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082508 CC WS MinCITY OF SHOREWOOD CITY COUNCIL WORK SESSION MONDAY, AUGUST 25, 2008 MINUTES 1. CONVENE CITY COUNCIL WORK SESSION 5735 COUNTRY CLUB ROAD SOUTHSHORE CENTER 6:00 P.M. Mayor Lizee called the meeting to order at 6:00 P.M. A. Roll Call Present. Mayor Lizee; Councihnembers Bailey (arrived 6:03 P.M.), Turgeon, Wellens and Woodruff; City Administrator Heck, Finance Director Burton; Planning Director Nielsen; and Director of Public Works Brown Absent: None B. Review Agenda Councilmember Woodruff requested Item 2.C, Performance Evaluations for Department Heads be added to the agenda. Wellens moved, Turgeon seconded, approving the agenda as amended. Motion passed 4/0. 2. 2009 BUDGET ITEMS A. Service Indicators Discussion Administrator Heck stated when he was reviewing the draft 2009 General Fund Operating Budget he noticed the budget contained numerous indicators. He did not think those indicators added much value from a financial standpoint to the budget document. If Council's intent is to be provided with objective performance measures, he thought there are better ways to provide that information. First, tangible goals or service targets have to be identified. If Council wants to see statistics about things such as the number and types of complaints handled and how they were resolved or the amount of front-counter traffic or phone calls handled, that information could be provided in an annual report of the previous year's department activities and accomplishments. He cited the example of the Excelsior Fire District's year-in- review report as an example. He recommended removing the service indicators from the budget document. Councilmember Bailey arrived at 6:03 P.M. Councilmember Woodruff stated he somewhat agreed with Administrator Heck; some of the metrics didn't have any value. During the budget process he would like to be provided with an explanation for any significant changes in the quantity of service provided, quantity of materials consumed or a change in cost of material when a change results in a noticeable change to a budget amount. Staff should determine what metrics they need to track and justify budget numbers. He then stated there should be some established quality standards for how work is completed. CITY OF SH®REWO®D WORK SESSION MEETING MINUTES August 25, 2008 Page 2 of 10 Councilmember Turgeon stated she would like to know about items such as an anticipated increase in work load that would require the additional expense of using contractor services to handle the extra load. Councilmember Bailey stated he agreed with Administrator Heck's recommendation to remove the indicators from the budget document. Perfor-nance measurement and budget considerations are two separate items. He expected the City Administrator to provide Council with quantitative information such as there are not sufficient fiends to do something that's expected. He did agree there should be separate qualitative performance standards for the departments. He stated as a starting point past expenditures are reasonable predictors of future expenditures. Councilmember Wellens stated he would like to look at a plan for establishing and measuring performance standards before the indicators were removed from the budget. He thought it was important for Staff to provide justification for budget increases during the budget process. Mayor Lizee stated she thought she heard consensus to remove the current indicators from the budget and to have department performance standards identified which could be reported on with a to-be-determined frequency. There was ensuing discussion regarding the indicators in the budget. There was consensus that Staff should identify department performance standards, focusing on the highest priority standards first. There was also consensus that during the budget process Staff should provide justification for out-of-the- ordinary changes in quantity of service provided, quantity of -naterials used or cost of materials. Administrator Heck summarized his understanding of what Council expected as a result of this discussion. First, Council would like to understand the impact of operational changes (e.g., an increase or decrease in work load) would be on the budget. Second, to provide an explanation for major supplies used (e.g., sand and salt) and how a change in supply costs affects the budget or a change in consumption affects the budget. Lastly, Staff will identify qualitative measures that can be used to determine if a department is meeting its targeted goals noting that it will be difficult to measure some departments that way. Councilmember Bailey stated he would like to have Staff provide benchmarks, where they exist, to determine if human resources and supplies are being used effectively. Administrator Heck stated the State Auditor had developed a list of benchmarks and best practices. B. Draft 2009 General Fund Operating Budget Director Burton stated at its August 11, 2008, work session Council reviewed the second draft of the 2009 General Fund Operating Budget. Revisions were recommended and they are included in the third