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HomeMy WebLinkAboutBudget Advisory Commission - 05/05/2011 APPROVED MINUTES BUDGET ADVISORY COMMISSION MEETING THURSDAY, MAY 5, 2011 6:00 P.M., CITY CENTER 8080 Mitchell Road EDEN PRAIRIE, MN COMMISSION MEMBERS: Chair Rick King, Vice-Chair Jon Muilenburg Commissioners: Annette Agner, Eapen Chacko, Dan Funk, Michael Morris, Chris Nylander CITY STAFF: Sue Kotchevar, Finance Manager; Tammy Wilson, Finance Supervisor; Jan Curielli, Recorder I. ROLL CALL/CALL THE MEETING TO ORDER Chair King called the meeting to order to 6:00 PM. Agner, Funk and Morris were absent. II. MINUTES A. BAC MEETING HELD THURSDAY MARCH 3, 2011 MOTION: Nylander moved, seconded by Chacko, to approve the minutes of the meeting held Thursday, March 3, 2011, as published. Motion carried 4-0. III. DEBRIEF APRIL 28, 2011 EDUCATIONAL SESSION King said he thought the educational session was good and moved along pretty well, although he was hoping for a little more time for questions. He said it was good to have the City Council and the BAC there at the same time and hear the Council's questions and comments. Having a workshop together with the Council is helpful, and we should think about other times when we could do that. We are trying to serve the Council and to better understand what they want us to do. Nylander agreed with the concept of a joint session. One of the past comments about the BAC was that there was a disconnect with the Council. It was valuable to see what their questions were. He thought it was important for the Council to see the information provided in the session. It was good to hear about some of the statutory limitations we were not aware of. He thought the most important thing was to have a plan and follow through with that, and he hoped that resonated with the Council. Chacko said he thought there was some value to have the joint session. The pros and cons presented were written for someone making a policy decision, so those were more addressed to the Council and not to the BAC. He wasn't sure those types of things are in the Commission's bailiwick. Budget Advisory Commission Minutes May 5, 2011 Page 2 Muilenburg said the discussion about sensitivity to the political implications was good for him to hear. He thought the Commission has not been as sensitive to the political implications as we might have been,but the Council must make decisions in light of what they expect and what the potential fallout will be. We need to be aware of the position the Council will be in as we advise them. IV. CITY COUNCIL DIRECTION Kotchevar said at the Council workshop the Council spent 45 minutes talking about the BAC and what they would like to see and 30 minutes on the operating budget policy. She distributed a summary of the Council direction to the BAC. She said the Council is very interested in how other cities fund capital maintenance. The funding sources the Council would like the BAC to review are listed in the summary, somewhat in order of priority. Franchise Fees -- Kotchevar said the rule is that if you have a franchise fee on one you must have it on all; however, if you designate the franchise fees to pay for specific utility costs, then you may be able to just have it on one utility. She noted we have estimated we would be able to collect about$875,000 with this. Once we start to discuss the details we would be discussing the advantages of a flat fee versus a percentage fee. King said we will take the information and then go find out how other cities do this, what their percentages are and what their total revenue is. We would come back with our best recommendation in terms of what is good about one and what is good about another. He asked if franchise fees are applicable to gas and electric only. Kotchevar said she believed that was so. Street Light Utility Fees -- Kotchevar said we spend about$900,000 per year on street lighting and the expenditure is currently taken from the General Fund. We could charge the fee on the utility and we would then have that amount available in the operating budget. Nylander asked if that figure is just for the utility cost. Kotchevar said it is almost all for electricity. User Fees -- Kotchevar said this is a general category and there is not a lot to do there. She said some cities hire companies to do fee studies for their city, so we might want to consider that. They might find areas where we are not charging as much as we could. King asked if you could charge more with the street utility and put some into pavement management. Kotchevar said we would have to look into it. Naming Rights -- Kotchevar said we have used this to a certain extent. Muilenburg asked if we are talking about one-time or recurring revenue that would cover the cost of managing or coordinating what is being named. He wondered if we add the costs to City management to take care of that piece of it. King thought we could have recurring costs included on a big item like the Community Center. Kotchevar said she thought the naming rights at the Community Center covered a 20 year period. Nylander asked if that was used Budget Advisory Commission Minutes May 5, 2011 Page 3 to help fund the facility. Kotchevar said it was. Nylander thought that is a more appropriate use of naming rights. Tax-exempt Property Fees (PILOT) -- Kotchevar said the Council is interested in charging tax exempt properties for their share of City services. She didn't know how practical this would be for existing tax-exempt properties. We may want to discuss this in terms of new opportunities when tax-exempt entities first come into town. Right-of-way fees charged to internal utility funds and Accumulation of fees charged to all users for facility replacement (funding depreciation) -- Kotchevar said the Council didn't talk about