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120505 CC SP Min . . . CITY OF SHOREWOOD CITY COUNCIL SPECIAL MEETING MONDAY, DECEMBER 5, 2005 5755 COUNTRY CLUB ROAD COUNCIL CHAMBERS 7:00 PM MINUTES 1. CONVENE CITY COUNCIL SPECIAL MEETING Mayor Love called the meeting to order at 7:00 P.M. A. Roll Call Present: Mayor Love; Councilmembers Callies, Lizee, Turgeon, and Wellens; Administrator Dawson; and Finance Director Burton Absent: none B. Review Agenda Wellens moved, Turgeon seconded, Approving the Agenda as presented. Motion passed 5/0. 2. TRUTH IN TAXATION PUBLIC HEARING Mayor Love opened the Truth in Taxation Public Hearing at 7:01 P.M. A. Staff Presentation Administrator Dawson explained the annual Proposed Budget and Tax Levy Hearing, known most commonly as the Truth in Taxation Hearing, is a statutory requirement. It is an opportunity for residents to comment on the City's 2006 Proposed Budget and the levies to support it. While not required, the rest of the proposed Budget for activities not supported by taxes will be reviewed. He went on to say this was not the forum to discuss the assessor's valuation of property for tax purposes. That takes place at the Board of Review, generally in midllate April. Property values for Pay2006 have been set and may not be changed here. He stated only the City's tax levy, which is approximately 25% of the total property tax levied on a property, can be discussed at this meeting. Administrator Dawson noted there were no recommended rate increases for City Utilities for 2006. Administrator Dawson explained taxes represent the subsidy for the City's operation. Cities levy tax dollars, not tax rates. The tax rate is computed after the City sets its levy, and the rate changes every year. Administrator Dawson explained that the Legislature had placed levy limits on cities off and on since the early 1990s. They were removed for Pay2001, and reinstated for Pay2002 through Pay2004. They are not in place for Pay2005 or Pay2006. Levy limits have forced the City to defer many items needed in doing business. As levy limits were not imposed for Pay2005 or Pay2006, the proposed levy is designed for the City to get back on course with budget and financial planning. Administrator Dawson went on to state the City's proposed 2006 levy represents 10.9% increase, approximately $416,000. The resulting tax on the individual property may be greater or less than this percentage, depending on whether its assessed market value rose more or less than the City-wide average. CITY OF SHOREWOOD SPECIAL MEETING DECEMBER 5, 2005 Page 2 of5 . The 10.9% levy increase is less than the 13.25% increase in property values;, therefore the City's tax rate will decrease slightly. Finance Director Burton then presented information on the City's property tax distribution for 2006 and reviewed the budget preparation calendar. She restated the 2006 Proposed Budget recommended a property tax levy of nearly $4.25 million; an increase of $416,000, or approximately 10.9%. In addition, a portion of the 2006 levy would include debt service payments that were made annually to fund the new public safety buildings. For 2006, Shorewood's share of this special levy amount was estimated to be $512,000 the same amount as in 2004. Finance Director Burton explained the reasons for levy increase. She summarized 2006 Proposed Budget revenues and expenditures. She summarized the major contributors to the proposed 2006 levy increase. They were (in round numbers): 1) $117,000 for public safety costs; 2) $111,000 for capital reserves; 3) $60,000 for the Public Works addition; 4) $58,000 for City operations; 5) $54,000 for one-time technology improvements with the majority of that for major enhancements to the City's financial software; and 6) $10,000 for contingencies. Finance Director Burton briefly summarized the Enterprise Funds, and subsequent proposed budgets for these funds, including Water Operations, Water Debt Service, Sanitary Sewer, Stormwater Management, and Liquor Operations. . Finance Director Burton stated, in summary, total property taxes on a $385,000 home in Shorewood, which is a median value home, would be approximately $4,614. The city portion of that tax bill would be $1,122. For that amount of money, residents received a value in the diverse City services provided. B. Public Hearing Mayor Love opened the Public Hearing at 7:22 P.M. Richard Woodruff, 4485 Enchanted Cove, made a presentation that noted 2006 Proposed Budget concerns about various departments. (A copy of his presentation is on file with the City.) During his presentation he compared actual 2002-2004 Budget amounts, annualized amounts for 2005, and the 2006 Proposed Budget amounts. He questioned the need for a Contingency line item when no Contingency money has been spent since 2002. Mr. Woodruff, in summary, asked the Council to: 1) review the 2006 Proposed Budget to ensure there are no unnecessary expenses included; 2) reduce the 2006 proposed expense increase to less than 4.5%, 1.5% higher than the general inflation rate; and 3) ensure there is rigorous monitoring of the