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HomeMy WebLinkAbout12.09.13 Work Session Minutes COUNCIL WORKSHOP MINUTES December 9,2013 Mayor Larson called the workshop to order at 6:30 p.m. Present: Larson, Bonar, Fogarty Absent: Bartholomay, Donnelly Also Present: Robin Hanson, Finance Director; Kevin Schorzman, City Engineer; Randy Distad,Parks and Recreation Director; Cynthia Muller, Executive Assistant MOTION by Fogarty, second by Bonar to approve the agenda. APIF,MOTION CARRIED. Long-Term Fund Balance Strategies The City organizes financial records into separate funds with different purposes. Each fund is designed to stand on its own. Last year several steps were taken to eliminate negative fund balances, restructure debt and restore the timing in the debt, redeeming bonds early and adopting financial policies for the liquor stores. The next step is to address the general fund and the debt service fund. These funds do not have sufficient resources throughout the year to pay their bills. In June 2013,the maximum combined cumulative deficit reached$2.3 million. There is a City policy that the general fund should not go below 25%of current year expenses. The debt service fund has a funding requirement to have on hand 105% of the next year's payments in the event taxes are not collected so we have enough to cover the difference. At 25% of the current year's expenditures we should have had$2.6 million on hand at the end of December;the actual fund balance was just under$2.1 million so we were underfunded by$600,000. The State Auditor offers two options: If you choose 35% of general fund operating revenues, the general fund was short$1.6 million, and if you choose five months of expenses, we were short$2.4 million. The fund balance of similar sized cities ranges from 22% - 92% of current year expenditures. At a previous workshop, internal borrowing was discussed to cover the deficit. That is the cheapest way, but not a long term solution. Finance Director Hanson explained several steps the City can follow to increase the general fund and debt service fund fund balances to the minimum funding levels: 1. Continue to adopt solid, comprehensive budgets, including conservative revenue projections. 2. If the general fund's revenues exceed expenditures, we need to retain those funds in the general fund to strengthen its fund balance. This was done in 2012. 3. When structuring bond sales, make sure we collect money prior to payments being made and structure them so the 105% minimum funding levels are satisfied. This was done on the last two bond issues. 4. In 2014, we have included $80,000 in the debt service levy to address the 105%funding deficiency. 8 Council Workshop Minutes December 9,2013 Page 2 5. Staff will continue to review existing funds such as the road and bridge fund and TIF funds to determine if there is money that can be transferred into the corresponding Debt Service Funds to comply with the 105% funding requirement. 6. In the general fund we will make good progress over the next five years if we follow this plan. If by 2018,the water fund and other internal funds need their money, we will have to increase the debt tax levies in 2018 —2023 to eliminate the deficit by the end of 2023. As of December 31,2013, we will be $1.2 million short on the 105% funding. Finance Director Hanson presented a chart showing how the debt service fund shortage can be addressed through transfers over the next several years. In 2016—2018 we have $17 million in debt that will be eligible for refunding. Councilmember Fogarty noted she would prefer to not levy dollars to put into the general fund. If in 2015 we get LGA money, she will consider it one time money forever, and not budget for it and not use it for one-time expenses. Finance Director Hanson reminded Council LGA is part of the Fire Department CIP. Councilmember Bonar liked it that we are under the State Auditor's minimum requirement. He would prefer we be a model of lean government. Councilmember Fogarty agreed with staff that we should not dip into the negative during the year. Councilmember Bonar stated it would be difficult to say we need a 50%, or 72% or 90%reserve. Finance Director Hanson could justify a 35% reserve. Councilmember Bonar noted it is a balance of wants and needs. Proposed Debt Policy Revisions This policy was last reviewed in April 2005, After researching other debt policies,Finance Director Hanson presented a revised debt policy for Council's consideration. The purpose of the policy is to establish parameters and provide guidance governing the management of the City's debt obligations. She reviewed debt limits, debt structuring practices, debt issuance and management practices. Council agreed with the proposed revisions. Both of the above items will be brought to the December 16,2013, Council meeting for approval. Akin Park Estates Project Update City Engineer Schorzman asked Council for their thoughts on including incentives for bituminous density in this project. One reason for doing this is there have been density issues with the roads in this area in the past. Of the 24 cores taken, 18 did not meet the current minimum construction densities. The incentive amount would be less than$15,000. This will make the contractor pay more attention to the process and design a compaction plan. The project will go out for bid in January 2014. Council consensus was to include the incentive as we will get a better product. 