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HomeMy WebLinkAbout11-19-13 WSCITY OF LAKEVILLE CITY COUNCIL WORK SESSION MINUTES November 19, 2013 Mayor Little called the meeting to order at 5:00 p.m. in the Marion Conference Room at City Hall. Members Present: Council Members Swecker, LaBeau, Anderson, and Davis, and Mayor Little Staff Present: Steve Mielke, City Administrator; Dennis Feller, Finance Director; Interim Police Chief John Kornmann; Chris Petree, Public Works Director; Brenda Visnovec, Liquor Manager; Brett Altergott, Parks and Recreation Director; Julie Werner, Senior Accountant; Tom Nesseth, Senior Accountant; Judi Hawkins, Deputy City Clerk 2. Citizen Comments There were no citizen comments 3. Proprietary Mr. Feller introduced budget issues which Council wished to discuss further. The Utility Fund consists of four components: water, sanitary sewer, street lights, and environmental resources. Proposed changes include increased rates to generate additional revenues for the purpose of watermain replacement. An additional position which started in June of 2013 is shown in the 2014 budget for the full year. Mr. Petree stated that 2014 Major Maintenance items includes $2.4M for the watermain replacement program, rehabilitation of Well #17, wellhead protection plan, and water asset management software. The water meter replacement program will be accelerated from 500 to 800 meters per year, in order for all meters to be changed on a 20 -year cycle. Installation of residential radio transmitters to utilize drive -by readings is also being proposed. Other major items in 2014 are Michaud Park water tower cleaning, construction of Wells 20 and 21, both along Dodd Blvd., and acquisition of a site for an elevated storage tank. Results of the Water Treatment Facility Expansion Study show that a second facility is not needed; however, the current facility can be expanded incrementally to increase capacity. Mr. Feller discussed remodeling of the City Hall utility billing area to include a window to the hallway to provide better customer service and security for employees. Council Member LaBeau asked if current figures are being used for calculations by the Met Council in their water and sewer projections. Mr. Petree stated that the figures are based on the City Council Budget Work Session November 19, 2013 Page -2- next five years at more conservative growth projections. Council Member Swecker asked if there is a correlation between the water meter transmitter replacements and the increase in water rates. Mr. Petree stated that the increased rates will cover the cost of the transmitters. The increase in the Sanitary Sewer budget is due to the anticipated NCES annual increases of 6% to 7 %. Capital Outlay is $290,000 which includes lift station improvements and sanitary sewer improvements in conjunction with the 2014 Street Reconstruction Program. Inflow /Infiltration mitigation is also included in this category. Anticipated rate increases from Xcel and DEA will be offset by the sales tax exemption. City -owned street lights on Kensington Blvd. from 205 to 210t Street will be replaced as part of the overlay project on that street. The utility provider will take over maintenance when lights are replaced. The City's policy for many years has been that the utility companies own all lights. The Environmental Resources Fund includes an update of the stormwater pollution prevention plan, erosion control standards, recycling and solid waste reduction programs, and South Creek channel restoration. Mr. Feller stated that rate increases are being proposed for water and sanitary sewer in 2014, but not for surface water fees. Mr. Nick Dragisich, Executive Vice President, Springsted Inc., was present to discuss the results of the water and sewer rate study. Based on historical trends it was anticipated that the increase from Met Council would be approximately 4 %; however, the actual increase is now known to be 6 -7 %. Cash reserves will not keep up with operating expenses and annual capital spending for system maintenance and Metropolitan Council fees. Compared to other communities, Lakeville's water rates are low and would remain so, even with a modest rate increase. Based on projections, Springsted is recommending a 4.25% increase for water and 6.35% increase in sewer rates. Feller stated that the increase will mean approximately $20 per year for an average household and $50 for a large business. Council Member Swecker asked about the changing rate structure over the next several years. Mr. Dragisich responded that a higher rate is required in the beginning to fund the necessary capital improvements and watermain replacements. Mr. Feller added that the last rate increase was in 2008, when the tier system was implemented. Council Member Anderson asked about the possibility of issuing debt on the capital outlay rather than implementing a rate increase. Mr. Feller believes MCES has deferred maintenance projects in order to keep their rates low through the years when their connection charge revenue was low. Anderson suggested a steady rate increase in order to minimize spikes in the rates; however, he does not believe $20 per