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HomeMy WebLinkAbout10.12.09 Work Session Minutes Council Budget Workshop Minutes October 12, 2009 Mayor Larson called the workshop to order at 7:10 p.m. Present: Also Present: Larson, Donnelly, Fogarty, May, Wilson Peter Herlofsky, City Administrator; Robin Roland, Finance Director; Brian Lindquist, Police Chief; Kevin Schorzman, City Engineer; Todd Reiten, Municipal Services Director; Lisa Shadick, Administrative Services Director; Brenda Wendlandt, Human Resources Director; Tim Pietsch, Fire Chief; Troy Corrigan, Assistant Fire Chief; Cynthia Muller, Executive Assistant MOTION by Fogarty, second by May to approve the agenda. APIF, MOTION CARRIED. At the last meeting, Councilmember Wilson asked for options for a $225,000 cut in the 2010 budget. City Administrator Herlofsky presented Council with a spreadsheet showing a summary of the 2010 budget. It also contained three options: Option 1. Option 2. Option 3. No change from the preliminary levy adopted on September 7, 2009. Shows a total reduction of $203,000. This contains: - Additional revenue from building permits of $50,000 - $196,000 was included in the Fire budget plus the state aid. The state aid can be used to cover the City's portion. Staff proposed removing $83,000 in state aid from the general fund and the $196,000 would still be covered. - Reduce $20,000 in expenditures from the Parks budget. - A $50,000 savings in bond refinancing Further Discussion A discussion followed regarding the requirements for the Fire Relief pension. Councilmember Fogarty stated it was difficult on the City's budget and with what we are trying to accomplish in a year like this to have to accommodate for that. She felt it would eliminate a battle if it were put into the Fire Reliefs hands; then Council just has to negotiate a dollar amount each year. She was uncomfortable with the retirement benefit level and the Council having input. We have no control over investments, but yet we are responsible for the money. Her problem is going to the negotiation table with the Fire Department 3-4 years ago and we agreed to increase the benefit. She was hesitant to do that. She was told a lot of members would not retire and the fund would not be depleted, but it has been depleted due to retirements. She would like to have the liability out of the City's hands. She was interested in finding a solution so that a Council is not in this position again. City Administrator Herlofsky noted the Fire Department has done well with their investments and can do some things the City cannot. Council Budget Workshop October 12, 2009 Page 2 Councilmember May thought the amount of money put into the fund was not negotiable and did not understand the option for the $83,000 reduction. City Administrator Herlofsky explained the budget shows an expense of $279,000. That is $83,000 more than we are required to put in there. The practice was that is what we would do each year. Based on our financial situation and the requirement for an additional $196,000 he felt it was reasonable to suggest taking the $83,000 the City receives from the state and reduce the $279,000. Councilmember May felt this would compound the problem later. City Administrator Herlofsky stated looking at the investments at the beginning of the year and the requirement of $196,000, with a reasonable amount of risk, there is a more positive market that will hit at the beginning of next year. For next year's budget staff needs to meet with the Fire Department to resolve this ahead of time. Councilmember May asked if it would be more prudent to do this mid-year next year. City Administrator Herlofsky stated we have $83,000 and we are trying to match up a budget for 2010. Council can reject or agree with the proposal. Based on the way building permits are going, staff feels another $50,000 can be added to building permits for 2010 and reducing the levy by $50,000. The $20,000 reduction in Parks comes from various expenses throughout the different areas. Mayor Larson clarified we have $20,000 we are not putting into the Parks budget. City Administrator Herlofsky replied we are removing it. Finance Director Roland stated the directive was given to departments to put in the 2010 budget those expenses that were necessary to run 2010. All departments except for Parks and Rec put in the same amount as 2009. The Fire Department requested more in training required for new members. The Parks department requested $20,000 in increased expenditures above the 2009 level. Staff was suggesting the Park & Rec expenditures in the general fund be reduced to 2009 levels. Mayor Larson asked what the $20,000 was going to be used for. Finance Director Roland replied $8,000 was going to redo the tennis courts, chairs, and other increases above 2009 levels. With the exception of payroll and benefits, we tried to keep everyone at the same expenditure level as 2009. The Fire Department has certain turnout gear needs and training needs that exceeded their 2009 expenditures. That was justifiable given the number of new people. Regarding the $50,000 in bond refinancing, under debt service there is $1,924,388. Staffis proposing with some bonds coming due and the decrease in interest rates, we can eliminate about $50,000 from that amount. These changes would reduce the levy by $203,000. Staff is assuming there will be a street light fund established and there would be fee increases for solid waste and sewer. Other additional issues to be discussed include the Ice Arena, the Police SRO, EDA budget and seal coat policy. As far as personnel, there is no increase in the schedules; steps will be allowed. The only contracts in place are for supervisors in Police and Police Officers that will be honored. There is no increase in health insurance for employees in 2010 except for the contractual arrangement