draft of the budget. The recommended changes are as follows. - Alcoholic beverage license revenue is increased to $8,820 from $8,200. - The Police operating portion of their budget was reduced to $938,950 from $970,500 per the actual SLMPD operating budget that was approved. - Public Works/Supplies & materials were increased to $80,800 from $70,800. Burton then stated the State of Minnesota Department of Revenue notified the City its base levy limit for Pay2009 is $4,225,960 which reflects an increase of $169,043 over Pay2008. The third draft of the budget contemplates using $21,755 of the allowable levy amount which would leave $147,288 levy potential available for use in the 2009 General Fund Operating Budget. She noted the special levies for CITY ®F SHOREWO®L7 WORK SESSIOI~t li~IEE'I'ING MINITTES August 25, 2008 Page 3 of 10 debt service and other specific purposes allowed. by the State are added to the base levy limit for a final total levy. Staff recommends approving the maximum tax levy for the proposed budget certification. The final budget and tax levy approved in December 2008 can be reduced, but it cannot be increased above the certified levy. Staff suggests adding a line item to the budget for $1.47,288 in the Mayor and Council department. Burton then responded to information requests that were outstanding from other budget work sessions. Burton explained that $13,600 out of the $20,000 budgeted for merit increases in 2008 were used. In 2008 no employee received more than a 1 percent merit increase. Slle noted there were two employees with salaries less than the market rate that received substantial increases per the compensation plan approved in 2006. Burton distributed a work sheet of salary estimates and headcount allocations by department that she used to prepare the budget. The salaries included a 3 percent economic adjustment for non-union personnel and a 2 percent bi-annual increase for union personnel; they do not reflect 2009 merit (pay for performance) increases. The total amount budgeted for General Fund salaries in 2009 is approximately $1,220,250. When FICA, pension and estimated insurance costs are factored in the total salaries plus benefits amount is approximately $1,564,700; an approximate $23,000 increase over 2008. Although salaries and benefits in the Enterprise Funds will be discussed when the Enterprise Budgets are reviewed, the current estimate for enterprise salaries and benefits will increase the amount to approximately $1,822,000 (an approximate $34,000 increase over 2008). She noted the Administration budget for 2009 includes $30,000 for merit increases. Councilmember Turgeon stated she did not think it was appropriate to increase tl~e merit pool to $30,000 in 2009 when 2008 merit increases were only $13,600, until there is better justification. In response to a comment from Councilmember Turgeon, Director Burton explained the salary ranges were adjusted by 3 percent which in past years has been the approximate consumer price index. There was ensuing discussion regarding employees who were at the top of their pay range yet deserved a merit increase. Administrator Heck stated there were ways to give employees at the top of their pay range a lump-sum payment that is not added to their base salaries. Administrator Heck explained Minnesota has a Pay Equity Act. If the City does not make adjustments to minimum and maximum salary ranges in accordance with the market rate, the City's ranges will not keep pace with the market rate. He stated when you convert from a step system to apay-for-performance system and there are employees at the top of their salary range, there was an inherent problem with how to reward them. He explained he had done a cursory review of the compensation plan approved in 2006. The wage schedule included a market average maximum rate, a minimum rate which is 76% of that market rate, and a maximum rate which is 110% of that market rate. Good performers move through their position's salary range faster than average performers. Councilmember Woodruff stated there were two things that had to be addressed. Council had to first determine if there will be a merit increase pool and if so the size of the pool, and then the approach for dispensing that pool has to be determined. He then stated he was willing to have Administrator Heck study this and come back with his recommendation. He would support budgeting some amount for merit increases. He commented the $13,600 spent for merit increases in 2008 was the equivalent of approximately 1 percent of the salaries. Councilmember Bailey stated he thought the majority of that was used to bring salaries that were grossly under market rate to market rate. CITY OF SHOREWOOD W®R1C SESSION MEETING MIIs1UTES August 25, 2008 Page 4 of 10 Councilmember Bailey stated he would also like to hear Administrator Heck's philosophy about this. Administrator Heck suggested that the market rate adjustments (equity adjustments) should be budgeted separate from merit increases. There was consensus to leave the $30,000 budgeted for merit increases as is for the time being. Director Burton explained there had been a question