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042808 CC WS MinCITY OF SHOREWOOD CITY COUNCIL WORK SESSION MONDAY, APRIL 28, 2008 MINUTES 1. CONVENE CITY COUNCIL WORK SESSION 5755 COUNTRY CLUB ROAD COUNCIL CHAMBERS 6:00 P.M. Mayor Lizee called the meeting to order at 6:02 P.M. A. Roll Call Present. Mayor Lizee; Councilmembers Bailey, Turgeon, Wellens, and Woodruff; Acting Administrator/Director of Public Works Brown; Finance Director Burton; and Engineer Landini Absent: None B. B. Review Agenda Mayor Lizee requested Item 6, Discussion Regarding Funding for the City Hall Renovation, be added to the agenda. Wellens moved, Bailey seconded, Approving the Agenda as Amended. Motion passed 5/0. 2. ADMINISTRATOR'S PERFORMANCE REVIEW FORMS Acting Administrator Brown stated the Council had requested it have a discussion regarding the forms used for the City Administrator's performance evaluation. He stated the meeting packet contained the current evaluation form, the current job description for the position, as well as evaluation forms from Springsted Incorporated, other municipalities, and the International City/County Management Association (ICMA). Mayor Lizee stated it was an appropriate time to update the current evaluation form. She thanked Sharon Klumpp, with Springsted Incorporated, for providing evaluation forms from other communities. She suggested if a new City Administrator was hired by mid-year then the first performance evaluation could be done in December of this year, and again one year from the date of hire; after that the evaluation would be done yearly. The following comments and clarifications were made by Councilmember Turgeon. - The current schedule for evaluating the City Administrator was to conduct an informal evaluation Enid-year and to conduct the formal evaluation at year-end. - There appeared to be multiple interpretations for the current performance standards. She suggested the performance standards section be eliminated and those performance standards worth keeping be incorporated into the responsibility section. - An attempt should be made to make the evaluation criteria more objective. - There were items that were included in multiple performance categories. - She liked the format of the current evaluation form. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES April 28, 2008 Page 2 of 7 - Questions from the sample evaluations could be incorporated into the City's evaluation. She liked some of the questions in the evaluation forms from the cities of Perland, Texas, and Diamond Bar, California. - She liked the form from Diamond Bar, although it could require the services of a professional to compile the data from each of the Councilmember's evaluations into one overall evah~ation. - It could be appropriate to use a combination of the Diamond Bar format and the City's format. The following comments and clarifications were made by Councilmember Wellens. - The format of the evaluation form was fine. - He had previously submitted a list of specific tasks that could be included in the evaluation form. For example, comparing the City's performance in specific areas to other cities' performance, how often Staff completed things Council had requested, the number of resident calls answered, Staff initiated follow-up on status reports requested by Council, etc. The following comments and clarifications were made by Councilmember Bailey. - Based on his experience with his current employer, for administrative functions similar to the City Administrator position it was not wise to have too many specific numerical performance standards (e.g., how many phone calls were answered). Those types of things were expectations that were more appropriately identified in the job description. The position was not a line operation which was evaluated by volume output. Caution should be exercised to not be too specific. - A responsibility was a performance standard; therefore incorporating the current standards into the responsibility section would be appropriate. - It was important the evaluation criteria were consistent and that it would be possible to evaluate the person on the criteria. - He did not think there were many problems with the current evaluation standards, although there were probably some that could be added or deleted. - He was comfortable with the current format. - He thought the format of the form from Diamond Bar was also fine (provided the questions would not be too specific) and the questions in that form were good. A format similar to Diamond Bar's could be done as a spread sheet which would make the compilation of the evaluations easier. - He would be reluctant to use the sum of the scores of each of the weighted criterion for each of the Councilmembers as the final evaluation ranking. There must be more subjectivity to the evaluation. The following comments and clarifications were made by Councilmember Woodruff. - He had provided Acting Administrator Brown with his proposed revisions to the current evah-ation form. - He thought the format was fine. - He thought there was a lack of some specificity. - He could support deleting the performance standards section and incorporating those standards worth keeping into the responsibility section. - He suggested Council have more discussion on how it expected to take output from the discussion about the evaluation form and transform that into a revised evaluation form. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES April 28, 2008 Page 3 of 7 - He suggested someone with professional experience in developing evaluation forms be contracted with to orchestrate this effort. - He had not spent much time considering the sample forms provided. - He thought it would be possible to take the items in the current form and redistribute them into a format similar to the one from Diamond Bar. That format would force the Councilmembers to consider each criterion individually. The following comments and clarifications were made by Mayor Lizee. - She thought the current evaluation form was somewhat onerous. - She thought the Diamond Bar's evaluation form appeared to allow for a more objective evaluation than the City's form did, and the Diamond Bar form was easier to use. - She thought each of the performance categories should be specific without being overly detailed to the point of including specific job task measures. - She suggested Sharon Klumpp, with Springsted Incorporated, may be able to help create the evaluation form, or she may have a referral who could. There was consensus to have Staff merge the City's criterion into the form from Diamond Bar. Different fonts would be used to indicate it was the City's criterion. 3. DISCUSSION REGARDING USE OF LIQUOR FUNDS Director Burton explained the City's Municipal Liquor Operation was discontinued in December 2007 and both stores were sold at that time. Both stores showed an operating loss for 2007. That downward trend was known earlier in the year and it was a factor. behind the decision to sell the stores. The operating loss was offset by a gain on sale of asset, resulting in combined net income before transfers of $305,000. The cash proceeds in the Liquor Fund at 2007 year were about $932,000. After all known obligations were satisfied, including potential firture unemployment claims estimated at about $16,000, the Liquor Fund balance would be slightly more than $900,000. Burton encouraged Council to consider any and all options for use of the Liquor Fund balance. For discussion purposes, she suggested Council could consider the following options. Use all or part of the proceeds to directly fund a specific one-time project such as the renovation of City Hall, a major environmental or park project, or another project that would benefit the City. 2. Use all or part of the proceeds to pay the debt service requirements for a project that could be financed by issuing bonds. For example, if bonds were issued to renovate City Hall the remaining Liquor Fund balance and/or any interest income it might generate, could be used to meet the annual principal and interest payment on the bonds. Invest the principal balance and use only the interest income for desirable programs on an annual basis. If the City received 4% - 5% on its investments, the interest income on $9.00,000 could be $36,000 - $45,000 per year. The General Fund had been a beneficiary of annual transfers from the Liquor Fund of $40,000 - $50,000 per year, and the Council could decide to continue this custom as it had the effect of reducing ~ the tax levy for general operations. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES April 28, 2008 Page 4 of 7 4. Use the fund to finance internal loans to other City funds, i.e., allow other funds in need of financing to `borrow' internally from the Liquor Fund with repayment programmed at a market rate over a 3-5 year period. 5. Take no action at this time and allow the available cash balance to increase pending future projects and/or emergencies. Burton noted the meeting packet contained a memo from the City's bond consultant discussing debt financing options for the renovation of City Hall. Mayor Lizee stated the City held a public forum on October 22, 2007, to discuss the sale of the Liquor Operations. At that forum residents expressed they would like to have input as to how the Liquor Fund balance would be used after the Liquor Operations were sold. She stated some of the balance could be used for things such as the City Hail renovation project; an environmental project; to establish a fund that could be used to provide residents with matching grants for neighborhood projects that would improve the environment; etc. She stated the Liquor Fund balance was the result of the sale of the City's 40-year- old Liquor Operation business. Councihnember Wellens suggested the planned city survey include a question with various alternatives for the use of the Fund balance. He stated a City would generally bond for funding for something like the City Hall renovation in order to match the beneficiaries of the project with paying for the project; the expansion would benefit future generations, therefore they should help pay for it. He could support some of the Liquor Fund balance to fund a portion ($200,000 - $300,000) of the renovation. He could also support using another portion ($150,000) for improvements to the parks. The remainder could be used to