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City Council - 07/11/2023 - Workshop APPROVED MINUTES CITY COUNCIL WORKSHOP AND OPEN PODIUM TUESDAY, JULY 11, 2023 CITY CENTER 5:00 – 6:25 PM, HERITAGE ROOMS 6:30 – 7:00 PM, COUNCIL CHAMBER CITY COUNCIL: Mayor Ron Case, Council Members Mark Freiberg, PG Narayanan, Kathy Nelson, and Lisa Toomey CITY STAFF: City Manager Rick Getschow, Police Chief Matt 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 Sara Aschenbeck Workshop - Heritage Rooms I and II (5:30) I. 2024-2025 BUDGET Getschow explained Council discusses the budget multiple times per year. The budget process begins with a council goal session in February. Events such as division work plans, the prior year financial audit results, and the Quality of Life survey occur throughout the year and influence the budget. Council reviews the preliminary tax levy in September. In the fall Staff prepares the Enterprise Funds budget, and the budget is finalized in December. Getschow highlighted the Quality of Life survey results. The City’s benchmarks and rankings have continued to rise compared to surrounding cities. Residents rate the City’s services highly, and the City’s tax rate is one of the lowest in the area. Getschow also stated the goals of the City drive the budget. The goals are Community Well-Being and Safety, Economic Vitality, High-Quality Efficient Services, Innovative and Sustainable Practices, Preserved and Beautiful Environment, and Sense of Community. Getschow began with overall goals for the 2024 – 2025 budget including providing value to citizens, creating a balanced budget, maintaining fund balances, and conservatively estimating revenues and expenditures. The City will ideally spend between 97 and 99 percent of budgeted expenditures to ensure the property tax levy is accurate. If revenues are greater than expenditures, the excess is transferred to the Capital Improvement Fund. Getschow noted as a service organization, almost 70 percent of expenditures are related to people. The City is focusing on recruitment and retention related to Diversity and Inclusion. The City has a high level of employee satisfaction and competitive pay. These factors ensure the City provides high quality services. The 2024 – 2025 budget focuses on maintaining the workforce and continuing the level of service delivery in the face of rising inflation. City Council Workshop Minutes July 11, 2023 Page 2 Next, Getschow outlined the 2024 – 2025 budget by department. Rising costs for insurance, energy, IT, facilities, and fleet are the main sources of budgeted expenditure increases. The Administration budget is increasing in 2024 for three elections the City needs to staff. Narayanan inquired if the City receives any money from the State to fund elections. Tammy Wilson, Finance Manager, confirmed the City receives about $40 thousand from the State which does not fully cover the $100 thousand of expenditures. Case inquired if the City receives reimbursement from political parties as the purpose of a primary is for political parties to select candidates. Getschow answered no. Getschow explained the Fire budget includes a service study to evaluate service delivery and its current staffing model. The City is one of the last paid on call duty crew fire departments in the area. Public Safety is budgeting for a fire fleet replacement, a police station remodel, and education of future police officers. The City will receive $2.8 million dollars from the State for a one-time Public Safety cash infusion, which will be used for police equipment or fire fleet replacement. Toomey inquired if these funds can be used for the mobile command unit. Sackett confirmed Police has submitted an application for a Burns grant of $1.2 million of federal funds for the mobile command center. Getschow stated Parks and Recreation is budgeting for trail extension and trail maintenance. The newly constructed Round Lake building will be open in the next year. The Public Works budget includes investments in infrastructure and sustainability initiatives such as the City’s Climate Action Plan, solar energy, LED lighting, organics, recycling, and fleet electrification. The Community Development budget prioritizes housing and race equity. The City will receive approximately $500 thousand per year from a new sales tax to expand housing programs. Getschow noted Council prioritizes community engagement. The City is seeing record number of attendance at community events. A class of residents recently graduated from City Government Academy. In Summer and Fall 2023 the Council will attend several town halls in different communities. The August City Council Workshop will be dedicated to the City’s relationship with the school board and a September City Council Workshop will be dedicated to the non-profit community. Getschow explained technology is also a focus of the budget. Technology such as police body cameras and enhanced software allows the City to conduct business more efficiently, but there is a higher cost. Nelson inquired if the City is utilizing electric lawn mowers. Lotthammer stated no. It is not feasible to mow the City’s parklands with an electric lawn mower due to park size and frequent recharges needed. However, the City received a grant from the Minnesota Pollution Control Agency for battery powered equipment such as string trimmers and chain saws. Nelson stated the City should utilize the electric technology as soon as it is feasible. Lotthammer confirmed that is the City’s practice. Getschow added the City has an electric Zamboni and will soon have an electric garbage truck. City Council Workshop Minutes July 11, 2023 Page 3 Getschow next summarized the revenue budget. Property tax revenue, which is the City’s largest revenue source, is proposed to increase $2.2 million or 5.4 percent for 2024 and 4.9 percent for 2025. Narayanan inquired what the property tax increase was in 2023. Getschow responded 4.5 percent. Getschow explained the second largest source of revenue is Charges for Services, the majority of which is from the Eden Prairie Community