if there has ever been a year water rates have not increased. Ellis replied no. At a minimum rates have gone up the cost of inflation. Wilson presented on water use comparing drier years in 2012, 2020, and 2021. Usage is overall lower in 2021 due to conservation. Every year there has been a decrease in the water pumps. Precipitation and temperature over the last ten years has led to changes in usage. In regard to the 2022-23 water budget, there is a three percent increase in the operating revenues. There is a decrease in the non-operating revenues due to not anticipating any water access charges. There is an increase in the supplies budget primarily due to the increase in cost of chemicals. Contractual services were decreased to be closer to the actual. The increase in 2023 is due to the new meter change out program. There will be a monthly cellular fee associated. The increase in user charges and a decrease in capital under $25,000 is due to no longer budgeting for fleet initially. Fleet will do a user charge back to the fund going forward. The non-operating expenses increase is due to the interest on debts for projects such as the ground storage reservoir and meter change out. Without factoring in depreciation, there is a change in net assets at an increase of $2.6 million and $2.3 million. In regard to the wastewater fund, there is a decrease in the non-operating revenues due to no anticipated sewer access charges (SAC). Contractual services were decreased again to be closer to actual results. Not factoring in depreciation, the change in net assets is an increase of $1.3 million dollars and $1.6 million dollars. The largest charge in contractual services is the monthly wastewater charge, and there was a decrease in 2020 and 2021. There is an anticipated increase in 2022 at 2.7 percent. In regard to the stormwater fund, there will be no non-operating expenses going forward because the Burr Ridge project loan from the capital improvement plan (CIP) was paid off. Case inquired if every vehicle is assigned a number of years associated with depreciation. Wilson responded yes. Wilson stated the change in net assets would be an increase of $1.6 million dollars and $1.5 million dollars. The fund balance policy is to have 90 days of operating expenses, the following years debt service payment, and two years of capital expenses. At the end of 2020, all the utility funds had cash reserve balances that met the policy. Some of the projects have been moved sooner rather than later due to the availability of funds. For example, the commercial meter replacement has been moved up and the Burr Ridge project was paid off early. Case inquired what the project was for Flying Cloud Drive and Eden Prairie Road utility cost transfer of $490,000. Ellis clarified now with the project being completed this is a transfer to the account for the completion of the project for water and sewer services. Jaime Urbina, Liquor Operation Manager, provided the history of the liquor stores established between 1977 and 1992, strategically placed next to all the large grocery retailers. Case added the only location we own is off Den Road, and we have leases with the others. Urbina replied yes, we have long term leases through 2028 and 2030. City Council Workshop Minutes November 16, 2021 Page 4 Urbina stated the goals of the operation is to control alcohol sold in the City; maximize profit to support the CIP; provide exceptional customer service, selection, convenience, and innovation; and engage in the community through Eden Prairie Rotary, Eden Prairie Foundation, parks and recreation events, and People Reaching out to People (PROP). In 2020 there were record sales. In 2021, average sales are still up over 2020 year-to-date by 1.3 percent. There has been an overall increase in customer count. The year-to-date average sales per customer are up 15.3 percent from 2019. Toomey inquired if pricing has gone up as well. Urbina stated prices have gone up, but the profit percentage has still increased. Case inquired how the municipal profit compares to Total Wine. Urbina responded information about private retailers is unknown since the data is not readily available. In comparison to other municipal retailers, the City is doing better by at least 2 to 3 percent in profit margin. Urbina stated current priorities are customer service with retention and loyalty. They continue to have employee development. There has been an increase in communications through electronic marketing, social media, and e-commerce. Delivery is slated to begin in 2022. Events have returned in 2021. Toomey inquired if delivery will be to homes in a City vehicle. Urbina replied yes, the hope is to capture more people with this service and expand who the stores serve. Freiberg inquired who the delivery market will be capturing and if this will be free of charge. Urbina responded delivery could potentially capture a larger area of people further from stores, and it will be free with a $50 purchase. Case inquired if drivers will be accepting tips. Urbina responded there will be no tips due to