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HomeMy WebLinkAboutBudget Advisory Commission - 10/28/2008 APPROVED MINUTES BUDGET ADVISORY COMMISSION MEETING TUESDAY, OCTOBER 28, 2008 7:00 PM, CITY CENTER 8080 Mitchell Road, Eden Prairie, MN Heritage Room COMMISSION MEMBERS: Don Uram(Chair), Katherine Kardell (Vice Chair), 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), Rick Wahlen (Utilities Manager), Angie Perschnick(Recording Secretary) I. ROLL CALL/CALL THE MEETING TO ORDER Chair Uram called the meeting to order at 7:08 PM. Prior to this, the BAC group picture was taken. Commissioner Schultz was absent. Kardell moved and King seconded approval of the agenda. II. MINUTES A. BAC MEETING HELD TUESDAY,JULY 29, 2008 Kardell moved and Uram seconded to approve the minutes from the July 29 meeting. The vote was 3-0-2 with King and Muilenburg abstaining since they were unable to attend the meeting. B. BAC MEETING HELD TUESDAY,AUGUST 26, 2008 Kardell moved and Uram seconded to approve the minutes from the August 26 meeting. The vote was 4-0-1 with King abstaining since he was unable to attend the meeting. III. STAFF PRESENTATION AND BAC QUESTIONS A. UTILITY INFRASTRUCTURE Gene Dietz and Rick Wahlen spoke about water and waste water collection and distribution. Proops asked where money for billing goes, and King responded that it is under finance. In response to a question from King, Dietz clarified that bills are current from the previous quarter (there is not a lag time). Bills are actual and not estimated amounts due based on water usage. The City uses a remote radio Eden Prairie Budget Advisory Commission October 28, 2008 Page 2 read system, and approximately 1/3 of the City is billed each quarter (billings for business are on a monthly basis though). Dietz noted that a preventive maintenance philosophy is used for capital sustainment for the sanitary sewer and storm water collection systems. It was noted that the comprehensive guide plan estimated a population of 77,431 in 2030 in Eden Prairie, which may allow the City to construct up to 5 more wells (the City cannot put in more wells until the population growth supports it). There is a base water demand of 6 to 8 MGD and ultimate peak demand is projected to be 27 MGD at full development. Uram asked who in the state controls the use and distribution of water, and Dietz replied that it is the Department of Natural Resources. Eden Prairie is one of the most aggressive cities in Minnesota in terms of water conservation efforts, however, the City also has significant irrigation demand. Muilenburg asked if all the wells are in the same aquifer. The aquifer renews itself so there is no projected end date for its availability. The water within the aquifer has declined, and the point of recovery is currently just a bit lower than 25 years ago. Saving wetlands is important for recharging purposes. Muilenburg confirmed that it sounds like we should not have to worry about the aquifer going dry in 40 years and needing to find another water source. Dietz clarified that his understanding is correct and noted that we do need to manage the aquifer, especially for contamination. King asked about the Distribution System Digital Model for water management. The software can model additional well capacity to the treatment plan. We can provide fire flows and pressures to developers and others who need information. The project began in 2007, and it is a multi-year project, which is why it is listed in the 5 year CIP Dietz noted that well #2 was lost to the Highway 5/212 expansion project, and #16 was constructed this past summer. It should be online in the spring, but state approval from the DNR is needed to pump additional water from the new well. Proops asked where the funding for the projects is coming from. Kotchevar answered that it is from the utility construction fund from dollars generated by the miscellaneous charge from utility bill, special assessments and access charges from new connections to the utility system collected at the time of building permit. $2-$3 million is in the fund now, and it is estimated they will have enough in the fund to pay for these projects. Some wells have become lesser performing over time. The plan for well drilling may be delayed if state approval does not come through. Dietz said historically they try to time capacity improvements to correspond to rising demand in order to have a customer base to pay the increased costs. Wahlen described several selected projects, including #8710 (Vehicle-borne Work order Management Computers) and 8712 (Turbine Meter Rebuild/Replacement Program.) These projects more than pay for themselves with the recovery of or increases in revenue. Meter upgrades are sometimes Eden Prairie Budget Advisory Commission October 28, 2008 Page 3 needed to provide more accurate readings for billing purposes. For project 8713 (Water Main R&R-Shady Oak/212 ramp), a water main upgrade is needed to prevent leaks. Stainless steel bolts are used now since they are more resistant to rusting out than the ones used previously. The City does not have a crew hired to do the work; they have outsourced it to contractors. Uram asked about the contractors the City works with. Dietz said they have two primary contractors and a third they use on occasion. The City wants to be an important customer to two contractors so they can receive good service and pay a fair price. King asked about the Shady Oak Road/212 replacement. It is not scheduled for the next couple of years (in 2011). King wondered if they could spread out the significant cost ($300,000) across a few years instead of paying for it all in one year. He also asked about the budgets used. The operations and maintenance budgets handle repairs, and major replacements are covered as needed from the