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5755 COUNTRY COUNCIL C AMBE_
5:00 Pa .
Mayor Liz6e called the meeting to order at 5:00 P.M.
A. Roll Call
Present. Mayor Liz6e; Councilmembers Bailey (arrived at 5:20 P.M.), Turgeon, Woodruff and
Zerby; Administrator Heck; Finance Director Burton; Planning Director Nielsen;
Director of Public Works Brown; and Engineer Landini
Absent: None
B. Review Agenda
Turgeon moved, Zerby seconded, approving the agenda as presented. Motion passed 4/0.
2. 2010 BUDGET
Administrator Heck stated Council discussed the first draft of the 2010 General Fund Operating Budget
during its June 22, 2009, work session. During its July 20`x' work session Council discussed a list of
potential budget adjustments (the adjustments are detailed in the minutes of that meeting). The net effect
of the adjustments was a decrease of $28,376 in proposed expenses, not including personnel adjustments.
Staff had also identified the possibility of reducing the transfer from the General Fund to the Equipment
Replacement Fund to $100,000 from $175,000 in 2010. The revised 2010 budget included in the meeting
packet for this evening reflects the adjustments discussed during these two work sessions.
Heck then stated a there are a couple of questions that have not been addressed that were raised during
the work sessions. For discussion purposes, a $40,000 transfer from the Liquor Fund to the General Fund
is included in this version of the draft 2010 budget, in addition to the estimated allowable levy increase
amount of 0.83% (approximately $40,000).
Heck stated Staff will entertain questions from Council.
Councilmember Turgeon asked if funding for the Arctic Fever event comes out of the Parks operating
budget or out of the Mayor and Council operating budget. Director Brown explained the event is self
sustaining. The Parks operating budget does fund a contribution to the Music in the Parks program. The
Park Commission has indicated that it would like some funding ($2000 - $3000) for Arctic Fever. If that
did occur the funds would come out of the Parks operating budget. Mayor Liz6e suggested the budget
allocate some funds for the Artic Fever event. Brown explained the City invoices the other cities that
participate in the event for the City's Staff taking the lead role in this event. Turgeon stated she was
confident the City had contributed financially to some Arctic Fever event. Liz6e responded that it would
have been an unbudgeted contribution.
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Councilmember Turgeon asked if $6,000 was added to the Parks operating budget as a place holder for
the Eurasian Water ilfoil treatment effort which will be in its third year in 2010. Administrator Heck
stated that place holder was moved from the Mayor and Council operating budget to the Parks operating
budget in 2010, noting Council had approved a $6,000 contribution to the program in 2005 and 2009.
Heck clarified the place holder in the Parks operating budget is for $6,000. Director Burton explained the
Parks operating budget includes $6000 for the milfoil treatment program, $1600 for Buckthorn removal,
$3900 for life guard services, $2500 for Music in the Parks, and finding for Park Coordinator services.
There was lengthy ensuing discussion about whether or not the $6000 for the milfoil treatment program
in 2010 was added to the Parks operating budget or if the budget has been reallocated to cover that cost.
Administrator Heck clarified there were a number of adjustments made to the Parks support services
budget, one of them being the addition of a $6,000 place holder for milfoil treatment. Another one is the
allocation for lifeguard services was reduced to $3900 from $6000; this reflects the actual cost. The net
effect of all of the adjustments is not a $6000 increase.
Councilmember Woodruff stated if the City is going to have a community garden in 2010 lie suggested
the Council allocate some funding for that. Also, the City has committed to doing more of the
maintenance of the ball fields in Freeman Park; therefore, there should be funding allocated for that.
Director Burton noted the current draft budget does not include the additional $3,000 for Parks building
maintenance for the replacement of the concession stand roof in Freeman Park. She explained the
addition was agreed to during the July 20`x' work session. The line item 223 maintenance for buildings
will be changed to $4000 from $1000. There are no funds budgeted for the community garden.
Councilmember Turgeon stated for 2010 there is a planned transfer of $45,000 from the General Fund to
the Park Capital Improvement Fund. She suggested that transfer be reduced and that decrease be
allocated to the Parks operating budget to help fund things like Arctic Fever, the community garden and
so forth.