about the $150,000 budgeted for miscellaneous revenue. It includes approximately $130,000 in interest ($3.5 million invested at 3.75 percent); a $9,000 refund from the League of Minnesota Cities Insurance Trust; dry hydrant funds; $1,700 from concessions; and $7,000 from miscellaneous (e.g., DUI forfeitures, a contribution from Mount Olivet Church in lieu of taxes, a donation from the Park Foundation and possible grant donations). Burton stated Staff had been asked to review the South Lake Minnetonka Police Department (SLMPD) Joint Powers Agreement (JPA) to determine what, if any, restrictions there are regarding the possibility of the Mound Police Department (MPD) providing policing services to Shady and Enchanted Islands. Administrator Heck stated the SLMPD's JPA does not prohibit the City from contracting with another agency to provide additional policing services; but, doing so would not reduce the City's contribution to the SLMPD. Contracting for services with law enforcement is essentially done on an hours per day or week or month or year basis. Before Staff can approach the MPD about providing such a service, the number of hours must be determined. Councilmember Woodruff stated that would be a question to ask SLMPD Chief Litsey. The services contracted for should be no less than what the SLMPD is currently providing to the Islands. It is his belief the SLMPD makes a trip out to the Islands either once a shift or once a day. It is not so much about patrolling the Islands as it is about emergency response. He thinks that most, if not all, of the emergency response services are provided by mutual aid because the SLMPD cannot get to the Islands fast enough. He asked Staff to ask Chief Litsey for an estimate of the amount of time the SLMPD spends policing the Islands and to talk to the MPD about the cost to provide the same level of service. Administrator Heck stated he understood Councilmember Woodruffs request to be one of the MPD providing areadiness-to-serve type of service more than a patrolling service. Councilmember Woodruff stated the MPD should have some benchmarks that could be helpful. Administrator Heck stated he had a meeting scheduled with SLMPD Chief Litsey on August 26`x'. Councilmember Woodruff stated if an officer comes to the Islands the total time for that trip is 1.5 hours; those 1.5 hours could be used to serve the rest of the SLMPD community. Contracting with the MPD for policing services for the Islands will cost the City more money. Director Burton stated at its August 4, 2008, work session Council decided to leave the transfer to Park & Recreation at $15,000 until it had the opportunity to review the Park Commission's master plan. That occurred at a joint City Council/Park Commission meeting held on August 12, 2008. Councilmember Turgeon stated she was not willing to support an increase to that transfer at this time. She then stated she was disappointed the Park Commission had not prepared a plan that contained estimated costs to do the improvements. She thought the Commission had had sufficient time to prepare the plan, and it was not done. Councilmember Bailey stated there were several Park Commissioners that would like to move forward with Park projects. There were others that were hesitant to move forward without further study. For CITY OF SHOREVd®OD W®laK SESSION MEETING MINUTES August 25, 2008 Page 5 of 10 example, he thought there should be park shelters in all the City parks; yet, some of the Commissioners thought there should be design studies done before that occurs. He was more inclined to increase funding for Parks & Recreation and he thought Council may have to provide that direction. Councilmember Turgeon questioned if installing shelters will increase the use of the parks; what is the return on investment. She stated if there was a solid plan she would be willing to support additional funding for Parks & Recreation. She then stated she was willing to increase the funding for both parks and roadways provided there is a plan. Councilmember Bailey stated from his vantage point shelters make parks more attractive. The shelter at Eddy Station is very attractive and it makes the park a more viable operation. For sports activities, that shelter provides shade on hot summer days. It is unrealistic to expect $15,000 to cover capital maintenance of the parks. He did not understand what benefit a $30,000 design study for park shelters would have. He thinks there is a lot that could be done to the parks, but there is a lack of direction. He stated roadways and parks are his priorities. Councilmember Woodruff stated he was encouraged by the Park Commission's approving the allocation of monies in the Park Fund to projects identified in the Park CIP. He was pleased they did not allocate all of the funds; it kept some in reserves. He thought most of the park projects can be done with the funds already in the Park Fund. Councilmember Bailey stated there is approximately $250,000 in the Park Fund. The two new park shelters and a shelter addition will cost approximately $150,000. Repair of the tennis courts (covering cracks, etc.) is estimated at $6,000 