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051208 CC WS MinCITY OF SHOREWOOD CITY COUNCIL WORK SESSION MONDAY, MAY 12, 2008 MINUTES 1. CONVENE CITY COUNCIL WORK SESSION 5755 COUNTRY CLUB ROAD COUNCIL CHAMBERS 6:00 P.M. Acting Mayor Turgeon called the meeting to order at 6:01 P.M. A. Roll Call Present. Acting Mayor Turgeon; Councilmembers Bailey, Wellens and Woodruff; Acting Administrator/Director of Public Works Brown; Finance Director Burton; Planning Director Nielsen; and Engineer Landini Absent: Mayor Lizee B. Review Agenda Wellens moved, Woodruff seconded, Approving the Agenda as presented. Motion passed 4/0. 2. DEBT FINANCING OPTIONS FOR CITY HALL IMPROVEMENTS -PRESENTED BY PAUL DONNA, NORTHLAND SECURITIES Director Burton stated Council requested awork-session be held to learn about the debt financing options available for the City Hall renovation. She then introduced the City's bond consultant Paul Donna, Senior Vice President for Northland Securities, Inc., who was present to discuss the options available. Mr. Donna stated there were three bond financing options available to the City for the City Hall renovation; 1) General Obligation (referendum) Bonds; 2) Lease Purchase Revenue Bonds; and 3) General Obligation Capital Improvement Plan Bonds. With regard to General Obligation (referendum) Bonds, he explained the City had the authority to issue this type of bonds which were backed by the full faith and credit of the City and would require a special election if this method was used. If a minimum of 51 % of the voters was favor, the City would have the ability to issue the bonds. The bonds would be subject to the City's statutory debt limit, which was currently approximately $16 million. General Obligation Capital Improvement Plan Bonds are based on a 2003 Minnesota program that allows statutory cities to establish a capital improvement plan and issue this type of bonds for certain improvements. The bonds are subject to the City's statutory debt limit. A capital improvement plan for the City Hall renovation would have to be developed, and it would have to be approved after holding a public hearing. The City would be subject to a 30-day petition period. The issuance of bonds would only be subject to a referendum if the City received a petition calling for a referendum on the issuance of the bonds signed by a number of residents equal to 5 percent of the votes cast in the City's last general election, and submitted to the City within thirty days of the public hearing. Lease Purchase Revenue Bonds, could be issued by the City itself or through an authority of the City (e.g. the Economic Development Authority). The bonds would be subject to the City's statutory debt CITY OF SHOREWOOD l~VORK SESSION MEETING MINUTES May 12, 2008 Page 2 of 9 limit. The process for issuing this type of bond would be similar to the process used to issue debt for the Public Safety Facilities. The EDA would issue the debt and lease City Hall to the City for lease payments equal to the debt service payments. This type of financing would not require a referendum. If the City wanted to levy taxes outside of levy limits to make the lease payments, these type of bonds would have to be issued by another governmental agency such as the EDA; a governmental agency was considered outside the levy limits pursuant to State Statute. He explained for General Obligation Bonds a levy was certified up-front for the entire term of the bonds. Bond holders and buyers consider these type of bonds the safest investment they could make with a city. For Lease Purchase Revenue Bonds, the appropriation of funds from a city's General Fund for the lease payments is done on an annual basis; the City would reserve the right to non-appropriate at any time and therefore these bonds could be considered a less secure investment. A Lease Purchase Revenue Bond currently yields approximately a 0.15% - 0.25% higher interest rates than a General Obligation Bond. Mr. Donna stated the financing process would take approximately 90 days to complete the closing of the bond issuance. He commented he had responded to many inquiries recently regarding the municipal market; people expressed concern about some municipal bond insurers failing or having their ratings downgraded. He stated bonds rated AA or better (the City had a AA rating) and bank qualified, which the issued bonds would be, hadn't been impacted by the market. He noted a 20-year issue for a general obligation bond would have an interest rate of less than 4 percent. In response to a question from Co~mcihnember Woodruff regarding investing the Liquor Fund, Mr. Donna stated the City would have to go out 4 - 5 years to exceed the 4 percent range. In response to another question with regard to the EDA leasing the City Hall back to the City, Mr. Donna stated if the improvements could be identified distinctly then only those items would be leased back otherwise the entire building would be the asset that would be leased. In response to a question from Councihnember Bailey, Mr. Dom1a stated in similar situations he had been involved with where a facility was not a very large tax capacity of the City other city councils generally chose the lease purchase revenue bond option for financing. The reasons were mainly to keep the project from being stopped. In response to another question, Mr. Dom~a stated if the City did a direct lease with a trustee the debt service payments would be within levy limits. In response to a question from Councihnember Bailey, Acting Administrator Brown stated the 90-day window to issue debt for financing the renovation project would not be an issue with regard to making the first construction payment. In response to a question from Councihnember Woodruff, Director Burton stated if a construction payment was due before the bonds were issued the City could "cash-flow" the payments