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HomeMy WebLinkAboutCity Council - 05/02/2023 - Workshop APPROVED MINUTES CITY COUNCIL WORKSHOP & OPEN PODIUM TUESDAY, MAY 02, 2023 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 Maggie Neuville, and Recorder Kelsey Engelen Workshop - Heritage Rooms I and II (5:30) A. 2022 AUDIT REPORT AND FINANCIAL STATEMENT Tammy Wilson, Finance Manager, explained that every six years or so the City seeks out new auditors to have fresh eyes looking at the City’s books. Wilson mentioned that this is the City’s third year using Bergan KDV. Caroline Stutsman, with Bergan KDV, was the director involved with the 2022 audit and presented a clean and unmodified opinion of the City’s financial statements. The audit report was issued in accordance with the Government Auditing Standards. 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. Stutsman stated the general fund revenues increased about $1.8 million. Taxes and assessments increased about $1.9 million due to the levy, licenses and permits revenue decreased due to less new construction, additions, and remodels. Charges for services increased because of rebounding from the Covid pandemic; levels are not completely back to pre-pandemic levels. Other revenues, which includes investment income, decreased about $500,000 due to market conditions on December 31. General fund expenditures increased about $3.4 million. Police, which makes up the largest portion of general fund expenditures, increased about $887,000 driven by an increase in wages and benefits. Parks and Recreation increased about $1.2 million due to more programs and activities. Stutsman stated the general fund budgetary comparison revenues were over budget by $1.2 million, or 2.2 percent. Stutsman pointed out licenses and permits were City Council Workshop Minutes May 2, 2023 Page 2 budgeted conservatively due to it’s potential for high variance. The other item that differed significantly from the budged was investments, again due to market conditions at the end of 2022 which affect interest rates and fixed securities. Expenditures came in less than anticipated by $1.3 million. Police came in under budget due to some open positions. Parks and Recreation also came in under budget based because, though there was a significant rebound post-pandemic, it has not bounced back completely to pre-Covid anticipation. Additionally, $1 million was transferred out to the capital improvement maintenance plan for the upcoming Police Department remodel. Relating to general fund operations, both the cash and investment balance, and the unassigned fund balance increased. Wilson outlined the City’s detailed fund balance policy, and Stutsman stated the City is in compliance with the guidelines laid out. Getschow pointed out that each time the budget grows so does the fund balance; having this detailed fund balance policy with money set aside has resulted in very high bond ratings. Stutsman shifted gears to discuss enterprise funds, stating the water fund operating revenue increased about 3 percent, due to changes in rates and continued development. Operating expenses were up about 9 percent due to wages and benefits, and the continuation of the water meter change out project. This led to an operating loss of about $2.2 million. The water fund had an increase in cash and investments and unrestricted net position. Ellis updated council that the labor- and cost-intensive water meter change out project is two-thirds complete at this time. Getschow noted that the meters can be monitored via an application. Mayor Case inquired when we last adjusted rates. Ellis replied rates are adjusted every year. Stutsman stated the wastewater fund had an increase in operating revenues based on rates, and an increase in operating expenses due to wages and benefits, repairs and maintenance, and the lift station rehab project. This resulted in an operating loss of $840,000. Operating income covered about 49 percent of depreciation in 2022. The wastewater fund cash and investments balance was $9.4 million and unrestricted net position was $11.1 million. The stormwater fund had an increase in operating revenue due to an increase in rates. Expenses increased as well by $275,000. This includes operating costs relating to a road drainage project. The fund did completely cover depreciation cost. Getschow pointed out the inherent depreciation that water experiences, compared to stormwater, based on the volume of equipment involved. He noted that we would expect depreciation to be covered for stormwater which has comparatively little equipment. The cash and investment balances decreased about $1.1 million and unrestricted net position decreased about $1.1 million. Stutsman noted the decrease is project-driven. Stutsman moved on to discuss the liquor fund, noting the operating sales and revenue increased about 1.2 percent, with a similar increase to cost of sales. It generated a gross profit of $3.6 million. Stutsman stated that the fund transfers dollars out based on generated profits, and $800,000 was transferred out to the City Council Workshop Minutes May 2, 2023 Page 3 capital improvement maintenance fund. Councilmember Narayan asked what happens to the balance of profits. Wilson answered that most of this money goes to the building fund for maintaining the city-owned buildings. Getschow looked back to 2020 when staff presumed the sales increase was due to the Covid pandemic, but the numbers have amazingly held up in the past two years and have not dipped back to pre-Covid sales. The gross profit percentage increased from 29.8 in 2021 to 30 percent in 2022 and remains high compared to the average of other Metro municipal liquor which was 26.9 percent in 2021. Cash and investments decreased slightly, keeping in mind the $800,000 transferred out, and unrestricted net position increased $200,000. Stutsman stated general fund revenue per capita increased from $1,165 to $1,197. This includes property taxes, tax increments, franchise fees, special assessments, licenses and permits, intergovernmental revenues, and charges for service. This compares to a 2021 statewide average of $1,106 for cities with population of 20,000 to 100,000. Stutsman stated general fund expenditures per capita increased from $800 to $868. This includes capital outlay and construction, which increased from $190 to $224. Debt service decreased significantly from $197 to $51 due to a bond refunding in 2021. Getschow pointed out that the 2022 debt service is a better reflection of the City’s low debt than 2021’s numbers which were skewed because of the bond refunding. Case also noted that any time there is a big construction project, like the upcoming Police Department remodel, the debt principle will be elevated temporarily. Stutsman talked about the tax capacity, tied to market values in the City. This increased by 1.9 percent from $120.5 million to $122.8 million. The certified tax levy increased from $41 million to $43.1 million. The change in the capacity and levy led to a slight increase in tax capacity rate, from 31.43 to 32.32. Case inquired about the 2023 rate which was just approved in the budget. Getschow replied that the tax capacity rate dropped very low to 28.84. Getschow also touted the importance of this figure and explained that Eden Prairie consistently has one of the lowest rates compared to similar cities. Open Podium - Council Chamber (6:30) I. OPEN PODIUM III. ADJOURNMENT