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081009 CC WS MinCITE' vv'ORY S S'F N M(___ _L, _ _ JC JST 10, MINUTES 1. CONVENE CITE' COUNCIL WO SESSION 5755 CO CLUB OA COUNCi U C __Ai'vIBERS 6:00 P® Mayor Liz6e called the meeting to order at 6:01 P.M. A. Roll Call Present. Mayor Liz6e; Councilmembers Bailey, Turgeon, Woodruff and Zerby; Finance Director Burton; Planning Director Nielsen; Director of Public Works Brown; and Engineer Landini Absent: Administrator Heck B. Review Agenda Zerby moved, Woodruff seconded, approving the agenda as presented. Motion passed 5/0. 2. 2010 Draft Budgets A. South Lake Minnetonka Police Department Budget Mayor Liz6e stated South Lake Minnetonka Police Department (SLMPD) Chief Litsey was present this evening to give a brief overview of the proposed 2010 SLMPD Operating Budget. Chief Litsey provided an overview of the process followed in arriving at the proposed budget as well as an overview of the proposed 2010 SLMPD Operating Budget (a copy of which was included in the meeting packet for this meeting). The highlights are as follows. The SLMPD Coordinating Committee discussed versions of the 2010 budget in a series of meetings. The proposed budget has been refined based on direction received from the Coordinating Committee and other contributing factors. Difficult decisions were made due to the economic conditions and the financial challenges facing the member cities. The Coordinating Committee made a policy decision to forego cost of living wage adjustments in 2010. The SLMPD will have to honor its contractual obligations for step wage increases. If the union negotiations for 2010 end up in arbitration, the Department would have to honor the arbitration award and that is not factored into the budget. SLMPD Staff and the Coordinating Committee also reviewed various line items to determine if further adjustments could be made. Any interest earned on any of the minimal balances in the designated funds is used to help fund operations thereby reducing the amount the member cities have to contribute to operations. The proposed 2010 budget before Council this evening reflects a 0.7 percent increase over the 2009 adopted budget. It was unanimously endorsed by the Coordinating Committee during its July 29, 2009, meeting. The original budget proposal reflected a 3.1 percent increase over the adopted 2009 operating budget. This 0.7 percent increase is less than the 0.86 percent maximum increase benchmark set by - ING MINUTES Pa I of Shorewood City Administrator Heck during the July 9"' Coordinating Committee special meeting. The benchmark did not influence the amount of the proposed increase. If there were not a substantial projected loss in operating revenues for 2010, the cost to the member cities would have declined from 2009. If revenues from state peace officer aid and from investment income had remained consistent with 2009 the budget being presented this evening, it would have gone down 0.8 percent. If revenues from state peace officer aid were fully funded (i.e., if they equaled what the SLMPD paid in PERA the previous year), the budget would have gone down approximately 1.2 percent. There were several favorable factors that came together coincidently in achieving the 2010 payroll budget. After the budget was adopted for 2009 there were some retirements. This reduced the payroll expense on a short-term basis because new officers are generally hired at a lower rate of pay; that difference is eliminated after a few years. Also, the Coordinating Committee's decision to forego cost of living wage adjustments in 2010 helped contain payroll costs. A pending retirement is reflected in 2010 payroll budget. That could become a budget problem should the officer choose not to retire. Some of the individual expense line items were also tweaked. Other than the payroll items, the utilities budget was proportionally reduced the most. The budget proposal for utilities factors in historical usage and cost. In 2009 the HVAC system was fine tuned to improve its efficiency; most of the efficiencies gained are on the natural gas side having to do with the boilers. It's difficult to project what the cost savings will be because there is not a fill year of history of using the fine tuned system. It's not known how much cost savings are due to weather conditions and how much are due to fine tuning the system. Part of the savings is offset by the cost to have the fine tuning done. Utilities are hard to predict from year to year. State peace officer aid is funded through a percentage of the revenues collected from automobile insurance. Collections on auto insurance are down because of economic conditions, and there was a larger demand on that fund because of the number of officers in the state. This trend is expected to continue for some years. State peace officer aid can be considered to be something similar to local government aid. Revenues from the peace officer aid are something the SLMPD has always counted on. It may be prudent at some future date to phase out of the position of depending on the aid, and to apply any aid received toward capital needs. Based on the circumstances over the next few years it has to be factored into the 2-1- budget; it would be too large of an expense to the cities to try and absorb. The Insurance Fund is used to pay liability insurance, property/casualty insurance and workers compensation insurance. It's anticipated the Fund will be depleted by the end of 2009. The amount being requested from this operating budget will not support 2010 needs. The draft budget does plan for an increase in the transfer to the Fund in 2010. An internal fund transfer or something else will have to be done to help with insurance costs the next few years. The Technology Fund also has inadequate funding. The cost to replace mobile data computers in the squad