Councilmember Bailey arrived at 5:20 P.M.
Councilmember Woodruff stated he could support reducing the transfer to the Parks Capital
Improvement Fund by $3000 (from $45,000 to $42,000) and allocating that to the Parks operating budget
for park programming and the community garden. The minutes of the July 14, 2009, Park Commission
meeting reflect a discussion about asking Council to contribute some of the transfer amount for Park
capital improvements to park programming instead.
In response to a question from Mayor Liz6e, Director Burton explained the contribution to the Excelsior
Chamber of Commerce July 4"' celebration comes out of the Mayor and Council activities budget.
Councilmember Turgeon stated tiie City used to make a contribution to the Southshore Center operations.
The City is now responsible for operating the Center. She asked if the Oversight Committee for the
Center operations had prepared a business plan for the remainder of 2009 and for 2010 for the Center.
She stated Council may want to allocate funds for Center operations in case the Center is not able to be
self sustaining in 2010. She also commented there has been discussion about the need to replace the
carpet in the Center and to paint the Center; that funding has to come from somewhere. Director Burton
stated she met with Kristi Anderson, the Director for the Center, recently and she indicated the business
plan is in the process of being developed. The 2010 budget for the Center will be discussed as part of the
enterprise budget discussions in the fall. The Center will be its own enterprise operation. She explained
the approximate $40,000 in the Senior Community Center Fund will be used to establish an enterprise
fund for Southshore Center operations. Turgeon questioned if Council should anticipate the need for
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additional funding and budget for a transfer to the new fund; there are number of things that have to be
done to update the facility. Burton indicated she thought the $40,000 in seed funding should be
sufficient, but she deferred that validation to the oversight committee. Administrator Heck stated the
Oversight Committee will be meeting later in the week. He explained that he and Anderson had met
earlier in the day and had discussed the projections for the remainder of the year and for 2010.
In response to a request from Councilmember Bailey, Director Burton quickly summarized the changes
discussed up until now.
Councilmember Bailey stated during the July 20`}' work session he questioned the reason the City would
replace the roof on the small concession stand in Freeman Park. The City needs to define what normal
maintenance on the ball fields entails, noting the City is responsible for that. South Tonka Little League
(SILL) would be responsible for improvements beyond. He suggested the City enter into a formal
contract annually with STLL to clearly define where responsibility lies for repairs and improvements to
the ball fields, and to clearly state that any improvements done to the fields become the property of the
City. He clarified that he was not indicating STLL was not a good partner. He explained STLL pays
virtually nothing to use the fields in Freeman Park. East Tonka Little League Bennett Park pays tens of
thousands of dollars a year to play in that park. What that League pays goes into maintenance of Bennett
Park. He thought the City had an ambiguous relationship with STLL. STLL keeps all the revenues from
the small concession stand, yet the City is expected to replace the roof on the stand. He noted the girls'
softball association does not take any of the revenues from the Eddy Station concession stand. He
clarified that he is not necessarily opposed to replacing the roof; but, he wants the relationship with
STLL formalized as it relates to responsibility for the fields.
Councilmember Woodruff stated it is difficult to understand what is included in the department budgets
because the most recent version of the draft budget doesn't include any descriptive information.
Administrator Heck explained he wanted the council to focus on the numbers, and thus made a decision
to not include the summary description sheets in the materials for this evening. The descriptive
information will be provided at the next budget work-session.
The following is a summary of Councilmember Woodruffs comments made about department budgets as
well as associated comments from other Councilmembers and Staff.
➢ General Fund Summary of Estimated Revenues
• Woodruff stated General Property Taxes reflect an increase of 0.96% yet the
Implicit Price Deflator is 0.83%. The levy increase can not be any higher than
the IPD. Burton explained that is a holder because the City has not received the
certified IPD amount. She noted Council needs to adopt a not-to-exceed property
tax levy by September 15, 2009 and that levy will not exceed the IPD.
