HomeMy WebLinkAboutCity Council - 05/03/2022 - Workshop
APPROVED MINUTES
CITY COUNCIL WORKSHOP & OPEN PODIUM
TUESDAY, MAY 3, 2022 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, and Lisa
Toomey
CITY STAFF: City Manager Rick Getschow, Police Chief Matthew 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 Maggie Neuville, and Recorder Katie
O’Connor
Workshop - Heritage Rooms I and II (5:30)
I. 2021 AUDIT AND FINANCIAL STATEMENTS
Council Member Narayanan was not in attendance. Case inquired why there was a change in
auditing companies for 2022. Tammy Wilson, Finance Manager, replied every few years the
City has to go out for bid for auditing services. It also provides accountability.
Andy Grice from Bergan KDV presented the audit report for 2021. The auditors provided a
clean and unmodified opinion of the City’s financial statements. They also issued their report
in accordance with Government Auditing Standards. This report is required when there is
grant and federal funding. There were no significant deficiencies or material weaknesses in
internal control, and no compliance findings. Bergan KDV also conducted a Federal Single
Audit. This is required when there is $750,000 or more of Federal funding. There were no
compliance or internal control findings. There were also no compliance findings in the
Independent Auditor’s Report on Minnesota Legal Compliance. Nelson inquired if these
standards are normal for most cities. Grice replied it is not unusual, but not everyone is to
this standard.
Grice stated the general fund revenues increased about $2.8 million. Taxes and assessments
increased about $1.5 million due to the levy, intergovernmental revenues decreased $885,000
due to less federal funding, charges for services increased about $1.7 million due to an
increase in registrations, and other revenue sources decreased from $198,000 to negative
$297,000 due to worsening market conditions. General fund expenditures increased about
$2.1 million. Police increased about $788,000 driven by an increase in wages and benefits.
Parks and Recreation increased about $1.3 million due to more programs and activities. Case
inquired why the debt service amount has not changed since prior to 2017. Grice replied debt
City Council Workshop Minutes
May 3, 2022
Page 2
service activity is presented in other funds. Wilson responded the debt service in the general
fund is for the fire turnout gear the City leases.
Grice stated the general fund budgetary comparison revenues came in better than anticipated
by about $4 million. Expenditures came in less than anticipated by $2.1 million. In regard to
revenue, general property taxes and assessment were $510,000 higher, Licensing and permits
revenue was about $2 million better than anticipated. Intergovernmental revenue was about
$4 million higher than anticipated due to American Rescue Plan Act (ARPA) funding. Case
stated if it weren’t for the ARPA revenue, the difference would have been about a $1 million
loss. Getschow added the City tied ARPA funds to lost revenue.
Grice stated charges for services was $2.3 million less than anticipated. Parks and recreation
registrations and programming were not quite back to pre-covid amounts. In regard to
expenditures, public works decreased by $540,000 due to less striping and crack filling of
roads. Parks and recreation was $1 million under budget due to less programming. There was
an overall increase in fund balance of $3 million. When reviewing the general fund
operations, there was an increase in unassigned fund balances by $3 million. When reviewing
the enterprise funds, the water fund operating revenue increased about $1.7 million and was
significant due to the water meter change out project. There was a loss of about $1.5 million.
The water fund had an increase in cash and investments and unrestricted net position. The
significant increase in case and investment balances relates to Nelson inquired what
percentage of meters have been changed out. Ellis replied about 6,000 of 18,000, so about
one third. Case inquired if everyone has been cooperative. Ellis replied most have been.
Toomey inquired how long these meters will last. Ellis responded about 15 to 20 years due to
the high-quality softened water. Nelson noted these meters can be monitored via an
application.
Grice stated the wastewater fund had an increase in operating revenues and fairly flat
operating expenses. The increase in revenue relates to rates and usage changes. It did result
in an operating loss of $19,000. The fund has experienced significant losses in the past, but
there was a significant improvement this year of about $1.7 million almost covering
depreciation. The wastewater fund cash and investments balance was $8.7 million and
unrestricted net position was $10.3 million. The stormwater fund had an increase in operating
revenue of $755,000 due to an increase in rates. Expenses increased as well by $358,000.