year is significant. Council members for an analysis City Council Budget Work Session November 19, 2013 Page -3- at the next work session of possibly issuing debt or an interfund transfer rather than a rate increase. The 2014 budget includes land acquisition and design of the elevated tank in the amount of $500,000; land acquisition for two well sites for wells #7 and #8, which will be needed for growth in the area of the 190 Street corridor; and the two -phase water treatment facility expansion. Anderson asked how Lakeville's water connection charges compare to other cities. Feller stated that they are among the highest rates in the metro area, but one of the lowest water rates. A long -time Council policy is that new construction pays its own way and does not create a financial burden on existing residents. Mr. Feller stated that in order to have adequate cash flows the water connection fees would also go up by 2.5% annually based on the construction price index. Staff is recommending the required public hearing be held on December 16 and the increase implemented effective February 1, 2014. Builders will be notified that the higher water connection charge will increase the total building permit application costs. . Liquor: Ms. Visnovec stated that the Liquor budget reflects the fiscally responsible and growing enterprise fund, with 2014 operating income projected at $1.69M. A review of accomplishments, philanthropic endeavors, and 2014 goals and objectives was provided. Council Member LaBeau complimented the Liquor Dept. on the Taste of Lakeville achievements in 2013. Mayor Little and other Council Members also commented on the operating efficiencies of the department and expressed their appreciation. Mr. Feller discussed allocation of liquor funds to equipment fund, debt, general fund, recycling support, and Police and Parks equipment. Council asked for a breakdown of liquor cash balance. 4. Budget Discussion - Fees Mr. Altergott stated that the Parks, Recreation and Natural Resources Committee annually reviews park dedication fees and is recommending a 2% reduction in fees based on property valuations and previous Council discussions. Staff recommends this be put on the December 16 agenda for a public hearing to revise park dedication rates. Mr. Feller compared tax levies in other communities and the factors that caused increases and decreases. The Metro average is 1.3% tax levy increase, but due to several factors such as state aid (LGA) and growth, it is difficult and misleading to compare. Lakeville has the lowest spending per capita in the state and is currently in the early stages of street reconstruction, when other communities have not yet reached that need. In addition, Lakeville does not receive the LGA funds which help to keep levies lower in many communities. City Council Budget Work Session November 19, 2013 Page -4- 5. Response to questions at November 12 work session New Personnel Positions: Mayor Little asked how the range of savings for the Fleet Supervisor position was calculated. Petree stated that significant efficiencies can be achieved in many areas. Industry standards show that with the use of fuel efficient technologies average fuel usage can be reduced by 5 -10 %. Mobile management on the plow trucks controls and reduces the amount of ice control chemicals that are dispensed. Dakota County has seen a savings of over $20,000 with the use of this technology. Council Member Swecker would like to see an analysis of the results at the end of the year. Petree stated that with the position starting later in the year the savings will be more accurately reflected in the 2015 budget. LaBeau would like to have defined expectations of savings for the new position, compared to potential overtime. Davis agrees that Council needs to be good stewards of tax dollars, but does not agree with giving the position a possible end date if cost - saving goals are not met. Mielke stated that he is not comfortable with a one -year guarantee for the person who fills the role. Not all results will be seen immediately. Anderson believes this position provides an opportunity for more efficiency and supports the leadership team and its goals. Little believes that all positions should go through periodic analysis, similar to the private sector. Mielke believes there will be immediate savings reflected in the 2014 overtime budget. Swecker stated that she believes staff will make the best use of all positions. Staff will analyze overtime and reasonable expectations for commodity savings in the 2014 and 2015 budgets. Staff suggests reducing the contingency by $198,497 which would reduce the tax levy by the same amount. Feller is suggesting shifting $300,000 out of the equipment fund into debt for protection and added flexibility in the event that levy limits are imposed by the Legislature. This does not change the levy. LaBeau suggested that half of the reserves be used for this purpose. Mayor Little is not comfortable using surplus for operating costs but prefers it be used for capital expenses or paying down debt. He does not wish to burden future councils with difficult funding decisions. Swecker stated that historically