with the Police Department. Mayor Larson wanted Council to talk among themselves and get on the same page so they can move forward together. Councilmember Fogarty asked how much dollar wise we will be over for building permits for 2009. Finance Director Roland replied as of the end of September we are $25,000 over where we would be for the year. We will be approximately $30,000 - $40,000 above in building permits. Councilmember Fogarty stated one possible source of revenue is $30,000 in ALF money and asked if staff was comfortable enough with the number that if it were Council Budget Workshop October 12,2009 Page 3 added in, it would not be too far off. Finance Director Roland stated it is an established number the ALF board has adopted and is in the ALF budget. It is not in the City's budget because it is a one-time revenue source. Those are usually reflected as increases to the fund balance. Councilmember Fogarty had requested a list of tax-exempt properties because she wanted to have a discussion about seal coating and how to handle it. Mayor Larson asked if City Engineer Schorzman was prepared to discuss the money saved with eliminating seal coat assessments. This will be discussed later in the meeting. Regarding the Ice Arena, if we participate in the program discussed and use the $160,000, in order for that to come down, it would have to be added back into the debt service fund and would be an increase in the levy. Councilmember May stated she did not want anyone to take anything personally, and is trying to do what she was elected to do. Even before she was on Council, she did not agree with the practice of putting building permit revenue in the budget because it is money we do not have. She did not like the option of increasing that number. Regarding staffing issues, it was a difficult Council meeting when Council had to approve the preliminary levy because she fully intended to vote no, because she did not want to see any increase. Now, there are numbers moving around without any real substantial changes for a difficult economic situation. She did not see it getting better anytime soon. She felt we need to look at staff reductions and had some ideas, but it was difficult because she is not working at the City level. She has seen job responsibilities, but asked if it was appropriate to throw thoughts out. She was thinking of positions. She started with the Economic Development Specialist. Right now, there is not a lot going on and felt we should have an Economic Development Director. It should be someone that has a long list of credentials and felt that is what the City really needs. At this point, she felt the position could be eliminated and in a year or two hire an Economic Development Director. Looking at top management and the Administrative Services Director position, she was not sure she fully understood that position as far as it being in the management group. She was not fully on board with adding a Police Officer. If the school feels they need another School Resource Officer, she asked if there was a way that SRO can travel from one school to another. The Middle School is 7tl1 _Stl1 Grade so there is a young age group. She was not sure about the need for another SRO. She felt they should talk about salary freezes. In her working word, 90% of the people are living through the second year of salary freezes and who knows if in 2010 any of those will see an increase. Mayor Larson added not only a freeze, but reduction. City Administrator Herlofsky noted Council needs to realize by freezing the schedule which we have except for the people eligible for steps, we are putting a salary freeze on employees this year. Employees this year received a 3% raise, except those eligible for steps, and took a 2.5% decrease because of the furlough. We are looking at a salary freeze, except for steps, in 2010. Councilmember May asked ifthere will be merit increases in 2010. City Administrator Herlofsky replied no, there are no merit increases for 2010. Finance Director Roland stated there are two employees left in the step process that are less than mid-point and there is nothing beyond mid-point. In the first three years of service, there is a step at 6 months, at 1 year, at 2 years and at 3 years. Beyond that, they are at mid-point. We used to have merit, but it is not in the 2010 budget. City Administrator Herlofsky stated we have already done that to the level we could. Councilmember May noted this is a big building and we were projecting growth. She asked why we are not just on one floor as we are cleaning the whole building. She asked if there was a reason the Council Budget Workshop October 12, 2009 Page 4 downstairs is % empty and we are taking up two floors and cleaning the whole building every day. She felt that would save some money. Just close the second floor until we grow again. She noted there is a projected reduction in the bond rating. Finance Director Roland stated it was anticipated in 2009 we would increase our bond rating as far as Moody's on the same level as Standard and Pours. We have not issued bonds this year, so Moody's has not revised our rating and therefore the ratings were left at the same level. Councilmember May did not like the street light fee. She understood it has to be made up in the budget. It is just another tax. Councilmember Wilson asked if the $25,000 - $40,000 in building permits in 2009 would be added to the fund balance. Finance Director Roland replied yes, because we are keeping all other expenses in line and collecting the revenue at the same level. She noted they do consult with the Building Official on the numbers. Councilmember Wilson asked about where the street light utility used to be in the budget. He felt the street light utility is budget neutral. It provides a more stable source of ongoing revenue. It is a reduction in the levy and