cars and the MHZ radios is substantially more $100,000. If Hennepin County would consider a lease program for the radios it would help mitigate the financial impact. The record management system is nearing the end of its useful lifespan; it will no longer be supported by the vendor. The purchase of a new system will be a long-term capital investment and it necessitates the SLMPD take due diligence before selecting a vendor. Some of the items that must be considered include: the initial purchase cost and product support; viability and reputation of the company; and bidirectional integration capabilities with Hennepin County because the SLMPD is dispatched through the Sheriffs Communication Division. The hope is that Hennepin County will make a decision during the next year about what type of system it is going to install. The SLMPD could consider selecting the same replacement system. The low-end price tag of $100,000 would essentially deplete the Technology Fund. The $20,000 transfer into this Fund d:T- - s from the operating fund is barely enough to cover the costs of the annual lease, maintenance and user fees from the County. One of the four strategic goals identified in 2008 is to keep pace with technology. This goal was to be addressed starting in 2009. This budget puts that on hold. During another meeting Mayor Liz6e and Administrator Heck had agreed this was an issue. The SLMPD replacement schedule for vehicles is to replace two vehicles one year and three the next, and this schedule repeats itself. Annually there is a transfer to the Vehicle Fund from the Operating Fund for this purpose. If the replacements were funded out of the Operating Fund, there would be spikes every other year to accommodate this schedule. The SLMPD should be transferring enough to the Vehicle Fund from the Operating Fund to replace an average of 2.5 vehicles each year to maintain consistency from year to year. The recent and proposed transfer amount is for 2 vehicles. If a squad car gets in an accident during the first year of ownership, the SLMPD needs to have sufficient funds to pay the depreciation on the vehicle, which would not be covered by insurance, in order to purchase a new vehicle. Some of this Fund was used to support operations in 2003 when there was controversy over how the SLMPD was funded. This Fund has not recovered from that. Although this is manageable in the short term, it is not sustainable. The member cities need to come to some agreement on how the long-term care and maintenance of the public safety facility will be funded. There is no fund to do that. The SLMPD has been using funds from a building fund established for the previous building to fund small repairs. Also, a few years ago when the SLMPD had favorable revenues they were added to this building find. He anticipates the find will be depleted in 2009 or 2010. After the fund is depleted the SLMPD will have to invoice the member cities for such repairs. The value of the SLMPD holding funds for this purpose is people would know the funds are there. As an example, a separate account was established for the debt service on the public safety facility to manage the flow of funds for debt service payments. That fund cannot be used for operations. The fund is the member cities' fund; the SLMPD is, in effect, the trustee for the account. When the cities' make their debt service payments to the SLMPD the SLMPD places the payments in this fund. The SLMPD makes the debt service payments out of the find. All interest earned by the fund remains in the fund. A similar process could work for the care and maintenance of the facility. The cities could decide how much should be contributed to such a fund; the interest earned from the contributions would remain in that fund. The Coordinating Committee or some other group of individuals would authorize the use of the funds. It would be cumbersome to get each city to agree to contributing to a certain repair, or authorizing the use of the funds each time a repair had to be made. Litsey stated the 2010 budget process was difficult. The Coordinating Committee provided a great deal of input this year; more than in other years. The City Administrators and Manager also provided input. Other people attended budget discussions, and the Chair Kind recognized those willing to speak. Litsey stated the SLMPD is always looking at ways to supplement the budget. Staffing of the Patrol Division is a serious issue. When former Deputy Chief Nieling retired the end of June 2009, that position was converted to a lieutenant's position with a greater emphasis on the patrol aspect. The lieutenant position will not be scheduled for any particular shift, but it will fill in for shortages and so forth within reason. The position has other responsibilities. Litsey explained the SLMPD has applied for five grants already this year with the total amount of the grants close to $500,000. The largest grant ($282,200) is the COPS Hiring Recovery Program (CHRP) grant through the United States Department of Justice. The SLMPD's application was not selected for 2009. The government is hoping to have more money available in 2010, but there is no commitment to do that. The SLMPD has been approved for two grants it applied for through the Minnesota Department of Public Safety this year. One is in tine amount of $2,000; it is for seatbelt education and enforcement along with some other traffic enforcement. The second grant, the Western Hennepin County Safe & Sober PTt . V 11___3 Page 4 Grant Group, is a team effort with other cities in the Lake Minnetonka area. The amount of this grant is $13,000. Litsey then explained he submitted two more grant applications in July when additional stimulus money became available. One grant is for a part-time, fully-licensed police officer over a two year period. It would address some of the issues