• Woodruff stated a large portion of this year's transfers are being funded by
drawing down General Fund reserves, and something similar is planned for
2010. He did not think the City could continue to do that. Burton noted the
City's General Reserve Fund Policy requires the City to reduce the reserves if
they exceed 60%
➢ Administration
• Woodruff stated the budget includes $24,000 for merit increases. He suggested
the amount be reduced to $12,000, and the other $12,000 can be allocated to
other items. Turgeon recollected Council wanted to eliminate this. Heck stated
he understood Council to want to put it on a to-be-considered reduction list.
Heck clarified when an employee leaves the City their earned vacation and
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accumulated sick leave are paid out of their respective department's budget.
Bailey stated he still would prefer making a list of potential reductions so they
can be considered at the same time, and this item should be placed on that list.
Zerby stated he would prefer to leave it as a place holder. Lizee stated this could
stay as a place holder for now. Lizee then stated she could not justify staff merit
increases for City employees when no wage increases are allowed for public
safety personnel. Turgeon agreed with Lizee's comment. Woodruff stated a
potential reduction list could be made, but he questioned when Council would
identify what the reductions would be.
➢ Professional Services
• Woodruff expressed concern that the 2010 budget amount of $199,000 may not
be sufficient based on 2008 actual expenditures and 2009 expenditures through
June ($171,644). Even if the $35,000 for the Ron Johnson litigation were
removed from the 2009 expenditures the run-rate for 2009 could be $270,000.
He asked Staff to review the 2010 budget amount. Burton stated she also
questions if the 2010 budget amount is sufficient.
➢ Municipal Buildings
• Woodruff questioned the 2010 supplies budget of $54,800. The adopted 2009
budget was $26,200 and 2009 expenditures through June are $15,245, and the
actual expenditures for 2008 were $26,532. He requested Staff review this item.
Heck explained part of that cost is for the maintenance/lease contract for the
City's phone and data services which is approximately $33,000. The cost for
LaserFiche is also included in there. Woodruff stated the 2010 capital outlay
budget is $123,000, yet the City has not spent more than $72,000 in the last few
years. The 2009 budget was $101,120 and to date nothing has been spent. Heck
stated $100,000 is for the debt service payment for City Hall.
➢ Police
• Woodruff asked if the capital outlay budget for the debt service payments on the
public safety facility reflects the savings from the bond refunding, to which
Burton responded yes.
• Turgeon requested the staffing descriptions be changed to reflect the current
staff titles. Mayor Lizee noted a few titles have changed. Turgeon requested the
budget reflect staff compensation by roles. (Brian, we don't have this info - it
may be in the Chief s SLMPD budget)
➢ City Engineer
• Woodruff stated the support services budget is $15,146. He questioned if there
shouldn't be some relief for this department out of the streets and roadways
budget for consulting services for roadway projects. He stated he thought the
streets and roadways budget should cover the entire cost of a roadway project.
Burton explained to the extent there is a specific roadway project to allocate
costs to, they are. This budget includes $5,000 for engineering consulting
because Staff anticipates there maybe some feasibility study for which there is
no specific project budgeted. Woodruff stated if all project costs are not
allocated to the project the City will not have a true understanding of what it
costs to do a project. Burton stated costs are allocated to appropriate projects.
Woodruff questioned if the budgeted amount is too much. Brown explained
when the engineering technician position was eliminated some of the savings
from that reduction were allocated to engineering to provide additional support
services.
P e5.
• Woodruff stated there was no explanation of what the $1000 capital outlay
budget was for.
➢ Public Works
Brown explained that each year the City uses approximately 5530 gallons of
unleaded fuel and 4000 gallons of diesel fuel. If an average price of $3.50 per
gallon is used these fuel costs approximate $33,500. The cost of oil and
lubrication is approximately $10,000. Burton explained the 2009 budget
included $51,750 for fuel, oil and so forth; that amount included the addition of
$10,000 for fuel because of the high cost. She and Heck reduced the 2010 budget
for fuel to $43,123 to reflect lower fuel costs.
Burton noted the transfer to Public Works capital was decreased to $100,000
from $175,000.
• Woodruff stated there was no explanation of what the $3800 capital outlay
budget was for. Brown explained it was for the radio system used in the vehicles.
• Burton clarified any unused funds in the department budgets at the end of the
year are put in the General Fund reserves.