from another city fund. Councihnember Wellens questioned what the impact would be on the type and cost of financing if the City chose to use some of the Liquor Fund or funds from the sale of the City owned house. Mr. Donna explained typically when the amount of financing needed was not more than $500,000 it was generally more cost effective to work directly with a specific bank or other institution; those institutions were only interested in fixed-rate bonds with a maturity date of 10 years or less. He stated he had been involved with many $500,000 issues withal 5 - 20 year maturity on the open market. He offered to run different scenarios using different financing amounts if that was what the Council wanted. Councihnember Wellens stated he was leaning toward the General Obligation Capital hnprovement Plan Bonds primarily because it would provide the residents an opportunity to stop the renovation project if CITY OF SHOREWOOD WORK SESSION MEETING MINUTES May 12, 200$ Page 3 of 9 they did not want it. He thought that risk was a good risk; it would make Council accountable to the residents. He would prefer to do that then dodge a referendumn; he would rather 6e subject to the will of the residents in that regard. In response to a question from Acting Mayor Turgeon, Mr. Donna explained the rate for the bonds issued for the crossover bond refunding for the Public Safety Facilities was slightly less then the rate for General Obligation bonds. He noted the Bond Buyer h~dex was historically low when that refinancing was done. Director Burton requested Council provide Staff with direction with regard to financing the City Hall renovation project. She noted the process for issuing bonds could be stopped at any time prior to the actual issuance of the bonds at no cost to the City. Acting Administrator Brown stated it would be beneficial if Council would identify its preference in financing options. Councihnember Bailey stated it was important for Council to decide on the size of the bond issuance, which would require Council to determine how much of the Liquor Fund would be used to fiord the renovation effort. Burton stated the amount of the bond issue would be contingent on the cost of the renovation effort. She suggested Mr. Donna address how to defease or buy down bonds in the future. Councilmember Woodruff stated the renovation construction could be started before all the financing was secured because of the City's financial state. Woodruff also stated there could be value in allowing the residents an opportunity to state they did not want to fiord the renovation. He indicated it would be problematic if construction had already started. Acting Mayor Turgeon stated the residents had already been provided an opportunity to comment on the project at the public hearing for the conditional use permit for the City Hall renovation and at the information open house held about renovation. She liked the option of issuing the bonds through the EDA. Councihnember Bailey stated from his vantage point General Obligation Capital Improvement Plan Bonds were the worst option. That process would allow a minimum number of residents (5 percent of the number of voters in the last general election) to call for a referendum which could stop the project. He was not in favor of a referendum; the public had been provided an opportunity to comment on the project at the public hearing for the conditional use permit for the City Hall renovation. Councilmember Woodruff stated if there was a referendum it would be in November 2008, and that would delay the project to 2009 and that the public had been provided an opportunity to provide input on the project. He commented he had not received any comment about the project, either positive or negative. Woodruff suggested Mr. Donna prepare scenarios fora $500,000 bond issue, a $750,000 bond issue and a $1 million bond issue, and address the options for paying the bonds down early. Councilmember Bailey stated the issuance cost for the three amounts would roughly be the same. Councilmember Wellens stated the risk of a petition calling for a referendum would be virtually zero, and the General Obligation Capital Improvement Plan Bonds had a lower interest rate. He questioned how much the City wanted to spend for the security of ensuring no one could stop the project. Councilmember Bailey commented the debt service for Lease Purchase Revenue Bonds would be approximately $40,000 more than for General Obligation Bonds. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES May 12, 2008 Page 4 of 9 Councilmember Woodruff stated the General Obligation Capital Improvement Plan Bond financing option would require more work than the other financing option. He noted he liked the option of the Lease Purchase Revenue Bonds, and the only additional meeting required for that option would be to authorize the issuance. He commented the bonds could be constructed so they could be paid off early. Councilmember Bailey, Acting Mayor Turgeon, and Councilmember Woodruff stated they favored the Lease Purchase Revenue Bonds option. CoLUlcilmember Wellens stated he could support that option even though it may look bad to the public. Mr. Donna stated the next step in the bond issuance process would be for him to prepare a more detailed analysis of what the bond structure would look like, including costs involved. He would also prepare a draft calendar of events. Councilmember Bailey requested an analysis of a bond structure for $500,000 on the public market, and then the costs if a lesser debt amount done through a bank. Mr. Donna clarified if the debt was issued for longer then ten years it should still be done on the public market; the costs would be a 1ligher percent of the total issue for a smaller issue amount. He explained at the next meeting the necessary paper work would be available for CoLmcil to authorize