The fund did cover depreciation cost. The cash and investment balances increased $6.5
million and unrestricted net position increased about $6.9 million. Liquor operations fund
had an increase in sales. It generated a gross profit of $3.5 million. There was an increase in
the gross profit percentage from 2020 of 29.1 percent to 29.8 percent. Getschow noted we are
the fourth largest municipal liquor operation in the state for revenue. Eden Prairie’s gross
profit percentage is the best of the municipal liquor operations. 2020 and 2021 were both
really good years. In regard to 2022, year-to-date we are down about three percent in
comparison to 2021 but above 2019. Nelson inquired how much gets transferred from the
City Council Workshop Minutes
May 3, 2022
Page 3
liquor fund. Getschow responded currently about $800,000 is being transferred to the capital
maintenance and investment fund. Freiberg inquired about Sunday sales and if they have
been worth it. Getschow stated Sunday is one of the slower days and sales have been spread
across seven days. Freiberg inquired why the City is open on Sundays if sales remain low.
Getschow responded to remain competitive with other cities and liquor stores who are open
on Sundays. It pays for itself to be open on Sunday. Nelson added people will go elsewhere if
the City stores are not open Sundays. Freiberg stated it would be worth exploring the
financial aspects. Case noted it would be helpful to have the liquor operation manager attend
a workshop to answer some questions about operations and Sunday sales.
Grice stated in the liquor fund the was an increase of $2.6 million in cash and investment as
well as a $2.1 million increase in unrestricted net position. Revenue and expenditures per
capita for government activities displays statewide averages. There was an increase in
revenues per capita in total to $1,165. The increase was due to intergovernmental revenue
and charges for services. Nelson noted, all things considered, the City has gotten through the
last two years of the pandemic in good shape. She inquired if there are many people who are
delinquent in tax payments. Grice replied 99 percent are current.
Grice stated general fund expenditures per capita increased from $766 to $800. This includes
capital outlay and construction, which decreased from $210 to $190. Debt service increased
from $73 to $197. The main reason for the increase is parks and recreation expenses with
increased programming from previous years. In regard to debt service, this year there were
two bond issuances refunded and paid off. New bonds were issued to pay the debt off at a
lower rate. Case inquired about removing debt service to have a better comparison to the
statewide numbers. Grice replied capital outlay and construction are not easily compared.
Getschow added some cities account for things in different ways such as community centers.
Nelson added it might be helpful to have notes about particular years, specifically the
pandemic.
Grice talked about the tax capacity, tied to market values in the City. This increased about
three and a half percent from $116.5 million to $120.5 million. The certified tax levy
increased from $39.6 million to $41 million. Tax capacity rate remained similar from 31.51
to 31.43. This is the lowest tax capacity rate in the last five years. Case noted the tax capacity
rate is very important. Getschow added this is the number that is referenced when comparing
with other cities. There is an updated one-page financial fact sheet every few years which can
be provided to Council. Nelson inquired if there is a threshold for tax capacity rate for
different values of homes. Getschow added in the early 2000s the commercial rate was
lowered and taxes shifted to residential properties.
Nelson thanked Staff for continuing to excel with the audit. Case stated one comment often
received is about the high reserve fund balance. He inquired what the policy is about how
much is held back in reserves and if it is a certain portion of the taxes. Grice replied the State
City Council Workshop Minutes
May 3, 2022
Page 4
Auditor’s Office recommends 35 percent. Wilson added the City does 50 percent of budgeted
taxes and 15 percent of budgeted expenditures for the general fund. Nelson noted this allows
the City to pay bills in between tax payments. Getschow added having this fund balance is
one of the reasons for the AAA bond rating.
Open Podium - Council Chamber (6:30)
II. OPEN PODIUM
III. ADJOURNMENT