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HomeMy WebLinkAboutBudget Advisory Commission - 07/29/2008 APPROVED MINUTES BUDGET ADVISORY COMMISSION MEETING TUESDAY,JULY 29, 2008 7:00 PM, CITY CENTER 8080 Mitchell Road, Eden Prairie, MN Heritage Room COMMISSION MEMBERS: Don Uram(Chair), Katherine Kardell (Vice Chair), Mark Kantor, Richard (Rick) King, Jon Muilenburg, Richard (Dick) Proops, Gwen Schultz CITY STAFF: Sue Kotchevar(Finance Manager), Tammy Wilson (Finance Supervisor), Gene Dietz (Public Works Director), Rod Rue (Asst. City Engineer), Mary Krause (Sr. Project Engineer), Angie Perschnick (Recording Secretary) I. ROLL CALL/CALL THE MEETING TO ORDER Chair Uram called the meeting to order at 7:00 PM. Commissioners King and Muilenburg were absent. II. MINUTES A. BAC MEETING HELD TUESDAY,JUNE 24, 2008 MOTION: Kardell moved and Kantor seconded approval of the minutes from the June 24, 2008 meeting. Motion carried 5-0 (for-against). III. CHAIR AND STAFF ADMINISTRATIVE ITEMS The Parks & Recreation subcommittee, which includes Proops, Schultz, and Muilenburg, will meet on August 12. Kotchevar reported on the recent City Council workshop. They discussed BAC terms, and the Council was in favor of 4 year terms and January 1 start dates. They would like to bring back the current BAC members who are interested (and give them options of 2 or 4 year terms). Reappointment forms were distributed and need to be returned to Mike Barone by August 15. At the August 19 City Council meeting, the Council will decide on a recruiting strategy for the BAC if needed. Uram encouraged BAC members to sign up for another term. Proops expressed concerns about Kotchevar reporting to the City Council. Kotchevar clarified that she coordinated the process with Mike Barone as part of her role. She has oversight for the City budget and needs to be involved in reporting. Proops is concerned that the BAC is not being allowed to act independently. Schultz and Uram spoke up to Eden Prairie Budget Advisory Commission July 29, 2008 Page 2 say that they do not feel that the BAC is being controlled. Uram clarified that he attends many night meetings and was not able to go to the Council workshop meeting. Typically he would attend and plans to do so as he is able in the future. IV. BAC COMMENTS A. REVIEW/FINALIZE SUMMARY COMMENTS FROM THE JUNE 24, 2008 MEETING The BAC did not approve comments for the Park & Recreation portion of the recent meeting because the extra review by the subcommittee is still taking place. MOTION: Kardell moved and Schultz seconded approval of the comments relating to Facilities from the June 24 BAC meeting. The motion carried 5-0. V. STAFF PRESENTATION AND BAC QUESTIONS A. PAVEMENT MANAGEMENT Gene Dietz presented some background information on pavement maintenance. The City has 225 miles of streets, and approximately 36 million square feet of pavement. Five years ago, the GASB 34 tracking and prediction computerized system came out which shows the cost of the system is $94 million. The City's current replacement cost is approximately $245 million, and approximately $2 million is needed per year for pavement management. Crack filling and labor is needed as part of this process. Maintenance crews do repair work and sealcoating. By repairing the road early, the City can save money and preserve quality in the long-term. When Dietz was in college, it was expected that pavement was designed for a 20 year period, and after that it would need to be reconstructed. They can use different strategies to extend the life of the pavement through sealcoating and overlays. Water is the greatest enemy to pavement, and this year $350,000 will be spent on sealcoating to keep water out of the pavement. A database is used to keep track of the condition of pavement, and after evaluation, information was put into an interactive database so appropriate repair could be predicted. The average street in Eden Prairie lasts about 42-48 years with the current levels of maintenance. The 20 year replacement timeframe would be expected if no maintenance was done. Every 3 years, the City evaluates all streets so they have a benchmark to create points in the database. It is a subjective evaluation. Because the comparisons are relative, it is helpful for them to compare all streets at one time. The database is a tool that gives direction for where to look,but it is not the final answer. The PCI (Pavement Condition Index) for 2007 is an 81 overall for the City. The goal is an 80, and the money in the CIP supports the goal of 80. The PCI range Eden Prairie Budget Advisory Commission July 29, 2008 Page 3 goes from 0-100 (100 is the best), and the average today is 84. Comparing the pavement condition over time between 1995 and 2007, they are getting more pavements in the range of 60 and 50 as