Center (EPCC). Before COVID the City received almost $2 million in EPCC membership revenue. This dropped to under $700 thousand during COVID. The City will receive $1 million of American Rescue Plan Act (ARPA) funding in 2024 and 2025 to offset lost revenue mainly at the EPCC. EPCC membership revenue is currently at $1.2 million and is expected to be over $1.5 million by the end of 2025. The final ARPA funding will be received in 2025, and the EPCC is projected to be back to pre-pandemic revenue by 2026. Getschow noted in intergovernmental revenue, the Police Department renegotiated the amount the Eden Prairie School District pays for officers in the schools. Over the past 15 years, the school district has paid between 20 and 40 percent of the wages and benefits for the four officers in the schools. Starting as soon as 2024 this will increase to 50 percent. Getschow explained building permit revenue is unpredictable. The City has traditionally budgeted for $2 to $2.5 million of development revenue. 2021 was the highest year in the history of development revenue as 2020 development was suppressed due to COVID. The City budgets for building permit revenue conservatively as Eden Prairie is mostly developed. Development focus now is mainly on remodeling and redevelopment. Any building permit revenue over budget is transferred to the Capital Improvement Fund. Getschow continued onto General Fund expenditures. The Public Works budget is decreasing by approximately $400 thousand as those expenditures will now be funded by franchise fees. The Police budget is increasing for an enhanced focus on recruitment, and an additional full time officer in mid-2024. The Fire budget is increasing due to a raise in duty crew wages. Getschow explained Staff reviews each budgetary line item to determine its necessity and find areas to reduce costs. Discretionary spending has decreased by creating efficiencies without the need to eliminate any services. The Facilities budget is increasing $450 thousand dollars in 2024 due to non- discretionary spending, mainly higher gas and electric rates. As the City follows a two-year budget cycle, the 2023 budget was adopted in 2021. Gas and electric rates have increased seven to nine percent annually since the 2023 budget was adopted. The City has offset prince increases in gas, electric, and insurance by finding cost savings elsewhere. New LED lighting and high efficiency HVAC was installed in City buildings, saving $140 thousand per year. Getschow stated the Information Technology budget is increasing due to election software, fleet management software, Public Safety software, police body cameras, and police car cameras. Regarding Health and Benefits, the City began a new health insurance contract in 2022, which City Council Workshop Minutes July 11, 2023 Page 4 included a zero percent premium increase for 2023. A portion of these savings went toward updating employee compensation to remain competitive. At a maximum the health insurance premium increase for 2024 would be 9 percent, with a 5 percent increase in dental insurance premiums. There is a possibility the budgeted health and dental expenditures could decrease as the premium increase in 2024 is not yet finalized. Getschow explained there are large increases in workers compensation insurance throughout the State due to the shared risk pool. All members of the pool are seeing higher rates due to increases in Public Safety Post Traumatic Stress Disorder (PTSD) claims. The City has an average experience modification. There were many years where the City had a below average experience modification, and the City expects to return to a below average experience modification in the future. Getschow stated the proposed tax levy increase is 5.3 percent for 2024 and 4.8 percent in 2025. These percentages include the capital levy and the debt levy which remain unchanged. The City has continued to see market value increases. The City tax rate will again decrease with the proposed 2024 – 2025 budget. City tax rate is a useful statistic as it is universally comparable between cities. The City’s tax rate of below 30 percent is lower than most surrounding cities. Using the currently proposed tax levy, a median valued home would see a City tax increase of $59, less than four percent. Getschow presented a graph with the combined historical tax levies for 14 comparable cities over the past 16 years. Eden Prairie was the lowest. The City’s 2024 – 2025 budget is again anticipated to be the lowest of any comparable city. Currently, there are not any cities that are proposing a 2024 tax levy increase below five percent. All cities are facing the same wage pressure, inflation pressure, and increased cost of utilities. In September the City will set the maximum amount the tax levy can be. The levy can be lowered by December when the final version is adopted, but historically the tax levy presented in September has been the final version. Freiberg inquired why some cities have a double-digit tax levy increase. Getschow explained common reasons include a large debt levy to fund a project, or additional full-time employees. Narayanan asked if the City shares levy information with realtors. Getschow noted the City most often shares Quality of Life survey results and development information. Narayanan inquired how the $14.3 billion market cap is divided into residential and commercial properties. Getschow explained 70 percent of the additional value increase from last year was in residential properties. In the current year, the value increase is more uniform between residential and commercial properties. Industrial and apartment building values have increased the most, residential value has increased three to five percent, and commercial value has increased one to two percent. Narayanan noted he thought residential values and property taxes may have decreased after last year’s historic increases. Getschow confirmed with the City Assessor residential home values are still increasing, but at three to five percent instead of the 20 percent increases of last year. The City