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City Council - 08/21/1997 - Workshop APPROVED NIINUTES EDEN PRAIRIE CITY COUNCIL THURSDAY,AUGUST 21, 1997 7:00 p.m. CITY CENTER CITY COUNCIL Heritage Room IV OVERVIEW OF 1998 8080 Mitchell Road PROPOSED BUDGET COUNCILMEMBERS: Mayor Jean Hams, Councilmembers Sherry Butcher-Younghans, Ronald Case, Ross Thorfinnson Jr., and Nancy Tyra-Lukens CITY STAFF: City Manager Carl Jullie, Assistant City Manager Chris Enger,Finance Director John Frane,Assistant Finance Director Don Uram, Director of Assessing Steve Sinell,Director of Human Resources and Community Services Natalie Swaggert, Director of Inspections Kevin Schmeig,Director of Parks,Recreation and Facilities Bob Lambert, Chief of Police Jim Clark, Accountant Sue Kotchevar, Fire Chief Spencer Conrad, Police Greg Thorkelson, Facilities Manager Barb Cross, Director of Public Works Eugene Dietz, and Council Recorder Barbara Anderson I. CALL MEETING TO ORDER Mayor Harris called the meeting to order at 7:03 p.m. H. OVERVIEW OF 1998 PROPOSED BUDGET Jullie gave a historical perspective of the budget process illustrating a downward expansion in the rate of increase. He noted the City of Eden Prairie has a balanced budget and the bulk of the revenues are generated by property taxes. On a$168,000 median home the tax bill for 1998 would be$631.00,which is $12.00 over the 1997 levy. The City has endeavored to maintain the same budget levels as last year,but this does not include the transit tax levy and there will be an increase for some technologic upgrades for the Police Department's new computer system. He reviewed the ten-year budget model which was developed in 1994 and revisions which have been made to it. The strategies used were reduction in spending for operations and development of a source of revenue other than property taxes. The 1997 budget included a 4% tax increase on a median value home rather than the projected 6% increase. In 1998 the City will be complying with the levy limits set by the Legislature and supplying performance measures based on costs of services within the City. Enger reviewed the 1998 Proposed Budget highlights which include a 6.3% cap on levies. The City needs to determine how we are going to live within this cap. He reviewed the projected tax impacts on properties in Eden Prairie and discussed the General Fund revenues CITY COUNCIL WORK SESSION MINUTES August 21, 1997 Page 2 which would be generated from the various revenue sources. We have been conservative in estimating these numbers because they have been based on the 1997 figures. Operations transfers include monies from the liquor store and the utility fund. Kotchevar explained that other revenue has gone down because special assessments are decreasing and Industrial Revenue Bonds are also decreasing. Enger stated expenditures show a larger increase in the 1998 Shared Services budget line item because wages are not included in the 1997 comparison amount. Dietz reviewed the utility budget and the proposed water rate increase for 1998 will be five cents. 1998 will be the first year we will have full staffing for the plant expansion and begin to haul the lime residuals on a daily basis, which is expected to be a substantial increase over 1997. He explained that the City has to pay the incremental cost of sewage disposal incurred in 1996 above the estimated cost as part of the 1998 billings. Excess costs from 1995 are included in the 1997 budget. Kotchevar noted that in 1998 we will start paying actual costs which should eliminate this catch-up accounting technique. Enger reviewed the liquor store operating budget and explained that the City is paying itself rent for the Cub Foods Liquor Store only,which will reduce the debt level and give the City a way to reduce the building debt retirement. Uram noted that the first four weeks of operation in the Cub Foods Liquor Store they were ahead in sales,but this has decreased in the last two weeks. Sales are slanted towards wine at the Cub Foods store and it appears that store will sell more wine than the other stores. There is a higher markup on wine which means this will be a more profitable store. Enger commented that the City needs to concentrate on the continued growth of the tax base. He said we have a conflict between traffic capacity versus allowing construction of more square footage of office buildings in the commercial areas. Cost containment will be important as development revenues slow down. The Capital Improvements Plan has been consolidated into something that will put more emphasis on getting the maximum result from monies spent. Levels and types of services will be broken down into one or two levels and costs for each service level spelled out. Performance measures will show the basis for starting points and where the City is now. He discussed use of the LOGIS system and computer software packages which are more cost effective in the long term. Issuing equipment certificates would spread the expenditure out over a five year period and would mitigate having the entire costs on this year's budget. The increase over the levy limit would be$144,000 which would pay off the expenditure over five years. We need to decide if we are going to include this in the budget by next Tuesday. It can be done for this purpose and would be an increase of 1%per year. Instead of the $12.00 increase per median home it would be$17.00 per year. Mayor Harris inquired if staff was asking for direction on this and Swaggert responded that equipment certificates are a good way to deal with this problem as technology is changing so rapidly it is more and more difficult to keep up. Clark stated the equipment would be used for the Fire Department as well as Police and there could be other uses within the City for this equipment. They have limited opticom and are looking at some other alternatives. They are looking at another emitter which has a much lower cost. Harris inquired if the LOGIS CITY COUNCIL WORK SESSION MINUTES August 21, 1997 Page 3 system would meet the City's needs, and noted she agreed that equipment certificates were the way to accomplish this. Harris directed staff to go with the equipment certificates because it would allow the greatest flexibility for a future decision to be made. She stated she was most impressed by the efficiency with which a process was moving along from year to year and this year was the best of all. Thorfinnson asked about one-time revenues and Dietz responded those were fees based on 5%of the construction costs which are charged for construction projects. They want to use the tools that are available and save the one-time revenues for future capital improvements. Thorfinnson inquired where the funds for capital improvements were in the budget. Enger responded they were obtained from special assessment fees. Thorfinnson inquired if there was any allocation for future capital improvements in the budget, and Jullie responded that there is$0.5 million reserved in the Capital Maintenance Fund. Thorfinnson stated it would be best to save on a systematic basis to be able to cover these expenses when they arise. Enger stated that the 5%which is budgeted for tax abatements could be reduced to 3%which would leave a cushion and as we get better information by December the Council could give staff direction to put the 2% into the CIP fund. Tyra-Lukens stated we should do this because we are going to have a problem in the future if we don't do something now. She asked what we did last year and Enger responded that we will have to keep new employees to a minimum again this year,but we will need to create 2.5 new positions. We will not add any new services. Dietz stated they have held the line with sealcoating and overlays on the City streets,but he believes this is the wrong trend for a roadway system that is getting older. If this continues there will be fewer miles of streets being sealcoated. Thorfinnson asked why staff was not presenting the Council with options and Enger responded that the new levy limits greatly reduced any spending options we might otherwise have had. Jullie stated that the Truth in Taxation Hearings are scheduled for 12-10-97 and 12-16-07. III. OTHER BUSINESS None. IV. ADJOURNMENT Mayor Harris adjourned the meeting at 8:30 p.m.