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111306 CC WS Min CITY OF SHOREWOOD CITY COUNCIL WORK SESSION MONDAY, NOVEMBER 13, 2006 5755 COUNTRY CLUB ROAD COUNCIL CHAMBERS 5:30 P.M MINUTES 1. CONVENE CITY COUNCIL WORK SESSION Mayor Love called the meeting to order at 5:30 P.M. A. Roll Call Present: Mayor Love; Councilmembers Callies, Lizee (arrived at 5:31 P.M.), Turgeon and Wellens; Administrator Dawson; Finance Director Burton; Director of Public Works Brown; and Acting City Engineer Gurney Absent: None. B. Review Agenda Wellens moved, Callies seconded, Approving the Agenda as presented. Motion passed 4/0. Lizee arrived at 5:31 P.M. 2. ENTERPRISE BUDGETS Administrator Dawson stated the 2007 Proposed General Fund Budget had been discussed earlier in the year, and the budgets for the Enterprise Funds for 2007 would be presented this evening for discussion. The Enterprise Funds were solely supported by revenues to the City's business operations. The documents presented to Council this evening consisted of the budgets for Water Operations and Debt Service, Sanitary Sewer Fund, Stormwater Management, Recycling Funds, and Liquor Operations. Dawson then stated the Liquor Operations budget would be discussed first as Mr. Swandby (Liquor Operations Manager) was present this evening for that discussion. He explained the Liquor Operations budget would continue to show a transfer to the General Fund, and Liquor Operations would break even as well. Dawson noted Staff recommended an increase in the stormwater rates in order to fund future capital projects. He stated the costs for the spring 2006 curb-side-pickup of recycling were included in the budget packet, and Council may want to discuss whether that program should be continued in 2007. A. Liquor Operations Director Burton explained the City anticipated small profit levels at its two current municipal stores; she commented the 2007 budget had been prepared quite conservatively. A transfer to the General Fund of approximately $40,000 was also anticipated. New countertops, painting, and new floor-covering were budgeted for the Waterford store; and new wood shelving was budgeted for the Shorewood Plaza store. The capital outlay for those improvements was approximately $30,000. The City had received notice CITY OF SHOREWOOD WORK SESSTION MEETING November 13,2006 Page 2 of7 from the owner of the Waterford store property that the owner planned to downsize the store's current space, a provision of the current lease. Burton then explained the combined budget for the two stores depicted a slight profit of approximately $300. She commented the depreciation of approximately $31,000 was a non-cash item. She also explained a transfer in from the liquor reserves for an amount of $30,000 was required to fund the improvements at the Waterford store, and that transfer was offset by a transfer-out to the General Fund. Mr. Swandby explained although the net profits for Liquor Operations was $300, the $40,000 transfer to the General Fund and the approximate $30,700 in depreciation should also be viewed as profits. In response to a question from Mayor Love, Director Burton explained the amounts depreciated would be used for future improvements. Mr. Swandby stated that approximately $1,000,000 had been made from Liquor Operations over that last seven years. In response to another question, Director Burton explained standard accounting depreciation standards were used in preparation of the budgets. In response to a question from Councilmember Turgeon, Mr. Swandby explained the Waterford store would be downsized from 4,500 square-feet to 2,500 square-feet (the 2,500 square-foot cost was the existing lease amount). The improvement costs were based on 2,500 square-feet of space. In response to a question from Mayor Love, Mr. Swandby stated the smaller store could have a negative impact on sales. He explained the variety of stock in the current inventory plan would not be altered; the amount of each particular item displayed may be reduced. In response to a question from Councilmember Turgeon, Mr. Swandby stated the Waterford store was performing better than expected, and the Shorewood Plaza store was not performing as well as expected. Swandby commented five new liquor stores had opened in the immediate area over the last seven years. He thought the available parking at the Shorewood Plaza store may have had an impact on the sales at the store, and he has requested additional short-term parking be designated by the owners of the Shorewood Plaza. Councilmember Callies commented that municipal liquor stores were generally not viewed as a destination, but were mainly considered a neighborhood convenience. Discussion ensued with regard to the impact of the Wine Club on the on sales. Mr. Swandby explained there was approximately $3,100 of at-cost tobacco products inventory in stock when the Council made the decision to cease the sale of tobacco products at the two liquor stores at an October 23, 2006, Council meeting. The inventory was slightly high on that day because new inventory had been received on that day. The 2005 profits from the sales of tobacco products was approximately $6,100 - that amount reflected approximately 20% of the Liquor Operations net operating income and over 7% of its profits. He stated the sale of tobacco products was not promoted, nor were the products priced in such a way as to be competitive; the products were sold as a convenience to customers. He expressed concern with the possibility that there could be a loss of customers because a customer would not be able to purchase tobacco products at the same time they purchased liquor products. Swandby noted the current at-cost tobacco products inventory was valued at $2,300, and the majority of