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HomeMy WebLinkAbout10.05.09 Work Session Minutes Council Workshop Minutes October 5, 2009 Mayor Larson called the workshop to order at 5:35 p.m. Present: Larson, Donnelly, Wilson, Fogarty (arrived 5:40 p.m.), May (arrived 5:42 p.m.) Also Present: Joel Jamnik, City Attorney; Peter Herlofsky, City Administrator; Lisa Shadick, Administrative Services Director; Cynthia Muller, Executive Assistant CEEF Members: Jeff Thelen, Ed Gerten Audience: David Pritzlaff, Michelle Leonard, Kara Hildreth MOTION by Wilson, second by Donnelly to approve the agenda. APIF, MOTION CARRIED. The purpose of the workshop was to discuss the CEEF financial issues. Council was provided with a list of outstanding bills. City Administrator Herlofsky stated staff has met with CEEF to review the various activities held throughout the year and tried to determine which activities generate income. The biggest chance for the largest amount of revenue comes from the continuation of Dew Days. There will also be an October Omelet Breakfast and a Haunted House. Dew Days is the primary source of revenue. At the last CEEF meeting it was determined CEEF will continue and if so some expectations need to be determined if a loan is granted. Mr. Jeff Thelen stated for the Halloween Walk there will be two fundraisers; one is selling hot dogs and pop and there will also be chances sold to win a bike donated by the fairgrounds. Mayor Larson understood the Haunted House cost $3,000. This is a separate event from the Halloween Walk. The Haunted House is put on by the Warrior to Citizen campaign and CEEF is used to funnel the insurance. City Administrator Herlofsky stated he met with the president of the Downtown Business Association and he indicated an interest in helping with Dew Days next year. Councilmember Wilson stated the location was the biggest challenge to the financial situation. Mr. Thelen agreed that was one of the obstacles. Councilmember Wilson stated one of the nights we were hoping to draw a lot of revenue, the Eagle's, Legion and VFW also had events the same night. (Councilmember Fogarty arrived.) Councilmember Wilson asked if we know going into next year, how interested everyone is on working on the same page. We cannot have separate major events happening at the same time. Mr. Gerten noted the downtown had an event the next weekend which could have occurred at the same time. As far as the fairgrounds, it is $5,000 to rent the fairgrounds and another $4,200 for the sheriffs department. Councilmember Wilson did not want to move this to the EDA level, but if we decide to do a loan he did not see how we could set up a mechanism for repayment Council Workshop Minutes October 5, 2009 Page 2 when we are talking about an organization where we do not know what the revenue stream would be. He agreed to look at a funding stream from the EDA where we set up a mechanism for repayment and strive for that goal. If we were to set up a loan with terms then you are talking about adding money onto the cost now. Councilmember Fogarty asked if we were to grant a loan, are we required to charge interest. City Attorney Jamnik replied the City Council has the authority to expend funds for City celebrations and can do so under any terms you want. (Councilmember May arrived) Councilmember Donnelly visited one of the new businesses who also has a clinic in Shakopee. One ofthe differences between Shakopee and Farmington is that Farmington has community events. She thought that was a big plus and made her decision to locate her clinic here more comfortable. Councilmember Wilson stated if we were to have a concentrated weekend downtown such as a Thursday - Sunday with all the marquee events, if you get everyone working together that should generate some positive cash flow. Jeff Thelen felt looking back 10 years, Dew Days probably only made a profit one year, but you cannot say Dew Days was not successful during that time. It depends on how you judge success. This year, no one could say it was a financial success. In many ways it was a social success. The Taste of Farmington doubled the amount of people in past years. We either did not promote it properly, etc. People did not show up so the revenue was not there. City Administrator Herlofsky stated there are a variety of events associated with Dew Days and there should be some opportunity for those events to contribute to the bottom line. If the Dew Run is $10, $1 should go to CEEF. He mentioned to the Downtown Business Association that there should be a large calendar and everyone lays out what they plan to do next summer. There would be a Dew Days weekend and what that means to everyone else is whatever they do that weekend should be for Dew Days. If our businesses could get together, they could all be more successful. If there is a loan, there would be a better chance that it could be repaid in a more reasonable period of time. Mayor Larson noted they also discussed having the parade late afternoon/early evening on Saturday. There are a lot of people here in the morning for the Dew Run and then they could come to the parade in the