HomeMy WebLinkAbout09.26.11 Work Session Packet
City of Farmington
430 Third Street
Farmington, MN 55024
Mission Statement
Through teamwork and cooperation,
the City of Farmington provides quality
services that preserve our proud past and
foster a promisingfuture.
AGENDA
CITY COUNCIL WORKSHOP
September 26, 2011
7:30 P.M.
1. CALL TO ORDER
2.
APPROVE AGENDA
I
,
3. 2012 ENTERPRISE FUND BUDGETS
4. 2012 BUDGET I PLAN
5. CITY ADMINISTRATOR UPDATE
6. ADJOURN
PUBLIC INFORMATION STATEMENT
Council workshops are conducted as an informal work session, all discussions shall be consideredfact-finding, hypothetical and unofficial
critical thinking exercises, which do not reflect an official public position.
Council work session outcomes should not be construed by the attending public and/or reporting media as the articulation of aformal City policy
position. Only official Council action normally taken at a regularly scheduled Council meeting should be considered as aformal expression of
the City's position on any given matter.
City of Farmington
430 Third Street
Farmington, Minnesota
651.280.6800 . Fax 651.280.6899
www.ci.farmington.mn.us
TO: Mayor, Councilmembers
FROM: David McKnight, City Administrator
Teresa Walters, Finance Director
SUBJECT: 2012 Enterprise Fund Budgets
DATE: September 26, 2011
STREET LIGHT UTILITY (PAGE 221-223)
Background
In 2009 the decision was made to move the Street Light Utility expenditures from the General
Fund into an Enterprise Fund. In 2010 a shift was made from funding street lights with the tax
levy to funding it with a street light utility fee added to each utility bill.
During the 2011 Budget session it was discovered that the fee was not sufficient to cover the cost
of running the utility. The utility maintained a deficit balance throughout the year. The rate was
increased from $6.00 to $6.90 per quarter. While the rate seems to be sufficient to cover the cost
of running the operation, we don't feel it will make an impact on the deficit, nor will it allow us
to adjust for the fluctuating maintenance and electric costs.
Adding the fee to utility bills has made an impact on the concern residents have for their street
lights. If a street light is out, they will immediately contact us. This was not the case in the past.
With more maintenance on street lights, additional electricity, and the rise in electric costs, we
are seeing an increase in the cost to run the street light utility operation.
Proposed 2012 Budget
Rather than immediately look at raising rates again, we took a closer look at the way we are
billing customers. It was determined when the fund was initially set up, that we added the Street
Light Utility Fee to each bill, not each equivalent residential unit (ERU). All other utilities are
charged based on ERU's.
For all non-residential properties, the ERU should be left at one (1). However, for properties
with multiple dwellings such as town homes, condos, and apartments, the ERU should be based
on the number of units (similar to the way other utilities are billed). We currently bill some
townhome associations one street light ERU. For example, the association may have ten units
under one roof but they are paying the same street light charge as a single family home. This
change will add 916 additional units to the bills. At $6.90 per quarter the total revenue added to
the Street Light Utility will be approximately $25,282. This amount is reflected in the revenue;
however, expenses were increased to be more in line with actual, bringing the net income used to
off-set the deficit to $16,459. The fund is anticipated to have a positive balance in 2013.
The table below shows the proposed changes:
Name
Cameron Woods
Charleswood Crossing
Charleswood Town Homes
Creekstone partners
Farmington Family Housing
Farmington Town Homes
Middle Creek Condos
Middle Creek East
Middle Creek East 2nd
Sherbourne Deck homes
Tamarack Ridge Homes
Townsedge Plaza Town Homes
Twin Ponds Town Homes
Vermillion Grove Town Homes
Westview Association
Condos
Town Homes
Town Homes
Town Homes
Town Homes
Town Homes
Town Homes
Town Homes
Town Homes
Town Homes
Town Homes
Town Homes
Town Homes
Town Homes
Condos
Current
2
12
24
17
8
4
27
73
54
6
15
3
5
50
9
309
Added
#
82
96
72
o
24
12
189
o
o
58
119
13
20
231
o
916
Total
84
108
96
17
32
16
216
73
54
64
134
16
25
281
9
1225
Recommendation
Staff has analyzed the financial impact of charging each residential unit and has determined it
will provide the necessary additional funding needed for the Street Light Utility. Staff
recommends Council approve this method of billing. No rate increase is requested in 2012.
