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HomeMy WebLinkAboutItem 06.cMinutes Lakeville City Council Work Session September 26, 2011 In attendance: Mayor Mark Bellows Council Member Laurie Rieb Council Member Kerrin Swecker Council Member Matt Little Council Member Colleen LaBeau Staff: Steve Mielke, City Admin Dave Olson, Community ; Tom Nesseth, Senior Ace( Dave Lang, Senior Accow Brenda Visnovec, Liquor t Allyn Kuennen, Associate Gene Abbott, Building Of Judi Hawkins, Deputy Cit The meeting was called to order at 6:00 ITEM #1— The Minneapolis St. Paul Regi Development Partnership, "Greater MSP," is a newly created private- pubhcpartnership dedicated to growing the economy of the 13- county Minneapolis -St. Paul re resnhrough coordinated leadership. The organization has a 5016 non-profit sta : ,,Community d Economic Development Director Dave Olson presented a brie�avervie� the initiadve.and introduced Kathy Schmidkofer, Executive Vice Presiclz iri and Sara Barrpw, Invesioi�Relations Director. Economic Development Commission members Jack Matasosky, Jeannie Schubert, Sheila Longie, and Bob Brantly, and Giaruber of Commerce Ecutive Director Todd Boinhauser were also in attendance. Ms. Schmirlkcr£er presented economic assessment of the MSP region and the goals of the organization:. ,Dakota County Community Development Agency has contributed $100,000 to help launch `the.GreaterMSP program. Other member cities in Dakota County include Apple Valley, Burtisville Eagan, and Rosemount. The group's objective is to raise the profile of and attractbusinesses to the Twin Cities metro area through marketing of the area's assets. Ms. Schmidkofer outlined the region's assets which will attract businesses: a history of economic prosperity; large, diverse private sector; a highly educated workforce; top tier research institutions; and a high quality of life. A Job Growth Task Force has been formed with the objective of developing strategies and policies to promote the retention, creation, and attraction of quality jobs in the Twin Cities region. The organization will provide a coordinated effort for business development through global outreach. City Council Work Session Minutes September 26, 2011 Page -2- Council Member Swecker asked if jobs in the medical technology field are declining. Ms. Schmidkofer stated that this area is still a hub and there are still many jobs here, especially in manufacturing, but the goal is also to retain those industries. EDC member Jack Matasosky asked how the advocacy would work and how Lakeville specifically would be represented with the organization. Ms. Schmidkofer stated that the group does not want to duplicate the efforts of other organizations, such as the State Chamber of Commerce, but wants to make sure potential businesses are receiving accurate data and information about the region. The Board of Directors is 70% private and 30% public, similar to the funding structure, so representation will be from both sectors. Council Member LaBeau asked 1) How is spending allocated Ms�Schmidkofer stated that about half of the current assets go to administrative salaries; includirt"marketing, business development, etc. 2) How can Lakeville be confident of henefrts,. S. =Schmidkofer stated that all member cities would benefit from having the oliportunity to bid 4', that ` Council Member Little asked about the organizational structure and how that `Would protect a city the size of Lakeville. Ms. Schmidkofer stressed that the entire area is included in the marketing plan and it is critical to the program to be fair and obleve. All members will have a fair share of opportunities for exposure. She aslted the Couricifio compare the cost of the program to having an additional econom' ic�develop ent specialist on staff. Todd Bornhauser, Executive Director of the Lakeville Area;Chamber of Commerce, asked what types of jobs have been lost in this area. Ms Sehmidkofe focused on what jobs will be added, specifically to deal with in aging po on: health care, education, etc. Greater MSP is asking Lakeville b join the organization at a cost of $25,000 annually. The EDC will review the program and, "R lyide a recommendation to Council for possible consideration as paint of the 2012 ITEM Steve'Mielke provided a briefhistory and background of how the Liquor Study had come about with:Council determining that it was necessary to conduct an analysis of Lakeville's munieipalli4#6r operations:.At their June 6, 2011 meeting Council authorized Shenehon Company to ptoceed with Phase One of the study. Presenting the report were Bob Strachota, Presidient'ofShenehon, and Scot Torkelson, Vice President. They explained that Shenehon primarily focuses on business and commercial real estate appraisals and related research, and they are experienced in municipal liquor appraisals. Shenehon was given three tasks as part of Phase One. The first was to measure the economic impact on retail development from operations of municipal liquor stores in the City. This task was to study