budget to eliminate any unwarranted spending. Ron Johnson, 5355 Shady Hills Circle, discussed Shorewood's near bankruptcy position in 1983. He stated the residents experienced approximately a 33% increase in taxes. He recommended looking at that history with the possibility of it providing insight to the budget process. Because the city is largely developed, he questioned the need for staff; outsourcing could be a possibility. Mr. Johnson, in summary, stated: 1) the City cost structure is proportionally higher than Minnetonka; 2) the City is largely developed; 3) Council and Staff should assess whether or not some of the established processes are still required; and 4) analyze what the impact of increased taxes has on residents wanting to relocate to Shorewood. . CITY OF SHOREWOOD SPECIAL MEETING DECEMBER 5, 2005 Page 3 of 5 . Harold Ness, 27610 Woodside Road, stated he was a 20-year resident of Shorewood who has great concern with increasing property taxes. He stated that his property tax levy increased 25% for Pay2003 and Pay2004 accumulatively. He stated tax increases of that significance create a serious burden for individuals with fixed incomes, such as retirees. He addressed four items in the City's December 31, 2004, Comprehensive Annual Financial Report. The items were: 1) assets exceeding liability, unrestricted assets; 2) the balance for cash and temporary investments; 3) Governmental Funds, an unreserved fund balance which is available for spending at the City's discretion; and 4) the General Fund, funds not legally reserved and they are designated for future purposes. He stated the General Fund increased in both 2003 and 2004. He questioned why the General Fund could not be reduced by $400,000 to approximately cover the proposed 2006 levy increase; if that were done the General Fund would have still have sufficient assets to cover 50% of proposed 2006 expenditllres. Margaret Muehlberg, 25700 Birch Bluff Road, stated she has been a resident of Shorewood for 17 years. She stated the reason she attended the Truth in Taxation Hearing was the 16.6 % increase in her assessment by the City of Shorewood, and stated she was sure her income would not increase by that amount. She expressed concern with certain service levels she received for her tax dollars. They are: 1) the lack of city water; 2) the frequent of loss of electrical power; 3) no street light at the intersection of Eureka and Birch Bluff Road; and 4) less than optimum ambulance service which she believed the City contracts for. In summary, Ms. Muehlberg stated she does not object to paying her share of taxes as long as the level of service is commensurate. . Amy K valseth, 4980 Shady Island Circle, had a question of Council - was there a time during the Truth in Taxation Hearing where the public can ask Council questions? Major Love stated once the Public Hearing was closed there will be some responses. He explained the first objective was to make sure all residents had the opportunity to be heard in the Public Hearing. He went on to state that Budget Workshop meetings during the year were open to the public and notice was given of those meetings. He also stated that it has been the tradition of Shorewood to recognize members of the public during these meetings. Mayor Love closed the Public Hearing at 8:08 P.M. C. Council DeliberationlDecision to Reconvene Major Love expressed his appreciation for the public involvement, and believed the feedback from the public was important information. He stated much of what he heard that evening is what the Council continually struggles with. He agrees outsourcing can be a great idea for certain activities; but outsourcing can result in increased consultant fees. Council is aware of some of the shortcomings in the ambulance service; the new Fire and Police station should lessen the impact of those shortcomings. He went on to say it's important residents be concerned about the amount of money being spent; they are equally concerned about getting the highest level of service. . Finance Director Burton stated she and Administrator Dawson had met with Mr. Woodruff the week of November 28, 2005. As she stated to Mr. Woodruff, the City provides a number of services, some of which are mandated by law. She stated all Councilmembers are residents and work diligently to make sure the residents receive the best value for their tax dollar. She went on to state that one of the reasons the City was in serious financial trouble in the early 1980's due to insufficient funds in the General Fund. Subsequently, the City has made a concerted effort to ensure adequate General Fund reserves. CITY OF SHOREWOOD SPECIAL MEETING DECEMBER 5, 2005 Page 4 of5 . Finance Director Burton then addressed the Contingency expense. She surmised that expense item was established in the 1980's to ensure the availability of funds for emergencies. She stated that Council could review the need for the Contingency expense. She felt confident that there were enough reserves in the General Fund to cover an emergency. Administrator Dawson clarified the City does not contract for