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City Council - 06/18/2002 - Workshop APPROZ'ED ilUNLITES EDEN PRAIRIE CITY COUNCIL WORKSHOP TUESDAY,JUNE 18,2002 7:00 PM, CITY CENTER Heritage Room II 8080 Mitchell Road CITY COUNCIL: Mayor Nancy Tyra-Lukens, Councilmembers Sherry Butcher, Ron Case, David Luse and Jan Mosman CITY STAFF: City Manager Scott Neal, Parks & Recreation Services Director Bob Lambert, Public Works Services Director Eugene Dietz, Community Development and Financial Services Director Don Uram, and Recorder Peggy Rasmussen I. ROLL CALL/CALL THE MEETING TO ORDER Mayor Tyra-Lukens called the meeting to order at 5:45 p.m. Councilmember Sherry Butcher was absent. H. APPROVAL OF AGENDA MOTION: Mosman moved, seconded by Luse, to approve the agenda as published. Motion carried 4-0. III. PRELIMINARY BUDGET DISCUSSION Tyra-Lukens reported that Financial Services had received the Distinguished Budget Presentation Award from Government Financial Operations (GFO). The award will be presented to the City at a future City Council meeting. Tyra-Lukens congratulated Uram on obtaining this award for the City. A. Presentation of 2003 Financial Plan Uram made a presentation on the 2003 Financial Plan. He reviewed the budget process, budget objectives and financial results from 2001. During the first year in the biennial budget process, the 2002/03 Budget and the 2002/08 CIP was developed and adopted. During the second year, the 2003 Budget will be formally adopted. Advantages of a biennial budget are that Strategic Planning is done in alternate years, the City develops a longer-term perspective, financial planning is improved, the budget process is streamlined, and it allows time to focus on other areas in the second year. Uram said limitations of a biennial budget are that revenues and expenditures are uncertain, budget decisions could become outdated and economic conditions could change. Facing uncertain revenues is probably the one that is the biggest problem. The Governor's proposal would have reduced tax revenues by approximately S1.2 million if it had become law. The City receives approximately 70 percent of its revenue from tax receipts, so property values and office vacancies affect the City's revenues. Building permits this year still exceed COUNCIL «'ORI+ISHOP AMINUTES June IS,2002 Pa`,-e 2 the past several years in terms of the number and value, which shows the housing market is extremely strong,whereas office and commercial markets are weak. One of the Council goals for the year would be to review and update the Strategic Plan and look at what has been accomplished. Business relationships are being developed, centering on the use of technology and a Web site partnership. One of the Budget Objectives is to review and amend the 2003 budget. Another is to comply with tax legislation. The City will need to set levy limits again this year. In 2001, the City levied to the maximum of 12 percent. This year it is looking at a cap of six-to eight percent. The budget was developed at six percent. The Capital Improvement Program (CIP) includes a transfer each year of $500,000 from the General Fund and $700,000 in net liquor store sales from the Enterprise Fund. Of that amount, less than $30,000 is from the sale of cigarettes. Within the General Fund, the City plans to maintain an undesignated fund balance equal to 40 percent of budgeted expenditures. Uram said this figure was arrived at by comparing Eden Prairie to other similar communities. The Revenue Stabilization Fund includes funds transferred from building permit and development revenue that is above the budgeted figures, and is reserved to offset future operations. The long-term model for the CIP shows the transfer from liquor sales will fund $2.5 million in projects through 2012. Long-term debt will be confined to capital improvements or projects that cannot be financed from current revenues. Uram said the City tries to use debt to its advantage, such as the cost of the joint public training facility,police and fire equipment, etc. A review of the financial performance in 2001 showed revenue of$27,822,860, expenditures of$25,862,763, and a surplus of$1,960,097. The surplus occurred because of positive budget performance. Conservative budgeting included five- percent tax abatement, accelerated building permit and development fee collections, investment income and delayed expenditures. Uram said interest rates are at 50-year lows. The City bought CDs that paid two percent more than other securities, and maintained more in cash reserves than in the past. He tools advantage of the tax increase by refinancing the City Center and the second ice sheet at the Community Center. Uram said Critical Issues regarding personnel include the rising cost of health insurance. The 2003 budget will reflect an increase in health care costs of $265,000. This is a substantial increase over the past years, and costs are not expected to go down. There will be double-digit increases for the foreseeable future,which will have a major impact on the budget. Opportunities