SEWER (PAGE 205-207)
Background
In the past, sewer charges for service covered the cost of personnel, supplies, debt service on the
bonds issued in 1999, and other charges for services including payment for Metropolitan Council
Environmental Services (MCES) fees. In 2012 the MCES fees will be increasing from $837,200
to $1,034,008. This is a difference of $196,808.
MCES charges are based on sewage flows from the City. The sewage flow increased from
450.67 million gallons in 2010 to 557.83 million gallons in 2011.
The MCES has also informed us that SAC receipts remain low. They currently have a shortage
of $4.3 million. They have decided not to increase the rates to cover the loss of SAC receipts.
Instead, they will be funding this loss from their Operations and Contingency Reserve Fund.
The SAC receipts will be evaluated again in 2013. Another increase could impact the MCES
fees.
City residential sewer charges are currently $27 for the first 10,000 gallons of use (based on
winter quarter consumption) and $2.70/1,000 gallons over the 10,000 base amount per quarter.
Commercial sewer fees are $69 minimum per quarter for the first 20,000 gallons and $3.45/1,000
gallons over the 20,000 base.
Proposed 2012 Budget
The 2012 Budget shows a net loss of $186,889 before transfers and depreciation. In order to
cover the loss created by the increase in MCES fees, we are proposing passing these fees on to
both residential and commercial through an increase in sewer fees.
Two options are shown below:
Current
Current New Rate Per New Rate Difference
Base Base 1,000 Per 1,000 Per
OPTION 1 Rate Rate Clallons Clallons Quarter
Residential 27 31 2.70 3.10 $ 6.66
Commercial 69 74 3.45 3.70 $ 35.41
Current
Current New Rate Per New Rate Difference
Base Base 1,000 Per 1,000 Per
OPTION 2 Rate Rate Clallons Clallons Quarter
Residential 27 32 2.70 3.20 $ 8.33
Commercial 69 69 3.45 3.45 $ -
Option 1 increases the residential rate by forty cents (.40) per $1,000 gallons or a total of $7 per
quarter. It also increases the commercial rate by twenty-five cents (.25) per $1,000 gallons or a
total of $35 per quarter (for the average 16,600 gallon user).
Option 2 increases the residential rate by fifty cents (.50) per $1,000 gallons or a total of$8 per
quarter. It does not increase the Commercial rate.
Both options provide us with enough revenue to cover the MCES increase.
Below is a table showing our rates compared to other cities:
Average Quarterly Average Quarterly
Residential Bill based Commercial Bill based
City Population on 16,600 Clallons on 141,000 gallons
FarminClton 21,086 $ 44.82 $ 486.45
Rosemount 21,874 $ 44.90 $ 231.50
EaClan 64,206 $ 48.76 $ 326.35
New Brighton 21 ,456 $ 54.12 $ 459.66
HastinCls 22,172 $ 55.45 $ 469.50
Apple Vallev 49,084 $ 55.48 $ 426.27
Lakeville 55,954 $ 57.54 $ 441.94
We tried to compare cities that were either geographically near us or cities with a similar
population. The new rate increase will bring Farmington's average residential bill to $51.82 for
option one and $52.82 for option two. This will still be significantly lower than most of the
cities compared. Option one would increase the average commercial bill to $521.70. Everyone
is experiencing similar increases from the Metropolitan Council. Therefore, we expect most
cities to raise their rates.
Recommendation
Utilities are the business enterprises of the city and must have adequate funding to cover costs.
Although it is a difficult decision to increase fees during tough economic times, staff is
recommending a fee increase to cover the cost of charges passed along to us by the MCES. Staff
recommends Council choose either option one or option two. The rate increase will be included
in the fees and charges ordinance to be adopted for the 2012 budget.
STORM WATER (PAGE 213-216)
Background
Currently a quarterly fee of$9.00 per residential equivalent unit is charged on all utility bills to
pay for maintenance and operation of all storm water facilities including National Pollutant
Discharge Elimination System (NPDES). NPDES is a federal mandate as part of the Clean
Water Act requiring non-point storm water discharge to be purposefully managed. The
Minnesota Pollution Control Association (MPCA) is the governing agency enforcing NPDES on
a statewide level. Requirements were put into effect in 2003. Farmington is considered an MS4
(Municipal Separate Storm Sewer System) and is required to follow NPDES Phase II
requirements since the population is over 10,000.
