City Council - 11/12/2019 - Workshop
APPROVED MINUTES
CITY COUNCIL WORKSHOP & OPEN PODIUM
TUESDAY, NOVEMBER 12, 2019 CITY CENTER
5:00 – 6:25 PM, HERITAGE ROOMS
6:30 – 7:00 PM, COUNCIL CHAMBER
CITY COUNCIL: Mayor Ron Case, Council Members Brad Aho, Kathy Nelson, Mark
Freiberg, and PG Narayanan
CITY STAFF: City Manager Rick Getschow, Police Chief Greg Weber, Fire Chief Scott Gerber,
Public Works Director Robert Ellis, Community Development Director Janet Jeremiah, Parks and
Recreation Director Jay Lotthammer, Administrative Services/HR Director Alecia Rose,
Communications Manager Joyce Lorenz, City Attorney Ric Rosow, and Recorder Katie O’Connor
Workshop - Heritage Rooms I and II (5:30)
I. 2020-2021 ENTERPRISE FUND BUDGETS
Mayor Case called the meeting to order and Council Member Nelson was absent. Finance
Manager Kotchevar presented on the 2020 and 2021 utility budgets and the goals. Kotchevar
provided the history of the conservation rate approach. The last utility rate study was
conducted in 2017, and currently the City is at a four tier rate structure to further promote
conservation. 2018 budgeted amounts for water flow and revenue, wastewater flow and
revenue, and stormwater revenue were close to the actual numbers. Due to the rainy weather,
2019 revenue decreased, but one year does not create a trend.
Aho stated water usage decreased significantly when the rate structure was revamped. He
inquired if the City has incorporated those new statistics into the budgeted amounts in 2018.
Kotchevar replied yes. The City is being expecting water usage to decrease per user.
Council Member Narayanan inquired if the City can incentivize residents to install high
efficiency appliances and smart sprinkler systems. Public Works Director Ellis stated the
City program helps with the cost of installation of a smart irrigation controller. Programmed
sprinklers utilize the forecasted weather to determine if an irrigation system needs to run.
Many residents have installed smart controllers this year. Narayanan inquired how the City
educates residents on these programs. Ellis stated even with population increases, overall
water usage is the same this year as it was in 1995. The goal is to continue to educate.
Mayor Case inquired how much of the total water usage is due to watering lawns. Ellis
replied 41.1 percent. Case inquired if the City can determine how much of the water
conservation is due to the weather. Ellis stated in comparison to winter water usage, total in
water usage is roughly ten to 15 percent lower.
Aho inquired what the City’s water processing and storage capacity is. Ellis replied the City
currently has 15 wells, and has four additional wells planned in the next ten years. No
expansion to the water plant is needed, as it can process 29 million gallons in a peak hour.
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November 12, 2019
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The distribution system overall is doing well. With the new ground storage reservoir, the City
will be in good standing through 2040 to 2050 for water storage.
Kotchevar stated AE2S Nexus conducted an annual study of metropolitan area rates. The
City’s rates are reasonable and lower overall compared to most surrounding cities.
Narayanan inquired why the other community’s water rates are lower. Kotchevar stated over
the years the City has stayed fairly consistent. Aho noted the water treatment plant also
softens the water. Case stated the City’s philosophy of funding the water system is different
than other cities, as there are water access charges (WAC) and sewer access charges (SAC).
Ellis noted many developers buy into the system with the SAC, WAC, trunk, and connection
fees. Getschow added the two cities with the lowest overall cost pay less for stormwater.
Narayanan inquired if infrastructure is factored into the City rates. Kotchevar stated the
incoming revenue funds the depreciation of the system. Case noted it is not an equal
comparison across cities. The City provides quality services.
Kotchevar stated the annual increases are minimal to cover costs. Sanitary sewer is projected
to increase three percent each year. Water will increase four percent. The base charge will be
increasing eight percent, and storm drainage will also increase eight percent. The base charge
is the steady revenue, no matter the weather. The City receives 20 percent of this revenue,
and the increases are comparable to metropolitan cities. Aho stated eight percent seems steep
for an annual increase over time. Kotchevar replied the eight percent base charge is what is
projected to be needed for two years, but the adjustment will decrease after 2021 to about
three percent. Aho noted the sanitary sewer costs are set by the Metropolitan Council. Case
noted the base rate will need to increase to continue to maintain the system.
Kotchevar stated storm drainage has an increase of eight percent, and these additional
resources are needed for upcoming projects. Irrigation has similar rate increases to residential
water. Aho inquired if the City is doing well on infiltration and inflow. Ellis responded yes.
The City received a grant from the Metropolitan Council to continue the work being done.
Kotchevar provided data over the history of utility water rate ranges. In 2018 tier five was
combined with tier four. Tier one has steadily decreased in the last ten years from 36,000
gallons per quarter to 20,000 gallons per quarter. Tier two and tier three have remained
consistent, and tier four has decreased. 76 percent of water usage is in tier one, 15 percent in
tier two, five percent in tier three, and four percent in tier four. Utility water rate ranges for
irrigation have remained fairly consistent. Tier one had a slight decrease from 16,000 gallons
per month to 13,000 gallons per month. Tier three and tier four were combined in 2018.