if, because of municipal liquor, there are retailers that are not coming into Lakeville. The second task was to compare the financial impact on Lakeville with municipal liquor operations to the alternative of licensed private liquor stores. The third task was to study the economic impact on Lakeville's revenues from liquidation of City Council Work Session Minutes September 26, 2011 Mr. Str i a high municipal liquor stores (real estate and businesses) and improved tax base with potential new development. Task #1. The study looked at the economic impact of municipal liquor and whether other retail businesses avoid the area because of municipal liquor. Mr. Torkelson stated that the overwhelming attraction for business to any community is demographics. The study looked at siting criteria of the top 15 retailers in the US and where they are located in the Twin Cities in relation to cities with municipal liquor. They also looked at retail space per capita and asked if Lakeville is under - served with retail based on population. The study found that of the 15 top retailers in the US, seven were already located in Lakeville., Inr addition, every one of the top 15 has locations in cities with municipal liquor. EqW large local retailers were specifically studied - two of those are already locations in a city with municipal liquor. Based on not impact retailers locating in the city. Council Member Little asked why the top 15 retailers that these larger companies are most likely to have foi locations are also more likely to attract other retailers; Costco is rated #3 of the top 15. Their location since there is not a major customer - based, and the other is b Costco has a store in Eden Prairie, with strong presence include Byerl liquor and serves a high -end client( households with no ehildren,A4 a household is higher than their tars+ cities with municipalligl to get people:to'the store identify top retailers that Amount of retail space per square feet per capita of rei per capita :, Sipe Lakeville there are fewer shoppers th high amount ofietail foi it is a Lui Page -3- three have l liquor stores do Mr. Torkelson stated criteria. Their preclude Lakeville as an ideal )f their two prototypes one is lot include a liquor component. or city. Other local retailers stores both with and without Trader Joe's; whose target clientele is double - income come into the area. Lakeville's population per Dal. Trader Joe's has located on the west coast in Iota added that their liquor business is more of a way t'oftt component of the business. The study could not due to municipal liquor. iita was also studied. The Twin Cities metro area has 23.2 space overall. Lakeville's built -out retail is 19.1 square feet located at the edge of the MUSA, not an "embedded" city, a city which draws from all sides. This is considered a very area and there is a very high occupancy rate. Task #2. This compared the financial impact on Lakeville with municipal liquor operations to the alternative of licensed private liquor stores. This included impacts on property taxes, payment in lieu of taxes (PILT), financial contributions to the community, philanthropic endeavors, licensing fees, and calculated the impact on property taxes on the average residential property. Municipal liquor stores average 15,000 residents per store; Lakeville serves an average of 18,651 residents per store. Private licensed liquor stores are more competitive: there is an average of 5,245 residents per store. Private stores are likely to be smaller but more numerous. An anticipated total of nine private stores would exist in Lakeville based on the data. They would generally locate in existing shopping malls, in City Council Work Session Minutes September 26, 2011 Page -4- closer proximity to residential areas. New construction would not be anticipated. No new development is expected to be attracted to the city because of private liquor licensure. There would not be a significant addition to the property tax base from new private liquor stores locating in the city. Regarding payment in lieu of taxes, the current amount of $69,000 paid by municipal stores is entirely retained by the City. With private stores, the amount of taxes retained by the City would be $15,215. Regarding philanthropic endeavors, private stores are limited in charitable contributions to the community. Municipal liquor stores generally are more likely to be engaged in giving back to the community at all age levels. No change would be anticipated in the contributions of other business in the community. Top ten.corporate givers according to Forbes include Target, Walmart and McDonalds, which aie already located in Lakeville. According to the League of Minnesota Cities license issuing the license, policing, and license activities. T for the city. Shenehon looked at the earning history of I cash flow, even during a difficult economy. future. The three stores provide annual cas estate being developed and added to the tali increase taxes on an average property by $244. If the