they age. The following scenarios are based on the database tool's predictions: Scenario 1: If they spend $2 million per year with no increases, they could expect the PCI to go down to a 40 in 30 years. Maintenance backlogs can occur, and they will keep increasing if the money in the CIP doesn't keep up with what is needed for maintenance. Scenario 2: If they spend $2 million per year with a 5% increase to their budget annually, over 30 years the pavement quality will end up around 76 and stay near the goal of 80 most years. Scenario 3: To keep a benchmark goal of exactly 80 each year, they need to spend an average of$6 million per year. It makes the most sense to spend $2 million per year plus add 5% to the annual budget each year to meet maintenance needs over time. This strategy is a high standard, and it is what Eden Prairie residents expect. Dietz noted that there is discussion about some state-wide legislature that would allow a transportation utility fee to be added to the utility bill for City residents. This would provide Public Works with consistent funding outside of the CIP. Proops asked about the costs for labor and benefits. Dietz said there is $1.3-1.7 million in the budget for employees in the street division. Proops asked how much this has increased over time. The response was that it had increased about 3% per year. Uram said this meeting is focused on the CIP, not on operational costs in the budget. Uram noted that Proops' questions seem to be related to the operating budget, which is outside the scope of this meeting. Dietz stated that the number of employees they employ is on the low side for the metro area because they contract out a lot of the work to save money. He went on to say that their staffing level has been very flat for the past 8 years or longer. Uram asked how much of Dietz' staff time is devoted to pavement maintenance. He said there are 2-3 full-time employees and 2-3 seasonals generally from April until it is cold outside. There is often a crew of 4 people working on manhole inspection much of the time so they can be reconstructed if needed. During any given week, a few people are doing other projects or on vacation. Workers sweep streets before and after the overlay process. Schultz asked if there is any savings for lowering the City's bar from a PCI goal of 80 to 60. Dietz responded that, when the pavement hits 60, 75% of the life of the pavement has been used. If we decide our average should be lower, we'll be Eden Prairie Budget Advisory Commission July 29, 2008 Page 4 slipping much lower for more and more roads (into the 20s for many). The reconstruction costs would increase significantly as a result. The state of Minnesota gets 9% of the tax money paid at gas pumps, and a certain amount of that is received back to cities. Eden Prairie receives about$1.6 million from that source. 20% of the street system can be on the state aid system, and most of the money is for upgrading and constructing roads from scratch. The other 80% of Eden Prairie roads are covered by the CIP. Schultz asked how reconstruction of the roads will get paid for when many of the roads need to be reconstructed at one time in the future. Dietz said they need a more stable source of funding, and he has talked with the City Council about this potential problem. Schultz then asked what Dietz foresees happening to their state funding from the rising gas prices. Dietz said they can expect double digit increases in their construction and repair costs. Due to the downturn in the economy, costs haven't increased much since many contractors are hungry for work. If the economy improves, costs are likely to increase in the future. Dietz would like for all garbage trucks to abide by the 6 ton limit that is posted on many roads. School buses are over this limit typically too. Kardell noted that the reality is that these costs will not get cheaper over time, and it is important that they do not fall behind in funding road maintenance. Although there are multiple funding sources for roads, some of those are fairly flat. Rue stated that, as the cost of gas increases, people are buying less and that revenue source may actually decrease over time (or at least not increase). Everyone pays for the initial cost of the road they live on indirectly. The road system, which was primarily built in the 1980s, will age, and costs over time for reconstruction will increase. Kardell asked why they would not add the costs of road maintenance to the utility bill. Dietz stated that there is a distrust of government even though they are highly accountable to the public, so there is some concern about allowing the transportation fee to be added to utility bills. Kantor asked about the expected growth in the number of road miles in the City over the next five years. Dietz