afternoon. City Administrator Herlofsky stated they have been trying to determine who would coordinate the various events. Council would have to be in agreement with any City participation. Councilmember Fogarty asked how coordinating is different than what we have done in the past. City Administrator Herlofsky stated in the past we have just helped out when needed. At the CEEF meeting they discussed how it can be arranged so it is a community success, not a City government success. It depends on what Council authorizes staff to do. Councilmember Wilson asked if other cities expend money for community celebrations. Mr. Thelen understood they do. Lakeville has a tremendous participation. Rosemount has a % time person. City Administrator Herlofsky stated when he came there was $10,000 set aside in the budget for Dew Days. Since then, the City has not given them $10,000 and instead there were in-kind services. Mr. Thelen stated this past year both Castle Rock and Empire gave cash contributions. City Administrator Herlofsky stated it was different for the City this year, because Council Workshop Minutes October 5, 2009 Page 3 of the event being at the fairgrounds in Castle Rock. Normally we would have provided the Police service. We provided more garbage service. In the past it has been approximately $25,000. Councilmember Donnelly asked where the $3,000 for the Haunted House is coming from. Mr. Thelen stated it is put on by the Warrior to Citizen campaign as their fundraiser. Because it is run through CEEF there is a portion of the money that stays with CEEF. CEEF carries the liability insurance for the event. It is a contract that was signed between the Haunted House committee and CEEF that a portion of the money would stay with CEEF. Mayor Larson asked if Mr. Thelen has reviewed the insurance policy to determine if some money could be saved. Mr. Thelen is waiting to hear from the insurance agent. It is a two part policy; part is liability and part is board member protection. Mayor Larson noted there was a $73/month storage locker fee. That has been cleaned out and is stored at Mr. Thelen's shop. CEEF is trying to reduce their costs. Councilmember Fogarty stated she has heard two themes from residents. One is that people do not have a real grasp on everything CEEF does. She is hearing do not let Dew Days go away. When she explains that they do far more than that, it becomes more urgent that we not let these things go. The second is the City should not be running things. They want a separate organization running Dew Days and Councilmember Fogarty agreed with that. City Administrator Herlofsky noted the businesses are trying to get organized and they were told the City would welcome as much participation as possible. Mr. Thelen felt CEEF should not be the organization that runs Dew Days. There should be a Dew Days committee larger than just the CEEF board members. CEEF is made up of township members, the school, and the fairgrounds until recently. As the body that oversees everything, CEEF has been invaluable by getting everyone together. However, he felt there should be a separate body that reports back to CEEF with a coordinator from the City. We do not need just 10 people discussing Dew Days, we need 100 people. Councilmember Fogarty felt that is for CEEF to coordinate and not the City. Mr. Gerten stated part of the problem with CEEF is overseeing multiple events. Dew Days is one the City is more involved in. He agreed with concentrating the event to a Thursday - Sunday, having the parade on Saturday, and having everything downtown. You would have police protection and garbage service. There are so many things that the City is involved with and should be. It is promoting the City. Councilmember Wilson stated we have to address the current issue, but does it become a permanent line item on the City budget? Councilmember Fogarty was not comfortable with that. Mr. Gerten stated it costs $5,000 to have it at the fairgrounds. If it is located on City property, that $5,000 is eliminated. Police protection is not done for nothing, but he did not think it would cost $4,200 for three days. There are a lot of savings right off the top. Mayor Larson heard that is why it was moved from the ice arena to the fairgrounds, to save $10,000 in portable electricity. That did not seem to make sense. Mr. Thelen explained the bands have a large power requirement and the arena did not have that. They rented a generator rather than putting in permanent service at the arena. Council Workshop Minutes October 5, 2009 Page 4 Councilmember Fogarty felt City Administrator Herlofsky should work with CEEF to develop a loan through the EDA. The EDA is the closest thing we have to business and community promotion. Councilmember Wilson asked what if we set up a loan with a structured contract and terms and what if the terms cannot be met? Would we put CEEF in default? Councilmember Fogarty felt that is up to the contract. She was comfortable with a low interest rate and flexible terms. City Administrator Herlofsky stated there is a CEEF meeting next Thursday and he and Attorney Jarnnik can work on something