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HomeMy WebLinkAboutBudget Advisory Commission - 06/02/2011 APPROVED MINUTES BUDGET ADVISORY COMMISSION MEETING THURSDAY,JUNE 2, 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 Vice Chair Muilenburg called the meeting to order to 6:00 PM. King was absent. Morris arrived late. II. MINUTES A. BAC MEETING HELD THURSDAY MAY 5, 2011 MOTION: Chacko moved, seconded by Nylander, to approve the minutes of the meeting held Thursday, May 5, 2011, as published. Motion carried 5-0. III. REVIEW METRO CITIES 2009 SURVEY Kotchevar said at the last meeting we got City Council direction as to where they want us to go. They want us to review the advantages and disadvantages of the various funding sources and to take a look at how other cities fund capital improvements. We also decided some things we wanted to do for this month, including a survey of how other metropolitan cities fund capital improvements. Morris arrived at 6:02 PM. Kotchevar said she forwarded the 2009 Metro Cities Survey to BAC members to use as a reference of what other cities charge. Nylander said he skimmed through the document but he was not sure it was within our scope to dig into the details of the various fees charged by other cities. Kotchevar said she agreed with that, and she didn't realize at the last meeting how extensive it was. She thought it might be a good reference as we go forward. IV. REVIEW CITY SURVEY ON FUNDING CAPITAL IMPROVEMENT PLANS Budget Advisory Commission Minutes June 2, 2011 Page 2 Kotchevar reviewed the responses to our survey questions we received from nine metropolitan cities that are about our size. Most of the cities are charging a franchise fee for cable, only two (Minnetonka and Apple Valley) are charging an electric franchise fee, and none of them has a gas franchise fee. She noted the cable franchise fee tends to be a percentage of revenue, not a flat fee. For the electric fees, Minnetonka has a flat fee and Apple Valley charges a percentage, and most are charging 5%. Chacko said he believes 5% is the maximum fee allowed. Regarding the survey question of how revenues are dedicated for each franchise, Chacko asked the meaning of"communications purposes." Kotchevar said the fee is used for communications staff and equipment and costs related to cable TV programming. Muilenburg asked if that includes the City website. Kotchevar said it does. Kotchevar said it is common for cities to have a separate communications fund,but Eden Prairie puts our revenue into the General Fund. There is a concern that the revenue from the cable fee is becoming more flat and that will pose a challenge for our general fund. The City isn't growing, and we will potentially lose customers over time. Muilenburg noted satellite technology will only get better. Kotchevar said the responses to the question about community response to the implementation of the franchise fees showed there did not seem to be significant issues raised at the time the fees were started. Kotchevar said a lot of cities are charging a street lighting fee. Some have a complicated formula for the charge, and others have a flat fee. For the most part the cities' revenues are going back to energy. She said the question is whether the fee is practical to set up. Funk asked if we have two separate funds to account for depreciation of the units. Kotchevar said we don't depreciate street lights. Funk asked if replacements would come from the General Fund. Kotchevar said with new development the developer is required to pay for the lights and three years of the cost to operate the lights. Wilson noted Xcel Energy owns many of the street lights in the City so they take care of the units. Kotchevar said most of the cities fund street mill and overlay maintenance with tax levies. Chacko said Richfield was not one of the cities surveyed,but they got$700,000 from their franchise fee with $400,000 going to mill and overlay and $300,000 for seal coating. Nylander asked if we need to find more reliable sources for the CIP or do we need to just focus on the revenue side. Funk said he gets somewhat confused about policy versus non- policy in the discussion of a one-to-one relationship. Chacko thought this relates to the subject of transparency as well. Funk said we know there is an expense that is not being offset, and most people will understand it makes sense to save something for the future. Kotchevar said most of the surveyed cities fund total reconstruction of streets with special assessments. She noted about 20% of our roads are Municipal Sate Aid (MSA) roads. Budget Advisory Commission Minutes June 2, 2011 Page 3 Kotchevar said we have tried to keep up with the parks and recreation maintenance needed and have transferred excess general fund money into the capital improvement fund. Minnetonka has a capital endowment fund that is used for major upgrades to recreational and other facilities. Kotchevar asked if there were any follow-up questions to the survey. Nylander thought this is good information, and we might want to follow up when we have some specific recommendations. Muilenburg thought it might be useful if we had the Eden Prairie information included with the information for the nine other cities. It would also be helpful to see information for cities such as Richfield, Hopkins and Golden Valley that are 20-30 years older than we are. Kotchevar asked if