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City Council - 08/16/2005 - Workshop APPROVED MINUTES EDEN PRAIRIE CITY COUNCIL WORKSHOP OPEN FORUM/OPEN PODIUM TUESDAY,AUGUST 16, 2005 CITY CENTER 5:00—6:25 PM, HERITAGE ROOM II 6:30—7:00 PM, COUNCIL CHAMBER CITY COUNCIL: Mayor Nancy Tyra-Lukens, Councilmembers Brad Aho, Sherry Butcher, Ron Case, and Philip Young CITY STAFF: City Manager Scott Neal, Police Chief Dan Carlson, Fire Chief George Esbensen, Public Works Director Eugene Dietz, Parks and Recreation Director Bob Lambert, Community Development Director Janet Jeremiah, Finance Manager Sue Kotchevar, Communications Manager Pat Brink, Assistant to the City Manager Michael Barone, City Attorney Ric Rosow, and Recorder Lorene McWaters Heritage Room H I. 2006-2007 Budget and CIP Budget City Manager Scott Neal said the objectives for the workshop were to: • Seek Council input on the proposed budget • Review the proposed 2006-2010 CIP • Discuss the proposed fund balance policy Neal said the 2006 General Fund budget proposal has been refined since the August 2 Workshop, and it now totals $31.5 million. This represents a 4.9 percent increase over the 2005 budget. The 2007 proposed budget totals $32.8 million, which is 4 percent more than the 2006 budget. Neal proposed the following expense reductions to close the $2.5 million gap in the draft budget: • Reduction in requested service level increases and expansions for Facilities • Reductions in the City's grant program for social service agencies • Conversion of the proposed new Community Development FTE to a part-time position • Elimination of the proposed two new FTEs (one in Police and one in Street Maintenance) City Council Workshop August 16, 2005—page 2 Increases in revenue under the proposal would include: • Increase in the General Fund levy • Creation of a new Street Lighting Utility • Creation of a new HRA levy • Implementation of a Rental Housing License Fee Councilmember Case asked if the funds cut from the social service grant programs will be picked up by other agencies. Neal said he does not know of other organizations that would make up the difference. Councilmember Butcher asked if there is any way to shuffle things to keep the Community Development human services position at full-time. Neal said that is a possible,but there is a philosophical question of whether or not the City is funding our operations or other's operations through these grants. It is his preference to reduce grant funding; however, staff will take another look at it if Council wishes. One possibility would be to increase the levy slightly,probably about.1,percent to fund the position. The proposed decrease in social service grant funding is from$189,000 in 2005 to $163,000 in 2006. Case pointed out that the proposal also calls for funds to be ramped down more in future years. Changes in Funding the Budget Neal said there are some fundamental changes proposed in the way the budget is funded, including creation of a street light utility. He said communities handle this fee in a number of ways. In some cases, the fee is based on acreage. It can also be implemented through a franchise fee. Councilmember Aho asked if the goal is to break even on costs. Neal said that is the goal. Councilmember Case asked how many other communities have street light utilities. His concern is that since it is a fee, it is not deductible. He said he thought the City was saving this type of revenue to a "rainy day," and he does not feel we are there yet. He said a street light utility is reminiscent of Governor Pawlenty's "fees," although it is a direct charge for a use. Sue Kotchevar said a number of suburban communities, including Maple Grove, Savage, and Woodbury,have street light utilities. Neal said if Council feels the street light utility is a bad idea, they can choose to increase the levy or direct staff to cut an additional $750,000 from the budget. The HRA levy is a new levy outside the general fund levy. Minnesota statutes allow a city to levy up to .0144 percent of taxable market value for economic development activities. The proposed HRA levy is $200,000 per year for 2006 and 2007. Neal said he believes this would be a good funding mechanism for MCA improvements. Staff is also recommending a rental housing license fee of$11 per unit. A rental housing inspector would be hired to administer the program, which is designed to address the City's aging rental stock. Fire Chief Esbensen said the infrastructure of some of these buildings is deteriorating, but the City currently has no way of identifying problems in a timely manner. City Council Workshop August 16, 2005—page 3 CIP The proposed 2006-2010 CIP totals slightly over$120 million. This CIP includes $60 million in transportation projects that were not reflected in previous CIPs. It also includes projects identified from the facilities assessments conducted in 2005. Young asked about the wayfinding improvements listed in the CIP. Community Development Director Janet Jeremiah said the proposed funds would be used for streetscaping and wayfinding systems in the Major Center Area,particularly on the Prairie Center/Valley View Ring Road, which is a little more than four miles long. Jeremiah said other cities are experiencing costs of$2.1 million per road mile for these types of improvements. Fund Balance Policy Neal said Councilmember Young asked staff to review the unreserved fund balance policy in December 2004. The proposed policy provides for tighter controls and more Council input. Aho said he thinks it is a good idea to have a policy. He said keeping the unreserved fund balance at 15 percent is okay,but he would be more comfortable if it were 10 percent. He said his research indicates 10 percent is more than adequate. He said information he reviewed from Moody's and the GFOA indicates a reserve of 5 percent is adequate, and 15 percent is considered on the high end. Aho would like to include a statement of what circumstances trigger spending out of the account and who makes the decision. He would also like to have a procedure for bringing expenditures before Council. Neal said it would not be a problem to add that language to the policy. Butcher said she has a different perspective on the unreserved fund balance level. She said she can think of many threats under which the City might need that money. Butcher cited a GFOA document which suggests minimally maintaining a balance of between 8 and 17 percent. She said she would be comfortable with a 17 percent fund balance. She agreed it is a good idea to have guidelines