two base the amounts would be', Task #3. This task looked at more valuable with the prose The businesses' market value $3,400,000. Net proceeds fi debt, are estimated at $6,490 that honey could be inves The municipal liquor oper Former May enforcement $50 stores a stable time in the foreseeable , equal to $112M of real ss of that revenue would an average commercial e sold and added to the tax ngboth the stores and the businesses. The real estate is as ofa municipal operation than under private licensure. stimated at $6,450,000; the approximate real estate value is he sale of the businesses and real estate, less the bonding Considering the limitations on where and how much of annual return would be about 1 %, or $64,900 annually. are currently realizing an 18% return. >ed his concerns about additional expenses for police stores. Council Member LaBeau asked about distribution of the $1.75M annual revenue and using it to pay down debt. Mr. Torkelson stated that how the money is used by the City is a policy decision and is not reflected in the report. LaBeau stated that one of the reasons Council members saw a need for the study was to look at the need for an additional store. Mr. Torkelson stated that is a question that would be studied in Phase Two, if the Council decides to proceed with that phase. to be Mel Verley of Lakeville asked if the return on the invested funds had been studied at different levels other than 1 %. Mr. Torkelson stated that they have only done 1% but could City Council Work Session Minutes September 26, 2011 look at figures for other interest rates. Mr. Verley asked if employee costs are fully funded within the organization for retirements. Yes, they are part of the general budget and there are no outside obligations. What impact does the existing debt have on the City's future borrowing if that debt were to be removed? Mr. Torkelson stated that that was not studied as part of this; also, $3M is not a significant number associated with Lakeville's debt. Page -5- Council Member Little asked if they would anticipate higher police costs with private vs. public businesses. Mr. Torkelson stated that has not been studied as part of Phase One, however, he would presume that it would cost more if there were additional private sector stores. Past studies have shown that private stores had a lot more problems and calls to the Police. Brenda Visnovec stated that local and national market studiessliow that along with increased density in liquor stores goes an increase in social issues. Mi.-Torkelson stated that is particularly true with small stores of 3,000 square feetor less. Council Member Swecker stated that it is a very their presentation. and for Ron Gerk, 10466 W. 175th Street, asked who had Mayor Bellows stated that the questions had been; Council. Mr. Gerk questioned the study in the and approved the questions. by staff ind'approved by City hics reauired by businesses in order to locate a store, particularly Costco,,. He askedif there as debt on Valley Lake Park because of the liquor store. Mr. Mielke responded, #hat one i�fthe costs associated with construction of the Galaxy Store was irpprovemerrts to the park and that the city retains ownership of the park. Mr. Gerk questioned tl e pxoperty i alue placed on the stores, the rate of return on investments, and use of liquor reyenires in the general fund. Council Member Little asked Sheriehon if they could justify the 1% rate of return which was stated. Mr. Torkelson stated that is a rate over the next five years, based on today's economy. The rate is also predicated on the limitations of investing municipal funds. Council Member LaBeau asked about store locations, is it better to be in a freestanding building or in the end location of a strip -mall. Mr. Strachota stated that one problem in being in a irrall is the lack of control of rent expenses. Mr. Torkelson added that the City has an advantage in owning�rnce the City is able to borrow money at a lower rate. Finance Committee member Doug Anderson asked for clarification of the income statement from which the analysis is based. Does it include the interest cost on the debt; and how does it include the cost of capital that was originally invested. He stated he has a number of other questions and asked the Council to pass the report along to the Finance Committee for additional conversation and discussion. Mr. Anderson believed it might be helpful as citizens to become more informed, especially on the question of an additional store. Mr. Torkelson explained the formula for their analysis and stated the capital expenditure was included. Mr. Strachota added that they have appraised several private liquor businesses and from what they have found the Lakeville stores are running efficiently. City Council Work Session Minutes September 26, 2011 Page -6- Mayor Bellows stated that last fall the private vs. municipal liquor was a huge issue in the community, fueled in part by the perception that Costco chose not to locate in Lakeville due to municipal