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HomeMy WebLinkAbout03.28.16 Work Session Minutes Council Workshop Minutes March 28,2016 Mayor Larson called the workshop to order at 5:30 p.m. Present: Larson,Bartholomay,Bonar,Donnelly,Pitcher Also Present: David McKnight, City Administrator;Robin Hanson,Finance Director;Adam Kienberger, Community Development Director;Kevin Schorzman, City Engineer; Cynthia Muller, Executive Assistant MOTION by Larson, second by Bartholomay to approve the agenda. APIF,MOTION CARRIED. 20-Year Financial Plan and 2017 Budget Council was given an overview of this plan at the March 14,2016, Council workshop. It pays for decisions Council has made over the last few years. From 2011 to 2016 we have reduced our debt by over$10 million. The fund balance has gone from 15%to 40%as a result the bond rating went from AA-to AA. Staff feels it is time to start looking at the budget in 10-15 year increments rather than one to two years. This formalizes the plan Council has been following. Staff took 2016 expenditures minus the debt to get to the base 2016 operating levy of $11,798,225. Staff increased this number by 3%for 2017, 3%for 2018 and 5%for 2019. This is assuming the cost of living increases,utilities, etc. Staff assumed revenues would increase by 1%per year and that fiscal disparities will go down by 2%per year which equals approximately $40,000. Staff recognized growth at 1.29%each year. The potential levy increases are 5.03%in 2017, 7.62%in 2018 and 6.91%in 2019. For 2017,the 5.03% levy increase amounts to $483,176. City Administrator McKnight reviewed the debt and CIP summary. Debt is split out between the road and bridge fund,and non-road and bridge fund. Road and bridge fund projects will be paid off in 2026. Non-road and bridge fund projects will be paid off in 2030. Staff presented the street CIP for the next 20 years. The next street project is Second Street/Honeysuckle in 2019 for$3,000,000. That will be paid for by issuing$2.4 million in debt and the other$600,000 comes from water, storm water and sanitary sewer funds. City Administrator McKnight continued to explain the payment plan for subsequent projects throughout the years. The plan shows the transition from borrowing to paying cash for projects and equipment. The total debt due in 2016 is$3,170,848. MSA dollars have been left out of the plan and would be used as a backup. MSA was collected for the 195th Street project, but it will take five years to collect all of it. City Administrator McKnight reminded Council we have a$10 million recreational facility question on the November ballot. That is not reflected in this plan. He will add it as a separate line item. It will include debt payments and estimated operating costs. That will be an additional$600,000-$700,000 yearly payment. Council Workshop Minutes March 28,2016 Page 2 Council mentioned adding more dollars for the EDA. If we had economic development it would help the numbers. To tie everything together,the March 21,2016,memo showed revenues over budget of$133,000 and net expenses under budget by$456,000 for a net increase in the general fund of$589,000. Council asked how that will calculate into this plan. Staff explained the fund balance was at 40%at the end of 2015. Part of that is perhaps holding expenses down too much. If we were to have that$500,000 again this year, staff would ask Council to pick projects off the CIP to help the bottom line. Council should not expect this overage every year. To use any overage to reduce the levy amount would not be good,because we would have to raise it that much more the next year. Any overage in the budget would affect the budget two years out. If we were over$200,000 in 2015,the 2016 budget is already set by the end of 2015, so the overage would be used in the 2017 budget. If staff was to bring the 2017 budget to Council today,the levy would be at 5.03%even with some minor adjustments. The debt will be discussed at the April workshop. Council discussed items that are not included in the CIP. We have discussed needing$185,000 for the emerald ash borer problem. City Administrator McKnight explained three ways to pay for it—with LGA dollars in 2020 if we can wait, extra fund balance dollars, or put more money away in the CIP. Council noted it is important to set money aside for building repairs. It was discussed whether to do a building assessment. Councilmember Bonar will provide a sample study. Regarding giving the EDA more dollars,we underwrite other budgets far less than we do for the EDA. If we give them$40,000 a year,we should not expect a lot in return. A TIF district is retiring in the next year or two. Any funds from that will go into the property tax levy; we do not collect it separately. The bond retirement for VRC will be coming in 2022. We are approaching the 10-year mark on bond payments for city hall. That will be discussed next month. Council asked about staffing for the recreation facility that will be on the ballot. That will be included in the proposal presented to Council on May 2,2016. If it's an arena or pool they are different amounts of staffing. Council asked about a staffing model for retirements. This is mostly unfunded. Council asked if we can chart this. Staff can do a simple chart,but it can change at any time. Council asked if we have a liquor operations CIP with a revenue model of more than we saw last year, is there a five to ten year acquisition plan,are we going to continue to lease? Staff stated our 6.5%profit as a percentage of sales is a goal and we can develop a CIP from that. Council will see