each. Enhancing the signage in the parks is estimated to be $30,000. He also agreed it was important to keep reserves in the Park Fund for emergency purposes. Based on that, there is not a surplus in the Park Fund. He stated the budgeted transfer in to Parks & Recreation of $15,000 is not sufficient to stimulate discussion about what other improvements could be done to the parks. In response to a question from Mayor Lizee, Councilmember Bailey stated it would be appropriate to at least double the $15,000 transfer. Councilmember Woodruff stated he could support increasing the transfer to the Parks & Recreation to $30,000. He stated Council had previously reduced Southshore Center and Friends funding, for the time being, by more than $15,000. Councilmember Wellens stated he could support increasing the transfer into Park & Recreation to $30,000. Councilmember Turgeon stated spending $50,000 on a shelter for Cathcart Park will be an issue for her unless the City of Chanhassen wants to enter in to some type of partnership for improving the Park. There was consensus to increase the transfer in to Park & Recreation to $30,000. Woodruff moved, Turgeon seconded, recessing the meeting to a City Council regular meeting at 6:56 P.M. Mayor Lizee reconvened the work session at 9:00 P.M. CITY ®F SHOREW®®I~ VV®RK SESSI®A1 1VIEETI1~tG MINUTES August 25, 2008 Page 6 of 10 Director Burton stated outstanding budget items that must be addressed include roadway maintenance funding; senior funding; and aquatic invasive species funding. She requested Council determine what the tax levy amount should be for the September budget certification. Councilmember Bailey stated he thought the amount for roadway overlays is seriously under funded. Planning to overlay one mile of roadway annually (one-fiftieth of the City's roadways) is not a viable approach. It appears as if the overlays were replacing road reconstruction. It's difficult for him to believe the City would not reconstruct a roadway every 50 years. He also thought a road should be overlaid more than once every 50 years; therefore, budgeting approximately $155,000 per year is insufficient. He stated he did not think the City has a good policy for addressing road reconstruction. He asked Director Brown to comment on this. Director Brown stated there are a number of City roadways that need to be reconstructed as indicated in the City's pavement inventory. The number of roadways that need to be reconstructed is greater than the number of roadways that need to be overlaid. He thought it would be appropriate to establish a funding strategy for long-term overlay needs. He cautioned that once the long-term costs for road reconstruction are known, the Council may want to reduce funding for overlays. Mayor Lizee stated once Council is able to review the 20-year CIP for roadways it will have a better understanding of what the City's needs are for roadway improvements. She thought that Administrator Heck's experience with the road reconstruction projects earlier in his career will be of value to the City. Administrator Heck stated once the 20-year CIP for roadways is done and high-level cost estimates known, the Council can begin discussing funding options for those improvements. He then stated some communities have gone away from assessments and bonding for roadways improvements and have chosen to fund all their roadway maintenance out of tax levies. His previous employer had bonded for infrastructure improvements over a five to six year period based on a plan that city had prepared. Director Burton stated the current Streets & Roadways budget includes a transfer in of $645,000. Councilmember Woodruff stated for 2009 there was approximately $954,000 budgeted for projects in the 2009 CIP for local road reconstruction, and the current draft budget indicates $645,000 will be added to the Roadway Fund for roadway improvements. He questioned if the Roadway Fund has sufficient funds to cover the difference. Director Burton responded there was. Woodruff then stated he agreed Council needed to have a philosophical discussion about how to fund roadway improvements. Councilmember Bailey stated his concern is the backlog of roadways that need to be sealcoated, overlaid or reconstructed continues to increase. Each street that is added to the backlog will make it harder to assess for the improvements. If the City continues to levy for those improvements, the backlog will continue to increase. He thought it was important the Council be visionary and brave, and make the right decision. Mayor Lizee asked the other Councilmembers if they were interested in certifying a budget that will use the entire allowable levy. Councilmember Woodruff stated he could agree with that, with the caveat that he was not proposing the budget adopted in December 2008 will use the entire levy. Councilmember Wellens stated the remainder of the potential levy should be used for asphalt. Director Burton questioned if Council would like to add a line item of approximately $132,000 (the remainder of the allowable levy) to the Mayor & Council budget. CITY ~F SHOREW®OI) W®RK SESSION 1~~IEE'TII~IG MINUTES August 25, 2008 