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HomeMy WebLinkAboutBudget Advisory Commission - 04/28/2011 - Joint Meeting APPROVED MINUTES JOINT CITY COUNCILBUDGET ADVISORY COMMISSION WORKSHOP THURSDAY,APRIL 28, 2011 COMMUNITY CENTER 6:00 PM, CAMBRIA ROOM CITY COUNCIL: Mayor Nancy Tyra-Lukens, Council Members Brad Aho, Sherry Butcher Wickstrom, Ron Case and Kathy Nelson BUDGET ADVISORY COMMISSION: Annette Agner, Eapen Chacko, Dan Funk, Rick King (Chair), Michael Morris, Jon Muilenburg (Vice Chair), Chris Nylander, Sue Kotchevar(Staff Liaison) CITY STAFF: City Manager Rick Getschow, Police Chief Rob Reynolds, Fire Chief George Esbensen, Public Works Director Eugene Dietz, Community Development Director Janet Jeremiah, Parks and Recreation Director Jay Lotthammer, City Attorney Ric Rosow, and Recorder Jan Curielli I. CALL MEETING TO ORDER Mayor Tyra-Lukens called the meeting to order at 6:10 PM. Council Member Aho was absent. Commission Member Agner was absent. II. EDUCATIONAL SESSION ON CAPITAL IMPROVEMENT FUNDING City Manager Getschow said tonight the Council and the Budget Advisory Commission (BAC) will receive a presentation on capital planning and capital budgeting to prepare for the joint work session next week. Terri Heaton, Senior Vice President of Springsted, Inc., said the goal for tonight's presentation is to give a general overview of capital finance and to talk about specific items that will be useful to the City of Eden Prairie as we move forward. She noted Springsted provides advice on public finance, operational finance, economic development, human resources and organizational management, and investment service. Ms Heaton reviewed capital financing principles and guidelines and said tonight's focus will be on capital maintenance areas. She said long term financial planning is needed to establish a fixed asset replacement policy and to prioritize maintenance of the existing capital assets. She said the City is currently using a"Pay-As-You-Go" (PAYGO)program to pay for capital expenditures; however, because of the increasing amount needed over the years, primarily for pavement management, the current reserves will not be sufficient to cover all of the projected expenses. She reviewed the techniques available to add revenue under the PAYGO program and explained some of the options that use a combination of PAYGO and bonding. She said a balancing act is needed to undertake capital projects at the most efficient time while having the least impact on the community from the added cost. JOINT CITY COUNCILBUDGET ADVISORY COMMISSION WORKSHOP MINUTES April 28, 2011 Page 2 Ms Heaton explained the basics of municipal bonds and the different types of bonds available, including General Obligation (GO) bonds, Revenue bonds, GO Revenue bonds and Annual Appropriation bonds. She said GO bonds have the lowest interest rates, and the GO Revenue bonds are often used to pay for utilities. Two types of GO bonds are used for roads and streets: GO Improvement bonds, where 20% or more of the project is specially assessed; and GO Reconstruction bonds, where less than 20% is specially assessed but which require a five-year plan to be unanimously adopted by City Council Members at a public hearing. She said the GO Improvement bonds are often used for street construction,but Eden Prairie is at the point where the GO Reconstruction bonds would be helpful. She said Capital Improvement Plan (CIP) bonds can be used for essential City facilities. Those bonds require majority approval of a five-year CIP and bonding for specific items at a public hearing. Kotchevar noted we used CIP bonds to build the last two fire stations. King asked if we currently have any General Obligation (GO) Reconstruction bonds. Kotchevar said we do not. Dietz said we haven't had to reconstruct any streets yet. Ms Heaton reviewed financing options including funding sources used by other cities to finance roads, streets and facilities. She said a special service district can be used for pockets of the community with higher levels of use. Case asked if the Payment in Lieu of Taxes (PILOT) tax-exempt property fees would be something to use for churches and other tax-exempt properties. Heaton said the fees could be used for anyone who is using services such as street snow plowing but who is not paying taxes. Case asked if the School District pays rent for their use of City Hall. Kotchevar said they don't at this time, and we would have to work with them in order to start charging them. Case said he would be interested in looking into that more. Nelson asked if a neighborhood group could ask to become a special services district. Heaton said it would be necessary to get a majority to petition for the request;however, she advised being very cautious about such situations. Rosow said some development agreements have that process built in; for example, Windsor Plaza is guided to do that. Heaton said the services would have to be over and above what the rest of the community receives. Butcher Wickstrom asked if there is a funding source for green buildings or other innovative construction. Heaton said the legislature approved the ability to enter into contracts that would be based on measuring the savings obtained by the