liquor. He feels the community values private sector vs. public and believes it would be worthwhile for the Finance Committee to look at the study, even though that was not the intent of the committee. He asked what the next steps would be for the Council. Steve Mielke stated that if the Council wishes to have a presentation at a Council meeting that could be arranged. The Council may or may not decide to move forward with the next phase. Council Member LaBeau stated that she would be in favor of the Finance Committee looking over the report. Council Member Swecker is concerned that they are committed to doing a lot of work with the budget right now would like them to focus on that. Council Member Little asked what instructions woizlzl:be F to the Finance Committee if they were given the report. Mayrir Bc review the report and bring back questions if theyhave'any - approval. LaBeau believes it would be a way of gathering m or disapproval would be for the Council. Little asked if�they or recommending what Council should do moving forward. defined instructions for the committee. LaBeau stated she is money on land without understanding everything ab�ouit. Little stated that Council has been given this in about moving forward with municipal liquor aj Committee review. Mayor Bellows stated that input and feedback on the study. Hi believes t] not want to go forward with Swecker and Little stated the Committee with specific dirt might be helpful m ha*42 reyi To council in ecision on the ttetJ'it be to ild liki 'their stamp ° of >rmatio, aitd approval be approving the study Is there should be some nfortable spending i"Order to make their decision fire purpose of the Finance iry board he would like their of the study is clear but he does without a united community. y would support review of the document by the Finance n as to what their task should be. Steve Mielke suggested it observations, and comment by the Finance Committee. ince Committee would be entering into a policy level area. ly and provide comments could be advantageous. The -ed. Mr. Mielke added that the study could be helpful in if it is determined to stay in the business. ITEM #3 Inspections Program As part of the 2012 -13 budget issues in June, Council reviewed the concept of whether to continue the electrical inspection program at the local level or return it to the State. At that time the consensus was to continue at the local level, but staff was asked to look at possibly contracting the service to a private vendor. Staff compared costs of an in -house electrical inspector with a contracted inspector program. Fiscally, the inspections program for the past couple of years has not brought in enough revenue to pay for the full-time position. Many neighboring communities have gone to a contracted position. During the State shutdown, several cities that depended on the State Electrical Inspections changed to a contract program in order to keep construction moving. A contracted service would allow the city to retain a percentage of the permit fees. This would allow for a guaranteed positive City Council Work Session Minutes September 26, 2011 Page -7- cash flow, however, lower service levels would be anticipated. Permit holders would likely be offered a block of time in which to set up an inspection, rather than an appointed time. Three options were identified for Council consideration. Option 1 would transfer the program back to the State, Option 2 would contract with an electrical inspector and issue permits through the City, and Option 3 would be to continue with the current program of an in -house electrical inspector. City Council believed that Option 2, a contracted electrical inspector most cost effective service and directed staff to proceed with preparin inspections become busy again it would be possible to review the dec Budget issues will be addressed at work sessions in October budget if Council chooses. Council Member Little asked tr readdressed. He requested that Parks and Recreation Dire( ice rinks and then look at options for a phased approachrof stated that the rink budgets fall into two different budget ye reopen rinks, revenue sources must be identified; the cost is rink, or about $35,000 total per year. The decisiomn was:ma to open additional rinks this year. If Council wishes to fool 13 season that would need to be added to this vear's budget Council Member Swecker asked if volunteers. Mr. Mielke stated that to close the rinks was made. The N he would Re to see a prioritiaatipr choose to open if they could open i open rinks. Mayot Be discussion. Mr. Mielk if Council directs staff ram, offered the UP. If at a later date. to adjust r Steve Miclumd `tioritize the ipening rinks. Mr: Mielke If Council directs staff to )proxirnately $7 -8,000 per as part" of the 2011 budget not t reopening rinks in the 2012- be possible to staff warming houses with it had been attempted a few years ago before the decision olunteer program was not successful. Little stated that i of which of the closed rinks the parks