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HomeMy WebLinkAbout10.11.10 Work Session Minutes Budget Workshop Minutes October 11, 2010 Mayor Larson called the workshop to order at 6:00 p.m. Present: Also Present: Larson, Donnelly, Fogarty, May, Wilson Peter Herlofsky, City Administrator; Teresa Walters, Finance Director; Jim Murphy, Police Sergeant; Randy Distad, Parks and Recreation Director; Todd Reiten, Municipal Services Director; Lisa Shadick, Administrative Services Director; Brenda Wendlandt, Human Resources Director; Tim Pietsch, Fire Chief; Cynthia Muller, Executive Assistant Councilmember Wilson wanted to discuss the Deputy Registrar Supervisor position that was posted. MOTION by Wilson, second by May to approve the agenda. APIF, MOTION CARRIED. Utility Franchise Fee Discussion In determining the costs for seal coating, staffuses Residential Equivalent Units (REU's). Currently there are 5,365 (80%) residential REU's and 1,310 (19.6%) non-residential REU's. The franchise fee comparison cost is residential 65.4% and non-residential 34.6%. The franchise fee would be a shift in how seal coat costs are currently disbursed. Staff looked at adjusting the franchise fees to make the disbursement comparison equal to what it is currently. The residential gas and electric franchise fee was $1.60/month; the adjusted amount would be $1.95/month. Staffhas not received agreement from the utilities yet on this adjustment. The City Engineer did a comparison of prices per square yard over the next seven years which shows an increase of approximately $400,000 per year. From 2002 to 2010, the costs for seal coat will more than double. The road and bridge fund received money at different times and the revenues were not consistent. To fund future seal coating, the cost will have to be 100% assessed or 100% levied. Councilmember Fogarty noted residents were concerned with a surcharge. Staffhas been able to talk with one utility company and staffwas told there would be no surcharge added onto the franchise fee. Councilmember May recalled the City Attorney said Council would need to approve a franchise agreement ordinance. This is only for the franchise agreement. The franchise fee ordinance is separate. There is currently a cable franchise fee which pays for broadcasting of cable communications, web streaming, and staff time. Council discussed the proposed fees and the adjusted fees. At a previous meeting, there was concern about overcharging commercial customers. The adjusted fees make the disbursement between residential and commercial consistent with the current process. 26 Council Workshop Minutes October 11, 2010 Page 2 Mr. Jeff Thelen, Thelen Cabinets, agreed with keeping the 80%/20% split between residential and commercia~ but he felt that does not tell the whole story. Even with this split, on the commercial side there is still a huge inequity. There are huge property owners who have no gas or very little electric demand, but own 100 acres. They have no meter and they pay no fee. An example is Marschall Lines. They have a small electric non-demand meter only and they would come in at $2/month and they have no gas meter. There is also agricultural land with residential along Flagstaff and Fairgreen Avenue. If they are on a gravel road, they currently are not assessed at all for seal coating, so the franchise fee does make that situation more equitable. Mr. Thelen recognized there will not be participation from the City for seal coating and there is inflation. He paid $613 for seal coating last time for 8 RED's. He had some questions to be answered at a future meeting. Mr. Thelen wanted a comparison on what we pay now and what we will pay in the future and compare that to his building and his neighbors. If staff wants this to be fair, it has to be someone with a similar size building on a similar size piece of land, would pay a similar tax. He has 2.08 acres on 21075 Eaton Avenue. He has a demand meter. There is a big difference between a non-demand and a demand meter. He asked for an explanation on why because he uses a little more electricity, his road fee goes up. He does not understand the connection. It is not how much land he owns, it is not how much the building is worth, it is how his electric meter sits. Directly across the street at 21080 Eaton Avenue, it is a steel building, 1.66 acres, a non-demand meter and his electric meter will be charged $2/month. Mr. Thelen will be charged $18/month. Behind him, to the west there is a parcel that is double the size at 3.82 acres at 5145 211th Street, Minnesota Pipe. They have a big storage yard, trucks coming and going and a lot of deliveries and Mr. Thelen assumed they also have a general demand meter. Mr. Thelen stated no one can drive by that building and determine how much tax he will be paying. The only one who can tell how much tax they will be paying is the utility company. Council and administration do not make that decision anymore. Mr. Thelen cannot vote out of office the people who make the decision on how much tax he will be paying because how fast his meter spins determines how much tax he will be paying. Before adjustments, Mr. Thelen will be paying $3,360 over seven years. The other two parcels will be paying approximately $1,449. One property has double the acreage and one has a similar acreage, but Mr. Thelen is paying double the price. There is a platted lot in the industrial park that does not have a building. On the northwest side ofthe industrial park, Mr. John Devney owns 26.2 acres. Mr. Thelen assumed ifthere was a seal coat on that property in the assessment process, he would pay his fair share. With the new process there are no meters, so he is paying zero. Regarding Dodge Middle School, Mr. Thelen assumed the schools have the same RED division. This