the issues it would create for City employees. Urbina stated some of the events they continue to focus on are Sip and Learns in store; wine club events; in -store walk around events; community events such as Arts in the Park, Music in the Park, and Prairie Brewfest; PROP Partnership events such as Happy Hour for Hunger events and the annual dollar drive. Last year there was a record number for the annual dollar drive. In regard to the 2022-2023 budget, there’s a proposed sales increase of three percent for 2022 and 3.9 percent for 2023. Cost of sales are projected to increase 1.4 percent and 3.8 percent. Expenses there is an increase of 5.3 percent and 3.7 percent. Operating income would be an increase of 13 percent and 5.5 percent. Case inquired if salaries for liquor store employees are under this budget or the general fund. Jaime replied they are under the separated under operating expenses for the liquor budget. Toomey inquired if there are issues with securing and keeping inventory. Urbina replied this has been a continuous struggle due to the glass bottle shortage. Urbina stated the net change of assets for 2022 is 12.6 percent and 5.3 percent in 2023. The budget includes personal services at $1.3 million dollars factoring in salaries. Contractual services includes advertising, insurance, and other expenses. Building rent includes the updated leases. Bank and credit card fees, at $272 million dollars, always increases with the City Council Workshop Minutes November 16, 2021 Page 5 number of sales. Utilities is around $80,000. User charges is around $166,000 and includes property insurance and information technology and facility charges. Other, at $218,000, includes annual cameras and other operating supplies. In regard to the Customer Service Satisfaction Survey, there was a 19 percent decrease in the survey respondents who felt the prices at Eden Prairie Liquor were too high. Survey respondents felt prices were about average. Survey respondents were asked when choosing liquor to shop how important are the following factors: selection, pricing, convenience, location, and customer service. Selection was one of the most important factors and customer service was second. Respondents were asked two questions regarding delivery, and the respondents’ responses to wanting delivery increased. Freiberg acknowledged a job well done by Staff. Getschow added other cities may have higher sales, but our profit margins are better because operating expenses are also kept low. Open Podium - Council Chamber (6:30) II. OPEN PODIUM A. WENDI RUSSO – TIERED WATER PRICING AND BILLS Wendi Russo, 15412 Stanburry Curve, stated she would like to discuss the City’s tiered water pricing. She has done research in comparing neighboring cities tiered water rates: Chaska, Chanhassen, Victoria, Minnetonka, Shakopee, and Edina. Eden Prairie’s tier four pricing is higher than those cities. Although Minnetonka’s tier four is higher it begins at 70,000 gallons versus 60,000. She would like the City to reconsider the tier four pricing. She had a shocking bill last summer and this summer. Another problem is the time between billing as an issue may not be discovered until after a large bill is issued four to five months later. Case asked Robert Ellis, Public Works Director to respond. Ellis stated with the older model of meters it is more of a manual process to track bills. If a leak is suspected, the City tries to reach out to those residents. With the new meters being installed over the next few years, residents can see their daily and hourly water use. With the Ion Water application residents with newly installed meters, like Mrs. Russo, can now select when and how they would like to be notified after a certain amount of usage. In 2021, the City has seen much more usage from residents due to a dry year. 2012 and 2013 would be comparable years for usage in a dry year. Staff have been proactive in reaching out to residents who have noticed higher water bills. In comparison to other cities such as Bloomington, Prior Lake, Shoreview, and Robbinsdale, Eden Prairie’s tier four water pricing is lower or comparable. The City is higher than average for pricing of the highest tier, but this is to encourage water conservation and drive water usage down as Eden Prairie has been known as a city with an excessive amount of water usage per capita in the summer. Case added above 60,000 gallons of usage is charged at the tier four rate. The City’s pricing is lower for tier one and two. The rate structure is meant to support City Council Workshop Minutes November 16, 2021 Page 6 both the infrastructure needed to provide water and encourage water conservation. It would be beneficial to have the Sustainability Commission review the rates, as they do annually, to see if the City is comparable for pricing and to continue to review where we would like to be philosophically to continue to encourage water conservation. Russo added there are outliers who do believe in water conservation but have ended up with higher bills due to a potential leak or problem. III. ADJOURNMENT