There are additional costs associated with following Phase II:
o Under Phase II operators of MS4s need to obtain authorization to discharge
stormwater runoff to surface water. Separate Storm Sewer Systems are pipes, ditches
and other transportation systems that are owned by the City that move stormwater
runoff to surface water bodies, such as ponds, streams and rivers.
o Phase II requires MS4s to develop a Storm Water Pollution Prevention Plan (SWPPP)
designed to prevent items considered pollutants from being washed by stormwater
runoff into the municipal storm sewer and then discharged from the storm sewer into
local waterbodies. The SWPPP needs to include six minimum control measures.
o Public Education and Outreach
o Public Participation/Involvement
o Illicit Discharge DetectionlElimination
o Construction Site Runoff Control
o Post Construction Runoff Control
o Pollution Prevention/Good Housekeeping
o Each minimum control measure is comprised of best management practices (BMP's).
Each BMP will have measurable goals that serve to track the effectiveness of the
BMP. The "Best Management Practice" approach provides our community the
flexibility to decide what our local program should include.
Proposed 2012 Budget
This fund had effectively built an unrestricted working capital reserve in excess of $500,000.
This balance is to ensure there are funds available for capital purchases, eliminating the need for
drastic increases in the rates. In 2012 we plan to spend down this balance by $20,000 for storm
water modeling.
The 2012 budget currently shows a net loss of $48,499 after transfers and before depreciation.
This shows the fee is no longer sufficient to support the operations of the Storm Water and
NPDES operations.
Recommendation
Staff does not recommend a rate increase at this time (except for the Surface Water Management
fee increases approved in prior years). This will be included in the Fee Schedule. In 2012 staff
will utilize the reserves to cover the excess expenditures over revenues. However, rates will be
reviewed in 2013. This rate has not been increased since 2008.
WATER (PAGE 217-219)
Background
The City of Farmington Water Board is responsible for the Water Utility budget. Each fall, the
Water Board reviews and approves the Water Utility budget for the following year and the
approved Water Utility budget is included in the overall final City budget.
Proposed 2012 Budget
The proposed 2012 budget includes funding for those items necessary to maintain the City of
Farmington's water system. The budget will include expenditures related to the day-to-day
operation of the water system, maintenance items (annual well maintenance, replacement of
necessary components, chemical purchases, etc.) and any capital expenditures.
Recommendation
Staff recommends that the Water Utility budget approved by the Water Board be included in the
final City budget for 2012. No rate increase is proposed.
SOLID WASTE (PAGE 209-211)
Background
The City of Farmington's garbage system is unlike any other community in Dakota County. The
City-owned and operated automated collection system uses less operators and equipment and
provides residents with an efficient and cost effective service. Recycling, yard waste service,
temporary dumpsters and pickups for large items are provided by a private contractor, selected
through a proposal process.
Benefits to having this service provided by the City include reduced wear and tear on streets,
reduced traffic and noise; same day pickup in neighborhoods provides aesthetic benefits (cans at
the curb once a week), excellent customer service, and concern for the environment.
Proposed 2012 Budget
Solid waste charges for service cover the costs of personnel, supplies, and other charges for
service including payments for landfill and recycling charges as well as "clean-up day". In
addition, fee revenue should cover funds set aside for the purchase of new refuse trucks on a
seven to nine year cycle.
Solid Waste operation is budgeted to break even in 2012. Solid Waste capital includes an
automated garbage truck. This brings the loss after transfers to $173,866 (see page 209). The
reserves in this fund which were set aside for capital purchases will be utilized to cover the cost
of the truck. The solid waste fund had a small increase in fees in 2010; however, this barely
covered losses. Since we are currently breaking even, there is nothing available to cover future
replacement costs for vehicles.
In the past we have lost the Dakota County $12.00/ton hauler reimbursement $80,000.00/year.
Also, Dick's Sanitation Incorporated (DSI) has been raising their recycling rates for the past
three years and will continue to raise it until 2013. This enterprise fund is run like a business.
When our costs go up, we need to increase our rates to cover the additional expense.