➢ Streets and Roadways
• Heck stated the general supplies budget was increased by $12,000 (from $73,000
to $85,000) over 2009 because of the increase in asphalt costs. The budget is
based on $65 per ton for 1,250 tons.
• Woodruff questioned the support services budget of $23,500. The 2009 budget
amount is $23,500 and to date only $3,390 has been used. Burton explained
$3000 is for emergency signing and traffic control; $11,500 is for striping; and
$9,000 is for street sweeping. Brown explained the City has not been able to do
all of the striping that is needed.
➢ Traffic Control/Street Lighting
• Woodruff stated the City has spent between $3000 and $4000 the last two years
and to date has spent $512 out of a $4000 budget. He questioned the $6000
budget for 2010. Heck stated Council had a discussion about Smithtown Road
signage a few months ago, and during the discussion Brown explained there are
new mandated standards for signage. The standards include increasing the
number of and reflectivity of signs. The cost to replace and add signs to
Smithtown Road alone will be approximately $3,500. Brown explained this is a
recurring cost (for signs throughout the City), and the cost will likely increase
because the City is supposed to be compliant with the reflectivity standards by
the end of 2011. Brown commented it's unlikely the City will be compliant with
sign standards by the end of 2011.
➢ Tree Maintenance
Woodruff questioned the supplies and materials budget of $2700. The most
spent in the last three years was $1,323. The 2009 budget is $2600 and to date
$264 has been used. Heck explained this includes supplies for personal
protective services; OSHA has standards for protective equipment that must be
adhered to.
Woodruff questioned the support services budget of $13,000. The 2009 budget is
$11,000 and to date $2,239 has been used. Heck explained this is for contractual
tree services. Heck explained staff anticipates the need for additional services
because of the loss of trees due to Emerald Ash Borer (EAB). Brown explained
the loss of trees in the City over the last 6 - 8 months has increased drastically
(both residential and right-of-way). In addition to the problem of EAB there is a
lot of disease from other things such as Oak Wilt. The budget was increased
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independent of w6nt will happen because of EAB. He noted the City has a
certified tree i . `or on staff.
Councilmember Woodruff asked if Staff could recap the changes Council has recommended. Director
Burton stated she thought the only change was a possible 50% reduction in the amount budgeted for
merit wage increases. Woodruff thought the only thing agreed to was the $3,000 increase in the Parks
budget. Administrator Heck stated he thought Woodruff wanted to know what the revised bottom line is
for revenues and expenditures. Woodruff stated the draft budget in the meeting packet reflects a surplus
of $33,150. Burton explained that includes a transfer of $40,000 from the Liquor Fund to the General
Fund. Woodruff stated the $3000 increase in the parks budget will reduce the surplus to $30,150. Burton
stated during 2009 budget discussions at this time in 2008, there was a contingency line item for the
amount of what the surplus would be, and during further discussions in the fall of 2008 additional
changes were made and that amount was reduced
Woodruff asked if budget discussions were concluded would the budget be okay. Director Burton stated
that would be correct provided Council chooses to transfer $160,000 from General Fund reserves,
$25,000 from the Technology Fund and $40,000 from the Liquor Fund into the General Fund as
indicated in this draft of the budget. She noted it is also contingent on what the certified IPD is.
Administrator Heck recommended Council discuss the possible Liquor Fund transfer. He explained in the
past few years $40,000 has been transferred from the Liquor Fund and the amount was similar to interest
earned on the Fund. He noted that during the previous budget discussion Councilmember Bailey stated he
was confident the Fund did not earn $40,000 in interest recently. Heck also recommended Council
determine what it wants to use the Fund for, noting the auditor also made that recommendation. He
explained there is close to $900,000 in the Fund. Director Burton clarified the auditor is not
recommending the City spend or not spend the Fund balance, only that Council designate it for a
particular use. Mayor Lizee stated maybe the Fund could be renamed. She recommended the use of the
Fund be discussed at another time. She noted Council promised the public that Council would solicit
input about the use of the Fund balance. She asked what interest the Fund earned in 2008. Although she
was not certain of the exact numbers, Burton thought the interest earned could be in the $8,000 -$10,000
range. Burton stated she would provide Council with that information. Councilmember Turgeon stated
philosophically Council intended to transfer the approximate amount of interest earned.
