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100807 CC WS MinCITY OF SHOREWOOD CITY COUNCIL WORK SESSION OCTOBER 8, 2007 MINUTES 1. CONVENE CITY COUNCIL WORK SESSION 5755 COUNTRY CLUB ROAD COUNCIL CHAMBERS 5:30 P.M. Mayor Lizee called the meeting to order at 5:32 P.M. A. Roll Call Present. Mayor Lizee; Councilmembers Callies, Turgeon, Dawson; Finance Director Burton; Director of Landini Absent: None B. Review Agenda Wellens, and Woodruff; Administrator Public Works Brown; and Engineer Woodruff moved, Turgeon seconded, Approving the Agenda as presented. Motion passed 5/0. 2. ENTERPRISE BUDGETS Administrator Dawson stated the first draft of the budgets for the Enterprise Funds for 2008 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, and Recycling Funds. Staff had been fully allocated between the Enterprise Fund budgets and the General Fund Budget. Director Burton stated that per Councilmember Woodruff's request, Staff would be preparing a preliminary budget for the Liquor Operations should the operations not be sold prior to the start of 2008. A. Water Budget Director Burton explained the Water Fund budget was comprised of two parts: the Water Debt Service budget and the Water Operating budget. The 2008 Water Debt Service budget included debt service payments programmed at approximately $388,000 which would be paid for by a transfer from the Water Operating Fund. She went on to explain the 2008 Water Operating budget revenues were projected to be approximately $728,000, while expenses (including depreciation) were forecast to be approximately $1.2 million. Proposed capital expenditures to be funded from 2008 bond proceeds included the Amesbury Well enhancements, Woodhaven Well building demolition, the Radio Read Meter project, and the Southeast Water Tower rehabilitation. Burton also stated that athree-year step approach to water rate increases was discussed and approved by Council several years ago. No further increases have been necessary. She noted there were approximately 1,250 water connections that use an average use is 30,000 gallons per quarter. The 2008 budget includes $8,000 for possible feasibility studies. Burton then related that Councilmember Wellens had prepared a chart depicting the current water rates based on usage and rates he thought could be considered, and she distributed that chart to Council. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES October 8, 2007 Page 2 of 8 Wellens stated his proposed rates would reward water conservation. Wellens also stated he thought the minimum number of gallons should be reduced to lower than 10,000 gallons as single-occupant households, seniors, and those that travel for the winter may use significantly less than 10,000 gallons per month. He then stated the chart depicted that the existing rate for 10,001 - 50,000 gallons was less than the rate for 1 - 10,000 gallons. Administrator Dawson stated if the minimum base charge were separated out of the rate it may better depict the usage charge; the base charge was for administering the water system and for debt service. Mayor Lizee questioned if there was information available showing how many households used 5,000 gallons of water or less per month. Burton stated she would get that information. Lizee suggested that rates be discussed at a future work session. Councilmember Woodruff stated he would want to review various rate scenarios and their impact on water revenues. Councilmember Turgeon stated that penalizing residents for heavy water usage could help with water conservation. Dawson stated the existing step-rate structure was designed to do that. Councilmember Callies questioned if capital expenditures were funded from bond proceeds why couldn't the Southeast tower wash and rehabilitation be done this year as the money was available. Councilmember Woodruff stated the washing of the water tower was delay until 2008 so it would not have to be done twice -once in 2007 and again in 2008 before it was refurbished. Director Brown stated there were very specific times of the year when the water tower project could be done. The following noteworthy clarifications and comments were made regarding Water Debt Service - Revenues from special assessments and connect charges were collected for the Wedgewood Drive, Mallard Lane, Teal Circle project in 2007 and would be collected again in 2008. - The $310,000 transfer in to the fund would occur at year-end 2007. The following noteworthy clarifications and comments were made regarding Water Operations. - Based on comments from the vendor, it was anticipated there would be a 3 - 5 percent increase in water revenues as a result of more accurate meter readings from the radio read meters. That could be evaluated at the end of 2008. The 2008 budget does not reflect any increased revenues because of the new meters. - The number of delinquent bills was not very significant. Notices were sent, notification was placed on the door, and eventually water could be turned off due to delinquency. The City's ordinance allowed the City to certify delinquent charges against property tax rolls. - Staffing, supplies and materials, and support services had been on the increase because administration and maintenance of the water system had become more complex, and water usage had been increasing by 10 percent per year. - The water usage service indicators needed to be updated. Councilmember Callies questioned if additional funds should be budgeted for installing City watermain, a question she had asked previously. She thought the City should consider what it would take to have City water City-wide, and she commented she was a strong proponent of City water. There was discussion about how watermain installation was currently funded -assessments for City water as well as the connection charge. There was also discussion about increasing water rates slightly and placing that into a fund for future watermain installation; the downside would be that property owners that had already paid to get City water would be funding those without it. There was agreement to discuss this topic at a future work session. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES October 8, 2007 Page 3 of 8 B. 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 expenditures for 2008 were contemplated at approximately $1.3 million, which included capital improvements of approximately $300,000 for refurbishment of three lift stations. Budgeted revenues were contemplated at approximately $200,000 less than expenditures. Council needed to discuss if a sanitary sewer rate increase was appropriate or if funds should be transferred from the sewer reserves to accommodate the shortfall. The current sewer rate was $70 per quarter and it had not been changed in five years. An increase of $3 per quarter per household would provide an additional $33,600 in revenues, and a $5 per quarter per household increase would provide an additional $56,000 in revenues. Burton then explained the largest single increase in expenses was the Metropolitan Council Environmental Services (MCES) wastewater treatment charge, a charge the City paid for wastewater processing. The 2008 charges are estimated at $548,000. The monthly wastewater processing charge did not include Inflow and Infiltration (I & I) surcharges, which MCES could impose. She noted the City would not be subject to the I & I surcharge program MCES implemented in 2007, although many surrounding cities were. The following noteworthy clarifications and comments were made regarding Sanitary Sewer. - Budgeted charges for service in 2008 would be reviewed. - A service indicator would be added for MCES flows and rates. - The need for a rate increase was questioned -the reserves were projected to be approximately 2.8 times annual expenses. The level of reserves would be used to fund future lift station refurbishing (little had been done in the last 12 years); pay for MCES surcharges for I & I should this be imposed; to take proactive measures regarding I & I mitigations; and to make some of the sanitary sewer system repairs. - There was not a desire to reduce the current rates; but there was also no desire to increase rates at this time. - The Christmas Lake Point lift station project would probably be delayed until 2008. - The goal for future projects was to do the design work in one year and the construction work in the next year. The budget would be adjusted where needed to reflect that approach. C. Recycling Budget Director Burton stated the Recycling Budget contemplated revenues and expenditures of approximately $126,000. 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. The City had entered into a new 33-month recycling contract and the contract rate had increased slightly. Burton explained the Spring Clean-Up Program changed in 2007 to discontinue the curb-side collection component. Although every effort was made to recover costs through collection site fees, it was anticipated that the City would have to subsidize a portion of that program. Therefore, a rate increase from $1.75 per month per household to $2.75 per month per household was suggested. Tliat increase would generate an additional $33,000 annually and that should be adequate to offset the increased costs for recycling and clean-up activities. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES October 8, 2007 Page 4 of 8 Councilmember Turgeon questioned if the City could conduct its spring clean-up activities in conjunction with Hennepin County for household for hazardous waste; when Minnetonka did that there was no charge to get rid of hazardous waste. Director Brown stated the City had tried to do that, but the City did not generate enough volume to make it worthwhile for the recycler the County used. There was discussion about the viability of doing amulti-community drop-off hazardous waste recycling effort in conjunction with the County to reach the necessary volume; the effort would be conducted at a controlled site. Councilmember Callies questioned if the City should consider organics recycling which would reduce the volume of waste generated. Grants were available from Hennepin County for that purpose. There was discussion regarding subsidizing the spring clean-up program. Councilmember Wellens stated he would prefer not to do that. Callies stated she somewhat agreed as some residents had complained about the $18 charge for curb-side clean-up. The following noteworthy clarifications and comments were made regarding Recycling. - The recycling tonnage for 2006 was 897 tons, or approximately 75 tons per month. - The recycling per household charge was independent of whether or not a household recycled. - It was suggested the Shore Report include a suggestion for people to take advantage of recycling as they paid for it whether or not they recycled. - The budget would be adjusted to remove the proposed rate increase of $1 per month per household. D. Stormwater Management Budget Director Burton stated the 2008 Stormwater Management Budget contemplated expenditures of $674,000. The amounts included operations and the major capital improvement of the Amlee Road, Manitou Lane, Glen Road Stormwater project ($540,000). Preliminary revenues were contemplated to be $394,000; the revenues included a proposed 2008 rate increase from $15 per residential property per quarter to $30 per residential property per quarter. Despite the proposed 2008 increase, the revenues generated would not be sufficient to cover the anticipated expenditures and the fund would fall into a deficit position. If the project was not implemented there would not be a need to double the rates; if the project was to be done, how to fund it would have to be decided. Administrator Dawson stated the City had not bonded for nor assessed for Stormwater improvement projects in the past. In addition to the project mentioned, there were other costly stormwater improvement projects that should be considered over the next few years. It may be appropriate to consider whether financing the projects could be based on a watershed or