initial action on the option of choice. A second meeting would be required where the final terms would be presented for consideration. He stated he would need approximately four weeks between the initial authorization meeting and the final approval meeting. Director Burton questioned if it would be more valuable to know renovation costs prior to Mr. Donna returning for a meeting with Council. Councilmember Bailey stated if the margin of error on the estimate renovation costs was 10 percent then waiting for bid amounts was not necessary; if it was anticipated it could be more than that it maybe worthwhile to wait for the bid amounts. Councilmember Woodruff stated the current cost estimate was about $925,000 which did not include landscaping, and the total cost could likely be $1 to $1.1 million. Mr. Donna suggested at the next meeting where initial action would be authorized, Co~mcil could approve anot-to-exceed amount. He explained all of the bond and lease documents would be available for approval at that same meeting. He stated the City would then be prepared to go to market but not until it received the construction bids. 3. DISCUSSION REGARDING WARD SYSTEM Director Nielsen stated the purpose of the ward election system discussion was not intended to go into depth about whether or not the City should have a ward system; it was to talk about the timing for having that discussion. He explained if Council wanted to have an at-large election system in place for the 2008 general election, then a public hearing would have to be held on June 9, 2008, and Council would have to take action on abolishing the ward system and going to an at-large system that same day. Polling places must be identified and submitted to the County by June 11, 2008. He noted the deadline could possibly be May 27, 2008. He explained the City had to notice a public hearing in the City's official paper ten days in advance of the hearing and it took one week to get the notice into the City's official paper. Nielsen then stated the upcoming City-wide survey would provide a great way to hear from residents about the ward system. The survey feedback on the topic would be valuable when considering any change to the election system. To hurry the decision to be done by June 9, 2008, did not seem like very good policy. He clarified there had not been any specific direction to make a change in the election system in time to have it in effect for the 2008 general election. He explained the resident who requested CITY OF SIIOREWOOD WORK SESSION MEETING MINUTES May 12, 2008 Page 5 of 9 Council reconsider the value of the ward system had hoped it could happen in time, but he was Linder the impression that the City had until the filing date in August 2008 to make any change. Nielsen said it was up to Council to decide if it wanted to meet the June 9`'' date or wait to discuss the topic until after the survey results were available. Councilmember Wellens stated it was his understanding that the process could not be started and stopped at a later date. Acting Mayor Turgeon stated the City could hold a public hearing on June 9`~', but it did not mean Council would have to take action on changing the election system that evening. Director Nielsen explained if Council thought it may want to take action on June 9`~', a resolution and ordinance amendment would have to be prepared by then. Councilmember Woodruff said he would like that to be done. Councilmember Bailey asked if the public hearing was a prelude to making a decision or was it just to hold a public hearing. Councilmember Woodruff stated the public hearing could be held, and after discussion .Council could decide to drop the idea of changing the election system or it could decide to abolish the ward system and go to an at-large system. He explained if a public hearing was not scheduled for June 9`~ a change in election systems would not be in effect until the 2010 general election, if there was any change approved. Councilmember Bailey stated he agreed the survey would be a good way to provide residents with the opportunity to convey their thoughts about the ward system. He said the only people who comment at public hearings are those energized about the topic; even if someone has a very strong opinion they often don't make it to the public hearing. It would concern him to hold a public hearing and make a decision immediately after that. He had no problem holding a public hearing to hear some of the issues, but he would be uncomfortable rushing a decision to change the system. He noted he was not a proponent of the ward system; and that a number of years ago when the election system was changed to a ward system there was a lot of civic involvement. Afast-track approach would not allow for that same level of involvement. Acting Mayor Turgeon questioned what new information would come from the survey; the issues had not changed. She stated when the decision was made to go to the ward system there were 8 - 12 people who attended the public hearing then. Councilmember Bailey stated at that time no one had experience with the ward system and now they do; the City had not asked the residents what they thought of the ward system once they had experience with it for two general elections. If residents were not in favor of the ward system it would be a solid reason to return to the at-large system. Turgeon stated a little more than three years ago a small number of residents requested Council reconsider the ward system; to delay a decision again in order to get input from the residents via a survey, when a timetable had not been established for conducting a survey, did not seem appropriate. Councilmember Woodruff stated the public hearing could, at a minimum, be a facility for explaining the experience with the ward system and getting it into the public record. The decision could be made at a later date as to whether or not Council should wait for feedback from the survey before deciding to possibly make a change. There was consensus to schedule a public hearing for June 9, 2008, for the ward election system. There was also consensus to have Staff prepare a resolution and amendment to the ordinance. There was CITY OF SHOREWOOD WORK SESSION MEETING MINUTES May 12, 2008. Page 6 of 9 comment that even if the resolution and amendment were not needed that evening it might be needed in two or four years. 