said they have had fairly flat growth recently, and the number of miles is expected to remain fairly stable going forward too. Uram asked where the $1.5 million comes from annually. The biggest source of funding is liquor store purchases, year end fund balances, and the tax levy. The tax levy for the CIP was $450,000 in 2007, and it is $650,000 for 2008. Dietz said that more information is needed for the City Council so they can see why the levy money is needed. Uram asked how overall funding is assessed since it is the City's policy not to assess projects. Uram wonders what the impact would be if the PCI goal were 75 Eden Prairie Budget Advisory Commission July 29, 2008 Page 5 instead of 80. Dietz cannot say what the impact will be. The Special Assessment policy would not come into play for five years. As they get more information, they will need to make adjustments. If they keep up on maintaining roads, they can avoid major problems. Dietz and Uram agreed that it is important to be proactive in this area. Special assessments for increases in value to property would be needed to see benefits. You would have to wait until the pavement is in the last part of its life (very poor quality) to assess the value of overlays and sealcoating. Proops said what is missing is an accurate presentation of what is flowing into and out of CIP for funds. Since more money flows into the CIP than just what is in the most recent tax levy, the projections are not accurate, according to Proops. Kardell responded that there is no way to know that information since there is uncertainty in the interest rates and funding sources, so the projections may not always seem very accurate. Proops said that budgeting is based on history and that it would be helpful if the chances of funding being available were included. Uram asked how CIP funding is made available. Kotchevar said she presents CIP projections, which include a transfer from the liquor funds, interest income, etc. at year end. A question was raised about whether or not the sale of land should be included in CIP projections, and Kotchevar noted that this would be a Council decision. Dietz said he hopes the BAC sees from his presentation that this is money we need to spend and that Public Works needs to have the requested money available from the CIP. Proops agreed that Public Works is doing its job, but he wants more transparency in the information on funding sources for the CIP. Dietz said that he is planning to present more data to the City Council this year to explain what money is needed by Public Works and how it will be spent for road repair and reconstruction. Proops noted that the BAC recommendation from last year on the sale of Presbyterian Homes was allocated to another place rather than to the CIP as the BAC recommended. VI. BAC ANSWERS CRITICAL QUESTIONS AND FORMULATES COMMENTS A. CRITICAL QUESTIONS 1. Were the projects adequately described? Was the need for the projects justified? 2. Where appropriate, is there a systematic method for identifying projects and costs? Was the condition of current assets including the projected need for repair or replacement and the likely demand for the improvement considered? 3. What is the funding outlook for these projects? Eden Prairie Budget Advisory Commission July 29, 2008 Page 6 4. Does the BAC have recommendations in this area including budgetary and operational changes? What are the recommendations and why? In response to questions 1 and 2 above, Proops said that Public Works is one of the great departments in Eden Prairie. Kardell said the presentation was helpful and told BAC members the information they needed in detail. In response to question 3, the response was that this is a policy decision for the City Council. In response to question 4, Proops said that BAC members need an accurate projection on the CIP with notes on the chances of funding not happening. Uram said that, from an efficiency standpoint, Public Works' staffing levels are flat and moderate compared to other areas. Kantor recommends that the City pursue adding the transportation fee to the utility bill in the future so they have a sustainable source of funding as exists already in some other areas (like sewer water). VII. COMMENTS Schultz said this was an excellent presentation. Kantor said this is his last BAC meeting since he is moving in mid-August to California. He has enjoyed working with the BAC members, and he thinks this is a good commission. Uram responded that he appreciates Kantor's time and efforts. Uram also recommended to Kotchevar that she look for a BAC replacement with a similar technology background to Kantor's. VIII. ADJOURNMENT The meeting ended at 8:24 PM. Kantor moved and Kardell seconded the motion to adjourn. The next meeting is scheduled for Tuesday, August 26, 2008.