Water usage in tier one is 42 percent, tier two is three percent, and tier three is 55 percent.
Narayanan inquired if both residential and commercial water usage are decreasing. Ellis
responded they have both decreased. Case noted the school district has their own wells.
Kotchevar stated water usage has steadily declined since 2012, and water usage has remained
consistent over the last four years. In regards to the water budget, operating revenues have
increased 4.4 percent in 2020 and 3.8 percent in 2021 due to rate changes. Non-operating
revenues are difficult to budget but will also increase. Expenditures are increasing 4.1
percent in 2020 and three percent in 2021. Other expenses within the budget will be
decreasing. In regards to the wastewater fund, operating revenues will increase 3.7 percent in
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November 12, 2019
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2020 and 3.6 percent in 2021. Operating expenditures will decrease by 4.1 percent in 2020 as
there is a decrease in fees to the Metropolitan Council Environmental Services (MCES).
Expenditures will increase four percent in 2021. Aho inquired if the decrease is due to a
decrease in usage rather than rates. Ellis replied both rates and usage are decreasing.
Kotchevar stated annual MCES charges have steadily increased from 2016 until 2019. Aho
noted it would be a good comparison to look at rates as well. Getschow added many years
their rates have increased more than our budget increases. The City’s flow may decrease but
the payments have increased.
Kotchevar stated in regards to the stormwater fund, operating revenues are increasing eight
percent per year, correlating with the rate increase. Non-operating revenues are increasing
2.9 percent in 2020 and 6.7 percent in 2021. Capital outlays and depreciation will increase.
Overall, the water and wastewater funds are meeting the fund balance policy. The City is
working toward meeting the fund balance policy for the stormwater fund. Aho inquired if
fund balances are factoring in potential needs and replacement of the system. Kotchevar
stated each year part of the study is the projected revenue, subtracting expenditures, and
factoring in the capital plan. 2010 was the first time an independent analysis was done of all
the utility lines. This helped the City determine the depreciation of the system so the City can
appropriately allocate funds. Ellis noted annual MCES charges are lower, 2019 flow was
1.56 billion gallons. The last time the City flow was at this point or lower was 2016. Aho
inquired about creating a graph for MCES rate charges in comparison to total MCES charges.
Case inquired what other enterprise funds the City has. Kotchevar responded there are many,
including debt funds, tax increment financing (TIF), capital investment and maintenance
funds, economic development fund, and park improvement fund. Getschow noted these will
be reviewed in the spring. Kotchevar stated enterprise funds are for a service charged outside
of the government and the intention is to cover the cost of the service. Case inquired if the
road maintenance fund is an enterprise fund since the City charges a franchise fee. Ellis
stated Xcel Energy is charged to use the right-of-way.
Liquor Operations Manager Urbina provided an overview of the store history, 2020 and 2021
liquor operations budget, and goals. The liquor stores are engaged in the community and
maintain partnerships with the Eden Prairie Rotary, Eden Prairie Foundation, Parks and
Recreation events, and People Reaching Out to People (PROP). Year to date, there is a 2.6
percent increase in sales from 2018. Year to date, the customer count has increased one
percent, and the average sale per customer has increased 1.6 percent. Store one, by
Kowalski’s, is the frontrunner in sales.
Freiberg inquired if City liquor sales have recovered from Total Wine moving into
Chanhassen. Urbina responded the biggest impact was to the Kowalski’s store, and sales
have recovered.
Urbina stated the liquor operations priorities are customer service, employee development,
communication, and events. They have worked to build retention and loyalty through their
wine club and loyal customer perks. There has been greater success with outreach and
targeted marketing via electronic marketing and Facebook. Liquor store events have also
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November 12, 2019
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been very successful utilizing Eventbrite for ticket sales. Freiberg noted the event feedback
has been very positive.
Urbina stated the liquor stores have hosted educational events around wine, liquor, and beer
and in-store walk around events related to spirits and bourbon raffles. Overall, wine has been
the most popular with clientele. In regards to the budget, there were two new ten-year leases
for stores one and three. Narayanan acknowledged the large budgeted amount for bank and
credit card fees. Getschow added the City pays large fees on credit card purchases for
building permits as well. The City has considered a fee for credit card purchases or setting a
limit for purchases. Narayanan inquired if cash is required to purchase a gift card. Urbina
replied customers can pay with credit card.
Urbina stated there is a budgeted increase of 3.2 percent in sales for 2020 and 3.5 percent in
2021. There is an operating expense increase of four percent for 2020 and 3.5 percent for
2021. There is an operating income increase of 1.3 percent for 2020 and 3.2 percent in 2021.
Narayanan inquired if the City has considered delivery. Urbina replied this is a work in
progress. Ideally, the City would like delivery to be a mainstreamed process rather than
handling the delivery through many different groups.
Open Podium - Council Chamber (6:30)
II. OPEN PODIUM
III. ADJOURNMENT