fund the Storm Water Fund. Councihnember Bailey stated he could support using the Fund balance for, multiple uses, but he would not recommend using all of the balance for one specific project. He then stated he thought it would be difficult to get the residents to coalesce on how the Fund should be used, be it though a public forum or a survey. He thought a public forum may result in a narrower subset of ideas coming forward than from a survey. Councihnember Turgeon stated she agreed with Councilmembers Bailey and Wellens. She then stated she could support using a portion of the Fund balance for the City Hall renovation. She stated she would want to keep some portion of the balance in the Fund for future contingency needs. Councihnember Woodruff stated he would like to have Staff prepare a matrix which would depict the impact of using the Fund balance for multiple purposes. He expressed concern about having a public forum because the public did not have the ability to understand all of the other things that were occurring within the City's operation. Also, residents would likely come to the forum to present their special interest projects. He commented that financing the City Hall renovation was closely tied to the use of the Liquor Fund balance, and he would support allocating some portion of the balance for the renovation. Director Burton stated the City would need athirty-day window prior to the first construction payment to pursue General Obligation Capital Improvement Plan Bonds or Lease Purchase Revenue Bonds financing. She commented there were economies of scale in bonding. Director Burton suggested a separate work session be scheduled to have the City's bond consultant discuss the details of different types of bonding and different options available. The Council indicated interest in scheduling awork-session at the May 12 council meeting. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES April 28, 2008 Page 5 of 7 Councilmember Bailey stated it appeared as if the Council would have to make some decisions on the use of the Liquor Fund balance before there would be time to gather public input about the use of the Fund balance. Councilmember Wellens stated the City had indicated to the public that it would solicit the residents' feedback on how to use the fiords. 4. DISCUSSION OF INVESTMENT POLICY Director Burton stated Councilmember Woodruff requested a discussion of the City's investment policy. The meeting packet included copies of the City's Investment Policy, the City of Aitkin's Investment Policy, and a document prepared by the League of Minnesota Cities (LMC) about City Deposits and Investments. Burton explained the City's Investment Policy was based on Minnesota State Statute and was adopted in 1996. The Policy had formed the basis of the City's investment practices these past years. She stated she and Councilmember Woodruff had received, via e-mail, a copy of Aitkin's Investment Policy which had recently been adopted by Aitkin's City Council and its Public Utilities Commission. The Aitkin policy had later been e-mailed to Councilmembers. She explained Aitkin's policy also followed Minnesota State Statute very closely and. appeared to have been based on the sample model investment policy outline included in the LMC document. She stated if Council decided to update the City's investment policy, the LMC document provided a good basis, especially in the area of defining investment objectives. Burton then explained at 2007 year-end the City's cash and investment portfolio was about $25.6 million. Approximately $10 million was designated as EDA bond refunding proceeds and was invested by and with U.S. Bank as trustee, per the EDA bond covenants. The remaining $15.6 million represented the City's cash and investment balances across all funds. The $15 million was invested with 9-10 different brokers and was invested primarily in United States securities including U.S. treasury and government agency notes; Certificates of Deposit (CD's); Commercial Paper rated A1P1 or better; and the 4-M fund, the League of Minnesota Cities Minnesota Municipal Money Market Fund (a Minnesota joint powers investment trust). All securities were held in safekeeping at the financial institutions and were collateralized appropriately as required. Approximately $4.5 million (29-30% of the portfolio) was kept in liquid accounts such as the 4M Fund and the City's Treasury Cash Series Sweep Account at Beacon Bank. In 2007, the City received $652,000 in interest income across all funds. With regard to delegation of authority, Burton explained the City's Investment Policy placed authority and responsibility for conducting investment transactions with the Finance Director/Treasurer, and in their absence, the City Administrator. That was similar to the LMC document which stated "in most cities the treasurer or chief financial officer is usually the person given this function." With regard to broker notifications, Burton explained the City's Finance Department prepared Broker Notification forms and obtained certifications anm~ally. The Broker Notification forms were designed to document compliance with the requirement that all investments were to be made in accordance with Minnesota State Statutes and the City's Inveshnent Policy. With regard to the City's investment objectives, Burton stated the City's Investment Policy was somewhat vague regarding investment objectives. Staff recommended the City's objectives be clarified in an updated policy. In practice, the following investment objectives were generally observed: 1) safety of principal -the foremost objective for the City's tax dollars; 2) liquidity -the portfolio must remain sufficiently liquid to meet all operating costs, especially given the periodic nature of tax receipts; 3) diversification - a variety of investments and brokers minimized exposure to loss; and, 4) yield -efforts were made to attain amarket-average rate of return. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES April 28, 2008 Page 6 of 7 Mayor Lizee stated it was time to update the City's 12-year-old Investment Policy. She suggested the City's investment objectives be clarified and the Policy be updated to the LMC's model. She suggested the City's auditor comment on the updated Policy before it was presented to Council. In response to a comment from Councilmember Wellens, Councilmember Bailey stated not all of the investments were FDIC insured. Councilmember Woodruff stated there was other surety that could be obtained and that was covered in the State Statute. Councilmember Wellens stated the City's Policy stated officers and employees involved in the investment process shall refrain from personal business activities that could conflict with the investment process, or which could reasonably cause others to question or doubt their ability to make impartial investment decisions. He suggested the City policy also state the officers and employees must disclose if they had any conflict of interest. Councilmember Woodruff stated what could have been a reasonable investment 1.5 years ago may not be so today, even though it was allowed by State Statute. If the City's objective was preservation of principal, then there could be investments allowed under the State Statute the City would not want to consider. He stated he would submit a list of investments allowed under the State Statute that he did not think the City should do. Councilmember Bailey stated based on his experience it was very easy in hindsight to say a certain investment should not have been made, but it was very difficult to say in foresight that an investment was very risky. He agreed the Investment Portfolio should not be invested in stocks, but he thought the City should take a little more risk than just investing in Treasury Biils. There was a lot of middle ground for investments between those two investment scenarios. He stated from his vantage point it was the intent that should drive investment decisions. Problems often resulted when an investment authority was "yield hungry" and stretched for yield. He then stated because the City's prime objective was safety of principal the City should continue to invest in conservative investments that would most likely be safe when there was a downturn in the economy. He also stated it would be almost impossible to write an investment policy which in detail would put limits on what could and could not be invested in. Councilmember Woodruff stated his intent was not to suggest that the Policy identify a specific list of issuers of securities. He did think it was possible to prepare a list of the types of investments. He suggested Council be provided with pros and cons on the types of allowable investments. Councilmember Bailey stated the list of allowable investments already identified was a fairly generic set. Mayor Lizee expressed concern that Council was making a decision to become too involved in the City's investments, which were already regulated by State Statute. She stated she did not think the Council had the expertise to decide how the City's investment portfolio should be invested. She clarified she was very interested in the investment process. Director Burton stated the City had never had a default or a loss in its investment portfolio. She further stated that she worked with a number of very experienced and talented brokers who provided very good investment advice. She stated that the City investments were very conservative and cautious. Director Burton stated she thought she could have a revised Investment Policy, which would be reviewed by the auditor, available for review and discussion by Council at a May 27, 2008, Council work session. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES April 28, 2008 Page 7 of 7 5. DISCUSSION REGARDING FIBER OPTIC SERVICES This item was continued to a firture work session. 6. DISCUSSION REGARDING FUNDING FOR THE CITY HALL RENOVATION This item was not discussed because be the work session had to be adjourned to conduct a City Council Regular meeting. 7. OTHER There was no other business for discussion. 8. ADJOURN Wellens moved, Bailey seconded, Adjourning the City Council Work Session Meeting of April 28, 2008, at 7:00 P.M. Motion passed 5/0. RESPECTFULLY SUBMITTED, Christine Freeman, Recorder ~ b ~ -t`: ~' ~, .. Christine Lizee, Mayor ATTEST: ~ awrence A. Brown, Acting City Administrator/Clerk