City Council - 07/12/2022 - Workshop
APPROVED MINUTES
CITY COUNCIL WORKSHOP & OPEN PODIUM
TUESDAY, JULY 12, 2022 CITY CENTER
5:00 – 6:25 PM, HERITAGE ROOMS
6:30 – 7:00 PM, COUNCIL CHAMBER
CITY COUNCIL: Mayor Ron Case, Council Members Kathy Nelson, Mark Freiberg, PG
Narayanan, and Lisa Toomey
CITY STAFF: City Manager Rick Getschow, Police Chief Matthew Sackett, Fire Chief Scott
Gerber, Public Works Director Robert Ellis, Community Development Director Julie Klima, Parks
and Recreation Director Jay Lotthammer, Administrative Services/HR Director Alecia Rose,
Communications Manager Joyce Lorenz, City Attorney Maggie Neuville, and Recorder Katie
O’Connor
Workshop - Heritage Rooms I and II (5:30)
I. 2023 BUDGET (5:30-6:00)
Mayor Case stated the budget is one of the most important things the Council approves as it
reflects the values of the Council and City. Getschow stated this is the second year or the
two-year budget process. At least 95 percent of the budget numbers are similar from when
the 2022-2023 budget was reviewed and discussed in 2021. Historically, the two-year budget
process has worked well. The budget process begins with City work plans created by staff
and presented at a Council workshop, along with City-wide community survey results. The
cycle will begin again with the City-wide survey being conducted at the end of the year.
Much of the budget reflects the services and responses to the survey. The City-wide goals
remain the same and Staff work plans are centered on these goals. The overarching City-wide
goals, that direct the City work plans, have remained the same for the last six years. These
goals could be discussed at the beginning of the year with the newly elected Council. The
goals for the 2022-2023 budget are to provide value to citizens through high-quality City
services and reasonable tax impacts. Another goal is to maintain a strong financial position
with a balanced budget and maintained bond rating. The Council also determines priorities at
the beginning of every year which, this year, include public safety support and investment,
race equity initiative, Housing Task Force Report implementation, sustainability initiatives,
promoting small business/entrepreneurship, light rail opening day plans, and post-COVID
community engagement.
Getschow stated the City Council priorities from the 2022 workshop are included in the
budget. Getschow stated there are some large projects to discuss in the budget. Some of the
general themes of the budget have to do with road improvement projects and transportation.
Almost two million dollars in the operating budget have been designated for trail
maintenance and extensions. There are some capital projects coming up as well as
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July 12, 2022
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implementing the Aspire2040 plan. In the 2022 budget, three positions and a contract for a
social worker with the County were added. Two of those positions are still being hired for: a
police officer and full-time fire administrative position. The proposed 2023 tax levy is
budgeted for a 4.5 percent increase from 2022, similar to the previous year.
Intergovernmental revenue decreased 72.6 percent due to COVID funds received last year.
Other revenue, charges for services, and licenses and permits remain fairly similar. Charges
for services is starting to increase and parks and recreation programming is beginning to
rebound after COVID. Community Center membership continues to be down about 1,000
memberships in comparison to pre-COVID numbers. The difference in membership revenue
was filled by CARES Act funds in 2020 and 2021, and some of the lost revenue will continue
to be budgeted back in 2022 and 2022. Full capacity may not be reached for a couple more
years. Nelson inquired if the City is still offering reduced rate or free classes to families who
qualify with lower income. Lotthammer responded the Passport to Fun program is still
happening. The use of the program is about the same as it was pre-COVID.
Getschow stated the largest source of revenue is property taxes, then charges for services
such as parks and recreation revenue, and third is licenses and permits. Actual licenses and
permits revenue were very high in comparison to the budgeted revenue. 2022 revenue will be
at a similar amount or slightly below. When there is excess general fund revenue, excess
dollars are transferred to the capital improvement fund. Cable television revenue has
remained similar. The 10-year cable agreement is expiring, and the City is currently
renegotiating. The hope is to receive more revenue for government programming to utilize
for cost related to broadcasting meetings. Intergovernmental revenue in 2023 should be about
the same as the total pre-covid without CARES Act dollars. The proposed increase in the
budget from 2022 is 3.4 percent. The loss in revenue in 2022 will be made up with CARES
Act funds. In regard to wages and benefits, the City will conduct a compensation analysis
and determine which positions should increase in pay to be comparable to other cities. There
are enough dollars set aside within the budget from cost savings in other areas such as
insurance or attrition. The City is also currently conducting a request for proposal (RFP) for
health benefits, and a ten percent increase has been budgeted prior to having those final
numbers.