that would be primarily for the road maintenance and reconstruction piece. Muilenburg said those cities have probably been through the long-term funding process already. Funk asked if we have established a target range that we want to collect each year. Kotchevar said the average for the ten-year projection is $2,000,000 per year. Funk said it will take two or three things to capture that amount through these mechanisms. Kotchevar said we have estimated a franchise fee for gas and electric would collect about$1,600,000 per year, which goes a long way to cover the pavement management costs. Funk asked if we could charge more for the street lighting than it costs to run. Kotchevar said there are rules that fees have to have a nexus to the cost to provide a service. V. FRANCHISE FEE Nylander thought there are two issues here: one is to find the appropriate revenues and the other is to determine how we assign specific revenues to specific tasks. Chacko thought the Council discussion included the fact that if we levy a tax or a fee it should be related to what is being taxed. Kotchevar said our franchise agreement for cable is to their benefit, and they want the City to invest it into communications. Chacko thought spending money on right-of-way guarantees that their service is more viable. Funk said he can understand paying for the utility in order to fund capital improvements. There is a direct relationship between paying the utility fee and paying for the street lights. Muilenburg thought a direct relationship might make it more acceptable to the public. Agner asked why none of the cities surveyed have a gas franchise fee. Kotchevar said we would have to negotiate with Xcel, and they used to be very resistant to cities implementing these fees. She thought they are coming around now as they understand many cities are having funding stress. They get a lot of benefit from a city so it is a mutual relationship. Nylander asked about the information on Minnesota City Surcharges. Kotchevar said that is information provided by Xcel. Nylander said he was surprised at the number of cities with street lighting fees and that none of them have a gas fee. Budget Advisory Commission Minutes June 2, 2011 Page 4 Funk asked if we should be giving consideration to a method of fees that will hit anybody within the City whether residential, commercial or non-profit. That seemed like an important factor the Council wanted us to bring back. He thought the cable fee would have less play on the three types, while gas and electric would be across all three. Nylander said he got the sense the Council wanted to spread the pain and didn't want to just hit the residential properties. Funk said other cities may have been considering this when they implemented different tiers. He thought we need to think about this if we want a more universal approach. Funk asked if there are neighborhoods or industrial parks that have self-funded lighting that would cause big blocks of the City to be pulled out of a street lighting fund. Kotchevar was not aware of any. Nylander thought we wouldn't have to create a complex grid to have a more equitable situation for percentage based fees for gas and electric. He wasn't sure we have frontage information for street lighting fees. Kotchevar said we have GIS maps,but she didn't know how much it would cost to get the information. Funk asked if there are neighborhoods that don't have lighting. Kotchevar said most neighborhoods do, and we might want someone from Public Works to come in and discuss that. Morris noted even if you live in an area that is privately lit, you benefit from driving on all our streets. Kotchevar said Xcel would like a flat fee and not a percentage of revenue. Chacko noted they are under some pressure now because of issues with their tiered pricing. He wouldn't recommend giving up on a percentage fee if we think it is reasonable. Morris thought a percentage fee would place more of the burden on larger homes that consume more electricity. Nylander thought we should push for the percentage fee. Muilenburg pointed out we would have more stability of revenue with a flat fee because the revenue from a percentage fee could go down if we got a big drop in energy prices. Kotchevar said it would also vary by the weather as well. Funk said we would have a very stable income source that can be directed to whatever we want with a flat fee based on the type of customer. Nylander said the larger entities are driving the use of our resources. Funk said it might make sense to do the pros and cons of both. We could stabilize revenue with a flat fee,but it would be more equitable as a percentage. He thought that is going to be a policy decision. Muilenburg thought we could tier it within the different property types although it might be a challenge to determine the size of the buildings. It might take more work on our part to come up with the structure,but it would be more stable. Kotchevar said the City would have to decide to charge one or all of the companies involved (Xcel, CenterPoint and Minnesota Valley). It would be done as a negotiating process involving the City Manager, the Public Works Department, and the City Attorney. Nylander said he agreed with that philosophically and would suggest we also negotiate with satellite companies. Kotchevar said the franchise agreement contract with NSP ends in 2012 and with CenterPoint Energy in 