sub-watershed basis for the improvements and then the individual properties would be taxed for the improvements. The City's Comprehensive Plan suggested storm water system improvements could be funded through a Chapter 444 special tax district process. Atwo-thirds vote of the Council was required to establish tax districts. The City would have to bond for tax district improvements, and the districts dissolved after the bond was paid off. The City could also bond on a City-wide basis for the improvements; that would become the basis for going forward for future improvements. A minimum of $500,000 in bonding would be required for it to be efficient and cost effective. Multiple projects could be bonded together, but 90 percent of the proceeds would have to be used within three years. Bonds were project specific; specified projects could be removed from the list of projects bonded for but others could not be added to the list. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES October 8, 2007 Page 5 of 8 Director Brown stated for controversial projects it may be difficult to use the bond proceeds within the 3- year timeframe. He then stated for a project where few properties would benefit the assessment per property could be cost-prohibitive; for a tax district with many properties, it might not. He went on to state projects could be designed before they were bonded for which would make it easier to use the proceeds within the 3-year timeframe. Councilmember Woodruff stated he would prefer the City-wide bond approach. The stormwater rates could be increased at a future date. Administrator Dawson stated the tax rates in a storm sewer improvement district would have to be established according to a debt service payment plan. He clarified different projects funded by one bonding effort could be charged different rates based on the tax district. Councilmember Wellens stated he would prefer to use the tax district approach to bonding. Director Burton stated for purposes of the budget the assumption would be the Amlee Road, Manitou Lane, and Glen Road stormwater improvement project would be funded via bonding and the first debt service payment would occur in 2009. Mayor Lizee recessed the meeting at 6:55 P.M. to a regular Council meeting. Mayor Lizee reconvened the meeting at 8:09 P.M. 3. APPRECIATION EVENT Administrator Dawson stated the Council usually held its appreciation dinner the first Friday in December, and in recent years it had been held in the Ballroom at the Minnetonka Country Club. Attendees had been encouraged to bring guests to join the event. That room was not available, but another room which would seat 75 was. Both rooms were available on Saturday, December 8, and on Friday, December 14, and Saturday, December 15. Dawson explained that the State Legislature this year clarified that cities could conduct this type of event; the events had always been allowed for counties and school districts (i.e., the expenditure of public funds for recognition events was allowable based on State Statute). The State Auditor's Office released a Statement of Position on Employee Recognition Programs and Events in May 2007. The Auditor's Position would require that contractors, other local government officials, and guests pay for their meals. Councilmember Callies stated the Auditor's Position was not binding (it was not a legal opinion), and other cities had conducted recognition events. From her vantage point, recognition events were good for morale. Mayor Lizee stated it was a tradition that she would like to see continued this year. If there were to be changes it would be appropriate to solicit feedback from the staff and the Commissions regarding what type of event they would like to have. Councilmember Woodruff questioned why the Auditor's Office wrote such a narrow opinion, while the Legislature was more vague. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES October 8, 2007 Page 6 of 8 Councilmember Turgeon stated she was not aware of any other city that held an appreciation event similar to the one the City had held. She suggested maybe the event should be scaled back (e.g., a pot luck event). Councilmember Callies stated she would support continuing with the type of event the City had held the past this year. If the City wanted to know what other neighboring cities did a survey could be conducted in 2008. She did not think a cookie and coffee event was the appropriate thing to do. Councilmember Woodruff stated he was unsure of what he would support this year. He would like direction from the City Attorney. Councilmember Turgeon stated she had previously received feedback from some of the staff stating they would prefer the event be held at another time as the holiday season was busy. Also, the attendance in 2006 was small. Administrator Dawson stated part of the reason the attendance was less in the past few years was because there was an intentional reduction in the number of people invited. Councilmember Wellens stated he would support an event the same as in 2006. Mayor Lizee stated she had previous conversations with people about the appreciation event, and she had explained it was a dinner to recognize the staff and volunteers, and it also included a toy and food drive. Councilmember Woodruff stated he would support an event similar to last year. He suggested the event be held on Friday, December 14. There was consensus to schedule Friday, December 14, as tl~e date for the appreciation event and the event would be similar to the one held in 2006. 