more from the presentation of the downtown redevelopment plan next month. Council recalled the cost of insurance is going up and can that be charted as to what we should expect for inflationary increases? Staff has charted that at 15% for next year. The city spends$1 million a year on health insurance for employees. Council asked about land acquisition for future liquor stores. We are further away from that than previously thought. Council asked about the streets CIP and areas to be determined. Staff explained those are eight years into the future and are a much larger number. City Administrator McKnight realized the levy number is larger than Council would like,but most of these decisions have already been made. If we are off track with the levy numbers, Council needs to let us know now. Staff will discuss the debt number in April,but it will not be final until October or November which is after the 2017 preliminary budget is set. Council Workshop Minutes March 28,2016 Page 3 Council asked about using the overage in the fund balance to fix the Rambling River Center parking lot. City Administrator McKnight stated the policy for the fund balance says it should be 40%to 50%. We just got to 40%with the$589,000. If Council wants to spend$100,000 on that,we would be$100,000 behind in keeping the fund balance at 40%at the end of 2016. It depends on the end of the year and how the entire budget does. We may be able to absorb that by not spending money somewhere else. It is Council's decision whether to spend some of the $589,000, it is not in the budget and it will take our fund balance down. The next project is in 2019. Council suggested adding that parking lot to that project. Plans for that parking lot are also included in the downtown redevelopment plan. Council noted in the past we talked about re-prioritizing spending and is there an update. City Administrator McKnight stated that will be discussed later and we tried doing that last year. We brought up the pool and the Rambling River Center position and were told no. Any other decisions will be more difficult. We cannot continue to pay for these decisions with people. We cannot continue to do the same services or more with the staffing we have today. Council noted the plan is a good, solid plan we just have a lot of holes we cannot fill. If Council wants the EDA to have for example$100,000 and the EDA has a plan to spend it,tell us. In the EDA strategic plan, one of their main goals is to understand the allowance they receive from the Council and will that allow them to do what they want to do. They will determine what they want to do,how much will it cost, and then what is in the fund balance. That will determine if the EDA needs more money. Councilmember Bonar stated he is pro-growth. Right now we want to increase the levy by 5.03%and have a hope of 1.29%in growth which would give us a levy increase of 3.7%. The 5.03%is real. People will not accept the 1.29%because people do not see it with commercial development. Residents need to see commercial growth to agree with a levy increase. Mayor Larson asked if councilmembers agree with the 5.03%levy increase. There was one definite no. Staff noted if the recreational facility question on the ballot passes,that will add 6%to 7%to the levy for the bond payment. The voters need to understand they will increase their debt and also the staffing associated with that investment. Council noted the next year we have a 7.62%levy increase so we would be adding to that also. It will be a 15 or 20-year bond. Staff will add this line item to the plan. The levy increase this year was 4.9%and there was not considerable pushback from the residents. Staff reminded Council they have made 90%of these decisions already. Liquor Store Update The downtown lease expires July 31,2017. At that time we will be paying$15.50 per square foot. The current contract was for four years. The rate went from $13.50 to$15.50. The cost of the laundromat building,with 3,000 square feet, is for sale at$399,900. The Dakota Motors building is for sale at$899,000 and is also for lease. A lot in VRC would be$399,000. Staff continues to work with the highway 3 site with a range of$15 to$18 per square foot over the ten year contract. An estimate of moving costs is$150,000. At the highway 3 site, staff expects the house to stay. Council recalled the entire laundromat building was for sale at$399,900. Now half the building is for sale for the same amount. There is room to expand to the back. Council Council Workshop Minutes March 28,2016 Page 4 felt the most viable site is highway 3. Staff noted we have$265,000 in the pot for capital improvements which would include purchasing. The moving costs would come out of this amount. The ownership of the location of the downtown store is changing. Council felt the current location is not a good position. Next to the laundromat is not a good place for a liquor store. That leaves highway 3 or VRC. Council recalled there was also a space available in Tamarack. The concern there is access. Council was leaning toward highway 3, but the price is concerning. It provides a stop light,traffic count and visibility. City Administrator McKnight recommended the owners of the highway 3 site meet with Council. With the Dakota Motors building, staff would try to work out a lease rather than own. City Administrator McKnight will look at options for the highway 3 site, Tamarack and the Dakota Motors building. MOTION by Bartholomay, second by Pitcher to adjourn at 7:55 p.m. APIF,MOTION CARRIED. Respectfully submitted, Cynthia Muller Executive Assistant