CIP, etc. Dietz noted that Edina is starting a replacement process for older parts of their system. For project 9702 (Filter Press Sludge Piping Replacement), filter press piping conveys lime residuals resulting from the softening process at the water treatment plant. Vertical rods suspending pipe is being replaced by a better system that is flanged. For the infiltration and inflow project(9704), the Metropolitan Council's Interceptor System and Treatment Plant is not sufficiently sized to accommodate an unlimited amount of excess storm water. Per a mandate, the City must decrease our infiltration and inflow from the system. A surcharge of $550,000 per year has been levied against the City and will be held in reserve for five years to be used to remove inflow and infiltration for the City. After that time, this amount will be converted to an additional user charge to the City for each year that their contribution to inflow and infiltration is above their allotted amount. $1.6-$1.7 million is paid per year for waste water disposal, and the surcharge represents a 30% increase, which will ultimately be passed onto customers. $300,000 in 2009 or 2010 will be paid for the home inspection process the City will start next year. This inspection process will start at the beginning of 2009, and home owners will need to comply or face a $100 per month additional fee on their sewer bill. Smoke testing, televising of service lines and inspection to determine if sump pumps are connected to the system will be evaluated in at least 4-5 service areas on a pilot project basis in 2009. The initial inspections will cost $200 per year. Smoke testing will be done in the next few weeks, and a brochure about this process will go out to Eden Prairie customers. Dietz clarified in response to Proops' question that sanitary (not storm) sewer is the problem. In some locations, sump pumps run almost continuously and if that water is put into the sanitary sewer system, it is a significant issue. Proops clarified where the $500,000 comes from with Kotchevar. She said the utility construction fund is from fees on the utility bills, and no property tax levy money is involved. There are also permits and utility fees and special assessments at the time of development. Eden Prairie Budget Advisory Commission October 28, 2008 Page 4 King noted that the water rates were considered last year, and they were increased over the past few years (partly due to the addition of a second tier of a higher rate charged for higher levels of water usage). Kotchevar has a model that Uram started to look at the three sources of funds for capital projects. It looks like they will be okay in the near future. Dietz noted that there are approximately 22,000 water customers in the City, and they can increase the annual fee slightly if they need to generate more revenue. New development has helped pay for debt incurred to date. They are trending what is happening in the system, but the age of our system is relatively new and the data does not support significant investment in the near term.. Muilenburg asked if there are any projections for recovering costs or adding additional revenue. The Eden Prairie Center cost recovery of$500 per month that occurred when a faulty meter was replaced with an accurate one is an extreme case of recovering costs since it is a large commercial account. Newer meters are more responsive and especially useful for recovering costs to customers who were previously undercharged. Dietz says it will generally pay for itself to improve meter reading of large commercial accounts, but most meters are already relatively new, since we replaced the meters with the new radio read technology over the past 5 years. Proops asked if people can get away from lawn usage for new developments. He suggested replacing it with something else that does not need to be watered so much (such as using rain gardens or vegetation for at least part of the yard). Dietz noted that there are rebates of $50 for replacing older toilets with low flow ones, and there are rebates of $100 for replacing older dishwashers and washing machines. Uram asked if the City runs out of the money in the utility rebate program each year. Dietz confirmed that they usually run out of the $13,000 set aside for the program during the third quarter of the year. Muilenburg asked if there are water usage studies to see if people are overwatering. Dietz said that the amount of water needed to keep lawns green varies in different parts of Eden Prairie because of differences in soil so there is no way to create a standard for the whole City. Currently, in the summer, customers are charged $1.65 for base water usage up to 150% of their average winter levels. 43% of customers received the surcharge last year of an extra $1.00 per thousand gallons($2.65). Dietz said the two-tiered system has done more to raise public consciousness than anything else they have done, but the fact that we have had two dry summers in a row had a significant impact on the demands to the system. IV. BAC ANSWERS CRITICAL QUESTIONS AND FORMULATES COMMENTS A. CRITICAL QUESTIONS 1. Were the projects adequately described? Was the need for the projects justified? Eden Prairie Budget Advisory Commission October 28, 2008 Page 5 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? 4. Does the BAC have recommendations in this area including budgetary and operational changes? What are the recommendations and why? In response to question 1 above, the group agreed that the projects were adequately described and justified. In response to question 2, the group answered affirmatively also; however, Kardell noted that they do not have enough history yet to predict the future well in this area. For question 3, the group said that the funding outlook seems stable. In response to question 4, King noted that he would like to see the second tier increased to a higher rate. Dietz said that it is not unusual for residents to reach 150% of their winter rate in the summer,but it does not necessarily mean they are overwatering their lawns. The possibility of adding a third tier to the system was raised,but Dietz noted the addition of the I & I issue and that as a consequence they would probably wait another year before seriously considering the change. It was noted that this is a progressive type of tax. Proops' comment regarding looking for additional alternatives to conserve water would also fall into the category of possible recommendations. V. BAC COMMENTS A. REVIEW/FINALIZE BAC COMMENTS Uram noted that the BAC's recommendations and comments need to be finalized for the report that will be presented to the City Council on November 18. The comments were prepared during the meetings, and Proops added a set of recommendations he would like to see included for the City Council. Uram noted that a few of the items on Proops' handout do not relate to this year's CIP. Uram recommends that comments related to wages, benefits, and other budgetary recommendations that were made last year be removed from the BAC's CIP recommendations for this year. King noted that it might not be a bad idea to talk about wages and benefits since dramatic changes have happened recently to affect people's financial well-being. Uram noted that the group needs to finalize the CIP recommendations, and they can include anything Proops has included if it is needed as part of the final version. Proops thinks the BAC is being negligent if they do not reconsider Eden Prairie Budget Advisory Commission October 28, 2008 Page 6 wages, benefits, and debt-related recommendations in light of recent financial market changes. Uram said the first focus is on the CIP piece for the November 18 meeting, and King agreed to finalize the CIP recommendations first. In reference to the roadway recommendations, Uram said it is critical that the road information is prepared and included in the CIP. Federal and state money is used for many roadway projects. Staff understands what is expected to happen, and he recommends the BAC avoid taking projects out of the CIP. Proops thinks all funding sources need to be listed (what Eden Prairie, the state, the county, and the federal government is responsible for). Kardell said this has been done on a project by project basis. Proops noted some of the numbers are fairly high and showing a rise. He wants to know where the funding is coming from. Kardell noted that the City's road building cannot go forward unless the money from other governmental sources comes through. Most of the group thought that adding a street utility fee would be useful to create a more stable funding source for road repairs. Kotchevar noted that some sources of funding are under review, and they are noting that a source of funding needs to be found. Proops was concerned about the significant$469 million for the roadway projects. Kardell noted that the money will be spent over 29 years, and many projects include multiple funding sources besides the City of Eden Prairie. Kotchevar responded to Proops' question about the 494 & 169 intersection project by stating that the City is a part of the project and they are somewhat involved in providing oversight. Muilenburg noted that the objective is to comment on the five year plan. Kardell noted that a stable funding source such as a modest street utility fee is needed. Kardell moved, Muilenburg seconded, and the group voted in favor of adding additional language on a street utility for transportation as one of their recommendations. The group decided there were no issues on the parks and trails land lease with MAC. Kardell noted that Phase II and III of the Cedar Hills Park expansion are not in the CIP until 2011, so she would recommend waiting to comment on it until the future. Muilenburg would like to see language added about cost recovery for the lease of land from MAC should it ever be taken back. King noted that this is not needed since MAC and the City have a formal agreement in place already. Muilenburg questioned the need for more ball fields. Proops is concerned that there is currently a blank check for these types of items. Uram noted that developers are expected to contribute to the park improvement fund that is used for some park improvement projects. Kardell recommended that the costs be justified and a description be provided of what expansion means. Proops is concerned that Parks & Recreation is spending money rapidly, and there are a number of projects being charged to the CIP. Muilenburg wondered if it is worth paying money to renovate existing fields so sports teams can play on them a day sooner. Uram thinks it is important that the fields are accessible to be used as Eden Prairie Budget Advisory Commission October 28, 2008 Page 7 soon as possible. Kardell noted that it would be helpful for the BAC to see all projects listed together by park. Kotchevar said that could be done. The subcommittee of Muilenburg, Proops, and Schultz recommended the City recover more fees from Community Education and Parks & Recreation programs. Muilenburg moved, Kardell seconded, and all voted to approve the Parks & Recreation comments and recommendations. Kotchevar will summarize the changes and the BAC members can get back to her with any necessary changes. The City Council workshop is only for BAC recommendations, and they may touch on plans for next year. The assumption they are starting with for next year is that they will strive to maintain current service levels. In July, Scott Neal will present the recommended budget and receive feedback. In August, he presents to the City Council and then the BAC reviews the budget again. Muilenburg noted the BAC will likely need more time with Scott Neal's initial budget. Uram asked when the City Council will give Scott budget direction, and Kotchevar stated that it will be in the first quarter of 2009. Proops recommends the CIP levy be suspended until it is needed again. Kotchevar responded that the CIP is a plan, and they do expect to spend the funds down over time. The City has made a philosophical decision that it is good to maintain a balance in the fund. Uram clarified with Kotchevar that the fund balance is scheduled to decrease over the long term (there will be less money coming in than going out). That understanding is correct. It was noted that the fund balance is decreasing based on the current budget decisions in place that were made last year. The annual funding of $1 million was decreased to $450,000 this year and $650,000 next year. Uram said that with preventive maintenance programs, there is a danger of having to go back to taxpayers to ask for a lot of money to replace a big item that may not be foreseeable if the cushion in the fund is allowed to decrease too dramatically. Proops is concerned that the City Council will not likely go lower with the CIP amount in the future, and he anticipates that it is likely to increase in the future. Kardell said that the impact of reinstating the levy would be significant, so she does not want to see the money spent down to a low level. Uram said the BAC could let their previous recommendation regarding the CIP stand and no new recommendation would be needed. Since the tax levy is done, no new recommendation for the CIP amount is needed in the near future. There was a misunderstanding regarding how heavily leveraged the City of Eden Prairie is in terms of their current debt load. Kotchevar clarified that the City has used only 11% (not 89%) of the debt they are allowed to have, so Eden Prairie has low debt levels compared to many other communities. Proops is concerned about recent increases to debt levels that were primarily due to the Community Center expansion. Uram noted that there were processes in place to review alternatives, and the City chose to use debt for this purpose. Eden Prairie Budget Advisory Commission October 28, 2008 Page 8 Proops recommended that the City modify the budget for 2009 because of economic changes since the time the BAC made its initial recommendations. Proops wondered if taxes should be lowered for City residents in light of difficult economic conditions. Proops recommended that the City freeze employee wages for 2009 as some companies in the private sector are likely to do. Uram agrees that cutbacks like this are common in the private sector and may make sense. Kotchevar said the 3% increase to wages in the budget is a pretty solid number for increases, and it is consistent with what many others are doing. Uram noted that they could delay increases until mid-year as a cost-saving strategy too. Muilenburg wondered if the BAC could recommend that the City find wage increase dollars elsewhere in the budget (delay or remove other projects), and then the budget could be reduced. Muilenburg moved, King seconded, and all agreed to a motion for the City Council to consider reducing the 2009 budget(and 2009 tax levy) to a no growth budget in light of the current difficult fiscal environment. Proops said the City could use the severance fund in lieu of the general fund. King said they could discuss paying out the severance fund money for and moving to a PTO plan during the next budget cycle (starting in January). Proops was concerned that discussing the items at that time would not be soon enough to have an impact. It was decided that no official recommendation is needed for the severance fund at this time. King is not in favor that the land sale to Presbyterian Homes is going to the Community Development Fund since we do not know what that money is being used for. Proops said he thought it was for streetscape and way finding. It was noted that most of the money from the sale is not being used for this purpose ($1.2 million is for streetscape and way finding; the other $2.3 million is for other purposes). King would prefer to see the $2.3 million flow back into the system. He would like to see it used to reduce taxes for the operating budget, but Uram did not support that recommendation. King also suggested the money could be moved into the CIP, and then a levy increase for the CIP would not likely be needed for the near future. King then moved and Muilenburg seconded a recommendation to the City Council or staff that the extra money from the sale of Presbyterian Homes be put into the CIP fund. All BAC members agreed with this recommendation. VI. BAC ANSWERS CRITICAL QUESTIONS AND FORMULATES COMMENTS A. COUNCIL WORKSHOP The BAC's recommendations regarding the CIP for the City Council will be presented at the Council Workshop on November 18. Kotchevar noted that the meeting will begin at 5pm and dinner will be provided. Eden Prairie Budget Advisory Commission October 28, 2008 Page 9 Kotchevar noted that the Pavement Management and Transportation presentations will be presented again on November 5 and 6 at 3pm for those BAC members who missed them the first time. B. PLANNING FOR 2010/2011 BUDGET Kotchevar will coordinate with the two new members of the BAC in the near future. Kardell will be ending her term with the BAC at the end of the year. BAC members were asked to email Kotchevar with dates when they are or are not available for the training session to be held in December (with a 7pm start time). After the November 18 meeting takes place, Kotchevar will email the group to set the December meeting time. VII. ADJOURNMENT The meeting ended at approximately 9:53 PM. King moved and Kardell seconded the motion to adjourn.