Page 7 of 10 Councilmember Bailey requested Council have a substantive discussion about funding for roadway improvements before the budget is adopted in December 2008. Administrator Heck commented it would cost approximately $2.5 million to reconstruct Vine Hill Road. Director Brown stated Vine Hill Road was one of the more complicated roadways; it's a major roadway and because of State standards sight distances will have to be increased when the Road is reconstructed. Councilmember Bailey stated it would be helpful to him if Staff could recommend a frequency for roadway reconstruction and a frequency for overlaying roadways and an approximate cost to do so. Council can then discuss funding options. Councilmember Woodruff stated the timetable and costs for reconstructing the Shady Island Bridge should be factored into the plan. Mayor Lizee proposed budgeting $15,000 for aquatic invasive species control as a place marker. Councilmember Woodruff recommended the potential use of the remaining approximate $132,000 in allowable tax levy be left as one item at this time. Councilmember Woodruff stated a significant portion of the Deputy Clerk's payroll costs and time in 2009 are moved to the General Government budget from the Elections budget. He questioned what the position will do in 2009 that was not done in 2008. He stated in 2007 Finance spent a small amount of time on activities related to the City's liquor operations; he questioned how that time was used in 2008 and how it will be used in 2009. Director Burton stated at its September 8, 2008, meeting Council will be provided with a revised proposed 2009 General Fund Operating Budget for approval. Councilmember Woodruff requested the 2008 - 201.2 CIP be discussed next. Discussion moved to Item 3 on the agenda. C. Performance Evaluations For Department Heads This item was discussed after Item 3 on the agenda. Councilmember Woodruff stated he would like Administrator Heck to provide Council with draft performance evaluations for his direct reports for the first Council meeting in November 2008. Heck stated he will still be getting to know his direct reports at that time; he will have been working with them for less than 90 days by that time. Heck stated he will have reviewed their past evaluations by then. Woodruff stated some type of evaluation has to be done by the end of the year for an employee to receive a pay increase; and he would like some idea of how Heck thinks his direct reports are performing. Administrator Heck stated he will provide Council with his assessment of the City's current compensation plan. He will also do a full time equivalent (FTE) analysis for what the City's FTE compliment should be. He will also prepare a cursory evaluation for his direct reports. His target date for completing those tasks is for the second Council meeting in November 2008. It was noted that Administrator Heck would normally need to have performance evaluations completed for his direct reports by year-end. CITI' OF Sl-IOREW®OD WORK SESSI®N MEETING MINUTES August 25, 2008 Page 8 of 10 Councilmember Woodruff stated he wanted Administrator Heck to share his perspective about the performance of his direct reports and he wanted Councilmembers to have an opportunity to provide him with their input. It was noted that Council will have to prepare an evaluation for Administrator Heck by the end of the year. Discussion returned to Item 4 on the agenda. 3. DRAFT 2008-2012 CIP BUDGET This item was discussed after Item 2.B on the agenda. Director Burton stated the meeting packet contained a very rough draft of the 2008 - 2012 Capital Improvement Program (CIP). In response to a question from Councilmember Woodruff, Director Brown stated CIP equipment replacement purchases often get delayed because they take a great deal of time; he did hope to complete most, if not all, of the budgeted 2008 equipment purchases in 2008. Councilmember Bailey requested a column be added for 2008 estimated amounts and for the 2008 actual amounts. Director Burton stated projects completed in 2008 are not included in this CIP. Councilmember Woodruff questioned if the $75,000 budgeted in 2009 for the Water Meter Radio Read Project was sufficient to complete the project. Director Brown stated it should be very close. Councilmember Bailey stated $75,000 is budgeted for 2008 and it will only replace approximately 20 percent of the meters; he questioned how $75,000 could be sufficient to replace the remaining approximate 30 percent of the meters. Brown acknowledged the $75,000 in 2009 will have to be increased. Councilmember Woodruff stated he had received comments from a few residents that repairs to the exterior of Boulder Bridge Well were needed. Director Brown stated Staff had received comments with regard to the Well's roof. He explained the Well's roof was not repaired after hail damage because the inspector did not think it was necessary. In response to a comment from Councilmember Turgeon, Director Burton stated she would change the amount for the project to paint the SE Area Water Tower to the amount of the accepted bid when that amount is known. Councilmember Woodruff stated