right away. Mr. David Pritzlaff stated regarding the electrical service at the arena, it was said the board members made that decision. They made the decision for one year and it cost $10,000. Mayor Larson stated we were not involved in those decisions. Mr. Pritzlaff stated if they had spent that money for something permanent, it could have been used the second year. He asked if CEEF is the organization that should be running this. Maybe it is a totally new organization. Does Council have a full financial report of Dew Days this year? Including total revenue, total expenditures. Mayor Larson stated that is part of the problem, no one really knows. Mr. Thelen stated he can show deposits and the cancelled checks, but cannot give any more detail. Mr. Pritzlaff stated in good faith he could not make a decision without everything at the table. If you don't have the revenue, you do not know how this will get paid back. You do not have the expenditures. One of the expenditures, $4200 was paid to the sheriffs department Sunday night in cash, which he understood was illegal. You bring the City money into this, at what point do you tie your hands into some illegal activity. He agreed that perhaps it should be a different organization for Dew Days and CEEF should file bankruptcy, go away, and come back with a different organization, with new people and new venues rather than bailing out what we have now. After the loan, you still end up with CEEF. You could say if we don't do the loan, CEEF and everything goes away. If you do this loan, what do you think the perception of CEEF will be from the people who are not paid today? The perception could be they want nothing to do with CEEF. There is no guarantee Dew Days will come back next year if you do this loan. Mr. Pritzlaff felt they need to know payments and interest for the loan. The payments need to be in the bank making money. The location is responsible for more than 25% of the debt. You are talking about putting a loan together without having the answers. Councilmember Donnelly stated we know $5,000 and $4,200 was spent. Mr. Pritzlaff stated you can account for $9200. Mr. Gerten stated we have a list of checks that were written for expenses. Mr. Pritzlaff stated you do not have a total amount of revenue that was brought in. Mr. Gerten agreed. Councilmember Fogarty stated we have a list of checks that were written from CEEF and we have a list of the outstanding bills. We do not know the revenues, we know the deposits. Mayor Larson stated there were a lot of checks and balances that did not happen. Mr. Pritzlaff stated you do not know if $4200 was the only cash taken out. Mayor Larson agreed they do not know. CouncilmemberWilson wanted to resolve the $23,271.38 in outstanding bills. He was tepid to jump into looking ahead to next year. He felt there needed to be a different fiduciary structure set up. There may be some vendors interested in partnering with the City in a community celebration. CEEF could have a bad name. Looking at how this is set up in the future is a larger issue. . He wanted to get the bills resolved and get the businesses taken care of that made a good faith effort. That is where he wants to stop for now until they have a better picture of what this will' look like. Mayor Larson agreed the main thing is to clear up the bills. Council Workshop Minutes October 5, 2009 Page 5 City Administrator Herlofsky stated coordinate means a tighter control of finances. We can kind of figure out revenues and expenditures and that is where we come up about $25,000 short. A lot of the bands were paid at the time they left. A lot of the local businesses that did not demand the cash immediately ended up being the ones not paid. Coordinate means working much closer with the financial arm of CEEF and whatever board is running Dew Days to make sure all bills have the appropriate review and all revenues are appropriately accounted for. Mr. Pritzlaff asked about the liability from the people that made the decisions. He asked Mayor Larson what decisions were already made when he joined the board in April. There was a statement at the last meeting about either the City or CEEF having a bond to cover the person in charge at the time. He asked if there was a bond that takes care of this rather than the City's money. He was upset that we do not have the person who made those decisions because they resigned and they are not at any of these discussions. Mayor Larson stated the whole board made the decisions and followed the Executive Director. The budget was already set, the location, many things were already set. Mr. Thelen stated there were ten board members. The first meeting he came to in April, he saw nine other people and thought they were seasoned veterans. Then he found out half the people were new members. He did not see what purpose it served to go back and question what decisions were made because you cannot change them. Mr. Pritzlaff stated there are four board members here today that did not vote to have it in Castle Rock Township. Mayor Larson stated the previous board did. Mr. Pritzlaff asked where is the previous