ambulance service; that service is provided by Hennepin County. Mr. Ness questioned whether or not it was possible to use the unrestricted reserves for emergencies. Finance Director Burton explained the funds are legally encumbered. She invited Mr. Ness to meet with Administrator Dawson and her so they could explain some.ofthe restrictions of using the various funds. She explained the City has many separate funds and each fund must stand alone, similar to separate businesses. Mayor Love stated the objective of the Council is to make information as easily accessible as possible, and there is a standing invitation to the residents to meet with Staff and express concerns. In response to a question from Councilmember Turgeon, Finance Director Burton explained the increase in election costs was a result of proper allocation of staff costs between Elections and General Government. Administrator Dawson stated there was also re-allocation of staff costs within the Public Works divisions. . Councilmember Turgeon stated she did not see a continued need for a Contingency expense item in the budget. Administrator Dawson explained what is often done within the General Fund balance is there would be some designation of an amount not to reserve that would be used for contingencies. Administrator Dawson stated Hennepin County will make a direct purchase of the election equipment for the City. In response to a question by Mayor Love, Administrator Dawson believed the purchase came through funded by Federal to State to County monies. Finance Director Burton stated the City is responsible for ongomg maintenance of the election equipment, a cost of $1500 for 2006. Councilmember Callies expressed Council and taxpayers should exercise caution when reviewing budget comparison numbers; what is included in the numbers is not always clear or consistent. She agrees there is no need for a Contingency budget expense item. She stated the City does not have many in-house services. She expressed concern about the use of less qualified professional services to reduce the expense; value for the dollar should be the priority. She asked for Staff to provide more current performance metrics data for Staff functions. Councilmember Turgeon stated the City Engineer position currently remains part of the Director of Public Works responsibilities. She wondered if the City Engineer position authorized by the Council could be outsourced instead. . Mayor Love stated the City is facing issues of redevelopment, issues resulting from problems that were not properly addressed in the 1960's and 1970's when there was rapid development. He stated previous research into hiring a separate City Engineer was actually cheaper than outsourcing. The City lost its . . . CITY OF SHOREWOOD SPECIAL MEETING DECEMBER 5, 2005 Page 5 of 5 Superintendent of Public Works three years ago and have since upgraded that position. Mayor Love stated at the time of the Superintendent's departure, it was the Council's intent to look at ways to develop a Public Works Department that could have a working arrangement with other cities to realize economies of scale. In response to a question from Wellens regarding animal control, Dawson stated the City contracts with Orono for the service for a yearly fee. The "cost per animal" could vary widely from year to year. Mayor Love reiterated one of the things the Council and taxpayers have to constantly address is when does investment into the future need to be made; the new Public Safety Buildings are an example of that. Technology enhancements that would provide easy access to information is an investment into the future. Ms. Muehlberg asked why electric lines cannot be buried. She also expressed concern with the frequency ofloss of electricity. Administrator Dawson stated Xcel's response to this issue in the past has been it is a lack of power to serve the demand and the lack of a backup system. Mayor Love stated Council's have looked very seriously into burying electric lines, a very costly endeavor. Administrator Dawson explained the various ways Xcel recoups the cost to underground wires. He stated the City has not had a request to underground lines for a particular street. Council directed Staff to remove the $40,000 Contingency expense and the $17,000 election equipment expense from the 2006 Proposed Budget and present the revised 2006 Proposed Budget to Council at the December 12, 2005, meeting. Council also directed Staff to provide additional performance metrics data to Council in conjunction with the final version of the budget. Finance Director Burton stated Staff will make every effort possible to obtain the necessary data, but that all indicators may not be able to be revised. Council requested a review of the justification for a second City Engineer be done at a future meeting. Major Love again expressed is appreciation for the public involvement. 3. ADJOURN Turgeon moved, Wellens seconded, Adjourning the City Council Special Meeting of December 5, 2005, at 8:45 P.M. Motion passed 5/0. RESPECTFULLYSUBNllTTED, Christine Freeman, Recorder Woody Love, Mayor ATTEST: ~