an increase in the pass through tax from a different entity. Councilmember May replied it is this year when it is imposed, but going forward it will get buried and become another revenue stream. She wanted to have it out front every year. Councilmember Fogarty supported the street light utility because it includes tax-exempt properties and gives a broader tax base. Councilmember Wilson asked if the $10.7 million projected surplus in the Internal Service and Enterprise Funds was dedicated to certain expenses. Finance Director Roland stated those funds would cover future improvements not supported by trunk funds. Councilmember Wilson asked about the Capital Project Fund. Finance Director Roland replied those funds are for future road, bridge, and trunk construction plans. The Enterprise Fund balance has to be dedicated to certain operations. The total is the cash number and not investments and assets. The Water Fund is different because they have operational costs and also trunk monies for future improvements to the water system. The Storm Water Utility has money for the future cleaning and improvements of storm water ponds. We do not have the same level of balance in the Refuse Fund, but what is there would fund future capital outlay for trucks, etc. The Sewer Fund is running low because development has eaten up those funds. The Met Council is increasing their costs to us. Their rates are going up 5%-7% for 2010. We have to cover that in operating costs and any future improvements to our sewer system will have to be funded by the sewer utility because the trunk funds have been used until this point to build trunk facilities. Councilmember Wilson stated each year he tries to project what the City needs to watch for and what we are not able to do immediately. The City will have to look at a new fire truck which we have delayed a couple times. Another concern is Council needs to figure out a game plan with the industrial park expansion. He was concerned we could lose an opportunity without a game plan and perhaps we need an EDA levy. He felt the City would benefit greatly by spending more money in the category of Economic Development for professional experience. Having an Economic Development Director is a greater need as opposed to a Specialist position. When the Council created this position in the 2006 budget, it was a complement to a director we had at that time. We do not have a director here. He believed we need director level experience in that position. Councilmember Fogarty did not disagree, and the idea of eliminating that position she is comfortable with, but did not like the idea of hiring a director down the road. It will not happen. Elections happen and everyone runs on the same platform of needing economic development, but not a dime is being put towards it. Councilmember Wilson stated he supported all the areas identified and felt Council could look at other areas. At the same time, he would not reduce one and down the road add another. He Council Budget Workshop October 12,2009 Page 5 would add the expense for 2010. He disagreed with Councilmember May in the timing of when a director would come on board. Councilmember Fogarty asked if the opportunity is there or if the fluidity of a contract person is a better option and bring in a specialist who does economic development with cities under a contract versus hiring a permanent staff member. Councilmember Wilson stated we have done that in the past and nothing has happened. There is not as much continuity as he would like. City Administrator Herlofsky stated other cities are impressed with what we are doing here even though this is not a booming time. Also, the person in place may have had less experience when they started, but now you have someone with three to four years experience who might qualify for a position you are trying to fill. He stated he has made an effort to address the issues over the last three years and make sure that person has some support from the City Administrator. He was satisfied with the production we are getting out of that office. Councilmember Fogarty stated Council is not disagreeing, but she is prepared to do more in that area and consider a director level with an expectation of getting more out of that position and having someone who has the time and connections to be more proactive than what we have been able to do. Industrial is the area we need to focus on. Getting someone in to guide us is what she is thinking of. Councilmember May did not want this to be a performance review of any kind. She is looking at what that position is providing as an EDA member and it is mostly a phone call report. She agreed at looking in 2010 for what we want, and in 2011 hire a director. Councilmember Wilson stated the position is performing as the position is supposed to. Specialist positions are often supporting a director. He was very concerned we do not miss an opportunity because we are not prepared. Councilmember Fogarty asked if it was too late to have an EDA levy for 2010. Finance Director Roland stated it would need to come out of the levy amount currently on the table. We would need to identify a certain amount of the levy going towards the EDA as opposed to any other source. As long as the maximum levy is not greater than the preliminary level, Council can choose to do what they want between the funds. Councilmember Donnelly stated putting a halt to the industrial park was the EDA's decision, not any individual decision. As far as the street light utility, it is just a different way of paying for it. You have to levy for it or have a street light utility. Ifwe do not have street light fees, then we will have to have another $155,000 out of the budget. The $203,000 reduction would lower the tax levy from $9.78 million to $9.5 million. In looking at things that were added, $95,000 was for the School Resource Officer. That is a big number. City Administrator Herlofsky explained we get paid nine out of 12 months of that officer's time. Councilmember May added and we also have to hire another officer. Finance Director Roland stated in 2009, the plan was there would be three Resource Officers from September - December. There would be no one hired to replace that officer. Any revenue received from the school district was bonus. Starting January 1,2010, we would have the three Resource Officers which are supported by ten months of revenue from the school district and also have the replacement officer on the patrol, because we have taken someone off patrol and others are filling in. When staff originally did the three Resource Officers, we only did one Resource Officer revenue and expense for a three month period. Part of the difference in the SRO is the backfill, but the other piece is that instead of three months we are filling the whole year. City Administrator Herlofsky stated the net cost to the City is two months we are not reimbursed by the school district. The amount is approximately $10,000 for two months. Currently there are 12 patrol officers and two SRO's. Council Budget Workshop October 12, 2009 Page 6 We will have three SRO's and 12 patrol officers. We are only adding one position that gets paid 10 out of 12 months by the school district. There is no increase in patrol officers. Councilmember May stated we are adding one salary plus six months for the three SRO's. Councilmember Donnelly stated he is not seeing the revenue side. Finance Director Roland stated the numbers are net of revenues. Mayor Larson stated the City will pick up two months of salary for three officers. City Administrator Herlofsky stated we have had two SRO's already, so it amounts to about $10,000. Councilmember Donnelly stated the other item is the squad car. Police Chief Lindquist stated they have reduced the number of squad cars to be replaced to make it the same as last year. Finance Director Roland stated normally we would be replacing four cars in 2010. Finance Director Roland noted the item on the fire truck is not lost. We would normally issue debt to pay for a large expenditure like that, because it is a two year purchase period. If Council decides to put that in the budget for 2010, it would arrive in 2011 and be paid for in 2011. City Administrator Herlofsky reminded Council he did request a full time Fire Chief for 2009, but did not bring it up this year as it was not an appropriate time. City Engineer Schorzman explained the seal coat payment process. Council had asked him to even out the payments residents make from year to year for seal coating. The best option is to switch from an assessment process to the use of franchise fees. You can still reap the benefits from the assessment program while still evening out the assessment over the seven year period. You get the benefit of the tax-exempt properties that would still be associated with the assessment, but you do not get the annual fluctuation based upon the area in town. The problem with evening it out based on area, is if it was done this year, you have to make a choice to wait ten years to seal coat areas because of changing the portion it is in and do some five years even though you could wait ten years or continue the same areas you have been, but because the costs are evened out everything stays the same. The problem with evening out the areas is as soon as the next development comes in it makes them unequal. He projected the seal coat out seven years, figured costs to do that in the middle of the program to average out the cost of the seal coat, and it came out to how we are currently doing it where we are collecting half of what we pay for. This would be split between gas and electric at $ 1. 52/month which over seven years equals $127.56 which is similar to the seal coat assessment just done. The savings by doing this are significant. Over the last seven year seal coat cycle we spent $53,500 directly attributable to the process. We have to do a feasibility report, because it is assessed we have to send out legal notices twice, and it stakes staff time. That $53,500 has not gone to seal coating the roads, it has gone to the process. That would be eliminated if we collected the franchise fees and put them in a specific fund used to seal coat the roads. We do not need a feasibility report or send out legal notices. The money the City has used to cover the 50% is running out. There will be a change necessary in the near future to obtain the other 50%. This could also be used for that. You would then double it to $3/month. If we instituted the franchise fees now from the gas and electric companies combined, at $3/month, the assessments would go away and we could seal coat the roads for the next seven years. Finance Director Roland stated the fund balance in the capital projects fund was to fund future projects and amounts to monies accumulated over time in MSA funds, interest revenues, and other related revenues. The fund balance has been used to cover the cost of the City's seal coat. We also use those funds to float the cost of feasibility studies until we choose to do the projects. If the franchise fee was adopted the funds would go in Council Budget Workshop October 12, 2009 Page 7 the capital projects fund and be available for street costs or trunk costs. It has to be dedicated to certain items. Councilmember May asked if you can start at a lower amount and then increase it next year, rather than jumping to $3 now. Finance Director Roland stated they are still negotiating with the utility companies. You could make it a smaller amount and gradually increase it. The utility companies prefer a per meter charge and the Council could adjust that fee at certain intervals. Mayor Larson asked if it was possible to start at a lower fee and gradually increase it. City Engineer Schorzman stated it is a seven year cycle. If you have less at the beginning you will end up over that at the end and the City will float the difference at the beginning. Mayor Larson stated if we charged $2/month rather than $1.57/month ifthat would take less of the City's funds to pay for the seal coating. City Engineer Schorzman stated once the process starts and we reach the break even point, we will stay there. Finance Director Roland stated once Council determines if this is what you want, then we can be more specific with the negotiations. Councilmember Wilson did not have a problem with the assessments. This year there were concerns because the cost was more. From an equity standpoint, you are paying for a service that will fluctuate year after year. City Engineer Schorzman stated the $3 was used to cover the entire cost of the seal coat should the other half of the funds go away. To cover the cost now (the half the residents pay) would be the $1.50 total. Over the seven years that would be $127.56. As he spoke with residents most said they would prefer a set amount rather than an assessment. Mayor Larson asked if staff has looked into the cleaning of the building. Finance Director Roland stated there has been a reduction in the amount we pay for cleaning of the building. The reduction is based on the amount of space used in the building. Staff is concerned if they go out for RFP we might find that not only are we already at the lowest level for building maintenance, but the current provider might increase the amount they are charging because they can under the RFP process. Mayor Larson asked if we are better off contracting the cleaning or hiring a couple part-time people to clean the building. Human Resources Director Wendlandt stated we are better to contract. With employees there is the cost of benefits. Councilmember May asked if this cleaning company is new this past year. Finance Director Roland replied they are the same company we used in the old City Hall and staff received an estimate for the new City Hall. We could do an RFP and we might see a change in the fee, but we are not sure that would be a decrease. Councilmember May recommended doing an RFP and felt the market is very competitive. Administrative Services Director Shadick stated the City went out for RFP in 2003 and the fee is based on square footage of the building. Recently staff did a walk through with the company to evaluate the areas being cleaned and with that evaluation the City received a 5% reduction because of areas not being used. Mayor Larson asked what we pay the cleaning company. Administrative Services Director Shadick stated the company cleans City Hall, the Central Maintenance Facility, two Fire Stations, and the Rambling River Center. For three to four people/night they charge $84,000/year. The cleaning company has their own insurance. Mayor Larson suggested before going out for RFP to investigate what other cities are paying per square foot. If we are seeing others pay less, then that should tell us to go out for RFP. Staff will look into that. Mayor Larson noticed in the budget we spend a lot of money on uniforms and asked if we would be better off with a clothing allowance. Human Resources Director Wendlandt stated staffhas looked at that and have tried a hybrid between providing the uniform and some allowance. We Council Budget Workshop October 12, 2009 Page 8 negotiated the replacement cost of uniforms. The City is required to include this in negotiations. It is more cost effective to provide the uniforms. Finance Director Roland stated it also provides a consistent, professional appearance. Mayor Larson brought up cell phone bills and the total cost being $40,000/year. Administrative Services Director Shadick stated it is $2300/month and used to be $4,000/month until a rate analysis was done in 2008. Finance Director Roland stated it comes to less than $30,000/year. Mayor Larson asked if we were comfortable with the Nextel service. Administrative Services Director Shadick noted the direct connect feature is very important. She works with Nextel to have rate adjustments reviewed. Mayor Larson has envisioned an Assistant City Administrator so we have someone to step in when the City Administrator retires in a few years. He was looking at combining a couple positions into an Assistant City Administrator position. Councilmember Wilson asked if Mayor Larson would be open to an Assistant City Administrator having a focus on Economic Development. Mayor Larson would be very open to that. Councilmember Fogarty stated she would also be open to that, but felt it would be difficult to find someone talented in government administration and economic development. She envisioned more of a head hunter, very experienced economic development person. They will not be an administrator. She wants someone in economic development who is economic development. The two are very different roles. Councilmember Donnelly would not want to hire someone with the anticipation they would be the City Administrator. That is a different process. Mayor Larson stated he would like to look at combining a couple positions and he also would like to have an Economic Development Director. Someone with more experience and that can focus and really sell the City, especially in the industrial park. Councilmember Donnelly stated if we want an Economic Development Director, we should levy for it and get it in. Councilmember May stated that is why she is struggling with the way it is set up now. Councilmember Wilson stated we have had consultants come in and give us great information and we have a lot of energy, and it goes no where. Councilmember Fogarty was not talking about a consultant coming in to help us again. She was talking about hiring a consultant for a set amount of time to come in and work full-time to get economic development in Farmington. To come in and help us focus on what we have to do, not should do, to attract industrial businesses here. Someone who has been in the field or maybe someone from a private industry. Someone who knows exactly what needs to be done and knows what sells. Finance Director Roland stated when she started in 1996, the City had an Economic Development Director, who was a contractual employee and was paid out of the HRA fund. However, it was not levied for. He was paid for out of tax increment administrative fees, which the HRA was receiving at that time. He had more of a sales background. He did sell the City. He went out and got us deals. He got people to come to Farmington and establish their business here, and we paid for it in TIF. Weare now down to two TIF districts. We have an industrial park that has numerous businesses, but it also has numerous empty buildings. She cautioned that even the best Economic Development Director that money can buy is still not going to have the immediate effect that Council is looking for. Councilmember Fogarty stated to her immediate is three to ten years. Right now we are doing nothing. Weare talking all the time. Councilmember Wilson felt that was a long time and suggested one to three years. Councilmember Fogarty agreed and clarified she meant with buildings being built and have businesses. Councilmember Wilson stated we have no continuity in development and Council Budget Workshop October 12, 2009 Page 9 framework and we keep starting over. Councilmember Fogarty stated that is lack of the EDA's willingness to pull the trigger. Councilmember Wilson felt he needed more information on the $83,000 reduction in fire relief state aid and the potential impact. He would support the $203,000 reductions backing out $100,000 to add a $100,000 EDA levy for a net general fund reduction of $1 05,000. He would still like to see another $20,000 reduction. Councilmember Fogarty stated we could add the ALF money into the budget. Mayor Larson stated we would be putting $100,000 in an EDA levy. Finance Director Roland stated for the next budget workshop, Council would like to see the suggested cuts in place, the $203,000. Councilmember Wilson agreed with Councilmember May on the fire relief reduction. Councilmember May stated she did not want to mess with the fire relief fund. Finance Director Roland asked if it would help if staff gave a couple scenarios showing how it would not adversely affect us in the future. She asked if Council wanted to see a couple scenarios. Councilmember May stated she is totally against messing with the fire relief fund. Councilmember Fogarty stated $195,000 is $30,000 more than what we would have put in if we were just putting in every year. This is an additional $83,000 to what we generally put in every year. Ifwe did $279,000 and did that for 2009 and 2010 we would be supplementing the fund by an extra $120,000. Finance Director Roland stated the Fire Department is getting $70,000 in 2009, but that is the $70,000 that we get from the state which is statutorily allowed to be the entire amount that we have to give them. Councilmember Fogarty was not comfortable with taking $20,000 out of Parks. Parks is the first one to take a hit every year. She would like to add back the ALF money and remove Parks and Rec from the reductions. Mayor Larson asked how Council felt about the street light utility. Councilmember Fogarty would support it. Councilmember May would not support it and felt we need to look at bigger, longer term cuts. Councilmembers Donnelly and Wilson would support it. Councilmember May asked about the proposed increase for solid waste fees. Finance Director Roland stated fees have to be increased because ofincreased costs. We would not go more than 2%. Councilmember May stated we are looking at a street light utility fee, a possible franchise fee, and an increase in the solid waste bill in addition to the taxes. Finance Director Roland added and sewer. We have to cover operating costs or we will not have money there. The Met Council increased their fees to us by 7%. She was not proposing a 7% increase in sewer rates, but staff would probably go 2%. It is easier to increase sewer rates 1 %-2%/year than increase it 10% every 5 years. Councilmember Donnelly asked when the last increase was. Staff replied it was three or four years ago; the same with garbage. As far as garbage, we survey as many private companies as we can and compare our rates to private haulers to make sure we are not out of competitive rates. We have several employees who live in other communities who have private hauling and pay a different rate and we do a comparison. Councilmember May noted she sees a lot more of the smaller bins as a lot of people have switched to a smaller size. Finance Director Roland encouraged Council to read the Star Tribune article. It is very good and very accurate. Council Budget Workshop October 12, 2009 Page 10 Mayor Larson asked Councilmember Wilson about the $100,000 EDA levy, and if it was just for an Economic Development Director, or would it be part ofthe industrial park expansion. Councilmember Wilson felt the EDA would need to discuss how to use it. He was also open to a staffing change. He was open to Councilmember May's ideas. He is open to staff changes if from a Council perspective it makes sense and usually at the direction of the Administrator. Councilmember May stated a very large percentage of the budget is directed towards personnel so if we are looking at hard changes, then we have to look at that. Of the positions she suggested, another one is the Assistant City Planner, she did not know what positions that would be, but felt we need to look at them. It is uncomfortable but it is not thrown out there and we should. Councilmember Wilson stated to separate personality