board? Mr. Pritzlaff asked how many decisions they made or did they just see a budget in April. At that point the event was going to happen in two months. Certain people have resigned and he has not seen them at one of these meetings. Where is the legality of holding someone responsible other than the City? Maybe it is better it goes bankrupt rather than throwing $23,000 towards something. Councilmember Wilson stated that will only hurt the vendors owed. They will get settlement payments as opposed to full cash payments. They could sue the City. It would be bad in so many levels to go that direction. It would tarnish the City's reputation and this event for 5-10 years. He could not identify one or two people and say you are responsible for this mess. Ultimately, it is the entire board that was accountable. Councilmember Donnelly asked how the money coming from the City or the EDA is different from a taxpayer's point of view. City Attorney Jamnik stated there is a separate levy for the EDA, but it is still the taxpayers. Councilmember Donnelly stated hind sight is 20120. If Dew Days had made $20,000 no one would know who CEEF was and everyone would be happy. You always know the bad guys. We saw the budgets and the projects and everything was rosy, but it did not turn out that way. Councilmember Fogarty stated a lot of people do not know who CEEF is; they see this as the City. Councilmember Donnelly agreed that maybe there has to be another body that oversees Dew Days. That does not fix this. This is still a blemish on the City. Councilmember May stated the Rotary held the Rocktober Fest and they started months ago and got a lot of sponsorships to cover the expenses. They did not make what they wanted to because it rained and was cold. They had 20 kids, 50 seniors and packed them in for Hairball, but did not make what they were hoping for all the work they did. Had they not gotten the sponsorships and lost money, it is a community event. As unpopular as this is, the answer is to sit down as an Council Workshop Minutes October 5, 2009 Page 6 organization and come up with ideas on how to raise money. That is what we would have done. We are an independent 501c3 organization and we would sit down and say we need to have a community dinner, or raffle or something to raise money to make up for the losses. She did not think the loan sets the right precedent. She did not think they have the power to loan taxpayer money. She understood it was a community event, but that could be said for a lot of organizations that do things for the community. She felt there are other solutions to make up the money and felt this is the easy solution. Councilmember Wilson asked if we have the power to loan the money. City Attorney Jamnik stated certainly the City has the authority to appropriate funds for City celebrations. You can appropriate funds without strings, or have a loan repayment. Councilmember May stated as a Councilmember she did not feel that was why she was elected to represent the taxpayers; not to decide who we can loan money to. Mr. Gerten agreed there are groups that have fundraisers to raise money for events. He asked what it costs Lakeville and Rosemount to participate. Councilmember May noted the City already does pay a very large portion over $10,000 annually that the taxpayer already contributes. City Administrator Herlofsky stated it was $15,000 - $20,000 in in-kind services. Councilmember May was not struggling with the actual event. There are other solutions that are more work. She wanted to focus on the budget and felt how this moves forward is a budget discussion. We need to move on. Councilmember Donnelly stated there is nothing that would preclude fundraising events to pay back the money. People will support the community, but you have to give them what they want. Councilmember Fogarty stated at the Council meeting she will make a motion to approve the loan and move it to the EDA. Mayor Larson stated the details of the loan will be worked out between City Attorney Jamnik, City Administrator Herlofsky, and Mr. Thelen. Councilmember Fogarty stated this gives them time so they will have something to review at the EDA meeting. Councilmember Wilson asked if this will be limited to this year and we are not talking about next year. Council agreed. Mr. Thelen stated when you make the motion, if CEEF ends up in a position that we have enough to pay the bills, but we don't have enough for seed money to start out next year, don't approve any of it. It will put us in the same position. It will take money to get us started. What we are asking for is enough money to pay the bills and a little start up money for next year. Councilmember Fogarty asked what that means; is it $3,000 from the Haunted House? Mr. Thelen stated at a board meeting they decided they would need $5,000 additional. Mr. Gerten stated we are looking to payoff the bills and enough money to work with for next year for a total of$25,000. Empire is 10% of the community so the township would pay $2500 and the City would be $22,500. Councilmember Fogarty clarified they are looking for the $23,271 and allowing CEEF to keep their