innovations. Kotchevar said we did the financing of the 20-40-15 program that way. Heaton said there are other programs or grants that can be applied for, but the funding for those is running out. Heaton said franchise fees are a surcharge on the amount of users' gas and electric bills. These are usually brought into a city to fund operations and can be dedicated to capital funding. It is also a way to collect money from tax exempt properties. She said right of way maintenance fees charged to utilities is a newer funding mechanism. Funk asked if there are other circumstances where these could be used beyond utilities. Heaton said most cities collect cable fees and use the funds to pay for cable programming. JOINT CITY COUNCILBUDGET ADVISORY COMMISSION WORKSHOP MINUTES April 28, 2011 Page 3 Case said he would be interested in knowing how many other cities out there use these fees, and he would want a lot more information about this if we decide to use them. He was concerned that we need a way to make it more progressive so it isn't just a flat tax. Heaton said she hasn't seen fees used for tax-exempt federal buildings, and schools are considered somewhat sacred properties. She said it would be important to figure out how to phase in any PILOT fees. She said it has been used in places where a college has located into an established community. She said there are also some new funding source options being considered by the legislature, including a local option sales tax, local payroll and income taxes, street utility fees and development impact fees. Heaton reviewed considerations regarding the City's credit rating and the importance of a high bond rating. She said Eden Prairie currently has an Aaa rating with Moody's, which is the highest possible rating. Butcher Wickstrom asked if other cities' ratings have declined because of the economy. Heaton replied there have not been many in Minnesota but there have been in other areas such as New York City, Las Vegas and Michigan. Getschow said there is a joint workshop scheduled for the Council and the BAC on Tuesday, May 3. The goal of the workshop will be to talk about which of the options should be explored as we think ahead for the next several years. Nelson said it will be a lot to get through in an hour. Getschow said we need to have a little bit of discussion on the budget at the workshop. We will need to have a much larger discussion on City-wide strategic planning. Tyra-Lukens said we need to come to the workshop on Tuesday with our calendars so we can get something nailed down. She thought we might take a Tuesday night in June since the Council has only one meeting scheduled that month. Case said he assumed there would be discussion about the expenditure side as well as discussion of the options for revenue. He was concerned that the projections show us as being completely unfunded at some point in the future. Kotchevar said the projections show the funds will be depleted in five years if we continue with the PAYGO policy. We have tried to put away one-time money,but the question is do we want a more formal strategy as we look at other sources of funding. The BAC is looking for direction from the Council about their role in this discussion. Case said we never decided how we would pay for reconstruction. Kotchevar said a lot of the reconstruction is included in the pavement management plan. Dietz said there is a 30-year plan to maintain the streets,but we don't know where the money for that is coming from. However, if we had a 5% increase per year, we would have it covered. Case noted the CIP funding mechanism was gutted over the last three to five years, so we need to figure out something as we go forward. Kotchevar said whether the Council thinks it is important to special assess citizens for reconstruction projects is a very important policy decision. Dietz said he thought the best way to fund reconstruction is through taxes,but some kind of assessment may be the only way to get it done. He said priorities will have to be made because we are coming up on the need to reconstruct some of our streets. Tyra-Lukens asked which streets need to be reconstructed. Dietz said the Hidden Ponds neighborhood is one example. Jeremiah noted the City survey showed the majority of respondents preferred funding by taxes. Case said we will want to look at what other cities do. JOINT CITY COUNCILBUDGET ADVISORY COMMISSION WORKSHOP MINUTES April 28, 2011 Page 4 Tyra-Lukens said on Tuesday we will talk about what things we want the BAC to look at. Nelson said we don't have a policy that says we will maintain our roads at the appropriate time, and that may be part of the long range planning. King asked what input the BAC will get from the May 3 workshop that they can use at their May 5 meeting. Tyra-Lukens said the workshop will be held before the Council meeting and staff will have to gather the materials. Case said the focus in the past two years was on ways to cut expenditures,but we should look at increasing revenue as well as cutting expenditures. He thought the focus of the BAC should be on helping find ways to look at revenue options. Tyra-Lukens thanked Ms Heaton for her presentation. III. ADJOURN Mayor Tyra-Lukens adjourned the meeting at 8:00 PM.