4. CHRISTMAS LAKE SURFACE USE Director Nielsen stated Acting Administrator Brown had been in discussions with residents on the north end of Christmas Lake (adjacent to the Merry Lane public access) regarding the silting-in of their bay. He explained the residents thought the silt problem was partially caused by the regular use of the public access boat launch. When boaters power their boats onto trailers they often cause substantial disturbance to the lake bottom, and the silt floats into that particular bay. The residents now have trouble navigating the waters in front of their properties. The residents had a number of discussions with the Department of Natural Resources (DNR) or the Minnehaha Creek Watershed District (MCWD) with the hope of either of the agencies undertaking a dredging project. The residents have resigned themselves to applying for a dredging permit themselves. Nielsen stated the residents requested measures be taken to prevent the silting problem from recurring, before they spent money on dredging. One of the ideas discussed was the possibility of a "no wake zone" in the vicinity of the launch area, possibly including the entire bay. The residents thought such a restriction would keep boaters from powering their boats onto trailers. He explained the process for designating an area a "no wake zone" had to be initiated at the local level; the City had to make a request to the DNR. Staff had contacted the DNR who indicated it would send information detailing the process that must be followed. At this time Staff was asking for direction from Council on 11ow to handle the request. Acting Administrator Brown stated the DNR and Hennepin County Water Patrol occasionally patrol Chrishnas Lake. Therefore, regular enforcement of the "no wake restriction" could be difficult. The MCWD had been heavily involved in discussions about a dredging permit. He related the MCWD indicated if its Board approved the permit, the MCWD would prefer something be done to keep the silting-in problem from recurring. Councilmember Woodruff stated he empathized with the residents and questioned if there was evidence that powering boats onto trailers was the cause of the problem. Director Nielsen said the process would explore if that were the sole culprit or if there were other contributing factors. He related the MCWD did think that could have an effect, and reducing that activity could help mitigate the situation. Councilmember Woodruff stated he was concerned about enforcement. He then stated most boaters would probably adhere to the "no wake zone" restriction, but he had never seen a restriction on how to put a boat onto a trailer at a launch. He expressed concern about the ability to educate boaters on not powering boats onto their trailers. Councilmember Wellens suggested a truck load of gravel be dumped into the lake at the boat launch area to bury the silt to keep it from being churned. Councilmember Woodruff stated one solution, although expensive, would be to redevelop the launch area and make a concrete ramp 20 - 40 feet out into the lake. He did not think the "no wake" restriction would solve the problem. Acting Administrator Brown commented that Staff had operated under the premise that everything below the water level was the responsibility of the DNR, and everything above the water level was the responsibility of the City. In this situation the DNR was not taking that position. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES May 12, 2008 Page 7 of 9 Woodruff moved, Bailey seconded, recessing the meeting to a Regular Meeting at 6:58 P.M. Acting Mayor Turgeon reconvened the meeting at 7:46 P.M. Councihnember Bailey questioned if there was a downside to the restriction. Director Nielsen stated there would have to be signage informing boaters they must winch their boats onto their trailers and Councihnember Bailey suggested the City encourage the residents to educate boaters at the launch on the ordinance. Acting Administrator Brown stated Staff had taken some measurements at the launch area, and the results indicated there was substantial depth at the boat access. It was past that area that the water depth was not very great. He related the MCWD had stated the powering of boats on to trailers was a problem. Director Nielsen stated Staff would solicit advice from the DNR and the MCWD regarding the effectiveness of this approach. There was Council consensus to direct Staff to initiate a study of the situation. 5. DRY HYDRANTS Acting Administrator Brown explained in 1994 the City installed three dry hydrants to provide an adequate water source for fire suppression ou Enchanted Island and Shady Island. The Mound Fire Department performed test pumping on the hydrants annually. Prior to the MFD tests the City's Public Works Department back flushed the hydrants to help clear debris from screen on the end of the intake pipe, and to prevent silt from remaining on the intake section of the system. Public Works had been back flushing more frequently based on feedback from the MFD regarding the amow~t of silt drawn in during the trial rims. Although the flow capacity was adequate for fire suppression, the capacity had been decreasing over the last few years. He noted the design of the dry hydrant system was not ideal, in part because the DNR objected to any obstruction above the lake bottom at the time the