spending has been below budget and staff does a good job of keeping costs at a minimum. Mielke stated contingency funds are for emergency purposes. Growth will absorb 2.2% of the 2.5% increase, leaving only a.3% increase. Council Member Anderson believes this levy amount would demonstrate the City's fiscal responsibility to the residents. He believes the goal should be to continue to find ways to become even more efficient. Council Member Davis is supportive of the 2.5% levy and the reduction of $198,000 in the contingency fund to provide additional flexibility with legislative decisions on levy limits. He complimented previous councils for the groundwork in efficiency. City Council Budget Work Session November 19, 2013 Page -5- Little has concerns for the long term if surplus reserves are used in this way. Previous councils reduced the impacts of the difficult years by making prudent decisions and building up fund balances and reserves. Little would agree to modification of the fund balance policy if there was a commitment to building up the reserve during times of economic growth. He prefers the use of capital and debt to use of reserve funds, and believes there needs to be commitment to future taxpayers and councils to prepare for unexpected occurrences or times of slow growth. Mr. Feller stated that the 2014 budget is premised on a 40% reserve fund; however, the objective is for reserves to be a minimum of 40 -45% in order to be prepared for uncertainties. Little suggested a fund balance policy that would commit to increasing the fund by 1% per year. Feller reviewed how 2013 general fund balances are being allocated for three purposes: $1.8M in the equipment fund; $590,000 to building fund; and $45,000 committed to the EAB program. The $500,000 could be used to reduce taxes by bringing down the tax levy; to establish a policy to gradually increase the fund balance; or to allocate it to a specific purpose, like what has been done this year to mitigate future tax increases. The funds can be mitigated to certain funds, such as the trail fund. The fund balance is kept in the 40 -45% range for several reasons including the uncertainty of building permits and sustainability of growth. Council should provide direction on fund balance goals for 2015 as soon as possible. Little believes council's basic principle and commitment should be to maintain steady levies and spending. A policy would provide a base to allocate surplus funds. Anderson agrees and believes it is the Council's duty to be good stewards of the tax dollars that are entrusted. Mr. Feller stated that the State Auditor recommends 35 -50 %; Lakeville's policy is 40 -50 %. Little is concerned that operating expenses are increased, but not the levy, thereby reducing the reserves. Swecker agrees that further discussion on this topic is needed in 2014 before the 2015 budget is prepared. Davis agrees with a policy of putting a certain amount of any surplus into reserve in order to build the fund. Mr. Feller stated that Council will be provided a five -year projection in the early part of 2014 which will focus on fund balances, general fund policies, growth projections, and long range tax levy planning. It was Council's consensus to discuss the fund balance policy at that time and to use this policy as a tool for making financial policy decisions. Council continued their discussion of the proposed new positions. Anderson believes new revenue is needed to support the Code Enforcement position. Mr. Mielke stated that this part - time position is intended to relieve the building inspectors who would then have more time to perform inspections and provide better customer service. Hiring this position is a less expensive option than hiring an additional inspector or a contract employee. New revenue could come from re- inspection fees. City Council Budget Work Session November 19, 2013 Page -6- An additional Police Investigator is needed to focus on increasing fraud and digital crimes. Interim Chief Kornmann stated that even though crime is going down, year -to -date calls are up about 1,000 over last year. LPD needs to be able to process cyber- crimes in an efficient manner and keep up with growth and the ability to be responsive. There are no other positions from which to draw hours to assist the only detective. This will also help the City to maintain its reputation as a safe community. The position of construction observers is recommended in order to utilize City staff rather than a consultant to monitor street reconstruction projects. The cost is built into the project costs. Council asked staff to provide an updated overall levy including changes recommended by Council. There are a few items remaining to be discussed at the November 25 work session. Council Member LaBeau asked if a joint meeting of the Council and the Finance Committee could be scheduled after January 1st for the purpose of discussing the Committee's role. Council expressed their appreciation to staff for their work on the budget and the process that was used this year. 6. Adjourn Mayor Little adjourned the meeting at 8:27 p.m. Respectfully submitted, Jud awkins, Deputy Clerk Matt Litt fe, Mayor