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HomeMy WebLinkAbout11.09.09 Work Session Minutes Council Budget Workshop Minutes November 9, 2009 Mayor Larson called the workshop to order at 6:31 p.m. Present: Absent: Also Present: Larson, Fogarty, May, Wilson Donnelly Peter Herlofsky, City Administrator; Robin Roland, Finance Director; Brian Lindquist, Police Chief; Randy Distad, Parks and Recreation Director; 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 Wilson to approve the agenda. APIF, MOTION CARRIED, Fire Relief Pension Previously staff had proposed a reduction of $83,000 in Fire State Aid. After discussions it has been determined that cannot be eliminated so that is no longer included in the reductions. The Fire Relief Association requested an additional contribution over the required amount for the pension benefit. The current benefit level is $4575 and they requested a $125 increase to $4700, The City did not contribute $70,200 to the Relief Association in 2009 as it was not required. Councilmember Wilson asked ifthere was a schedule for payouts. The scheduled is based on the person's birthday and when they reach age 50. This is a one-time payment. Councilmember Wilson would like a schedule showing the result of the $125 increase. Councilmember Fogarty was uncomfortable with the increase to the pension benefit level. It has gone up 50% in the last seven years. There were a number of retirements this year when the benefit level jumped. There is also a huge training number for 2010, Council decided to wait for the revised spreadsheet. 2010 Budget The reduction of $83,000 for the Fire state aid was removed, and the $20,000 reduction in Parks was removed, Remaining is a $50,000 increase in building permits and $50,000 in bond refinancing. Each department reduced their budgets by 2%, Without public safety reductions this amounts to $71,208. With public safety reductions it amounts to $107,209. Council had also suggested employee furloughs for all employees, except the liquor store. For six days per employee it would amount to $150,000. Staff is not recommending this. As a result of the furlough in 2009 and managing overtime, there is a good fund balance for the end of2009. City Administrator Herlofsky recommended refinancing bonds amounting to $50,000 every year, staff restructuring over the next two years amounting to $50,000 each year. This would not involve any lay-offs, but through natural attrition, If there is a change in status, staff would evaluate whether to replace the position. Revenue adjustments include $30,000 from ALF, and an Council Budget Workshop November 9, 2009 Page 2 additional $50,000 in building permits. This amounts to $180,000. The improvements to the ice arena amount to $170,000. Staff presented a capital acquisition plan for 2010-2014. Many of the items have been pushed back from 2008,2009 and 2010. lfthe levy is reduced, it reduces the base and it makes it more difficult later. Mayor Larson asked about the $50,000 in building permits. It is $50,000 over the original estimate of $202,900. Currently we are $30,000 over that amount. Councilmember Wilson asked for an explanation of the rationale for the 2% reduction in department budgets. Finance Director Roland stated each department head was given the direction to reduce their budgets by 2% and they made the choices. Counci1member Wilson noted the City calendar is reduced by $1,000. Staff felt an additional $1,000 would not be spent on the calendar. Councilmember Wilson noted a reduction of $1 ,000 in citywide training and asked what is not happening. Staff stated some is compliance related. Trainers have been brought in to train supervisors on ADA and FMLA. Money has been left in the budget to do compliance training next year. Human Resources Director Wendlandt will not have a City cell phone and this amounts to a $500 reduction. Councilmember Wilson noted insurance has been reduced by $3,885. Staff stated the amount paid has gone down and it has been reallocated. Councilmember Wilson noted the Parks and Rec Department has been hit the most where there is visible residential impact by reducing programming and professional services amounting to $7,000. Finance Director Roland stated these cuts with the exception of the Park and Rec Department are starting from the 2009 level. Park and Rec numbers in the original budget were at 2009 levels plus $20,000. They are now coming down to the 2009 levels and the other departments have cut from the 2009 level backwards. Parks and Recreation Director Distad noted the banners for the light poles have been pushed back for the last three years. The programs are a reduction from the 2009 level. Councilmember Fogarty thought we tried to make the programs break even and was confused as to how we could cut $7,000. Staff explained some programs to make a little profit, so programs where we break even were cut. Councilmember Wilson has decided against having a furlough. He would rather see a staff elimination. Also, he would not consider a furlough and then spend $1.3 million on ice arena improvements, He would like to see a mid-year adjustment on building permits or third quarter adjustment. As a more conservative approach, not put permits in the budget until mid-year. He agreed with the $71,209 in department reductions, no furlough, and to not add in the $50,000 in building permits. Regarding bond refinancing, he asked if staff looked at the entire portfolio and the best scenarios for debt management. Finance Director Roland stated that is reviewed with Ehlers twice a