school has 46 acres which would be 184 RED's x $108. He asked if that is what they pay for their seal coat. He does not know what kind of meter they have and neither does the City, because you cannot obtain that information from the utility companies. Townhomes versus apartment buildings - on Lower Heritage Way in the 700 block, there is an 8-unit apartment building on the north side of the street. In the last seal coating they were charged 3 RED's. On the south side we have attached townhomes, but they are considered 27 Council Workshop Minutes October 11,2010 Page 3 single family townhomes. There are 12 townhomes. Taking eight townhomes, the apartment building is being charged three REV's. Instead of coming up with a brand new tax that has many loopholes, let's go back and work on the assessment process we do now and get the assessments more in line. The formula might work better ifwe count multiples, and not let an 8- unit apartment get by with less than half. City land - does the City participate in the REV's with parkland, drainage land, ponds, buildings, pool, ice arena? Will the City participate in the future? Does ag land only pay? Are they currently assessed for seal coating? If a school has 40 acres is it divided by the same amount his land would be? Churches and non-profits do pay assessments under the current assessment policy. They do not pay property taxes. Ifwe go to a straight levy, they would not pay. Mr. Thelen stated if the franchise fee was based on the dollars that pay for the meter, that might be different. This is just the type of meter. Mr. Thelen explained that a demand meter has a needle that goes higher depending on how much demand is required to run his equipment. His demand is between 50 - 53. This is multiplied by $9 in the summer and $7 in the winter. That is before he uses his electricity. Then they go back to meter 1 and determine the total kilowatt hours. Mr. Thelen asked what this has to do with how his roads are seal coated. Absolutely nothing. Schools are a big user. In the adjusted amounts, the large commercial/industrial went from $75 to $18/month. Mr. Thelen asked if there is any City-owned property that will pay anywhere near or more in franchise fees than what they are paying now, or will all City properties be less? How do we collect the tax on delinquent accounts? Mr. Thelen read from the franchise agreement a section which states the City will allow the utility to make an adjustment on their franchise fee so they do not lose that business. Mr. Thelen has heard that the road and bridge fund has some fmancial difficulties. This fund has had an influx of money left over from the construction of Pilot Knob Road. This is where the 50% participation for seal coating has come from. Mr. Thelen asked how the money from this construction got into the road and bridge fund to be used for seal coating. Staff explained the road and bridge fund is used for more than just seal coating. It is used to repair roads, including Pilot Knob Road. Every time we seal a road it comes out of the road and bridge fund. We bonded for 195th Street and the road and bridge fund also made those bond payments. There are funds that go into the road and bridge fund from the county, state aid, grants, and various areas. When you look at the portion of this fund for seal coating, the only money we have been able to use is anything left over from any other projects because everything else in there is designated for certain things. Mr. Thelen stated if he goes back 11 years and fmds there was $500,000 left over from Pilot Knob Road that was not needed for the construction project, maybe we were assessed too much. Obviously, the assessment was too high or the bond was too high and that money should have been paid back against the bond or the assessments against the property owners should have been reduced. Staff explained the project came in at a lower cost. Because of this that money was set aside to be used for seal coating. City Administrator Herlofsky explained with seal coating we have intermittent funds and we want to have an ongoing program, so we need to have a steady revenue stream. The issue of how the money was handled, we need 28 Council Workshop Minutes October 11,2010 Page 4 to take a closer look. Mr. Thelen asked if there are extra funds for a road project, does that automatically get placed in the road and bridge fund for a future project? Mayor Larson stated for Walnut Street, if the project was fmished for $1,000 less, where does that $1,000 go? Staff replied it goes to pay the bond. City Administrator Herlofsky stated some of the issues with Pilot Knob Road also have to do with how surrounding developments paid for their portion. Ifthere are various funds from other agencies that reimbursed us and because of the development policy, what previously were MSA funds, could now be used for other road and bridge activity. Mr. David Pritzlaff, 20255 Akin Road, regarding the road and bridge fund there are certain things the fund can be used for. He asked for a list of those items. He asked if the road and bridge fund is meant for seal coating, how could the City spend $129,000 from that fund for a trail. Mayor Larson stated staffwill provide him with the breakdown of how the trail was paid for. Only a small portion came from the road and bridge fund. Mr. Pritzlaffthen spoke about the franchise fees. He figured the fee two different ways. At $1.60/month/utility he will pay $3.20/month x 12 months is $38.40 x 7 years is $268.80. With the adjusted amount he will pay $3.90/month x 12 months is $46.80/year x 7 years is $327.60. His last assessment was $135 and he would rather have that assessment. Council noted the new assessment will be double the amount because the other half came from the road and bridge fund. His new assessment would be $270. Mr. Pritzlaff asked why not go back to lineal yardage per property. He asked how his road can cost more, except for the width of the road, than the industrial park roads. The businesses will be paying a lot more and why would they want to stay. Mayor Larson noted we have a lot of work to do with the franchise fee. Mr. Pritzlaff asked about people who apply for assistance for gas and electric usage. That is taxpayer money. Staff noted some of that money comes from donations. Mr. Pritzlaffstated it is not just Farmington's tax dollars, it is also State taxes. An audience member stated in Dakota County, assistance is privately funded by the CAP Agency. Mr. Pritzlaffwould like to see a more fair assessment for the roads. He suggested changing the schedule to get the categories more even. He asked why residents and the businesses should pay more one year, when everyone is getting the same thing as others did the year before. Mr. Pritzlaff stated the most productive thing is to figure out where things are now, let residents keep their money for six years, and make it more fair for everyone. Mr. Pritzlaff also commented on the street light utility fee. There are apartment buildings paying far less than they should be. You could have 80 people in the building and there is one utility bill. Councilmember Wilson stated if the goal of Council is to get new businesses in and we are punishing them with new fees, then we are not interested in attracting new business. He felt we need to have an honest dialogue with residents and tell them the story. Maybe there needs to be more cost sharing on the residential side. He does not fee the City should be collecting money for a future benefit. Maybe a resident will not be here in seven years. He did not agree with the franchise fee. 29 Council Workshop Minutes October 11,2010 Page 5 Regarding the Pilot Knob trail, Councilmember Wilson stated we used $119,600 from the road and bridge fund, $10,000 from the Park Improvement fund, and Dakota County paid $158,400. The largest portion we drew from MSA funds. For 2010 Farmington has $645,186 in MSA funds, of which $161,297 is for maintenance contribution and the other $43,869 is for construction. The State has given us that money because there are allowable construction projects on State Aid roads. Councilmember Fogarty wants a long term plan. We cannot continue to contribute 50%. As far as things being equitable, that has been discussed. She is open to suggestions, but currently we do have a long term solution. We need to change the policy that the City no longer pays for half the seal coat ifwe continue with that policy. Councilmember Wilson stated just because someone is in a different mix, you should not pay $70 one year and $150 next year. We cannot change that, but maybe we look at a fIxed amount. Councilmember Fogarty noted the League has advocated every year for a utility fee for this situation. No matter what we choose, it will not be equitable for everyone. City Administrator Herlofsky noted staff was directed in July to look at options. Ifwe want to do this for next year, we have to resolve this soon. If Council has no interest in franchise fees, staff needs to know. If Council has interest, staffwill continue working on it. Councilmember Fogarty stated no matter what, we do need to renew our contract with the utility companies. 2011 Bud!!et Staff provided information on the Parks and Rec budget adjustment of adding back in $23,494. Staff also discovered a $73,000 item for the Fire Reliefpension that needed to come out of the general fund. Council was also given a budget summary for the Deputy Registrar. Staffis looking for a commitment from Council to do this. An ad has been placed for this position and also some existing staff will be used which would mean a reduction in the general fund. Staff does not expect to make money in the fIrst year and hopefully, will break even. The main purpose was to create more traffic downtown, bring more people to the area and spur economic development activities. Councilmember Wilson was surprised with the Deputy Registrar posting. We are trying to reduce the budget and the position would mean another $51,000 - $60,000. He would like to have some comparables from other cities, whether to run it as a City enterprise operation or through a contract, and to provide more information. He felt there should be direction from Council to do this in 2011, and then go with it. Councilmember Wilson was not aware of any direction from Council to move forward. City Administrator Herlofsky stated Council did give an indication to staff that they were interested in doing this. We have provided a budget previously and an exact start date has not been determined. It would probably be in 2011. By placing the ad we were testing the market. It is not unusual to close a position and not hire. Councilmember Wilson stated Council has spent hours weighing other positions, and here we have not decided ifwe will open the operation. All Council has done was to enable legislation to do this. City Administrator Herlofsky stated he cannot hire, only the Council can. Councilmember Wilson noted Council only has the ability to hire the City Administrator. The 30 Council Workshop Minutes October 11,2010 Page 6 City Administrator is in charge of running the City. Council only sets legislative policy and Council has not directed this policy. Councilmember May was also surprised, because she was wondering when it would be brought up in the budget discussions as to when we will do this and how it will fit. It is late to try to put this in the budget now. City Administrator Herlofsky noted he sent this out awhile ago asking for comments and no comments were received. The action was taken that Council has an interest in doing this. We are exploring options. Nothing has been done. City Administrator Herlofsky noted he does not have the authority to hire and fIre. City Managers have that authority. Staffhas been discussing how to proceed with this. Council is concerned with a great deal of issues with the general fund and this may help to resolve those issues. Council has said to have a Deputy Registrar office. If that has changed, Council needs to say so. Councilmember May noted to have that discussion and actually place an employment ad is different. Mayor Larson would still like to see the Deputy Registrar office. He would like to see a model staff has worked on as far as staff'mg. Councilmember Fogarty would like to know what other cities have done, numbers, and more of the information staffhas collected. It would be good for the entire area. City Administrator Herlofsky noted ifwe want to start this at the first of the year, we have to initiate something as far as an approval process. We would hire a person with some experience and another person from current staff if we are looking at reductions. Mayor Larson would like to see that model and what staffhas. Councilmember Wilson stated he was not disinterested, he felt we were jumping ahead. Councilmember Donnelly stated the general fund would have to subsidize this office for $88,000 for the fIrst year. Staff noted the total expenditures are $186,773. Depending on the amount of service provided, other cities break even or make money. Until we get up and running, we will not break even for at least a year. Ifwe have an experienced person that understands all the legalities of operating the office, we should meet half the cost. The ad has been placed on the LMC website and the City's website. Staff discussed some of the information they have obtained and Mayor Larson noted Council needs to hear more of that type of information. Councilmember Wilson stated based on the budget, the arena is borrowing money, the liquor store transfers money, the senior center will require a transfer, there may be a small amount from the street light utility, and we have new debt payment. He was supportive, but did not see how with a small amount of information, we can start a brand new business in a month. We are starting a business, have not considered contracting out for the business where we could lease the space and receive money, and we should have an analysis of where is the competition. We need to be aware of all the pro's and con's and be prepared for two to three years of having to pay money into this. He wants to be supportive, but very cautious. Councilmember May thought Council would fmalize the budget and then figure out how this would fit in and maybe consider it next year. She felt we should tend to the current budget issues. This is not a necessary service. It would be nice, but not something we have to do. We have to make sure we can fund the services we need. 31 Council Workshop Minutes October 11, 2010 Page 7 The Council discussed the 2011 budget. They were given a preliminary budget and results of discussions from the last meeting. There were items added back into the general fund from Park and Rec amounting to $23,494, and there is a Fire Relief issue where we owe $73,000. Staff did not provide any cuts for these items. Councilmember Fogarty thought about Councilmember Donnelly's comments at the last meeting where Council's job is to hire the City Administrator to run the City with the policies Council sets and come up with solutions Council lays out. We asked to have the budget cut by $400,000 and a $500,000 option. She feels Council went beyond their bounds in identifying positions. There was frustration because Council thought they gave clear direction and it did not come back in the form requested. She felt Council has given clearer direction as to what they want. They have made it clear that in order to meet the Council's goals of $400,000 and $500,000 reductions staffwill have to be eliminated. That goes on Council's shoulders, but it is up to the City Administrator to determine those cuts. That is where Council goes from setting policy to the nuts and bolts of how the City is run which is what the City Administrator was hired to do. If Council is unhappy with what is being done, then it is up to Council to take care of that situation. She would like this put back to the City Administrator with $400,000 and $500,000 in cuts. She hoped Council has made it clear about things that are not palatable, such as closing the arena and the pool. If staff thinks they can cut paper supplies by $5,000, then Council will hold staff to their budget, but Council is concerned that Council is being set up to need $7,000 and there will be nothing we can do about it. She did not want to be so short, that in case of a storm, we do not have the resources to help our residents. Council understood to have that safety net, another position may have to be eliminated that the City Administrator is not comfortable recommending, but Council would rather make sure that safety net is there. Every year has been bad for the budget and Farmington is not alone in this. Council needs to regroup and remind ourselves what our role is. Mayor Larson agreed. We went too far because we thought we gave clear direction and what we got back was not anything we asked for. That was very frustrating. One of the things we need to consider is having a safety net. Is Council okay with Engineering cutting $30,000 in professional services? People will have to wait for engineering reviews. Is Council okay with Police reducing training, shooting supplies, and equipment? Is Council okay with eliminating the maintenance agreements on the IT equipment and eliminating security training? Is Council okay with not having mandated employee training? Are we setting ourselves up for a liability if something were to happen? Is cutting things that close and not doing things we should be doing, setting us up for failure? Councilmember Fogarty stated Council's job was to redirect with that information. Mayor Larson was not comfortable with cutting things that close. Councilmember Wilson was concerned hearing that staff morale is low because Council is put in a position of weighing employee A, B, C, or D. He did not want to do that. He is not at City Hall to determine which employee should be at the City. He trusted the City Administrator to make a recommendation to Council. Ifhe can show Council how he can run the City operation where we do not have concerns with the items mentioned previously such as training, without reducing staff, he is fme with that. Ifwe do not have to layoff staff, that is okay. It becomes stressful when Council's dialogue with other people is which person do you want to fire. He is a Councilmember who makes the broad policies. He stated Councilmember Fogarty's direction is 32 Council Workshop Minutes October 11, 2010 Page 8 good, but he encouraged the City Administrator to bring back a variety of options with a series of recommendations to review. Councilmember Wilson would like to see what $500,000 in reductions looks like. Councilmember May went back to the philosophical decision made to pay the debt in full. She thought it was understood by everyone at the table that there was no way to do that with just increasing taxes. Unfortunately, we would be looking at staff reductions. When we got to the point where we were saying positions out loud, no one on Council wanted to be in that position. It became increasingly frustrating because it never was an option presented to Council except for maybe some layoffs without knowing where that would be or how it would affect the City. Referring to Councilmember Donnelly's comments, she did not feel we should be comparing the School Board to the City Council. When the school district had a lot of cuts, if the Superintendent had cut all teachers, the School Board would have had a problem with that. There were individuals at all levels with a lot of reorganization. She does not want to be involved with looking at individual job descriptions, but she also respects that the City Administrator will look at everything. She has never gotten that impression. She has yet to see the $500,000 and now we are running out oftime. She is representing the taxpayers, but this has gotten to be so piecemeal and is very frustrated. She apologized to any City staff members that were in a very uncomfortable position, but so was the Council. It was never Council's intention to name specific positions. There is not a big staff. She would like to know the general area where we are looking at cuts. If Council's concern is to make sure we maintain a level of service, we have to have more information on what positions and in what areas are being considered. We all want to pay the debt in full without borrowing from other funds. Councilmembers agreed. City Administrator Herlofsky stated from a staff perspective Council's desire to address Vermillion River Crossing was a good decision. Council's suggestion to handle that has not been an issue. He will work with staff to provide some options. He suggested the next workshop be November 8. Councilmember Donnelly stated we put ourselves in the position of naming positions. He did bring us $400,000 in cuts. Whether we agreed or not, that is fme. We have not touched the fund balance. He asked if all these budgets have maintained the fund balance at the current level. Staff stated the general fund does go negative throughout the year. At the end ofthe year we have not dedicated any general fund reserve as a way to balance the budget. He asked what Council wants for more options to help staff come up with what Council wants. Mayor Larson stated months ago Council turned in suggestions. He suggested staff looking at those suggestions and minutes from past workshops. Councilmember Fogarty noted there are five Mondays in November, we could move the EDA meeting and we also have December 13, if needed. Councilmember Wilson stated we all agree that Police, Fire, park maintenance and programs are the top tier of what we want to support. Councilmember May mentioned there is also the DOT with the Police Department. Councilmember Wilson stated we would rather not eliminate a Police Officer versus doing something else. 33 Council Workshop Minutes October 11,2010 Page 9 (Councilmember Fogarty left at 7:56 p.m.) For options, Councilmember Wilson suggested there are all different functions in City government. City Administrator Herlofsky could call each individual Councilmember to discuss options, or bring options from different categories. We have $23,000 worth of things we want brought back in. He expected to see a list of options to take out in order to do that. Councilmember Wilson wanted the City Administrator to look at what is working well, and not working well, and bring back options from that. Councilmember Donnelly noted last time the reductions totaled exactly $400,000. If there was something Council did not like, then those options did not work. He suggested coming up with $600,000, of which $400,000 is acceptable so we have a cushion. The next budget workshop will be November 8, at 6:30. A special meeting will be held fIrst to canvass the election results with the budget workshop to follow. Councilmember Wilson asked to also see a rationale as to why the cuts make sense. Councilmember Donnelly agreed that having the same reason for everything is not useful. MOTION by Wilson, second by May to adjourn at 8:02 p.m. APIF, MOTION CARRIED. Respectfully submitted, Cynthia Muller Executive Assistant 34