Councilmember Woodruff stated the City had a practice of transferring earnings from the Liquor
Enterprise to the General Fund. When the City sold the Liquor Operations Council decided to continue
the practice of transferring $40,000 for a while. Tile amount was approximately the amount of interest
earned. The Liquor Fund is one-time money that should be used on projects and not on general expenses.
He could support reducing the transfer to $10,000 which would ostensibly be the amount of interest
earned.
Councilmember Zerby asked if there would be any benefit to paying down any of the City's bonded debt.
Director Burton stated she discussed the possibility of doing so with the City's bond consultant a while
ago; and the only debt to buy down is water debt, which would benefit the Water Fund and not the
General Fund. The savings from doing that would be relatively small because the water debt is almost
paid off. She noted the City cannot call the bonds for City Hall at this time; it would have to go to the
market and buy its own bonds. The option to call these bonds is a few years out. Zerby stated the time-
value of money should be factored into any consideration.
Councilmember Turgeon stated she supported reducing the amount transferred from the Liquor Fund to
the General Fund to what the earned interest is.
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Director Burton stated another option would be to transfer funds from the Liquor Fund to parks and
roadways rather than to the General Fund. She noted there would not be any financial advantage to doing
this, but it could demonstrate Council's support for those goals and priorities. Councilmember Bailey
stated he would prefer it flow through the General Fund, and that demonstrates Council's support.
Councilmember Zerby stated he's aware of some certificates of deposits (CDs) that are earning 2%
interest, and he questioned why the Liquor Fund couldn't earn the same. Councilmember Woodruff
stated commercial 12-month CDs are earning 1.2% - 1.3%, 6-month CDs are earning 0.7% and the 4M
fund is earning 0.45%. If the Liquor Fund can earn 1.0% it would be close to $10,000. Director Burton
stated the City's emphasis is on safety of principal and not yield.
Councilmember Woodruff stated if the transfer from the Liquor Fund to the General Fund was reduced
by $30,000 it would basically balance the budget. He recommended Council have a separate discussion
about the use of the Liquor Fund balance, and that should occur before Council solicits public input.
Councilmember Bailey stated he supports reducing the transfer from the Liquor Fund to $10,000. He
then stated he understood why the City at times exceeds the budget for legal services. He suggested
Council have discussion throughout the year about the need for certain legal services and make a
conscious decision about whether or not it should spend the money. He stated the police budget reflects a
0.84% increase (the levy limit) over 2009, and the Fire budget reflects a 0.0% increase. He thought it
important to ask the Chief for that same zero percent increase in the police budget, noting it may require
the use of reserves. That reduction would result in an approximate $7,000 reduction in the City's
operating budget.
Bailey then stated he thought there should be a thorough discussion about the public safety departments'
reserve policies. He explained some of the operating fund reserves are required because of quarterly
payment schedule for member cities' contributions to the Excelsior Fire District (EFD). If the schedule
was reduced to monthly the level of reserves could be reduced. From his vantage point, reserves should
be built on the cities' side and not the joint powers organization side. It's the cities' job to have sufficient
reserves. The cities should have sufficient reserves to fund any contingencies situation that could occur
with the joint powers organizations. From his vantage point, those two organizations should not hold
reserves to fund long-term care and maintenance needs of the public safety facilities. He thought the
public safety organizations holding the reserves can lead to a lack of accountability. He clarified he was
not implying they were doing anything wrong. He stated he would bring this forward to the EFD Board
and he requested Mayor Lizee bring this forward to the South Lake Minnetonka Police Department
(SLMPD) Coordinating Committee.
Mayor Lizee stated any change in reserve policies would have to be approved by tile SLMPD
Coordinating Committee and the EFD Board. She questioned how the member cities would ensure they
had sufficient reserves to cover the public safety needs; reserves that would have to be readily available.