these at all, so they may be the lowest priority of all. Nylander said it seemed to him that right-of-way fees are just a recalculation of utility fees, and these costs should be charged to the utility fee as would any charges of that nature. He said we should make sure these are currently being charged appropriately. Kotchevar said she didn't think it is common for cities to consider that when they charge the fee. Nylander said if you are charging on a cost basis we would want to incorporate any associated costs. King thought this would be worth looking into. Kotchevar said there is about $400,000 charged back in capital for funding depreciation but we need $500,000 more. The depreciation on buildings and utilities is about $1,100,000 per year. She said the Facilities Internal Service Fund is a new fund and we haven't fully funded it yet. Nylander asked if we are violating the direction of the Council to not review the tax levy if this has been funded by the tax levy. Kotchevar said it falls back to the tax levy. King thought we should keep it on the list for visibility since we are talking about what we will discuss as we go forward. Chacko said we talked about the street lighting utility before and he thought we concluded we didn't like non-transparent revenue sources. King said the game now is how to deal with the issue of capital fund depletion. Chacko said a related point is when we changed the water rate we talked about the build-up of cash in some of the funds. If revenue does build as some projections suggest, that can have implications for other things. Kotchevar said fees are collected for utility operations, and City policy is that water utility funds will stay with water, sewer and stormwater utilities, not go to street maintenance. King said we are actually doing that kind of study for the longer term. We have the opportunity to really dig down into the top three sources and do analysis and comparisons of what other cities are doing. He thought we might want to consider getting expert opinion from a consulting firm to assess our situation and then put together a really good set of specifics for the Council to look at. He said his target would be to deal with the top three sources for sure and keep the other ones in mind. We would want to know how other communities have implemented any of these sources and how it has worked in terms of residents' feedback. Chacko said he would like to see the Commission do as much of this as possible and avoid the consulting studies. He thought there was some value in saying we did this, and he believes we can get the information from resources without hiring a consultant. King said Budget Advisory Commission Minutes May 5, 2011 Page 4 he too would rather do that; however, we need to understand if we have the expertise and also understand it would put a lot of work on staff. He thought we are here to do more, and if we need some expertise then maybe we can buy less of it. Kotchevar said a Council Member brought up the concept of mapping certain funding sources to certain projects rather than having one pool. Also it was noted that it is important to communicate the importance of what we are doing and that we are doing the proper planning for future road maintenance expenditures for the community. King said we get a lot of heat when individual members of the Commission express individual opinions with the tag that they are a member of this group. We haven't had that problem with those who are currently on the commission. One of the problems was that information was hitting the public before the Council was ready to deal with it. It is important to emphasize that as BAC members we are focusing on those things on which the City Council directs us. Chacko asked if Gene Dietz has made any comments on this. Kotchevar said he has recently updated the model that goes out five-years, and we used those projections for our road maintenance needs that we covered at the educational session. V. MOVING FORWARD Kotchevar said she thought we could have discussion and brainstorming on how to move forward with this. Kotchevar distributed a copy of a worksheet she developed to rank the characteristics of the various funding options to help determine what the characteristics of a good fee are. Regarding cable fees, Muilenburg asked if there is any possibility of recovering fees from the other TV providers such as Dish Network. Kotchevar said she was not aware of any possibilities. King thought we could ask if there is a way to do that. Muilenburg thought it would be challenging to implement a fee like the cable fee on other TV or data services. King said the cable company comes to the City and signs a contract for a monopoly and pays fees for that. There is no statute that says the satellite services have to come to the City. Kotchevar said she envisioned staff either meeting or calling other cities to see how other cities do their funding. King asked if the League of Minnesota Cities collects that information. Kotchevar said she didn't think they do, at least in a way that would be useful. She thought we will have to talk to people to get the information. She said there is one study that deals with all city fees,but it doesn't say what they dedicate the funds for. Nylander said he thought the City Council wants information on the fees that are charged as well as how they are used. He thought we might be able to use that study as a starting point. Kotchevar said she will bring the most up to date study to the next meeting. King thought we should at least look at the results even though they may be aggregated. Budget Advisory Commission Minutes May 5, 2011 Page 5 King asked if Rick Getschow is getting an intern this summer and, if so, could we use that individual for some of this work. Kotchevar said the intern