2013. There is no agreement with Minnesota Valley. She and Rick Getschow have meetings set up with Minnesota Valley and CenterPoint to let them know we are thinking about a franchise fee. Nylander asked what area is served by Minnesota Valley. Kotchevar said they serve a portion of the southwest corner of the City. Budget Advisory Commission Minutes June 2, 2011 Page 5 Funk asked if there could be anything in the franchise agreement that would offer competitive opportunities such as rate concessions. Kotchevar didn't know if that was possible. Funk thought that was something to consider. Nylander asked who owns the companies' infrastructure. Kotchevar said they own it. Morris said the percentage fee sounds attractive but he didn't know how much usage affects us unless we have to do an upgrade. Nylander thought it goes back to the Council's objective to spread the pain away from the residential and onto the commercial, industrial and non-profits. Funk thought we could consider that residents bear a higher portion of the burden because of cable, so the residential fee for gas or electric might be significantly less than for commercial. We might want to mix up the types of fees and not just have flat fees. Nylander asked about the difference between demand and non-demand customers in the Xcel spreadsheet. Kotchevar said it is a cut-off based on the total amount of energy used. Nylander asked where schools would fall, because the Council was very specific about including them in the fee structure. Kotchevar said she will check on that. Nylander asked if we are looking at the electric fee to fund street lighting. Funk thought a one-to-one relationship feels a lot better and seems to be more consistent. VI. OTHER POSSIBLE DISCUSSION TOPICS A. STREET LIGHTING UTILITY (See discussion in Items IV and V) B. OTHER FUNDING SOURCES Morris asked if a trash fee is a possibility. Kotchevar said we charge a licensing fee but it doesn't generate substantial revenue. Morris noted the waste haulers have big trucks using the roads every day. Nylander asked if we should be looking at other potential license fees like the one for trash haulers. Funk said it feels like there are additional opportunities. Muilenburg thought we need to research the possibility of trash fees and also covering the costs for the City to administer the franchises. Nylander asked if we have a franchise agreement with Qwest. Muilenburg noted that is another industry that is shrinking. Chacko said cable is losing share over time so he wondered if we should be thinking about whom they are losing out to Budget Advisory Commission Minutes June 2, 2011 Page 6 and what the future is. Kotchevar said we get about$200,000 for the capital improvement fund from charging rental for the cellular antennas. VII. MOVING FORWARD Kotchevar asked if we should start writing narratives or if we need to follow up with cities to get more information. Chacko thought we should know the split in total revenue between residents paying property tax and commercial interests so we can see what the total tax burden is on businesses. Kotchevar said she can check into getting that,but she was not sure it would be an easy process. Nylander said he didn't want to spend a huge amount of effort on it,but it would be good to have that if we want to do a burden analysis. We have the tax capacity by group but not the taxes received by group. After checking some figures, Wilson said she thought we would be able to calculate it. Nylander thought that would play in the analysis of pros and cons, and it might be valuable data for the Council. He thought we can compare total valuation against how much comes from the categories. Chacko cautioned that changes could be perceived as being disproportionately against business which could have a negative effect on our business community. Nylander proposed the BAC split into two groups, with one group developing the pros and cons of each of the different funding sources and the second group discussing the philosophy of using a percentage versus a flat fee. He thought the second group might also touch on the concerns about commercial versus residential. Kotchevar said the groups need to be comprised of three or less members, and she asked the groups to funnel their work to her so she can distribute it to the entire Commission ahead of the next meeting. Funk asked if the second group would also tackle the question of having a one-to-one relationship of the fees. Nylander said he saw that as a separate question and it may be one to put off until later. Agner, Chacko and Nylander volunteered for the first group. Funk, Morris and Muilenburg volunteered for the second group. Kotchevar said we would need just a draft to get us started, and she will work on getting more information on the items we discussed. Nylander suggested looking at the licensing arrangement for haulers and see if we can do that similar to a franchise fee. Information prepared by the two groups should be submitted to Ms Kotchevar by July 1. Kotchevar said she will not be able to attend the next meeting on July 7. The options are to meet on July 7 or change the meeting date to the following week. She asked everyone to let her know by email what days they would be available during the following week. VIII. ADJOURNMENT Vice Chair Muilenburg adjourned the meeting at 7:50 PM. Budget Advisory Commission Minutes June 2, 2011 Page 7