Getschow stated there is a 4.5 percent proposed increase in the general fund budget for 2023.
No increase in the debt-per-capital levy would mean a total increase of 4.2 percent. Staff are
unaware where fiscal disparities will end up until next month. A conservative estimate would
be for fiscal disparities to stay the same. The total proposed levy increase would then be 4.4
percent. The City will continue to pay off debt as they did in 2022. Market value for 2023 is
unknown, but it is expected to increase and is estimated at over $13 billion. Because of the
increase in market value, the City tax rate is below 30 percent for the first time in over 15
years. City property taxes would increase about $10 for the median value home. In the State
of Minnesota, commercial property is still taxed at a higher rate than residential. This last
year, the average valued home increased by 19 percent and the average valued commercial
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July 12, 2022
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property went up two percent. The median value home increases from $430,4000 in 2022 to
$513,200 in 2023. A median value home with a tax increase of 19 percent would have an 8.5
percent increase in taxes or $121. Decreasing the levy would only decrease the increase in
property taxes by about one percent. When comparing City taxes, last year the City was the
third lowest compared to five neighboring cities and the second lowest for total tax. This year
may even be lower, but more data will be available towards the end of the year.
Nelson inquired if the City taxes still fall in the lower 15 percent of cities in the metropolitan
area. Getschow responded yes, but more data will be available at the end of the year. The
school district also does not have any major anticipated levy changes. For next steps, the City
Council will vote on the proposed tax levy and budget September 6 or 20. On December 6
there will be a public meeting and adoption of the final budget and tax levy.
II. LIQUOR OPERATIONS (6:00-6:30)
Jaime Urbina, Liquor Operations Manager, stated he would present data about sales trends
and liquor operations. There have been changing customer trends since opening on Sundays.
Sunday is one of the slowest days of the week, 9.3 percent of total sales annually, but
continues to show the most growth. It is also the day with the least amount of payroll used.
Friday continues to be the biggest sales day of the week since 2017. Some of the sales have
spread out from other days of the week to Sunday. They conducted a survey this year asking
about the most important factors being location and convenience. Convenience received the
least number of responses. Year-to-date gross profits have slightly increased compared to last
year. Overall sales are slightly lower due to a difficult first quarter, but the second quarter
data is trending up. There were a couple of days this year a store had to be closed due to
COVID. There has been a decrease of about one percent in customers. Average sales per
customer continues to increase. Getschow noted store one, near Kowalski’s, is the one that
took the largest decrease in sales after Total Wine and Haskell’s moved nearby.
Urbina said, based on 10-year sales trends, sales peaked in 2013. The lowest sales were in
2017. Sales are currently trending back up. Case noted Sunday, with the lowest payroll, has
good net profit for sales. Nelson stated Sunday availability gives people options. Freiberg
noted a slower Sunday is offset by other factors. Urbina added for the sake of convenience, it
has been best to be open to allow customers to shop whenever they can.
Toomey inquired if the liquor stores have been experiencing shortages. Urbina replied there
have been some issues. One of the biggest issues has been the merger of two larger
companies and experiencing a shortage with their products.
Nelson inquired if City liquor stores do special orders for customers as Total Wine will not.
Urbina replied yes.
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July 12, 2022
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Case stated, on a similar note, one topic the Council will need to further talk about is
Tetrahydrocannabinol (THC) and the changing laws. Freiberg added there aren’t many
guidelines in the bill about amounts. Case noted there will be the discussion around how it
involves our liquor stores but also how the City would regulate it. Getschow added the
Mayors and City Managers of MLC will be meeting next week with the bill authors.
Open Podium - Council Chamber (6:30)
III. OPEN PODIUM
IV. ADJOURNMENT