In response to a comment from Mayor Lizee, Councilmember Turgeon stated it is her understanding the
SLMPD was directed by the Coordinating Committee to budget for zero wage increases but not for a zero
budget increase. She wanted a zero budget increase, and that is what she heard Councilmember Bailey
ask for. She wanted Mayor Lizee to convey their sentiments to the SLMPD Coordinating Committee.
Councilmember Bailey asked Mayor Lizee to convey they wanted a zero percent increase in the police
budget over 2009. Bailey stated he understood Lizee's position regarding wage increases.
d- I EWOOD WORK,,- - MEETING MINU'T'ES
Council e ber Zerby stated he supports reducing the transfer from the Liquor Fund. He does not want
to reduce the principal balance in the Fund; he wants to capitalize on investments. He also requested
Council be provided with more descriptive information
3e REVIEW JUNE 30, 2009, MONTHLY BUDGET REPORT
This was added at Councilmember Bailey's request.
Councilmember Bailey asked Director Burton to provide an overview of the June 30, 2009, Monthly
Budget Report. He thought it appropriate to discuss this now.
Director Burton stated she had provided Council with a copy of the report via e-mail and paper copy. She
explained the report includes the General Fund, the Water Fund, the Sanitary Sewer Fund and the
Stormwater Fund. She stated she believed the Funds were on target to achieve the budgeted amount as of
June 30`h.. Total General Fund revenues at the end of June were approximately 35% which is about 1%
less than expected year-to-date. The City did receive some additional tax revenue in early July. Building
permit revenues continue to lag behind the 2009 budget and 2008 actual, noting these revenues represent
about 3% of the City's budgeted revenues. Total General Fund expenditures were approximately
$2,079,000 (about 38%) at the end of June. This is $150,000 less than the 2009 budget and less than the
approximate expenditures of $2,286,100 through June 30, 2008. All departments have positive budget
variances with the exception of Professional Services which includes the Ron Johnson litigation and a
full year of assessor services. Parks is slightly over because of the addition of park coordinator services.
Councilmember Bailey asked if the $150,000 surplus is sustainable, to which Director Burton responded
she did not think it would be. Bailey asked what would happen that would reduce that surplus in the last
half of the year. Burton explained the bulk of the costs are personnel related, and she thought the
personnel costs were quite accurate. She also thought there is probably some under spending by
department heads. Director Brown explained Public Works provides a number of seasonal services, and
there are other services that are time dependent. For example, Public Works is focusing on patching pot
holes. Tree activities will not be done until into the fall or towards the end of the year. Bailey
recommended more realistic monthly projections be prepared for 2010.
Councilmember Bailey stated if he thought there would be a $150,000 surplus at the end of the year
Council would be considering 2009 projects and the 2010 budget differently. He expressed his
appreciation for Director Burton's efforts to make the 2009 budget reports more useful. He stated more
realistic monthly projections in 2010 will provide in Council and Staff with better information to take
corrective budget actions earlier in the year.
Bailey then stated if the surplus would be even $30,000 at the end of 2009 that would impact discussions
Council is having regarding the 2009 and 2010 budgets.
Administrator Heck stated the general cost for the City to do business is related to personnel. If personnel
costs are less than budgeted that should be carried forward except for Public Works. Public Works also
has snow removal related expenses that are incurred in October - December and those costs vary by
season. The personnel costs year-to-date are approximately 42% of 2009 budget, and based on that these
costs should be at about 94% at the end of the year.
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Councilmember Zerby stated if there was a monthly budget report it would be easier to compare revenues
and expenses to the previous year. Administrator Heck stated Councilme ber° Bailey, Director Burton
and he have been discussing how to establish a monthly base.
Councilmember Bailey requested Administrator Heck and Director Burton review year-to-date amounts
and project year-end amounts to try and determine what surplus will be left at the end of the year.
Councilmember Woodruff stated the current report shows 2008 actual and 2008 year-to-date actual. He
suggested an additional column be added to show the percent of 2008 year-to-date actual. It would help
in analyzing the current year's budget.
Turgeon moved, Woodruff seconded, Adjourning the City Council Work Session of July 27, 2009,
at 6:50 P.M. Motion passed 510
RESPECTFULLY SUBMITTED,
Christine Freeman, Recorder
Christine Lizee, Mayor