would have to have a level of knowledge,but there may be some work they could do. Chacko noted there are some people who don't like looking at peer practices. He asked which cities we would look at for this. Kotchevar said the City belongs to the Municipal League of Cities (MLC), which is a group of similar cities within the Twin Cities area. She meets with the Finance Directors of the cities in this group on a regular basis, and that would be a good resource. Nylander asked if the MLC has any surveys or studies on this. Kotchevar said they aren't active in that way,but she can check with them to make sure. King said he thought the ultimate aim of all this is to determine the advantages or disadvantages of the various types of fees, so that should be a separate point on the list. In regard to franchise fees, Kotchevar thought we could work with contacts at each of the utilities. King asked if the energy companies are a resource. Kotchevar said we need to find that out, and we will also have to look at the franchise agreement. Nylander thought we could determine the specific information we want for franchise fees and build that first. Muilenburg asked if there is an opportunity to look at solid waste as that might be another mechanism to look at. Kotchevar said the street lighting utility is potentially more internal, and City Attorney Rosow has some information on this. It is usually a flat fee per household, and the fee is calculated on the street frontage for commercial property. King said we talked about this before and also discussed fees on tax-exempt property. Kotchevar said she will get the final version of the survey for the next meeting and staff will start making phone calls and other contacts. She said she is considering having a peer group discussion with her colleagues in the MLC group. Nylander said we could put the information together and develop a survey to use with the MLC cities. Muilenburg said other MLC cities may be having a similar discussion, and this may be an opportunity to do this collaboratively with other cities. Nylander said some of the questions we want to ask are data point questions and then there is the narrative information about citizen response and how effective it is. He thought there are data point questions as to whether they have franchise fees and if they are a flat fee or a percentage of revenue. Muilenburg suggested adding the question of how they are allocated and if they are dedicated to specific costs or funds. Nylander said we need to know the relationship of franchise fees to total revenue. Kotchevar said we should ask when the fees were implemented and what the acceptance was. Kotchevar asked if we need something about street lighting fees. King thought we could ask what other fees the city uses to fund its capital management. Kotchevar noted cities do business very differently. Some cities put their cable franchise fee into capital funds while Eden Prairie puts it into the general fund. The consensus was to ask other cities how they fund their capital maintenance program. Muilenburg said we could have a final question regarding any other sustainable mechanism they have found to be effective and easy to Budget Advisory Commission Minutes May 5, 2011 Page 6 implement. King thought these questions would provide useful information and then we can see where we are. He thought it was doable in a period of one or two months. Chacko asked if we will target a subset of the 16 communities in the MLC. Kotchevar said it will take less time if we do a written survey. King thought we could wait to get something back and then call them with additional questions. Chacko suggested the possibility of having an online survey with an accompanying explanation of what we are doing. Kotchevar thought she could get that out and have some information back in a month. Nylander thought the question is whether the cities will share the information. King said we probably should not list the identity of the city. Overall,he thought this is a very good technique. In June we could discuss what we have and decide what we want to look into. We might also have Mr. Rosow discuss what the issues with the statutes are in June. That would leave time for analysis on some of these things between June and July. In August we could figure out what more we need to do to develop a recommendation. Our big question will be if that is enough information to make a recommendation or do we need some outside validation that would take more time to complete. Kotchevar said we may want to get back to the City Council if we find new opportunities. King suggested changing the proposed ranking for the "Characteristics of a Good Fee" worksheet to be 1, 3, and 9,rather than just 1, 2, 3,because that makes things stand out more. Regarding the budget, Kotchevar said the Council believes the City survey is important input to the budget. She said the City will be participating in large town hall discussion forums about city services to be sponsored by the League of Minnesota Cities in four Minnesota cities, one of which is Eden Prairie. The Council said it is important to review the processes and determine where efficiencies and savings can be made. She said we need to work with the Council and keep them updated. King said we could ask the energy companies to send a representative to discuss their experience with cities that have implemented these fees; however, before we ask we need to know it will then become apparent that the City is considering this. Nylander thought these fees have to be high on the priority list. Kotchevar said the next meeting is June 2. She said in the interim she may meet with Ms Agner, Mr. Funk and Mr. Morris since they were not able to attend tonight's meeting. VI. ADJOURNMENT Chair King adjourned the meeting at 7:40 PM.