4. AMLEE ROAD, MANITOU LANE, GLEN ROAD STREET RECONSTRUCTION PROJECT UPDATE Engineer Landini stated that out of the residents that had responded, four residents along Glen Road and one resident along Harding Lane had given a verbal "no" to any easement associated with the reconstruction of Glen Road. A couple of them could be worked around, but if the City received any more "no" responses it would it would be extremely problematic. Councilmember Callies questioned if Staff had any idea of what the cost would be to obtain the easements. Director Brown stated Staff had not considered that. Director Brown stated the City had received 10 - 12 verbal "yes" responses. He commented that often when property owners were willing to grant the City an easement they wanted to know what the City would do to compensate them for the easement. He stated from his vantage point the City could hold a public hearing, but if the City was not committed to going through the eminent domain process to acquire the easements, the project would fail because the City did not have the necessary easements. There was a potential that the process of eminent domain would have to be used on 20 properties. Mayor Lizee commented that the project had been discussed by many Councils. The City had done the planning and design phases, it had conducted numerous neighborhood meetings, and it had an estimated cost for the project. She stated unless the City could obtain the easements for safety reasons, the project would not happen. She suggested the City obtain written agreements from residents agreeing they would grant the City either temporary or permanent easements. The City should also let the other property owners know that if they were not willing to grant the necessary easements either the costs for the CITY OF SHOREWOOD WORK SESSION MEETING MINUTES October 8, 2007 Page 7 of 8 eminent domain process would be built into the cost of the project, or Council would not move forward with the project and it would not be done for many years to come. Tl~e City would focus on other projects. The property owners needed to be specific regarding their support for or against the project. Councilmember Callies stated if the City did not obtain the necessary easements, she assumed only minimal maintenance would be done to the road (e.g., sealcoating, slurry, overlays). Councilmember Woodruff stated if the City could not obtain the easements he did not think the City should obtain them through eminent domain for a variety of reasons. He stated maybe the City could obtain easements from willing property owners on the basis that the City would try to do the project in the future, and then hope the willing property owners would convince the other property owners to grant easements. Director Brown stated the design proposed would remain valid into the future, and the easements needs should basically remain the same. The City could try to obtain permanent easements from willing property owners; the easements would be recorded against the property and would remain in effect should be property be sold. The City would not seek the temporary construction easements until project construction would begin. He stated it would difficult to do the project without temporary construction easements. Councilmember Callies questioned if there was any public safety reason to pursue acquisition through eminent domain. Director Brown stated that photographs of the area during a recent rainstorm showed significant pooling of water on the roadway during the rainfall due to drainage; that could be carried to the extreme and be considered a safety issue. Callies stated the pooling water could be considered a public health and welfare concern. Councilmember Callies stated if the City used eminent domain there would be costs associated with that, but it was appropriate to use it for stormwater improvement and road improvement projects. She questioned if this was a project where that should be done for the betterment of the City today and for the future. Councilmember Wellens stated the use of eminent domain could be appropriate if there were only 2 - 3 properties involved; he did not think it was appropriate if there were 12 - 13 properties involved. He then stated he was willing to stop the project. Councilmember Woodruff stated he was willing to stop the project. He wanted the City to try and obtain permanent easements where possible at this time, and if enough easements could be obtained then the project could be rescheduled. Director Brown questioned if Council still wanted to conduct a public hearing. Councilmember Callies stated if the project was going to be canceled she did not see the need for a public hearing; the public hearing was required for the possibility of assessments. Mayor Lizee stated the public hearing was a way to communicate the information. Lizee then stated the City needed to know how many property owners were willing to grant the necessary easements. She thought there was value with the property owners coming to discuss the need for the project with the Council; the project had been considered for many years. From her vantage point, if the project was going to be stopped it should be done with a public meeting. Callies questioned what the scope of the public hearing was. Administrator Dawson stated the public hearing was for the entire project; a public hearing was required to consider assessments as part of financing it. CITY OF SAOREWOOD WORK SESSION MEETING MINUTES October 8, 2007 Page 8 of 8 Director Brown stated based on what he heard at this meeting that the Council should make a clear statement explaining that one of the reasons for canceling the project was the City did not want to acquire easements through eminent domain. That statement could possibly turn the situation around. Council~nember Turgeon suggested Council have a discussion in the future regarding how it wanted to retrofit roads in older neighborhoods before another road was considered to be retrofitted. Director Brown stated Staff could prepare information for discussion at a work session describing what it had learned from this project and llow projects such as this one should be done in the future. 5. OTHER There was no other business for discussion. 6. ADJOURN Woodruff moved, Wellens seconded, Adjourning the City Council Work Session Meeting of October 8, at 8:47 P.M. Motion passed 5/0. RESPECTFULLY SUBMITTED, Christine Freeman, Recorder ATTEST: ~- ,® ~ ,' ~ '. ~.~ ~` Craig ~~; awson - iministrator/Clerk Christine Lizee, Mayor