from the position he looks at what he as a Councilmember thinks the City can or should do that we are not doing now or what are we doing too much of or don't need to do as much of. That is why he can zero in on economic development. Weare not doing enough of the right stuff. We need to reshuffle what we are doing. The other categories, he did not know about. They may be good recommendations; he just does not have enough knowledge of the positions. The Economic Development Specialist position stands out because the City Council had a lot of direct input in creating that position. Mayor Larson would like City Administrator Herlofsky to look at the staffing positions and see what can be combined. Councilmember Wilson agreed as that would force the discussion between the City Administrator and the Council saying here is the reason I have all these positions, here is what they do, and here is why they are valuable, here is the essential function we are getting. Mayor Larson stated when he looks at the book on positions Council received in January, there are a couple positions he feels can be combined into one. That is something we need to look at. Finance Director Roland clarified Council would like to have the City Administrator do an evaluation of the positions that Council has just named and by evaluation Council means essential functions, what they do, etc. She asked if that was for every position in the City. Councilmember May stated supervisory positions. Councilmember Donnelly assumed this is done every year. If the position is not justified, they are not here. He was not going to get into personnel. That is what we hired the City Administrator for. His job as an elected official is to say I want the levy to be this amount. It is up to the City Administrator and staff to get there. That is the way this should work. Councilmember May understood what he was saying, but at the last City Council meeting Council talked about a number and staff is coming back with a street light utility and fee increases, and she does not see any long term changes here. She was saying it, because the hard issues are not getting addressed. She was not saying she wanted to sit down with the City Administrator and evaluate all the staff. Unless everyone is comfortable with the budget levy presented, let's just vote and be done, but she is not. She wanted to see some significant change and did not see how we can accomplish that unless Councilor the City Administrator take a good hard look at staff. Councilmember Fogarty stated part of the challenge is Councilmember May has not been here for the past couple years letting people go. There is a perception out there that we haven't been doing that and that is not true. Lakeville did it all at once. Councilmember May did not care what other cities are doing and did not like the comparison. It can be apples and oranges. She was looking at this budget and is she comfortable with the levy being proposed, no. Is she comfortable with option 2 as to what Council is supposed to accept, no. If we are not getting access to look at the harder things, which unfortunately is staff related, then let's just vote at the next meeting. Finance Director Roland clarified only supervisory and above. Councilmember Donnelly felt it should be everyone. Council Budget Workshop October 12,2009 Page 11 Councilmember May stated you reach a point where you have to provide the services. We have to plow the streets, and have patrol and fire services and we have to have so many people to do that. We are not flush with those people. The City Administrator will have to consider that. Finance Director Roland stated Council does not want the City Administrator to make decisions about line staff. You hired the City Administrator and we do look at all these positions and what their responsibilities are. If the City Administrator determines that we do not need the staffing level and he can recommend someone gets laid off, you do not want him to do that, or you do want him to do that. She was trying to understand where the line is. Councilmember Donnelly stated we should agree on a number for the levy. Staff took $203,000 off and you do not agree with the means of getting to that point. There was an attempt made to come close to the $225,000 and he did not understand why that amount. Councilmember Fogarty stated that would keep the median home price in Farmington paying the same amount of tax. Councilmember Fogarty stated it was never an agreed upon number. Councilmember Wilson stated he suggested that number as a way to offer direction to staff and felt it was a starting point. Councilmember May stated now it has become the number without any real discussion about what the number is. Finance Director Roland asked if Council was to give staff a number to work towards, say no levy increase at all, and staff was able to cut to that level and we were to make the recommendations of positions we might not necessarily need under those scenarios, what would Council think of that. They may not be the same positions. So then the issue is not about the number it is about the positions you are talking about. Councilmember May had no interest in wanting to manage City staff. She threw out those positions based on observations. Finance Director Roland stated if Council was to say $225,000 we don't care how you do it, and staff said every department cuts 2% and that did result in lay-offs, Council would be okay with that if the departments made the recommendations and the City Administrator agreed with them. Councilmember May wanted to say yes, but option 2 does not do much. Council would still look at the recommendations. Finance Director Roland agreed, but if it is about getting to a number versus meeting specific objectives that Council has laid out, those are two different things. Councilmember Fogarty asked if we