Assessing division values each house at its estimated sale price. City Council Workshop Minutes July 11, 2023 Page 5 Getschow asked Council to confirm its comfort level with the initial budget and the tax levy, with the knowledge staff will continue reviewing it until it is finalized in December. Nelson inquired if the City’s service level will continue at the current high level. Getschow responded it will continue at the same level or better. Nelson stated quality of services provided is crucial as City services are not free. Case noted the City has an advantageous tax base spread of 40 percent commercial properties and 60 percent residential properties. When new properties are built in the City, the tax base is increased. These may be some contributing factors to the City having the lowest historic levy increases while maintaining very high levels of customer service. Nelson added the City began energy efficiency projects earlier than surrounding cities. II. THC UPDATE Getschow introduced the next topic, THC. A recent State law gave liquor stores the ability to sell low potency THC drinks and gummies. Several surrounding municipal and private liquor stores are now selling low potency THC products or will be soon. Getschow asked the Council for direction on City liquor stores selling low potency THC products. Case inquired if the age limit is 21 and above for THC. Getschow confirmed the age limit of 21 and above is correct. Case questioned how State Statute addresses consuming THC and operating a vehicle. Sackett confirmed he would review the Office of Traffic Safety’s latest guidance. Case inquired about the signage requirements for selling THC products, and noted the City should be responsible and ethical by ensuring products are well labeled. Neuville explained state law has label and packaging requirements for THC products. Case confirmed he is comfortable with City liquor stores selling THC products and stressed the importance of Staff researching how to sell THC products responsibly and ethically. Getschow stated in the next few years municipalities must allow at a minimum one marijuana dispensary per 12,500 people, which would be five dispensaries in the City. Getschow asked the Council if it would like to cap the maximum number of dispensaries at five, with the knowledge the cap can be increased. Vendors would still need licenses from the City and the State and conduct business in a properly zoned area. Nelson inquired if the three City liquor stores would count for three of the five locations. Getschow noted City liquor stores selling THC products would not count as a dispensary. Case stated the Council could set the maximum number at the mandated five dispensaries for now, knowing it can revisit and raise the limit later. Toomey, Nelson, Narayanan, and Freiberg agreed to set the maximum at five dispensaries. III. MILLER COURT UPDATE Lotthammer explained the City has plans to construct an indoor court facility at Miller Park. Miller Park is the optimal location due to the compliment of summer and winter activities, in addition to the existing infrastructure in place. The cost estimates the City received back were significantly higher City Council Workshop Minutes July 11, 2023 Page 6 than expectations. The City reviewed multiple options in addition to an indoor facility, such as a partial replacement or an outdoor facility. RJM Construction Management, a highly regarded vendor the City has worked with previously, created cost estimates for the different options. The indoor facility would include two tennis courts, six pickleball courts, a locker room area, and a lobby area. The indoor facility would cost $13 million, funded by $6.5 million of cash park fees and $6.5 million of bonds. The City could use the facility’s park fees to repay the bond. An outdoor facility would cost $1.8 – $2 million and would be funded by cash park fees. While the outdoor court facility is less expensive, it cannot be used in winter and requires more maintenance as the court is exposed to the elements. To remain on schedule, the City would need to request bids for the facility by early 2024. Toomey inquired if a dome would be feasible. Lotthammer noted controlling temperature in a large volume of space is challenging. Toomey inquired if a sponsorship is possible. Lotthammer noted naming rights for the facility would likely generate $500 thousand. Narayanan inquired if it would be less expensive for the City to buy an existing facility within Eden Prairie and modify it. Lotthammer noted the City has not explored converting an existing facility. Case stated the Council has too many questions to give an answer on the indoor court facility. He added he receives many inquiries from residents regarding Pickleball and requested Lotthammer to return with possible alternatives to an indoor facility. Open Podium - Council Chamber (6:30) IV. OPEN PODIUM John Mallo, 14000 Foresthill Road, stated he has concerns about Senior Center bus drivers consuming alcohol during lunch and then returning to the Senior Center to operate a bus. Bus drivers for the Eden Prairie School District follow a zero-tolerance policy for alcohol. Mallo stated wearing a seatbelt is not enforced. Lotthammer noted there are state laws applicable to school bus drivers, but they do not govern smaller busses such as the 15 passenger Senior Center bus. The City is not legally required to perform items such as background checks for drivers, but does so as a best practice. Proper seatbelt use is part of the employee handbook and training procedures. Senior Center staff has not had concerns over drivers operating a bus under the influence of alcohol. The City has investigated these claims with no findings. Case stated in previous conversations he has encouraged Mallo to work with the State legislature to enact laws for smaller passenger busses. Freiberg inquired if the City had a best practice regarding drinking and operating a City vehicle. Getschow confirmed the City has a zero-tolerance policy for operating a City vehicle under the influence of alcohol. V. ADJOURNMENT