9 Council Workshop Minutes December 9,2013 Page 3 Four of the 16 bids items will have an alternate bid. City Engineer Schorzman asked if Council would be comfortable using a blind bid process as it would be advantageous to us if a contractor should ever challenge the bids. Base bids would be listed lowest to highest with no contractor associated with the amounts. Alternate bids would also be listed lowest to highest with no contractor shown. After selecting the bid, Council would see the contractors and choose one contractor by deciding whether to choose the base bid or the alternate bid. The base and alternate bids cannot be separated to allow choosing two different contractors. This takes away from the perception a bid was chosen based on who the contractor is. Staff will inform Council if there is a bid that does not meet the specifications. Councilmember Bonar was more interested in quality than quantity. He would prefer to look at best value rather than low bid. In hiring a firm that provides a product at the lowest cost, you have chosen the lowest cost. He noted it is a challenge to get quality out of a low quantity bid. Alternates are put in a bid to allow the owner to choose and not be chosen. Councilmember Fogarty asked that staff talk to the contractor about doing driveways so we have the answer upfront in case residents ask. This will not be a part of the City contract. Mayor Larson and Councilmember Fogarty agreed with the blind bid process. Councilmember Bonar was on the fence, No Net Loss of Parkland and Open Space Policy The Parks and Rec Commission has worked on developing the above policy. Staff has received requests from residents to buy strips of parkland to add to their lots. Staff has declined these requests in the past, but there is no formal policy. City Attorney Jamnik has recommended developing a policy for this issue. Parks and Recreation Director Distad presented the draft policy. The policy clarifies the criteria to be met and the process to follow. The end result is that the City does not want to lose parkland, whether it be acreage or value. If someone wants to swap parkland for wetland,that would not be comparable property. Mayor Larson asked what if the City wants to use parkland for its own use, such as building a liquor store. How would that fit into this policy? Staff explained the liquor store would have to purchase the parkland and the City would use that money to buy parkland somewhere else. Because the liquor store is an enterprise fund, it would be considered a business expense for them to buy the land. The price would be set through an appraisal. A comprehensive plan amendment would be required through a public hearing. The proposed policy calls for four criteria to be met for the sale of parkland: - Safety of the community is at stake. - Public benefit is greater than the loss of parkland. - Its proposed use does not destroy or threaten a unique or significant resource. - The sale, lease or transfer of the parcel is not contrary to the express wishes of the person who donated, dedicated or sold the parcel or interests to the City. Council was concerned with handcuffing the City if we want to purchase parkland for a liquor store. Councilmember Fogarty felt the policy could be as simple as saying, at the discretion of the Council and Parks and Recreation Director. The park boundaries are there for a reason and 10 Council Workshop Minutes December 9,2013 Page 4 felt we do not need a two-page policy. We are looking for a solution without a problem. Staff felt the criteria of public benefit would allow the City to purchase land. However, all four of the criteria have to be met, so it could be revised to only meet one of the criteria. Park dedication and fee acquisition are two different pieces. Park dedication is by plat where if land is turned back, it reverts to surrounding land owners. Staff will ask the City Attorney about park dedication vs. fee acquisition and how that could play into loss of parkland. Mayor Larson noted we do not want to handcuff ourselves for something we will have in our plan. City Engineer Schorzman suggested a policy saying it is the City's policy to not sell parkland to private individuals. Staff will take this back to the Parks and Rec Commission. MOTION by Fogarty, second by Bonar to adjourn at 7:35 p.m. APIF,MOTION CARRIED. Respectfully submitted, Cynthia Muller Executive Assistant 11