include the business partnership for technology. The City is behind in moving toward a G.I.S. system but it will be done as soon as possible. The City has been conservative in the use of debt. Leasing revenue bonds, backed by revenue generated by the City, goes toward funding debt. Special assessment debt is primarily used for the City's infrastructure. Transportation funding is also a major issue. Contingent expMdit-ures are primarill, for the Frog. Cloud -Vrport COUiNiCIL«'ORKSHOP ilIIiNUTES June 1 S,2002 Pane expansion. Uram said CIP challenges include the transfer of$500,000 from the General Fund to the CIP. This is the critical piece. Following is the Budget Schedule: • June 18 Budget Workshop • Aug 20 Budget Workshop • Sept 2 Preliminary levy adopted • Nov/Dec Truth in Taxation hearing • Dec 17 Adopt biennial budget/CIP • Dec 27 Certify Levy B. Discussion Luse asked what process the City uses to make decisions about health insurance costs. Uram replied the City has a Health and Benefit Committee as well as a consultant who advises them. Staff has looked at every option available. The City's schedule for renewing health insurance runs from mid-year to mid-year rather the calendar year, which allows the City to negotiate better rates. Luse stated the City has to be protective of that benefit for employees. The next five- to ten years will see a tight labor market and it is important to keep the morale of employees positive. Neal agreed it is an important benefit for employees. The City doesn't want to jump from one insurance plan to another because of how that affects employees. Case said school employees expect that within five- to six years their salary increases will go to cover the increased cost of health insurance. He expected City employees will be facing the same issue. Case pointed out that, as employees become older, health insurance would become more expensive. Luse urged them to do everything they can not to take the increases off employees' salaries. Uram replied the City is a service industry so most of its budget is wages and benefits. The City needs to make sure it treats employees as fairly as possible, but also look at what this is costing the City's taxpayers. It has to look at fiscal responsibility, as well as the matter of being fair and getting the best benefits. Mosman referenced a management letter sent to councilmembers. She asked why property taxes are going up if property values are going down and if that included businesses as well as homes. Uram replied property taxes went up because the City levied more taxes. Property tax is a tied directly to what the City levies. When City expenditures go up the tax levy goes up,which includes all property. Uram stated the City's only sources of revenue are from property tales, building permits and development fees. As the overall budget goes up, there is no way for the Cite to get more revenue, so it has to increase property tales. COUNCIL WORKSHOP MLNUTES June 1 S, 2002 Page 4 Mosman said the management letter indicates a large increase in expenses for Public Safety last year. Uram said the increase was for a new computer system. Mosman asked about the increase in legal expenses last year. Uram responded that the airport legal expenditures were over budget. Dietz explained storm drainage expenditures were over budget due to pond maintenance. By the end of this year he expects to have an item in the CIP for maintenance. The different kinds of water bodies in Eden Prairie will be prioritized this year, with Round Lake and all its tributaries having a high priority in order to keep phosphorous out of the lake. Dietz said to remember when going through the Strategic Planning process that there will always be a demand for single-family housing, and emphasized the importance of maintaining the City's parks. Case said the Senior Issues Task Force found that substantially fewer single- family homes will be needed in the near future. He pointed out the necessity of retaining the City's high quality of life to attract more people who want single- family homes, and to keep up the value of homes. One way for the City to show this would be to join with the School Board in making a statement that we value the quality of life in Eden Prairie. Dietz said the City has to decide whether housing inspections will be required at point of sale. That would put an emphasis on keeping up houses. IV. OTHER BUSINESS Tyra-Lukens inquired if a joint meeting with the School Board has been setup. Neal said he has talked to Melissa Krull, Acting School Superintendent, who suggested either Friday, August 16 or Tuesday, August 20. Tyra-Lukens asked Case if he thought there should be another Senior Issues Task Force to revisit the same issues as before. Case said he believed there was a need to do that. The task force could consider where Eden Prairie is going to be in 2015 and if it is on track to get there. This would help the City with its Strategic Planning. V. ADJOURNMENT MOTION: Case moved to adjourn the meeting. Mayor Tyra-Lukens adjourned the meeting at 6:45 p.m.