hydrants were installed. Brown stated Staff recommended a feasibility study be conducted to determine reasonable solutions for improving the quality and quantity of flow available for fire fighting operations. Councihnember Woodruff stated this affects him personally, and he cited a situation a few years ago where a wetland burned and the MFD did a quality job of responding to the sihiation. The MFD did not use the hydrants because of the silt situation; instead it used tanker trucks to bring water to the scene. He stated the location of hydrant system 3 was very shallow and the lake bottom was mucky. Acting Administrator Brown stated the location of system 3 was not a good location. He explained when the dry hydrants were installed the intent was to use them in conjunction with the tanker trucks. He stated the feasibility study would explore what could be done with the intake pipes, from an economic perspective. He stated since the time the City installed the hydrants, it appeared the DNR had allowed hydrants to be installed well above the lake bottom. He noted that lengths of some of the intake pipes were 700 - 800 feet long. Councihnember Woodruff said he would like the Staff to research ways to Hake the dry hydrant systems .more usable then they are now. He also stated the lack of hydrants could increase the cost of homeowners insurance. Acting Administrator Brown stated the Insurance Services Office, Inc., was completing a study for the areas the MFD services, and they were satisfied with the results of the hydrant tests. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES May 12, 2008 Page 8 of 9 Acting Administrator Brown stated all three hydrant systems had the same design problem, and he had reported the design problems to the DNR. 6. OTHER In response to a question from Councihnember Bailey, Director Burton stated the next discussion of the investment policy would be scheduled for the Jmle 9"' Council work session. Acting Administrator Brown stated the following topics were slated for the May 27; 2008, Council work session: plans and specifications for the City Hall renovation project; the search for a City Administrator; the pros and cons. of hiring a construction project manager for the renovation project; and the roadway overlay request from the Boulder Bridge Farm Homeowners Association. There was consensus to schedule a work session for June 2"d. Staff will identify topics for discussion at that work session. Director Burton stated Mr. Donna will discuss bond financing for the City Hall renovation at a June 9`-' meeting. Director Burton noted that budget discussions would begin the latter part of June. Councilmember Bailey stated in order to have a productive discussion about the use of the Liquor Fund it was important for Staff to identify alternative uses and provide an analysis of the alternatives. Councilmember Woodruff stated he would like to discuss Bber optics sometime in the next 6 - 8 weeks. Councilmember Bailey stated that groups are more productive when they evaluate options, rather than having too many possibilities, as is the case with many of the decisions before Council. Staff was best suited to prepare options based on previous Council discussions, and it was important that Council come to meetings prepared to bring closure to a topic. Acting Administrator Brown cautioned Council that for each topic Council wanted to discuss Staff had to be provided with adequate tine to prepare for that discussion. Acting Mayor Turgeon suggested Staff prepare agendas that would result in meetings lasting until 9:30 P.M. Councilmember Bailey stated he and Director Burton had discussed the possibility of a budget variance report. He reviewed a sample he had prepared. The variance analysis would compare current -nonth actual against budget; and would also compare current month actual against last year actual and identify the variance. He stated if the budget were prepared with realistic monthly projections, the report would be much more meaningful. The report was ahigh-level report that would identify significant variances, relatively easily; and the report would be accompanied by a summary page explaining the major variances. The same type of reporting could be done for Enterprise Funds. He asked if the report would be of value to Councihnembers. Councilmember Wellens stated Council had already asked the Finance Department to change budget reporting to accommodate his requests and Councihnember Woodruffs requests for specific formats. He would prefer the reports be more graphic in nature. He said Councilmember Bailey's report was yet another variation. Wellens stated Colmcil should consider what formats future Councils may want to use. Councilmember Woodruff stated the format was less important than the result. He also would like the budget to be prepared with realistic monthly projections. He suggested the 2009 budget be prepared that way. He also thought graphical reports were easy to understand. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES May I2, 2008 Page 9 of 9 Councilmember Bailey suggested no reporting changes be made before budget discussions. He stated based on his experience the initial budget discussions focused on annual projections and when the budget was agreed to, the detail budget could be prepared with realistic monthly projections. Councilmember Wellens suggested Council be provided with the data electronically and then Councilmembers could put it in the format they wanted. Director Burton stated it was important there were standardized reports, and Councilmember Bailey's sample report was a good start. 7. ADJOURN Wellens moved, Bailey seconded, Adjourning the City Council Work Session Meeting of May 12, 2008, at 8:27 P.M. Motion passed 4/0. RESPECTFULLY SUBMITTED, Christine Freeman, Recorder ATTEST: ~- Lawrence A. Brown, Acting City Administrator/Clerk