The following shows the rates for the contract set from 2009-2013:
a) Single Family Dwellings & Townhomes
2009
2010
2011
2012
2013
One Sort
$ 3.36 /monthlunit
$ 3.49 /monthlunit
$ 3.63 /monthlunit
$ 3.78 /monthlunit
$ 3.93 /monthlunit
b) Multi-Family Dwellings
2009
2010
2011
2012
2013
$ 2.15 /monthlunit
$ 2.24 /monthlunit
$ 2.33 /monthlunit
$ 2.42 /monthlunit
$ 2.52 /monthlunit
c) City Buildings
2009
2010
2011
2012
2013
$ 165.00 /month
$ 165.00 /month
$ 175.0Q /month
$ 175.00 /month
$ 185.00 /month
Currently the Quarterly rates for solid waste collection are:
30 Gallon $46.00/quarter ($15.33/month)
60 Gallon $55.00/quarter ($18.47/month)
90 Gallon $64.00/quarter ($21.33/month)
This rate is competitive in comparison to other cities with organized collection. Below is a
comparison of the 30 Gallon Garbage fee:
Method of
30 Gallon Recycling Recycling
City Hauler Garbage Fee Fee Collection Total
Farminaton Citv/OSI $ 11.70 $ 3.63 sinale stream $15.33
Shako Dee OSI $ 8.32 $ 3.57 dual stream $11.89
Hastinas WM $ 16.61 $ 3.39 sinale stream $20.00
HoDkins CitvlWM $ 16.85 $ 3.75 sinale stream $20.60
Little
Canada private $ 13.70 $ 4.40 varies $18.10
No.St.
Paul Allied $ 14.56 $ 2.94 single stream $17.50
Average 30gal $17.24
Below is a comparison of the 60 Gallon Garbage fee:
Method of
60 Gallon Recycling Recycling
Ci Hauler Garba e Fee Fee Collection Total
$ 14.84 $ 3.63 sin Ie stream $18.47
Shako ee OSI $ 10.35 $ 4.46 dual stream $14.81
Hastin s WM $ 17.61 $ 3.39 sin Ie stream $21.00
Ho kins Cit IWM $ 19.85 $ 3.75 sin Ie stream $23.60
No. St. Paul Allied $ 15.70 $ 2.94 sin Ie stream $18.64
Little
Canada rivate $ 16.58 $ 4.40 varies $20.98
$ 26.00 $ $19.00
$19.30
Below is a comparison of the 90 Gallon Garbage fee:
Method of
90 Gallon Recycling Recycling
CI Hauler Garba e Fee Fee Collection Total
$ 17.70 $ 3.63 sin Ie stream $21.33
Shako ee DSI $ 11.97 $ 5.00 dual stream $16.97
Hastin s WM $ 18.61 $ 3.39 sin Ie stream $22.00
Ho kins Ci IWM $ 23.15 $ 3.75 sin Ie stream $26.90
No. St. Paul Allied $ 17.89 $ 2.94 sin Ie stream $20.83
Little
Canada rivate $ 20.61 4.40 varies $25.01
$ 29.00 source se arated $22.00
$22.15
Farmington residents and businesses also receive several other benefits from this rate such as;
curbside clean-up, Christmas tree disposal, card board cage drop-offs, Dew Days collection, and
many other benefits. Many private companies charge extra for these services.
Recommendation
Due to the economy and the tax levy increase, staff is not recommending raising rates for 2012.
Council should consider increasing rates next year to cover the cost of fuel increases, higher
tipping fees, the increase of DSI rates, and replacement of revenue from the loss of the Dakota
county $ 12.00/ton hauler reimbursement which was $80,000.00/year.
LIOUOR STORES (PAGE 201-204)
Background
The liquor stores operate similar to other retail liquor stores. We have two liquor stores, Pilot
Knob and the Downtown location. In 2011 we renegotiated our lease for the Pilot Knob store.
This saved the City $72,000 per year. Staff has also looked at other cost reductions (including a
reorganization of staff) in an effort to save money at the liquor stores.
A reduction in personnel costs occurred when the pay plan for any newly hired part time
employees was reduced; new part-time employees are now hired at a lower starting wage from
what they previously were hired at. Not only has the starting wage been lowered for part-time
staff, but the highest wage a part time staff member may earn under the new pay plan has also
been reduced. A further reduction in personnel costs occurred when a full-time staff position was
filled with two part-time staff positions resulting in a reduction in wage and benefit costs. Staff
will continue to look for additional cost savings whenever possible in order to increase the net
income (profit) of the liquor stores in 2012.
Proposed 2012 Budget
The combined liquor stores show a net income (before transfers) of$100,127. After transferring
$70,007 to the General Fund and $30,000 to the Swimming Pool, the net income is close to
breaking even at $120.
The downtown liquor store expenditures are anticipated to increase slightly over last year, mostly
as a result of increased rent. Last year we paid $155,000 for rent, this year we are budgeting to
pay $165,000. The high cost of rent appears to be the only expense keeping the liquor store from
showing a higher profit. Our downtown store lease is up in 2012; therefore staff is looking at
options that will reduce the rental expense.