that inventory was low turnover. In response to question from Councilmember Lizee, Swandby stated cigarettes did have a shelf life. In response to a question from Councilmember Callies, Mr. Swandby stated very little of the inventory cost would be recovered if the suppliers would even consider taking the inventory back. CITY OF SHOREWOOD WORK SESSTION MEETING November 13, 2006 Page 3 of 7 Mr. Swandby explained the majority of the profit on tobacco products was made on the high-turnover items. He stated to sell the existing inventory would take a long time. In response to a question from Councilmember Turgeon, Mr. Swandby stated he did not think it was worth renewing the tobacco license to sell only the existing inventory. His preference was to allow for the purchase of additional high-turnover inventory if the license was to be renewed, and the sale of product would only occur at the Shorewood Plaza store. In response to a question from Councilmember Callies, Director Burton stated there would be no tax advantage to disposing of the existing inventory. B. Water Budget Finance Director Burton explained the Water Fund budget was comprised of two parts: the Water Debt Service budget and the Water Operating Budget. The 2007 Water Debt Service budget included payments for the existing bond issues, including the 2006 issue for financing major water and well improvements in 2006 and 2007. These debt service payments were programmed at approximately $380,000 and would be paid for by a transfer of $310,000 from the Water Operating Fund. She went on to explain the 2007 Water Operating Budget revenues were projected to be approximately $693,000, while expenses (including depreciation) were forecast to be approximately $1,372,000. Proposed capital expenditures to be funded from 2007 bond proceeds included the Amesbury Well enhancements, Woodhaven Well Abandonment and Chanhassen Interconnection, the Radio Read Meter project, and the Southeast water tower wash and rehabilitation. Director Burton also stated in order for the Water Funds to be self-supporting, to assure the system could provide for improvements, and to preserve fund balance at current levels, a three-year step approach to water rate increases was discussed and approved by Council several years ago. She noted there are currently approximately 1,252 water connections (this number is expected to increase to approximately 1265 in 2007) and the average use is 30,000 gallons per quarter. The 2007 budget includes $8,000 for possible feasibility studies. With regard to staffing, Director Burton explained if the Public Works staff provided task specific information on their timesheets, then the Accounting Department would capture that actual information. Director Brown stated there had been significant improvements to the City's water system as a result of the capital expenditures. He also stated there had been a significant increase in the stability of the utilities as a result of those responsibilities becoming internal to the City's operations. In response to Councilmembers' comments, Director Brown explained the increase in number of connections between 2004 actual and 2007 projected was conservative; if the number was budgeted aggressively and the actual was short of the projection that could have serious negative impact on funding. Brown commented there would be an additional 18 water connections on Wedgewood Drive alone, and he anticipated additional connections in spring 2007 in the Amesbury Southeast Well area. Councilmember Callies stated she had understood the cost of the proposed Southeast water tower wash and rehabilitation would be $20,000 - $30,000. Director Brown explained the cost of that project was projected to be $200,000; the $9,000 in the 2007 budget was for a wash only. In response to a question from Councilmember Wellens, Director Brown stated there would be a drop in the request for capital improvement funds in future years as a result of the more recent major capital CITY OF SHOREWOOD WORK SESSTION MEETING November 13, 2006 Page 4 of7 improvement expenditures. Brown commented there was finally a shift to an "improvement mode" with regard to the City's water system as a result of those expenditures. In response to a question from Councilmember Wellens, Director Burton stated she did not have figures immediately available that identified what percentage of the residents connected to City water used less than the minimum 10,000 gallons per month; she stated Staff would research that and provide that information to Council. Wellens suggested ifthere was a significant percent that were under that amount, maybe the City should consider lowering the minimum water-usage amount. Burton noted senior citizens and low-income residents were billed at a discounted rate. Councilmember Callies stated the reason for a minimum rate was to help cover the cost of the entire system. Councilmember Lizee commented the list of water-system improvement projects that had been completed was impressive. She stated it was also important to ensure there were ongoing improvements. In response to a question, Director Brown stated the Radio Read Meter project could be done in phases provided it was planned to be done that way. C. Sanitary Sewer Budget With regard to the Sanitary Sewer Budget, Director Burton stated the City currently had about 2,800 connections to its Sanitary Sewer system. She explained the proposed operating revenues and expenditures for year 2007 were contemplated at approximately $1,185,000. She noted those amounts included capital improvements of approximately $236,000, for refurbishment of two lift stations. The capital improvement projects would be funded by a transfer from the reserves. She commented the Sewer Fund was very