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HomeMy WebLinkAbout06.11.12 Work Session Minutes City Council Workshop Minutes June 11,2012 Mayor Larson called the workshop to order at 6:40 p.m. Present: Larson,Bartholomay,Donnelly, Fogarty, May Also Present: David McKnight, City Administrator;Randy Distad,Parks and Recreation Director; Cynthia Muller, Executive Assistant Audience: Doug Bonar,Larry White, Tom Wartmann, Dave Hartnet,Kyle Snesrud, Todd Blast MOTION by Fogarty, second by May to approve the agenda. APIF,MOTION CARRIED. Liquor Operations At the May 29, 2012,workshop Council narrowed down the location options for the downtown liquor store to either staying at the current City Center location or moving to Tamarack Ridge Center on hwy 3. Two proposals were received from Tamarack, one for 5,058 sq. ft. and 3,508 sq. ft. Staff also received another proposal from City Center. Staff requested Council identify which property owner to negotiate with and the term of the lease. Mr. Larry White explained the relocation numbers for Tamarack and gave a summary of what the layout would be and what would need to be installed. The smaller space would not allow room for the beer cave. There would have to be reach-in coolers. The cost to relocate the beer cave is$50,000. Council asked about SAC and WAC charges and building permit fees. There are some credits and we should not have to pay SAC charges. Building permit fees would be waived. Council also asked about utility fees for the small and large spaces at Tamarack and also what the current fees are at City Center. Parks and Recreation Director Distad explained the comparison in lease rates for the square foot cost and the CAM cost. For the Tamarack 3,508 sq. ft.the lease rate and CAM would be $61,355 for the first year; 5,058 sq. ft would be $78,349. The lease rate and CAM for City Center for 6,280 sq. ft.would be$121,078 for the first year. The lease rate goes up each year over five years or seven years. Moving to a smaller space over five years we would save $140,000. Council needed to determine if it was worth it to move. A seven year lease would save more. The utilities for the downtown store were $13,723/year for electricity and $1,531/year for gas. Councilmember May went back to the MMBA meeting and declining numbers and felt we still should not be in the liquor business. We need to decide the location based on if it were our business,where would we want to be. She felt hwy 3 at Tamarack is our best option to see if we can turn around the profitability. Traffic count is higher,visibility is higher and those are two main things that could really help us. She would like to see it come back downtown to the old Rambling River Center or City Center as a satellite store. Going to 5,058 sq. ft. at Tamarack we 10 Council Workshop Minutes June 11,2012 Page 2 would be reducing space,but was tempted to go with the 3,500 sq.ft. and fine tune management and how we run the business. Councilmember Fogarty agreed with Councilmember May except for not being in the liquor business. Between 3,500 sq ft and 5,000 sq ft what cooler would we put in? Mr. White stated at 5,000 sq. ft.you could put in both the beer cave and the coolers. With 3,500 sq. ft.you have to choose one or the other. Councilmember Fogarty stated as a customer, she would take the easiest place to get into and that is Tamarack,but wanted staffs recommendation. City Center is not an easy in/easy out. Money wise,they are all good news. Mayor Larson stated if we do move to hwy 3 we are taking a risk if the customers will follow. Although we don't have the visibility at City Center,we do know our customer base. He asked if the signage at City Center could be improved. Councilmember Fogarty asked about the difference in customer numbers between the former downtown location versus City Center. Councilmember Bartholomay agreed we should not be in the liquor business. We are concerned about the visibility and signage at City Center. Mr. Wartman stated different signage is possible. The grocery store is changing to a full service market and felt we could work with them on a pylon sign up to the maximum square footage allowed. He cautioned Council to not overlook the traffic a grocery store brings of 8,000 trips/week. Mayor Larson asked about the current size of the pylon sign and if we are at maximum size. Councilmember Bartholomay wanted to know about the signage before making a decision and also hear staffs recommendation. Councilmember Donnelly stated we know the history of City Center and we have been given a better lease rate. We want staff to concentrate on running a better business and being more profitable. The move will distract from that and disrupt the customer base. He has heard pro's and con's for traffic on hwy 3. Tamarack is not full so that says something. If it was the golden spot we would not have a chance to lease it. If we chose Tamarack, it should not be the 3,500 sq. ft. To keep us on course and focus on improving business, he would choose City Center. Mayor Larson agreed,but they are both good sites. We have a customer base and people know where we are. We would have a lower lease rate,but keep the same business with better ways of running the store. If we can improve on marketing and sales it is a plus. With Tamarack,he wondered what we would lose for customers. City Center takes that risk out. If Tamarack he would not want the 3,500 sq. ft. Councilmember May stated we are looking at saving a store where we are losing money. We need to take the risk and move because where we are is not working. Mayor Larson stated two months ago we said we were losing money because of the lease. Mr. Todd Blast,Tamarack owner, as far as customers following, Pellicci Hardware was in City Center before and moved to hwy 3. He is the best source whether it is a good move. Mr.Dave Hartnett, Dunn Bros., stated they held a wine tasting hosted by Farmington Liquors,they drew people from Lakeville and Northfield for one event. It was the best wine tasting in history. Mr. Tom Wartmann, City Center, stated you need a strong core downtown area. You have the grocery store