year. The amount you have to save on a refinancing has to reach a certain threshold. This refinancing meets that requirement. ' Councilmember Wilson asked about the 1995 waste water treatment. Staff explained that is a loan given to the City in 1995 for some waste water facilities for sewer upgrades. It was actually bonds and we have debt service on those bonds for the next seven years. We levy each year for the bonds and have a small fund balance that covers one year of debt service. Councilmember Wilson noted we will have a Finance Director vacancy. He asked if it was worth noting when in 2010 the financial impact of that position would come back on line. City Administrator Herlofsky stated when employees end their position, there are payouts for their years of service amounting to two or three months. Once someone is hired, there should Council Budget Workshop November 9,2009 Page 3 .. ..... ... .. not be much of a gap. Councilmember Wilson would like to add an Economic Development ........... Director in 2010. He would be willing to reduce his reduction of $225,000 down to $125,000 if we can hire a Director for $100,000. Councilmember Fogarty did not support the furlough. She was in favor of the expenditure reductions and the ALF revenue. She was unsure about the increase in bui1dingpermits. She wanted to hear about the reductions in Police and Fire. The Police Department reduction amounts to $20,000. Police Chief Lindquist stated it would be done by looking at in"state training only, watching gas expenditures, and watching overtime. The Fire Department reduction amounts to $16,000. Fire Chief Pietsch stated they would delay hiring firefighters. This could increase service times. Councilmember Fogarty was uncomfortable with cutting public safety. It is difficult to look at cuts and then hire an Economic Development Director: She suggested the EDA needs to ask City Administrator Herlofsky what staff is needed to accomplish their goals. The EDA needs to clearly layout their goals. . She felt a Director is a 2011 budget item. Councilmember Wilson suggested funding the Director position from the EDA levy. City Administrator Herlofsky stated we need to determine what type of expenditures would be best suited for today and tomorrow. Councilmember Fogarty did not feel we were at the point yet to hire a Director. Councilmember Wilson felt we are at a critical position with economic development and there is a critical need for a Director level position. Councilmember May appreciated the reductions by each department. She apologized for some of her comments at the last workshop and they were not intended as a performance review. She is doing what she was elected to do. Regarding the building permits, she has never agreed with putting permits in the budget and felt we should not increase that number. She did agree with the suggestion of a mid-year adjustment. As far as the furlough, she was concerned with it if we are not talking about a salary freeze. It seems counterproductive to consider step increases and also a furlough. She would rather see adjustments with the salary freeze and recalled salary increases would amount to $60,000. Finance Director Roland explained the salary increases would occur in 2009. There are no salary increases budgeted, except for the Police Department, in the current budget. There are five or six people eligible for steps. No other cities that have imposed a salary freeze have included step increases in the freeze. Councilmember May stated most people are glad just to have a job. She would be willing to give up the raise Council received last year: She would be more willing to put a number on a salary freeze rather than a furlough. She would like to see the Economic Development Director position happen sooner rather than later. She asked if any sale of property would help with the EDA budget. Staff stated it would if it is an EDA property. Councilmember May thought they had discussed taking out the $30,000 ALF revenue as it is a one time event. It is the same as the building permit revenue. City Administrator Herlofsky disagreed as from an accounting standpoint, they have to report revenues and expenses as they see it. If we do not count building permits we are not doing our job. Building permits are not just new homes. With that in mind, we are giving Council the best expenditure and revenue estimates we can. Councilmember May stated to some degree it could be over zealous to include the permit revenue. City Administrator Herlofsky disagreed as they estimated low. Staff has been very accurate the last two or three years. Councilmember Fogarty stated it has to be included in order to justify the work some of the employees do. Councilmember May would compromise, but did not feel we should increase the permit number. Councilmember Wilson did not feel it was a bad practice to delay expenditures until revenues were more certain. Finance Council Budget Workshop November 9, 2009 Page 4 Director Roland stated if Council identified at mid-year that revenues were ahead of expenditures Council could designate those funds to a capital acquisition plan. Councilmember May did not approve the third SRO position. She felt the Middle Schools could do with one SRO instead of two. City Administrator Herlofsky explained this is a contract with the school district and they would like three SRO' s. If we only offer two, they can go to the county or anywhere else. They are willing to pay for those positions and the City pays for two months in the summer, but that also helps with overtime in the