stable, and it had a reasonable balance. Burton then explained the largest single increase in expenses was the Metropolitan Council Environmental Services (MCES) wastewater treatment charge, a charge the City pays for wastewater processing. The 2007 charges of $573,740 reflected an increase of approximately $112,000 (24%) over 2006. The City's share of the cost was determined by the MCES using a formula based on the last actual known flows from the period July 1, 2005 - June 30, 2006. She noted the City would not be subject to the Inflow and Infiltration (I & I) surcharge program that the MCES planned to implement in 2007. For the City to continue to be exempted from that program, the City would have to be proactive regarding I & I mitigation and funds that had been designated for that purpose. Although Staff did not recommend a sewer service rate increase at this time (the current rate is $70 per quarter), it was imperative that the sewer rates be monitored closely. Director Brown stated he was disturbed with the significant increase in the MCES wastewater charge. He then stated it would be prudent for the City to hire an Engineering Consultant to assess the current 1&1 situation and to establish additional monitoring practices to provide additional and/or more accurate data for determining responsibility of flow and cost. He guesstimated the cost for such a study would be $100,000, a cost-effective expenditure from his perspective. He was concerned the MCES estimated much of the City's flow when determining the City's share ofthe cost. Mayor Love stated he thought it would be beneficial to gather benchmark data that the City could use in the future. He questioned if there were neighboring cities that would willing to participate in that type of study - his experiences had been that the State and County appeared to be more receptive to addressing concerns when more than one city shared the concerns. Director Brown commented wastewater did not flow in conjunction with cities' boundaries. CITY OF SHORE WOOD WORK SESSTION MEETING November 13,2006 Page 5 of7 In response to question from Councilmember Turgeon, Director Brown stated the City had its sewer lines televised approximately 10 years ago. He commented the City had not done much with trying to reduce I & I, that would be done within the next few months. He stated a significant portion of I & I comes at the connection points to the right-of-way sewer line; those connection points were replaced when a house is rebuilt. D. Recycling Budget Director Burton stated the Recycling Budget contemplated revenues and expenditures of approximately $120,000. The City anticipated receiving approximately $21,000 in grant monies from Hennepin County Grant Funds. She commented that the number of households participating in the recycling program remained stable at approximately 1,100 households per month. Administrator Dawson stated the six-city group (including Shorewood) that jointly contract for recycling services had prepared an RFP for those services. He anticipated there would be a slight rate increase as a result of a new contract. He noted the rates had been the same for the last six years. He then stated no rate increase was proposed at this time, and the impact of minor increases could be funded from the reserves. Administrator Dawson stated the City was somewhat unique in its offering of curb-side collection for some items as part of it spring clean-up program. He commented the City also offered a drop-off site for other items, and the costs for the site were primarily paid for by the residents who used that site. He explained the net costs for the overall spring clean-up program are paid by residents, regardless of whether or not they used the service; that additional charge on utility bills was the single-most complaint Staff heard from utility customers. The approximate cost for curb-side collection in 2006 was $15 per household, while the per-household-served cost was approximately $28 (the total curb-side collection service cost was approximately $38,800 for 2006). Dawson then stated because the curb-side collection was the costliest component for the spring clean-up program, Council may wish to consider if the benefit of the convenience was worth its costs. Councilmember Turgeon stated neighboring cities provided curb-side collection as part of their spring clean-up programs. She suggested the City survey its residents to determine what the residents would be willing to pay for curb-side collection, and what items they would prefer to have included in the collection. She commented Greenwood collected residents' used appliances at the curb-side. Councilmember Lizee commented the difference in geographic size between Shorewood and Greenwood was quite significant; the cost Shorewood to provide such a service would be quite large. Councilmember Wellens stated in his ward there were a number of residents that had expressed a desire to have the City terminate its curb-side collection service; the residents preferred the drop-off site program. Councilmember Lizee stated that approach could be viewed as more equitable. In response to a question from Councilmember Lizee, Director Brown stated having the collection site located at the Public Works site was very manageable. Lizee questioned if the drop-off site program could be expanded to include additional items. Brown stated that was viable, but the challenge was the City may not generate enough recyclable waste to warrant a being charged a minimum fee by Hennepin County for pickup of the waste, particularly household hazardous waste. Brown commented that the City had received a request for the yard-waste collection program to be reinstituted. Discussion ensued with regard to the costs versus