and the opportunity to keep the dynamics in a one block area within the heart of downtown. You need to consider that in the seven years of established retail business, moving 11 Council Workshop Minutes June 11,2012 Page 3 away from City Center would be a detriment to sales. There are still unknowns in the cost of moving. Councilmember May favored the larger space at Tamarack. Over five years that saves us $100,000. We can focus on improving profits. If that means a satellite downtown,we can look at that later. She would like to start with something fresh and new and put a new face on it. Councilmember Bartholomay was not afraid to take a risk, so he would choose Tamarack at 5,000 sq. ft. Parks and Recreation Director Distad would not make a recommendation, but stated liquor store staff prefers to stay at City Center. Moving will disrupt the customer base. The lease rate at City Center has dropped. Council should consider walking traffic downtown,which we get a lot of. The other issue is access in and out. At City Center traffic is 30 mph. At Tamarack it is 45 mph. He cautioned you cannot keep moving the downtown store around. If you are going to move, you need to have a plan in place for a permanent location. That is the stability we need to establish a customer base and make sales profitable. City Administrator McKnight has serious concerns about the access into Tamarack. At certain times of day he will avoid it. He looks at who the neighbors would be;a grocery store in the current location or a potential restaurant at Tamarack. It is the unknown of whether the customers will follow that is the tipping factor. Council is asking staff to make changes to get higher profits. Putting the unknown factor on that makes it harder. If you are going to enter into a 5-year lease, after two years we need to decide if we will build or get out of the business. Mr. Doug Bonar felt the 5-year lease is the wisest choice. If you stay at City Center,you should challenge yourselves to change 1500 sq. ft. and do something that hasn't been done before. Council consensus was three to two to move to Tamarack. Councilmember May would choose a 7-year lease because if we move to Tamarack we would stay there and have a third satellite store downtown. Councilmember Bartholomay agreed with a 7-year lease because it is better fmancially. A 5-year lease would coincide with the other lease. Staff stated it would be close so would recommend a 7-year lease. Mayor Larson would choose a 5-year lease. Councilmember Fogarty chose a 7-year lease for stability. 2013/2014 Budget City Administrator McKnight wanted Council to see department requests and his changes from the beginning. The fund balance history and going below zero a couple times a year is a red flag. The proposed general fund budget is$10.3 million which is a 3.2%increase. To cover spending it would mean an 11%tax increase. There is a$221,000 increase in HR costs; $120,000 of that is a correction on costs not included in the past. Council discussed HR costs,overtime and comp time costs. Revenue expectations—City Administrator McKnight proposed some significant reductions in revenues. Building permit revenues should have been reduced for this year, so he reduced it by $90,000. The Building Official suggested reducing it by$50,000. The expected revenue for the SRO has been removed amounting to $96,148. The liquor store transfers have been reduced to $20,000. He proposed a delinquent tax levy of$75,000,and an ice arena tax levy to cover the 12 Council Workshop Minutes June 11,2012 Page 4 $250,000 negative fund balance. He would like to create a building fund and include$15,000, and there is the fire truck debt of$130,000. The fiscal disparities number used this year was $2,016,261. For 2013,he has lowered that number to $1,900,000 until we get the actual number in August. This increases the bottom line of the tax levy. Councilmember May would like to use that money to clean up the ice arena debt. City Administrator McKnight added at the same time we need to have an ice arena budget that does not go negative every year. Mayor Larson noted the pool is now in the general fund, so liquor transfers do not go to the pool anymore. Those transfers could be put towards the arena deficit. Councilmember Fogarty would like to put some money towards the CIP. We could keep the fiscal disparities at$1.5 million, use it to pay off debt, and put the rest toward the CIP. Council and staff agreed they would like the September budget to be the budget. Regarding Fire, Councilmember Fogarty would like someone to look at the number of vehicles we have and does all of it need to be replaced. She would also like to see a comparison of fire departments outside our region. City Administrator McKnight had several areas where he requested Council direction: Revenue reductions of$296,000. Council agreed with his approach. Fiscal disparities reduce by$116,261. Council agreed with this number. HR Costs for 2013 and inclusion of missing HR costs of$120,000. This will be discussed in closed session. Delinquent tax levy—No. Ice arena levy—No. Explore using liquor store transfers. Building fund—Yes. Fire truck payment—Yes. Fire equipment/building repairs—Talk to Fire Chief Pietsch. SRO—Council will talk with Police Chief Lindquist. Tax levy target—Council would like to have more discussion on line items. The majority would like to see the levy stay flat. The next workshop will include the Police and Fire Departments. Council wants options and solutions and look at reorganization and equipment. They do not want to move numbers around to make things work for a year. City Administrator McKnight and department heads will start to make budget changes, long-term planning, and the budget impact. Council wants to see options with substance,not paper and pens. The Fire Department should look at whether we really need all the equipment. This same approach should be followed for all departments. The budget will be discussed again July 9, 2012. MOTION by Fogarty, second by Bartholomay to adjourn at 9:53 p.m. APIF,MOTION CARRIED. Respectfully submitted, Cynthia Muller Executive Assistant 13