have a consensus of where we want to be. We need to narrow down a majority consensus so we can move forward. Councilmember Wilson was adamant about the $225,000. He was trying to identify what number would keep the average property from having an increase in property taxes knowing the property value had decreased. It would be $125,000 if we added the $100,000 back in for the EDA levy. The EDA needs to discuss if that is a good investment long-term. He also proposed the idea of supporting the furlough similar to 2009 which would add $90,000 - $100,000 which would get us back to the $225,000. His goal would be to have that number and try as hard as possible to not layoff one person. Councilmember Fogarty agreed with not laying anyone off. Councilmember Wilson had an opinion on the one position. It is absolutely not the person, it is the position. Council needs more from that position. Mayor Larson asked if $225,000 was a workable number for everyone. Councilmember Fogarty stated with the possibility ofa $100,000 EDA levy, yes. Councilmember May felt the number was way to low, especially if we have to talk about the ice arena. She suggested at least $350,000. Councilmember Donnelly agreed with holding the median tax payer steady for this year and whatever it takes to accomplish that. He was not sure about the EDA levy. Council Budget Workshop October 12, 2009 Page 12 Mayor Larson asked about options for the ice arena. Finance Director Roland stated all we are talking about is fixing the floor with an upper end cost of $1.2 million which is worst case; that is not adding rooms or anything, just the floor. A ten year revenue bond or lease revenue bond, because we would not go out for referendum and would have to be able to support whatever bonding is done, you would have to support with revenues coming from sources such as the City, the school district, the hockey association, contributions from townships, etc. The City would have to come up with $160,000/year for a ten year bond. Staff provided the $50,000 in debt service for 2010 as part of the $203,000. That is for one year. The $50,000 might be available for another revenue bond to fill in the gap. You would not raise the levy as you would have that money, or there would be other contribution sources such as the liquor store profits. There is the potential of annual contributions from the school district. The hockey association mentioned $30,000/year. Otherwise, if Council chose not to use those sources of bonding, Council would need to go out for referendum. Councilmember Fogarty spoke with the association about the $1.2 million and the resources within the hockey association as far as electricians, excavators, etc. and working with a general contractor. They realize it would take six months versus three months, but right now they are comfortable with utilizing as much in-kind donations as possible to bring down the cost. That is the best place to start talking. They are very open and have very willing members. Mayor Larson asked if the ice arena money would have to be in the 2010 budget. Finance Director Roland stated as it is laid out it would be transfer funds. The bonds would have to be issued before any work could be done next spring. The earliest payment would be 2011. Mayor Larson stated we have a $225,000 number and a $350,000 number for cuts and possibly another $100,000 from that going to the EDA levy. Councilmember Wilson suggested directing staffto show us what $350,000 looks like and we decide if we like that product. Mayor Larson also wanted to know what $225,000 looks like. Councilmember Fogarty wanted to see the consequences that go along with those cuts. When cuts were done this year she was not aware and that is concerning. Council can make the decision, but we also need to take responsibility for that decision. Mayor Larson directed staffto come back with $225,000 and $350,000 in cuts. Councilmember Donnelly asked why $350,000. Councilmember May said that is the market value homestead credit number we are trying to make up which should not have been in the budget in the first place. Finance Director Roland stated if the methodology staff uses is a 2% across the board cut and every department cuts 2%, that is what Council wants to see. Mayor Larson stated the majority of Council is saying staff should make the decision. Councilmember May stated she assumed that is a decision the City Administrator would make. Finance Director Roland stated they would be recommendations staff would make to the City Administrator or the direction the City Administrator would give staff. Council wants this for the November 9,2009, budget workshop. Councilmember Wilson wanted staff to present two options including $125,000 out of the general fund with $100,000 additional going to the EDA levy, but he would also like to explore the impact of $225,000 out of the general fund and an additional $100,000 which would be close to the $350,000. Mr. David Pritzlaff asked if the street light utility is for each household and what about apartment buildings. Staff replied it is each utility bill. Mr. Pritzlaff asked if there are any apartment buildings that have one utility bill. Staff will check on it. Mr. Pritzlaff asked about the bond refinancing and wouldn't we have done that anyway to save money. Staff replied yes. He asked what we would do with the $50,000. It did not come as a suggestion previously. Finance Director Roland stated it is a cross over refunding which will take effect in 2011 and Council Budget Workshop October 12,2009 Page 13 because of the kind of refunding it is it was not in the picture prior to this. The $50,000 probably would have gone to pay another debt. MOTION by Fogarty, second by Wilson to adjourn at 9:41 p.m. APIF, MOTION CARRIED. Respectfully submitted, ,/.. .:" ~ ,,/ / - ~"l/a~ ?r?uAaJ tynthia Muller Executive Assistant