staff would me, two three, etc., without any trade -off for currently ted time be allowed at the October work session for this it is not too late in the season to provide additional rinks a revenue source. JJ RJ,an 16024 Hubbard Drive, said he would welcome the opportunity to prioritize the rinks and start bringing them back. He asked if it would be possible to "share the pain" with another rink and open their neighborhood rink instead of another. Mayor Bellows said he would be willing to discuss it at. Bill Messerich, 16162 Gunflint Circle, said he moved into Highview Heigh#s,,because'of the hockey rink being there. He believes the rink would be heavily used by thelie borhood. Scott Salmon, Havelock Way, also said he chose his lot because of its proximity to the ice rink. He stated that the LNHS assistant hockey coach also lives in the neighborhood and would like the rink reopened. ITEM #4 — Development Forum Issue Review Mayor Bellows stated that the document summarizing the results of the Development Forum was excellent. Steve Mielke had presented the document to the Parks, Recreation and Natural Resources Committee and to the Planning Commission. He identified administrative issues to be reviewed and policy issues. Some of the policy issues are simple City Council Work Session Minutes September 26, 2011 Page -8- changes and others have huge implications across the community. Some of the changes are already being implemented such as use of checklists and providing better information to applicants and educating them on the process if necessary. Some of the current procedures can be streamlined, i.e., shortening the process by not requiring the final plat to go through Planning Commission and Council if there are no changes from the preliminary plat. In response to developers requesting changes in the required design standards, Mr. Mielke believes the City must maintain a long -term approach for both aesthetics and durability. Mielke stated that developers had asked to be consulted in the decision - making process when changes are proposed. Issues discussed as a result of the forum included responsibility for funding of public infrastructure; when do some development fees get paid; and whether more high density housing is needed in the city. He believes the forum was very productive and will have positive impact on the city /developer relationships Mayor Bellows also heard favorable comments from the public and believes If was A' ositive experience Council directed staff to continue to implement the admmitisirative process an for a discussion of the policy issues that will need to be addressed by Council. ITEM #5 — Park Dedication Fee Review In response to a request from the deN reducing the current park dedication fees. Other communities have been if they have lowered their fees as a re neighboring communities use to arri Council was provided with several 0.. review park south of the as All per of Crescent Ridge,Second Addition to consider to for thatp3at, staffis reviewing park dedication veyed to' , determine methods for arriving at fees, and It of the eonomy..: there are several methods that at their fees'; but no cities have lowered their rate. ons for possible action: maintain the same fees; re 2011 Parks and Open Space System Plan; take a family rate to multi - family rate; or consider a submitted in 2 have paid the existing rate and additional plats are not mitted this year. Staff has received comments from both sides of the issue. er LaBeau stated that as a member of the Builders Association she is concerned'about the cost of lots. Council Member Swecker interjected that she had received two calls today and is wondering if LaBeau had spoken to the City Attorney about a possible conflict of interest regarding this issue because Shamrock (developer of Crescent Ridge) is her father. LaBeau stated that she had not spoken to anyone about it but does not believe she has any financial interest or conflict. LaBeau stated that she is mostly concerned with a court case by the Builders Association a couple of years ago in Shakopee and asked about Rosemount adjusting fees. Mielke stated that it is not just land value that can be taken into consideration but also long term needs as established in the park plan. Those two cities have not adjusted their fees. He feels it is important to determine a methodology for establishing fair land valuation and park standards when determining fees. City Council Work Session Minutes September 26, 2011 page -9- LaBeau asked about looking at building permit fees also. Mielke stated they will also be reviewed. ITEM #6 — Council Committee and Inter - agency Reports • Cedar Corridor Improvement Group There is significant discussions about identifying a revenue source for buses to operate on the new BRT line through Apple Valley and Lakeville. • HiPP Work continues on administrative courts, sharing of equipment and training opportunities. ITEM #7 — Adjourn The meeting adjourned at 9:05 pm Respectfully submitted, Judi Hawkins Deputy Clerk