summer. Councilmember May stated if the SRO position stays in the budget, she would like to see the overtime number reduced. She also suggested City Hall being on one floor for efficiency and to save cleaning expense. She felt this could save more than $3,000 in office supplies. Regarding the street light utility, she would rather talk about the budget and what we need instead of breaking out a piece. She realized the fee affected a broader base in the City. Her concern is with the future. It is a revenue generator, but it is a tax. She was not in favor of having separate revenue sources and would not be in favor of the street light utility fee. Councilmember May felt they don't talk enough about what is happening in the community with the highest foreclosure rate, unemployment rates, the decrease in values, etc. If we could see a decrease in the overall tax to the residents, that would be good. If we want to compare ourselves to other communities, wouldn't it be great if we could be on the front page how we took a serious look at the budget and showed some compassion for the residents. That could help us in the long run to start the growth trend again. She did not want to talk about anyone's particular job. Those are conversations we should have with City Administrator Herlofsky. We are looking at a significant hike in the tax rate and it is hard to not see more dramatic cuts. The source of revenue is depleting. Councilmember Wilson stated Farmington is a great community, but it is very expensive. Other communities are bigger and have a broader industrial base because of their land size. The quality of life is impacted when taxes are higher. What we want to see will occur with lower taxes. More people will come here and that will spur retail growth. Councilmember Fogarty stated part if it is helping residents understand Council's situation. Our overall levy and budget is lower than other cities. Mayor Larson would not support the furlough as morale is low enough. Council agreed with not having a furlough. Mayor Larson asked about the amount for step increases. Staff stated it is 4% for a step, perhaps $10,000 - $15,000 total. Mayor Larson liked the idea oflooking at building permits mid-year and leaving the number where it is. Council agreed with not increasing building permits. He would support the 2% reductions in each department without public safety. Council agreed. Three Councilmembers supported having a third SRO. Mayor Larson stated as far as the Economic Development Director, the EDA will have a strategic planning session with City Administrator Herlofsky to look at objectives in December or January. Council agreed with the bond refinancing of $50,000 and the $30,000 from ALF. This amounts to a$150,000 adjustment in the budget. City Administrator Herlofsky asked about the staffing issue. Councilmember Wilson's original thought was to reduce the levy to an amount where residents would see no change in taxes from 2009. This would mean cutting the budget by $154,000. Councilmember May would like to see it greater than $150,000 to provide a cushion. Mayor Larson asked about the staff restructuring. City Administrator Herlofsky stated heseesthe possibility over the next couple years some staff changes will present themselves and wewill evaluate whether those positions need to continue. This would amount to $50,000 per Council Budget Workshop November 9, 2009 Page 5 year which would bring the budget reduction to $200,000. The street light utility would be included in the budget. Councilmember Fogarty asked if they need another budget workshop. Finance Director Roland stated the schedule is that Council will take public comment at the December 7,2009, meeting. Council would adopt the budget at the December 21,2009, meeting. Staff will provide a summary of the budget changes. Ice Arena Improvements City Administrator Herlofsky will meet with the school district on November 23, 2009. Councilmember Fogarty was told this was ajoint Council/School Board meeting. Originally Mayor Larson and Councilmember Fogarty were also going to attend.' Councilmember Wilson suggested noticing a possible Council quorum. Councilmember Wilson stated the elected . . officials from the School Board have not met with the Council and this has been a hindrance. The cost for arena improvements is $170,000 per year for ten years. The total project cost is $1.3 million. Mayor Larson felt they should go ahead with the arena improvements. It was suggested to meet with the hockey association and establish either a fixed dollar amount for a contribution or a minimum amount of ice time. Council felt both these items should be requested from the hockey association and the school district. Councilmember May was unsure about putting $1 million into a 45 year old building. Mayor Larson stated he has heard it is a sound building and should last another 50 years. Staff noted the repairs that have been done are good only for this year. Councilmember Fogarty asked to have a presentation on the new ice system. Councilmember Wilson agreed with Councilmember May that putting $1.3 million into the arena is not a good idea. Based on the lobbying effort by the hockey association shows there is very little broad strategic game plan from their end. They were looking to the City for the solution. He is encouraged that they will have discussions with the school board. He suggested Lakeville should also playa part in this because they have a lot of people in the Farmington Hockey Association. He would be more open to spending $1.7 million fixing this problem and bringing the building up to date. He felt Mayor Larson and Councilmember Fogarty were too close to the situation and that another Councilmember should replace one of them in the discussions. It was impossible for him to think they are not biased and this is a big chunk of money. There are other capital items that could use the money that take priority over the arena. Council member Fogarty felt it was not fair to say the hockey association is looking to the City for the solution. The President said he was willing to come to the table with money. That is a long way from where we were two or three years ago. She did not think he was wrong in accusing them of being biased, however, that bias is working in our favor and she wanted an amicable solution that is good for both the City and the hockey association. She has worked very hard on the relationship with the hockey association so that when this time came, they would be ready to step up with a financial commitment. She did not want comments like that to be counterproductive in the process. Councilmember Wilson felt at the meeting it was the City's responsibility. Councilmember May agreed. Two Councilmembers who are' actively involved with the hockey association are the two having discussions with the hockey . association. Councilmember Fogarty stated working with the hockey association is not the same Council Budget Workshop November 9, 2009 Page 6 as being involved with them. She does not sit on the board. Councilmember May stated if your child is involved in hockey you are involved in the hockey association. It is different from the pool in that it is an organized sport. Mayor Larson was fine with Councilmembers Mayor Wilson replacing him in the meetings with the hockey association. Councilmember Fogarty will send out a notice to Council when the next meeting is scheduled. Councilmember Wilson felt they were fast tracking the $1.2 million. Mayor Larson stated it sounds like the ice system will not last another year. City Administrator Herlofsky stated the risk is we will not have a season next year. Councilmember Fogarty stated you will lose your base, the youth. They will be forced to play in other communities and most of them will not come back. So you have hurt your hockey program at the high school level for many years. Staff stated the floor has lasted 35 years. Most places last 15 years so we have gone through two life cycles. The improvements will increase the efficiency in the mechanical system. A practice arena would cost $3-4 million and a full game arena would cost $6-7 million. There is also the cost of land and parking. Staff will proceed with improvements to the arena. Councilmember May asked if Council agrees on the $201,000 reduction in the budget as that is lower than what she had in mind. Councilmember Wilson agreed it is lower, but he wanted to see arevised page 15 from the budget. His $225,000 reduction was to have a zero increase in taxes. With the revised numbers staff estimated it to be $154,000. If there is a $201,000 reduction that would be $46,000 more than he anticipated. Solid Waste, Sewer and Street Light Utility Fees Staff is proposing increasing sewer and solid waste rates for 2010 for financial reasons. Regarding sewer, the cost the City is incurring for MCES is increasing. Since 2006 it has increased from $776,000/year to almost $900,000 worth of expense we are paying out to the Met Council for sewage fills. The sewage flow amount has decreased from a level of 519 million gallons to just over 450 million gallons/year. The Met Council is increasing the rates they are charging the City on less flow. They have debt and infrastructure they have to pay for. Because of the decline in development the trunk fund with regard to sewer is in a precarious position. It does not have the level of funding in the trunk fund that the storm sewer or water fund have. This means any reconstruction projects in the future or any trunk projects will not have the funding level because the developer fees that were in there have already been used to pay for the existing infrastructure. Staff is recommending increasing sewer rates not on the first 10,000 gallons, but on each 1,000 gallons above 10,000 gallons. Currently the City charges $27 for the first 10,000 gallons based on winter quarter and $2.30 on every 1,000 gallons used after that. The average household use is 15,000 gallons/quarter. The quarterly cost would go from $38.50 to $40.50; it amounts to $8 more a year for sewer. This will add money to the trunk fund and cover operating costs, pay for the MCES fees, and add to the fund balance. The City has not raised sewer rates for three years. There has been a significant reduction in the amount of waste going to the garbage burner because of the recycling program. However, the bottom fell out of the recycling market. The City is paying a surcharge of $30/ton for recycling and costs $4,000/month or $50,000/year. During20Q8and20Q9 the Qityhas seen fuel surcharges and commodity surcharges that have not Council Budget Workshop November 9, 2009 Page 7 been passed on to customers. If the City does not raise rates, you runthe risk of not being able to cover operating costs and not having money available to replace garbage trucks. Staff recommends a $2 increase for all residential levels up to 180 gallons. This amounts to $8/year/household. ~ /'Y7~ t/ Cynthia Muller Executive Assistant Councilmember May would like to see the reduction number higher than $201,000. Council recessed into Executive Session at 9:09 p.m. Respectfully submitted,