savings and checking. Mr. Thelen replied $25,000 would give them some additional funds to sponsor the other events coming up such as the Halloween Walk and the Easter Egg Hunt and still have a little money. Councilmember Wilson stated if we enable a financially defunct organization to continue operating in the same sort of manner then we are funneling a continued problem. He did not know enough about CEEF to add a line item to the budget. His perspective is having talked to a number of businesses, they in good faith wanted to help out the City celebration and here we are. The businesses are having a difficult time managing their books because they have money being owed to them. Councilmember Wilson was not interested in adding to an uncertain future. Councilmember Fogarty stated this is the Council Workshop Minutes October 5, 2009 Page 7 first time since she has been on the Council she has had this discussion. She did not know if having one bad year means it was a defunct organization. She did not think that was a fair statement to make. Councilmember Wilson stated if we are going to formalize a financial item, as a result of the negative balance, we would want to have more of a line item for this function; When moving in the direction of funding $5,000 of seed money, we need to at least be able to have an understanding of the financial structure of the organization. Councilmember May stated you are melding two issues. You are talking about the bills and now you are talking about the future. She did not see how Council can make that decision. Mr. Thelen stated he came with no expectations. Ifwe do not have the funds available to start Dew Days next year that will be our biggest fundraiser. If we do not have enough money to start next year, there is no way we can pay back $20,000. Councilmember Wilson did not agree with the comment that if Council does not give $5,000 more than the balance, we do not want Y011f money. Mr. Thelen stated that was his opinion. Mr. Gerten stated you need money to start with and they realized there needs to be some changes to keep track of what is happening. Councilmember Fogarty stated CEEF has from now until February or March before they need to start securing things and putting deposits down. That seems like a fair amount of time to come up with fundraising ideas which is a reasonable request. Fundraising is hard work, but she felt that is a fair thing for Council to ask. Councilmember Wilson recalled in Rosemount the City assumed fiduciary control over their organization. He felt there needs to be a different organizational structure with an outside of CEEF financial control, whether that is the City or a different organization. The finances and the organization need to be separated. Mr. Thelen asked ifhe wanted the City to be the financial arm. Councilmember Wilson stated he would not advocate for that, but maybe it is a pass through for the checks to run through the City. Councilmember May asked why don't we just vote on this item tonight? Why move it to the EDA and have another discussion at the EDA meeting and take a vote? If in the future, CEEF wants to come back to the Council and wants the City to take a more active role and coordinate, then we can discuss whether it goes to the EDA. She did not think this was an EDA issue now. They are asking for money. Why not just vote on it? She knew how the vote was going to go and wanted to move on. City Attorney Jamnik stated the entire Council could see the loan agreement and be comfortable with the loan provisions that are drafted. He recommended coming back with the contract and having one vote. Mr. David Pritzlaff asked why not wait until the attorney draws up the document, review it, and approve it. The people in the organization need to be changed before you can set a loan. Are you worried about paying the bills or paying the bills and keeping the event? He agreed the event is important. In the realm it is, you have to have a different organization set up and cannot come back after the document is set. Councilmember Wilson stated Council can make the decision to have the money come from the EDA. City Attorney Jamnik replied no, each entity controls its own budget, although the EDA budget has to be approved by the Council as a second step. Legally it is a separate entity that reports to the Council. Councilmember Wilson stated we could direct the attorney to draw up something which would be at the next Council meeting and we could approve it or deny it subject to EDA approval. City Attorney Jamnik agreed. Councilmember Wilson felt they need Council Workshop Minutes October 5, 2009 Page 8 to look at the terms and see if they are agreeable and how flexible they are. It would then go to the October 26 EDA meeting. Councilmember Fogarty agreed. City Administrator Herlofsky stated he will bring the contract to the next CEEF meeting, then to the next Council meeting, and then the EDA meeting. MOTION by Wilson, second by Fogarty to adjourn at 7:42 p.m. APIF, MOTION CARRIED. Respectfully submitted, /? -.L ~ v./J ~~~ > [7""~'t-. I[.;td.., ,. r (u..-f:...{:i;Z ~ (tynthia Muller Executive Assistant