Recommendation
In an effort to increase the net income (profit) of the liquor stores, staff recommends working
towards moving away from a model where the City leases building space for the liquor stores to
a model where the City owns the building space for liquor stores. Until this model is fully
implemented, the City will continue to have a substantial amount of its profits consumed in
building rental costs.
Surface Water Management Fees per Acre
OPTION 1 OPTION 2
Phase In Low Density Residential In 2010
Phase In High Density Residential and
Begin Phasing All Categories In 2010 CommerclaJllndustlral Beginning In 2013
Year Low Density High Densi!y Comm./Indust. Year Low Density High Density Comm./Indust.
2010 $ 7,841 $ 13,898 $ 16,745 2010 $ 7,841 $ 12,719 $. 15,330
2011 $ 8,692 $ 15,409 $ 18,561 2011 $ 8,692 $ 12,999 $ 15,667
2012 $ 9,577 $ 16,979 $ 20,448 2012 $ 9,577 $ 13,285 $ 16,012
2013 $ 10,497 $ 18,611 $ 22,408 2013 $ 10,497 $ 13,898 $ 16,745
2014 $ 11,453 $ 20,307 $ 24,446 2014 $ 11,453 $ 15,409 $ 18,561
2015 $ 11,705 $ 20,754 $ 24,984 2015 $ 11,705 $ 16,979 $ 20,448
2016 $ 11,962 $ 21,210 $ 25,533 2016 $ 11,962 $ 18,611 $ 22,408
2017 $ 12,225 $ 21,677 $ 26,095 2017 $ 12,225 $ 20,307 $ 24,446
2018 $ 12,494 $ 22,154 $ 26,669 2018 $ 12,494 $ 20,754 $ 24,984
2019 $ 12,769 $ 22,641 $ 27,256 2019 $ 12,769 $ 21,210 $ 25,533
2020 $ 13,050 $ 23,139 $ 27 856 2020 $ 13,050 $ 21,677 $ 26,095
2021 $ 13,337 $ 23,648 $ 28,468 2021 $ 13,337 $ 22,154 $ 26,669
2022 $ 13,631 $ 24,169 $ 29,095 2022 $ 13,631 $ 22,641 $ 27,256
2023 $ 13,931 $ 24,700 $ 29,735 2023 $ 13,931 $ 23,139 $ 27,856
2024 $ 14,237 $ 25,244 $ 30,389 2024 $ 14,237 $ 23,648 $ 28,468
2025 $ 14,550 $ 25,799 $ 31,058 2025 $ 14,550 $ 24,169 $ 29,095
2026 $ 14,870 $ 26,367 $ 31,741 2026 $ 14,870 $ 24,700 $ 29,735
2027 $ 15,197 $ 26,947 $ 32,439 2027 $ 15,197 $ 25,244 $ 30,389
2028 $ 15,532 $ 27,539 $ 33,153 2028 $ 15,532 $ 25,799 $ 31,058
2029 $ 15,874 $ 28,145 $ 33,882 2029 $ 15,874 $ 26,367 $ 31,741
2030 $ 16,223 $ 28,765 $ 34,627 2030 $ 16,223 $ 26,947 $ 32,439
2031 $ 16,580 $ 29,397 $ 35,389 2031 $ 16,580 $ 27,539 $ 33,153
2032 $ 16,944 $ 30,044 $ 36,168 2032 $ 16,944 $ 28,145 $ 33,882
2033 $ 17,317 $ 30,705 $ 36,964 2033 $ 17,317 $ 28,765 $ 34,627
2034 $ 17,698 $ 31,381 $ 37,m 2034 $ 17,698 $ 29,397 $ 35,389
2035 $ 18,088 $ 32,071 $ 38,608 2035 $ 18,088 $ 30,044 $ 36,168
2036 $ 18,485 $ 32,m $ 39,457 2036 $ 18,485 $ 30,705 $ 36,964
2037 $ 18,892 $ 33,498 $ 40,325 2037 $ 18,892 $ 31,381 $ 37,m
2038 $ 19,308 $ 34,235 $ 41,212 2038 $ 19,308 $ 32,071 $ 38,608
2039 $ 19,733 $ 34,988 $ 42,119 2039 $ 19,733 $ 32,m $ 39,457
2040 $ 20,167 $ 35,757 $ 43,046 2040 $ 20,167 $ 33,498 $ 40,325
All fees Include an Inflation factor of 2.2% from the previous year.
Fees should be reviewed and adjusted every few years based on development and cost
estimates for the Trunk Stormwater System.
101