there would not be sufficient funds in the Park Fund for the 2011 $500,000 Freeman Park Wetland Enhancement project. Councilmember Bailey stated it was his understanding that replacing the hockey rink lights at Cathcart Park was more eminent than 2012. Councilmember Turgeon stated based on what she read in minutes from a Park Commission meeting she thought that was desired in 2009. Councilmember Turgeon stated the Freeman Park Wetland Enhancement project had been in the CIP for many years. She then stated it was her understanding there were grant funding opportunities to help cover the cost. Director Brown stated funding opportunities, such as grants, have to be found for this project. CITY ®F SHOREWO®I) WORK SESSION MEETING ld[INU'I'ES August 25, 2008 Page 9 of 10 He suggested this project be divided into sub-projects to make funding the project more attainable. He recommended the City get a commitment from the Lake Minnetonka Watershed District regarding funding help for the sub-projects. He stated he would advance the Cathcart Park Hockey Rink Lights Replacement project. Councilmember Woodruff suggested the Badger Park Tennis Court Resurface project be advanced to 2009. Councilmember Bailey stated to fund some of the project recommendations for Parks will require more than a $30,000 transfer to that budget; there are already $206,000 in Park projects in the 2009 CIP, and as Woodruff had previously stated it was prudent to leave reserves in the Parks Fund. Woodruff suggested the $15,000 increase to the Parks & Recreation budget approved earlier should be used for this project. Councilmember Turgeon stated she thought the court was resurfaced a year or two ago; she recommended the project remain in 2011. Director Brown stated the court had been sealcoated in recent years; the $12,000 budgeted in 2011 was for rehabilitation of the court. Brown recommended the project remain in 2011. until there is an opportunity to experience what the benefits will. be from the contractor's filling cracks in the court. Councilmember Turgeon suggested the projects to add or expand shelters be prioritized, and she recommended adding a shelter at Cathcart Park be done last. Director Brown stated the Park Commission wants park signage and the shelters at the City's parks to be consistent. He recommended all three projects be done at the same time so the City could get volume discounts. Councilmember Bailey stated he thought the Commission wanted consistent park signage. Bailey then stated he did not think it would be wise to remove some of the shelter projects from 2009 when Council told the Commission to consider improvements to the parks. Councilmember Woodruff stated because the projects are identified in the CIP doesn't mean there is authorization to do the project; the project still has to go through a justification process. Councilmember Woodruff questioned if the timing for the replacement of hockey rink lights at Cathcart Park had been resolved. Councilmember Bailey stated when he went on the park tour the Park Commission discussed the replacement, and he understood it to be a higher priority than waiting until 2012. Bailey stated the Commission had concern that the poles for the lighting were unstable. Mayor Lizee recommended the project remain in 2012 until the City has an opportunity to meet with Chanhassen to discuss sharing the cost for park improvements. Councilmember Woodruff recommended Staff prepare a plan for the Lake Mary Outlet project which is estimated to cost $505,000. He stated the City Hall phone system replacement and the City Hall copier and maintenance contract warrant discussion at a future meeting. He questioned if leasing a copier would be better than purchasing one. Administrator Heck stated Staff will do acost-benefit analysis of lease versus purchase. Director Brown questioned if Council would like to receive the meeting packet electronically; there are cities that have chosen to do that. Councilmember Bailey stated all that does is shift the burden for printing the packet to each Councilmember and to meeting attendees. Woodruff stated he liked having a printed copy of much of the meeting materials. Councilmember Wellens stated it was not necessary to provide him with a lot of the engineering and construction details for a project. Wellens suggested Council be provided an opportunity to have materials of that nature printed for them on a request basis. Woodruff agreed that items such as welding specifications did not have to be included in a meeting packet. Bailey recommended Staff use its judgment on what detail should be included in the packet and allow Councilmembers to have additional materials printed. Director Burton stated the CIP will be revised to reflect the changes recommended. Discuss returned to Item 2.C on the agenda. CITY OF Sl-IOREdVOOD dV®RK SESSION 1VlEET'ING 1VIINU'1'ES August 25, 2008 Page 10 of 10 4. ADJOURN Wellens moved, Woodruff seconded, Adjourning the City Council Work Session Meeting of August 25, 2008, at 9:52 P.M. Motion passed 5/0. RESPECTFULLY SUBMITTED, Christine Freeman, Recorder Christine Lizee, Mayor ATTEST: rian Hec , ity Administrator/Clerk