benefits of a curb-side collection program versus a drop-off site program, and the reaction of the residents with regard to the program. Mayor Love stated he was in favor of a once-a-year curb-side collection program, but he thought it would CITY OF SHOREWOOD WORK SESSTION MEETING November 13, 2006 Page 6 of 7 be appropriate for the residents who participated in the program to fund the costs, for equity reasons. In response to a comment by Councilmember Turgeon, Director Brown stated the Public Works site should continued to be used for the recycling drop-off site because the site could be controlled with regard to what items were dropped off. Mayor Love stated he thought he heard a common desire among Councilmembers and Staff to revise the City's spring clean-up program. He also stated he did not think Councilor the residents thought it was appropriate for residents to pay for curb-side collection if they didn't use the service. Administrator Dawson commented residents could arrange for special pickups through the City's waste management services provider. Discussion ensued with regard to how to charge for the spring clean-up program. Councilmembers agreed that the curbside collection service should be discontinued starting in 2007. E. Stormwater Management Budget Director Burton stated the 2007 Stormwater Management Budget contemplated revenues and expenditures of $325,000. The amounts included the final debt service payment due the Sewer Fund for the Gideon Glen land acquisition. Also included were capital improvements of approximately $191,000 for the following projects planned for 2007: the Gideon Glen Drainage project ($70,000, which would be funded by a grant from the Metropolitan Council); the Mary Lake stormwater sewer survey and design project ($74,000); the Manitou Drive / Wedgewood Pond project survey ($10,000); the Boulder Bridge Pond project survey ($10,000); and the Stratford Place project ($27,000). A stormwater rate increase to $5.00 per month from $1.68 per month (or to $15 per quarter from $5.04 per quarter) was contemplated to fund those projects. The last rate increase had occurred in 2003 when Council approved a small inflationary increase because there had not been a rate increase since the inception of the Stormwater Fund in 1993. She commented other cities rates ranged from $4 per quarter to $13 per quarter. Director Brown stated there had been significant issues that had arisen with regard to stormwater management over the last few years, and those issues needed to be addressed. Therefore, an increase in the rate was required to ensure there would be adequate funds to address those issues. Administrator Dawson commented the survey and design work for three of the projects would be completed in 2007, and the actual construction work for those projects would be completed in 2008 and 2009. In response to a question from Councilmember Turgeon, Engineer Gurney stated the Manitou Drive / Wedgewood Pond project would address the Glen Road stormwater drainage issues. Mayor Love stated he would support the increase in the stormwater rates in order to fund the projects necessary to address stormwater drainage issues. In response to a question from Councilmember Wellens, Director Brown explained a significant portion of the drainage projects were located on the western side of the City primarily because historically rural areas were served by culvert drainage rather than storm-sewer drainage. Mayor Love commented areas that had been developed earlier tended to have more drainage problems as those developments were subject to fewer restrictions during those times. In response to a question from Councilmember Callies, Engineer Gurney explained the Stratford Place project would address an eroding bank in that area - the bank would be reshaped, the area would be cleaned out, and rip-rap would be installed for protection. CITY OF SHOREWOOD WORK SESSTION MEETING November 13,2006 Page7of7 Councilmember Turgeon suggested the City may want to consider assessing the four property owners that would benefit from the Boulder Bridge Pond improvements the cost of those improvements. Director Brown stated it may an opportune time for the City to consider how it would want to fund stormwater management improvement projects in future years; many of the projects to-date had been funded by the developers. In response to a question from Director Burton, Mayor Love stated he thought there was general consensus amongst Councilmembers to support the proposed rate change. In response to a question from Councilmember Turgeon, Director Burton explained Staff had assessed a number of rate increase alternatives and the proposed increase to $15 per quarter was deemed the most appropriate. She stated after the majority of the problems identified during the analysis of drainage problem areas within the City had been resolved, the rate could be reevaluated to determine if the rate was still appropriate. Administrator Dawson commented that although the improvement projects would eventually be completed, there would continue to be on-going maintenance projects such as cleaning out the stormwater ponds. In response to a comment from Councilmember Turgeon, Administrator Dawson explained an outcome of the analysis of drainage problem areas was a prioritized list of problem areas that needed to be addressed and a probable cost for the associated improvements. 3. ACTIVITY INDICATORS This item was not addressed due to lack of time. 4. OTHER No other business was presented this evening. 5. ADJOURN Wellens moved, Lizee seconded, Adjourning the City Council Work Session Meeting of November 13,2006, at 6:55 P.M. Motion passed 5/0. {;' / j atL-. RESPECTFULLY SUBMITTED, Christine Freeman, Recorder Woody Love, Mayor ATTEST: