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HomeMy WebLinkAbout03.08.10 Work Session Minutes Council Workshop Minutes March 8, 2010 Mayor Larson called the meeting to order at 6:31 p.m. Present: Absent: Larson, Fogarty, May, Wilson Donnelly Also Present: Peter Herlofsky, City Administrator; Kevin Schorzman, City Engineer; Cynthia Muller, Executive Assistant MOTION by Fogarty, second by May to approve the agenda. APIF, MOTION CARRIED. This workshop was a continuation of the January 11, 2010, workshop on engineering issues. Develonment Fees Discussion Council had asked for a comparison of fees in surrounding cities. Staff looked at three options: 1. Do as we have in the past where development pays for itself and we raise the fee to cover the cost. 2. Phase in the increase over the next five years. 3. Have development pay for part of the increase and current residents pay for part of the increase. Staff spoke with a developer who is not building in Farmington to determine the effect of a $1,000 increase. The $1,000 will not break them, but it will in combination with anything else the City might do. Phasing the increase in over time would be more palatable to the developers rather than having the increase all at one time. This developer could see a justification to have the current residents help pay for development because development helps the existing tax base. These comments were from a residential developer. When people decide they want to build, it is more about the location than the fees. Smaller developers would be affected by the increase more than the larger developers. One ofthe big drivers in Farmington having higher fees is the Vermillion River. Apple Valley, Rosemount and Lakeville are not impacted by the rules that surround the river near as much as Farmington and Hastings. Their fees will not increase as much over time as Farmington's or Hastings, but there could be other things that will drive the cost of their development. Storm water is just one phase of development. Councilmember May preferred option 3 because of the Vermillion River making the fees disproportionate compared to other communities. She agreed if people want to build, the location will make the difference. She asked ifwe can do a combination of phasing in and splitting the fees between developer and residents. City Engineer Schorzman stated it could be done, but we would have to watch it closely. It would depend on whether you want to phase in 13 Council Workshop Minutes March 8, 2010 Page 2 the increase to the utility fee or just phase in the increase to the development. Option 2 would phase in the fees over five years. In option 3 the City would collect $1.43 from every storm water unit in the City for 50 years. If you phase that in over time, that $1.43 will get bigger. We could just phase in the developer portion. The argument that could be made for the current residents paying, especially in the downtown area, a lot ofthe regulations go back to past history. You have to reduce the pollutant load back to approximately 1980. Most ofthe downtown discharges directly into the river. Most ofthe things we have to look at are on a citywide basis. If they did not do anything in the downtown area as it was developing, the rest ofthe City is having to do more to make up for that. This would be a justification to implement option 3. Councilmember Wilson did not understand why Farmington is so expensive to build in. He asked if neighboring cities are looking at a full build out cost. City Engineer Schorzman stated Rosemount and Lakeville do things the same as we do. They look at when it is all built out, how much will it cost us in today's dollars and then adjust that. Councilmember Wilson stated his concern is commerciaVindustrial. If someone wants to develop 40 acres, there is $500,000 difference in the trunk fee between Farmington and Lakeville. Staff stated one option is everyone pays the same, no matter what kind of development you are doing. There are two issues with that. The fIrst is changing from development pays for itself, to being subsidized. Residential development has more green space and therefore, creates less run off. Commercial development is asphalt with all run-off. That is where the argument comes in from the residential development, as to why are they paying the same amount for storm water as a commercial development. Staff noted 55%-60% of the cost of development is related to directly discharging storm water into the river. Councilmember Wilson noted our developers are paying $20 million to keep a major greenway and waterway system in the kind of condition the State and the County want. Councilrnember Fogarty stated they cut our aid and then they pile on fees. It is as if they are not understanding the situation they are putting Farmington in. City Engineer Schorzman stated he has had conversations with the MPCA on this topic. Whenever anything is regulated they look at the people that are the most convenient to regulate. Farmington and Hastings are being charged with taking care of a river that has 80% agricultural drainage to it. Councilmember Fogarty asked about the Water Legacy money and why is that unavailable to Farmington. It seems that could be used to subsidize programs and requirements that are unfunded mandates. Staff stated we are not using things that are unique to Farmington; we are just using more of it. The Public Utilities Commission took the money given to them for this and they gave out 20% in grants and turned the other 80% into a revolving loan fund. There is a group, which Farmington is a part of, called the Minnesota Cities Storm Water Coalition. The purpose of that group is to evaluate the MPCA's new regulations and to oppose them if necessary or at least change them to the benefIt of the City. Councilmemher Fogarty would like to know what type of solutions can be done at the State level that she can work with legislators, such as repealing some of the requirements. Staffwill provide information. Councilmember Wilson asked about levying low density at 8%; high density at 10%; and commercial at 12%. He understood we need to raise the fees, but at the same time can we balance where we are today and make up the difference later. City Engineer Schorzman stated the issue with that is, in time ifthere is a different Council with other political pressures, will 14 Council Workshop Minutes March 8, 2010 Page 3 anyone follow through with it? There is a cost that we cannot change without deregulation. We can put it off: but eventually someone will be saddled with what is left. Councilmember May stated ifwe choose option 1 and phase that in were we have residential picking up some of the cost for the commercial side, would that work. Staff stated the risk with that is the potential of a developer challenging the fee structure because we are not applying it based on what runoff they are creating. They can be successful in that. Any option chosen should relate back to the amount of storm water generated by the different kinds of development. Councilmember Fogarty felt the decision whether or not to go with option 3 comes down to Council's philosophy on whether or not the residents should be subsidizing the smaller businesses. If Target wants to build here, $5,000 will mean nothing to them, but it might mean something to a private business. Ifwe fIX it now there is less chance of resistance later. Councilmember Wilson felt whatever option is chosen, we need to develop a 30 year schedule. Staff cautioned there could be increased regulations within that time. Councilmember Fogarty noted with the 2030 Comprehensive Plan, we met the State's requirements. Staffhas said we need to review it every two years. As part of that review, Engineering should be looking at the regulations and fees so we can make incremental increases. Staff could take the construction cost index and apply it to the fee. Staff agreed that planning for longer than four years is what needs to happen. Councilmember Wilson noted option 3 will be available at any time. He would be more comfortable with the phased in option 2. Councilmember May stated the only difference between this fee and a street light utility fee is that this is about future growth. She would consider option 3. Councilmember Wilson noted everyone is paying equitably for something they are benefiting from now, versus a possible future benefit. Councilmember Fogarty wanted development to pay for itself. People want commercial development so they don't have to go to Apple Valley and they want the commercial tax base. She would choose option 3A. City Engineer Schorzman stated Council could make a decision to shift some of it to the residential as long as there is a reasonable difference you can attribute to the storm water and the amount created in residential versus commercial. Councilmember May suggested 3A for the residential and phase in commerciaVindustrial and split that out with residential help; or 3C or 3D just on the commercial side. Staff clarified you would leave the $1.43 for residents to pay on their storm water, but that is offsetting the increase in the commerciaVindustrial. After further discussion, Councilmember Wilson was comfortable with option 2. Councilmember Fogarty agreed with option 2, but future Council's may not. Councilmember May liked option 2 for residential and option 3C for commerciaVindustrial. Mayor Larson asked for Council's thoughts on having existing residential help pay down the commercial/industrial. Councilmember May stated it goes back to why they are so high and it is because of the river. Because of the lack of commercial development, the discrepancy between neighboring 15 Council Workshop Minutes March 8, 2010 Page 4 communities, and we have the river. Mayor Larson asked if by paying it down, will that encourage people to come here more. Councilmember May felt we need all the help we can get because it is so competitive. Councilmember Wilson agreed with option 2. He proposed starting with the 2010 fee schedule and bump it up to the 2012 starting point, but compress the high density and commercial downward. City Engineer Schorzman clarified he meant to bump up low density residential 2-3 years before we start increasing the rest of them. We would have a five year increase in the low density residential to reach 2014, but in 2012 start bumping up high density residential and commercial/industrial. Councilmember Wilson stated every year we should move up the rate. Council reached a consensus to use option 2. Staffwill present two scenarios to Council showing the sale price for a couple years and increases for 30 years out. City InfrastructurelCIP Discussion City Engineer Schorzman noted the important thing for Council to notice is the replacement value of the existing City infrastructure in 100 years. Right now, ifwe replaced all the infrastructure in the City the cost would be $220 million. In 100 years it will be $1.24 billion. A street should last 30-50 years with proper maintenance. With the new plastic pipes we are using for sanitary sewer those should last 100 years. The ductile iron water pipe should last 100 years and also the concrete storm sewer pipe. In Farmington, 70% ofthe infrastructure is 20 years old. In the future there will be a huge push of infrastructure getting old at the same time. Typically the CIP's have been for five years. Staffhas developed a ten year plan. This assumes we continue to do good management practices of seal coating, etc. The concept of deferred maintenance is politically convenient, but it adds cost to the residents in the future. The City will not be able to bond for $1.2 billion. Ifwe continue to bond the way we have been, it will catch up with us. A bond is like a credit card and eventually we need to pay for it. Council needs to seriously consider dedicating some funding soon for these projects so we can pay some cash instead offmancing for all of it. It will take a combination of bonding and dedicated funding into the long term future to make this work. One scenario with an average of project costs shows $200 - $300 per year per residential unit to cash flow the project. If you are saving half and borrowing half you are looking at a sizeable increase. The number of residential units amount to 6,000. That may not be feasible as it would take up a large amount of what we can levy. We would have to internally dedicate the funds. Councilmember Fogarty felt one approach we could take is to take seal coating and mill and overlay off the assessment rolls. It will cost residents more in their annual taxes, but they will not see the assessment fee. It will take a strong Council to say we will raise taxes next year. This should be discussed as part of the budget. The long term is better roads and less resistance. City Engineer Schorzman stated we can always assess for part of a project. The Walnut Street project is 16% assessment, which means we are borrowing 84% of the money to do that project. Over time, that is not sustainable. Councilmember Fogarty would like to not assess the seal coat and mill and overlay projects. Staff felt figuring out a different way to do seal coating and the rehabilitation projects would be worthwhile. If a reconstruction is necessary, residents may still get assessed for it. Councilmember Fogarty stated the policy was set to do assessments because of non-taxable properties. It does not affect that much property. The school is the largest one and that is still the taxpayers. It does shift the burden more onto the City and off the school district. It is a fair criticism she is willing to take. There is an argument that the entire district 16 '- Council Workshop Minutes March 8, 2010 Page 5 should pay because they utilize those roads. Councilmember May noted that might be an argument for the arena. The school may say why should we help pay for City property. Well, we are paying for the streets in front ofthe schools. Councilmember Fogarty would like to see this as part of the budget. Councilmember May confIrmed there would still be assessments for full reconstruction projects. Staff stated you may not be able to collect enough money to offset an assessment for everything. Councilmember Fogarty felt it was a great idea to have a ten year CIP rather than fIve years. We have to expect to do something every year. Staffwill put together a formal ten year CIP for Council to review and bring to a workshop later in the year. Councilmember Wilson asked that Parks and Recreation Director Distad also talk about parks at that time and major capital purchases. Annual Seal Coat Proiect Fundinl! Staff stated we need to determine ifwe are going to stay with assessments for seal coating or go to other :financing options. We have a disparity in the assessment amounts because the City did not develop uniformly. Council wanted staff to come up with a plan so everyone is charged uniformly. There are two ways to do this; we can levy for it or if Council is concerned about including tax-exempt properties we can go with a franchise fee and dedicate that