for using the funds, although she thinks it would be unwise to make them too restrictive. Butcher said she has seen three bond rating changes since she has served on Council, and she believes our fund balance is part of the reason the City has such a good rating. Case agreed it is a good idea to have guidelines for use of the funds; however, he thinks the correct level of the fund is subjective. Different experts have different theories on the topic. He said modeling from the State and Federal government has shown spending down fund levels can be risky. Case prefers to be ready for an unforeseen circumstance. He said the City has been fiscally conservative in saving this money in order to not be caught off guard. He feels 15 percent is an adequate fund balance. City Council Workshop August 16, 2005—page 4 Aho cited a 1990 GFOA research bulletin that said fund balances in excess of 10 percent should be carefully examined. Case noted that document was published pre-9/11, and that views may have changed since then. Young said he wanted to make it clear most of the concerns he raised about the fund balance last year have been addressed in the proposed policy. As for the appropriate level for the fund balance, he said, "Reasonable minds can disagree." He would prefer to see a lower level 1) because the need to dip into the cash reserve has been rare, and 2) the City's working capital account is stronger than in the past. Young said his general preference is for government to hold on to less cash rather than more. Tyra-Lukens said all of the opinions expressed are valid. She suggested approving the staff-recommended 15 percent balance for 2006, and revisiting the issue in the future. Neal said the fund is currently at 17 percent. If Council approves the 15 percent level, Neal recommended transferring the additional two percent(about$1 million) into the CIP. Young recommended leaving it up to Council to decide where excess funds are directed, instead of automatically transferring them to the CIP. Neal noted that the City's auditors recommend that a list of all transfers be approved by Council annually, and this was done last year. Staff would continue this practice, including transfer of excess reserve fund balance money. Direction from Council Neal said staff is not seeking a yes or no on the budget from Council tonight; however, if they are uncomfortable with elements of the proposed budget, such as the new HRA levy or street light utility, staff needs to know this prior to September 6, when Council must approve the maximum levy. Tyra-Lukens asked if there is a typical HRA levy for a suburb. Kotchevar said there is a wide variety, from$200,000 to $600,000. Aho asked what advantage there is to separating the HRA levy from the general fund. Neal said this provides a dedicated source of funding for economic development activities, particularly MCA improvements, that does not have to compete with other priorities in the general fund. Neal said the philosophy behind the street light utility is that it is a direct charge for a direct cost, and it is a minimal cost for the average citizen. Jeremiah noted that in the past some cities instituted HRA levies because they were outside the levy limits. Kotchevar said the proposed HRA levy would amount to about$8 per year for the median value home. Tyra-Lukens asked the Councilmembers if anyone had concerns with the street light utility or HRA levy. No one voiced any concerns. Butcher said she is anxious about the prospect of reducing social services funding. Butcher reiterated that she would like to see the Community Development position remain full-time. Young asked about the impetus for the recommended cuts. Neal said the cuts were his idea. He noted the Community Development position is currently classified as temporary full-time, and it was originally funded through grant seed money. City Council Workshop August 16, 2005—page 5 Neal said when he did not see funding outside the general fund for a full-time position,he proposed it be reduced to half-time. Case said the proposed social service funding cuts feel too new to him to say what he wants to do yet. He is not prepared to say social services do not fall within the purview of the City. He is uncomfortable with the idea of City not funding these types of programs. He said we need to think about the history of the City's involvement with the programs and look at what other communities are doing. We also need to determine if there are needs the County is not meeting. He said it goes back to the question of the role of government. Tyra-Lukens said she understands the City has traditionally regarded social services as the responsibility of the County,but we have also seen that the County does not fully understand the needs of our community. Tyra-Lukens would like to see the City support programs that directly serve our portion of the county. Aho asked if there are private groups that might take over some of these roles. Butcher said as the Council's representative to the Hennepin South Services Collaborative, which is in the process of dissolving, she feels the County does not adequate provide services to our community. She said that by maintaining existing social services, the community is saving money by acting preventatively. Neal said staff will take all of these comments into consideration when preparing the final budget proposal. Council Chamber II. OPEN FORUM A. L.G. Everist Aswres!ate Transfer Station Mr. David Spoor spoke on behalf of Aggregate Action and himself regarding concerns with the L.G. Everist transfer station proposal, specifically the request for a variance. Ms. Jan Anderson, a 34-year resident of Eden Prairie, also addressed Council on the transfer station proposal. Mr. Eric Sandvick, a lifetime resident of Eden Prairie, told Council he disagreed with the City Attorney's opinion that the operation is not a non-conforming use. He asked Councilmembers to put themselves into residents' shoes and ask themselves whether or not the bad outweighs the good. B. City Communications with Residents Mr. Duane Wharton said he serves as liaison for members of the neighborhood who are interested in seeing changes made to City communications with residents. He asked Council to consider changing guidelines for notification of proposed developments. C. Recyclins! City Council Workshop August 16, 2005—page 6 Mr. Eric Solberg, a 2003 graduate of Eden Prairie High School and a seasonal Parks Maintenance worker, spoke to Council about starting a recycling program in City parks. III. OPEN PODIUM IV. ADJOURNMENT