money to the seal coat project. This will distribute the cost evenly to everyone regardless of density. Councilmember Fogarty stated she was generally not in favor of franchise fees, but she liked the concept of everyone paying equal amounts. We have stayed away from gas and electric because you have to have that. Gas and electric are not optional, but neither are roads. That is a necessIty. One way or another they have to pay for the roads. Her concern is that the money is dedicated to roads and not used for budget shortfalls. From a staff level, that is even more of a concern. Councilmember May asked once the franchise fee structure is in place, can you increase it for other things. Whether you pay in a lump sum assessment or $2/month you have to pay it. Her concern is that you put this out there and it could get increased and used for other things. City Administrator Herlofsky stated Council could change it, staff cannot change it. Councilmember Fogarty stated we could say that Council policy is this money is dedicated for infrastructure. Councilmember May stated we are talking about increasing taxes and it is only March. City Administrator Herlofsky stated once we have the new Finance Director, we will be coming back to Council to discuss budget guidelines. Council should think about what they want over the next couple months because staffwill bring it back looking for Council policy and how you want the 2011 budget put together. Staff asked for a consensus from Council whether to increase the levy or look at franchise fees. Councilmember Wilson would be open to a franchise fee. City Engineer Schorzman stated even if Council decides to stay with assessments, sometime within the next two years we will have to address where the other 50% is coming from. The funding we have been using for that is drying up. 17 Council Workshop Minutes March 8, 2010 Page 6 A franchise fee of$2.40/month would cover 100% of the cost. A franchise fee of$I.20/month would cover 50% of the cost. Council reached a consensus to consider the $2.40/month franchise fee to cover 100% of the cost. Other Ene:ineerine: Items Trail along Pilot Knob - Staffhas received concurrence from the County on a conceptual design. A wetland delineation will be done in the spring so the trail will miss the wetlands to keep the cost down. Part of the trail will go through private property and the owner will give the City the easement. The trail will run along the west side of Pilot Knob from 200th Street to CSAH 50. This will be a late summer project. Speed limit on 195th Street - The State's recommendation is 55 mph from Akin Road to TH3 or they could justify 50 mph from Akin Road to Embers. Ifwe are going to be consistent with speed limits from engineering principals it should be 55 mph from Akin Road to TH3. Councilmember Fogarty agreed with that as that is what they are driving anyway. People have been driving that fast before the road was open to TH3. Council consensus was 50 mph from Akin Road to Embers and 55 mph from Embers to TH3. The County will be taking 195th Street over this year. Vermillion River Crossing - Both McDonald's and the CDA did close on the property. We will need to discuss the remaining public improvements at some time. When we awarded Dushane there was Council concern about street lights, etc. Staffhas come up with some options and will forward them to Council. Council asked that staff list what was originally planned. Potential development issues in 2010 - What occurred with Vermillion River Crossing and Mystic Meadows in trying to get the developments finished, there will be at least one if not two in the same situation. Sunrise Ponds is at the top ofthe list. There needs to be a wear course put on even though they are private streets, we need to protect the resident's investment. Staffhas been trying to contact the bank. WorkshoD Schedule Staff provided a change in the workshop schedule. Staff suggested moving the EDA Strategic Planning to April 26. On March 22, there could be an EDA meeting at 6:30 and at 7:00 have a workshop to discuss the parks referendum. Councilmember May asked about an early budget workshop. City Administrator Herlofsky stated the new Finance Director will start March 22, so it looks like May 10 would be the next opening. In order to put the budget together, we need some rules. Councilmember Wilson stated prior to that meeting it is imperative for City Administrator Herlofsky to assemble the issues you see the City is facing and the fiscal impact. Ifwe had an upscale economy, Councilmember Wilson may agree to a 1 % - 2% increase in taxes, but in this economy he feels we cannot decrease taxes, but we cannot increase them. 18 Council Workshop Minutes March 8, 2010 Page 7 Councilmember Fogarty will not be available April 26. Council suggested having the EDA Strategic Planning on April 12. MOTION by Fogarty, second by Wilson to adjourn at 9:42 p.m. APIF, MOTION CARRIED. Respectfully submitted, ~' / ,- /l/J 1..-.4t- /rJ~-AJ Ynthia Muller Executive Assistant 19