discussed in 2008 during the strategic planning process. The position would help fill the gaps in the schedule when officers are taking time off, and it could help supplement shifts when demand is the greatest. The position would not be a benefited position; it would eligible for things such as uniforms and required training. The application states the goal would be to absorb the position once the grant expires, but there is no obligation to do so. The second grant is for an interactive training simulator. The cost savings that would be realized would be from the SLMPD not having to spend as much on live-fire ammunition, noting the Police Officers Standards and Training Board requires officers to do some amount of live-fire training each year. It would be a beneficial training tool. The SLMPD would have a better chance of receiving the personnel related grant. The SLMPD has applied for and received grants in the past to supplement the budget. Mayor Lizee asked if the Councilmembers had any questions about this budget. Councilmember Turgeon stated she did not have any questions this evening; she was waiting for information from Administrator Heck. Councilmember Bailey stated he is still confused about the reason for some of the designated funds. He understood the reason for the Vehicle Fund and the Technology Fund. He did not understand the need for the Insurance Fund because there is a relatively good understanding of what the insurance needs are from year to year. Chief Litsey explained that it is his understanding that when the Insurance Fund was established it was to help manage the volatility in workers compensation insurance. That has not been as volatile last few years. This Fund also allows the SLMPD to maintain higher deductibles, and with the higher deductibles and hopefully fewer accidents many of the deductibles can be managed out of this Fund. This Fund helps self insure the deductible. If the SLMPD had a serious workers' compensation claim, the cost for workers' compensation insurance would increase the next year and this could help fund some of that initial increase.. Litsey expressed his willingness to re-evaluate the pros and cons having some of the designated funds versus paying the expenses out of the operating budget. Bailey indicated he's a proponent of having things in operating budgets because they are more visible and easier to track. Bailey stated there is a cost to operate the fire arms range; therefore, he thought it appropriate to pay that expense directly out of the operating budget. He thought the purpose of the undesignated reserve funds is to handle these unbudgeted expenses or increases. He indicated the adequacy of the general fund reserves could be discussed at any time. Chief Litsey stated every two to three years the fire arms range has to be cleaned based on the amount it is used. The money is set aside to do that. Having the separate designated funds helps from an internal management perspective. One of the reasons the DWI Forfeiture Fund was established is DWI forfeitures are governed by State Statute; it made tracking the forfeitures easier. Litsey suggested the practice of having the various designated funds be discussed by the Coordinating Committee. He thought it prudent to do that. Councilmember Bailey stated he thought it would be prudent to have serious discussion at the Council level about a fund for the long-term care and maintenance of the public safety facilities. He thought the member cities should maintain their own funds. When unexpected repairs are needed the public safety departments can notify the City Administrators and Manager and they can discuss whether or not the N repair is necessary. If so, the cities would have to fund it. The cities maintain their own operating reserves to handle unexpected expenditures. He thought all of this would help with transparency. Chief Litsey stated his concerns are about the funds being available and the amount of bureaucracy that would be introduced. For example, the budget process is cumbersome enough itself. Trying to get each member city to agree a repair to the facility is needed will also be cumbersome. He clarified he was not saying one way or the other was right or wrong. He explained that for change orders on the construction of the facility the chief could authorize a change order up to a specified amount. The Coordinating Committee had discretion up to another specified amount. For larger change orders more authorization from the cities' councils was required, noting this is appropriate for very significant change orders. Councilmember Zerby questioned how this would work when the money has to come from all the member cities. Councilmember Bailey stated he assumed if, for example, the roof collapsed there would be some deductible the cities would have to pay for and that would be not be contestable. He thought the City Administrators and Manager should decide on whether the repair, for example, of the sidewalk adjacent to the entry into the public safety facility should have been made, and if it should have been done then the cities would have to pay for it. He noted it would be more cumbersome; a joint powers organization is more cumbersome. He explained the City is responsible for 50 percent of the cost of public safety; it's the City's largest budget line item. He thought it appropriate to submit planned expenses to the member cities. He also thought that doing it this way would cause the budget process to be more forward thinking. He stated there will be repairs that will be outside of the normal operating costs. Each member city should be discussing those repairs. Chief Litsey stated the public safety departments have tried to project the long-term needs of the facilities. The SLMPD Strategic Planning Group struggled with that. Everyone agreed a plan needs to be developed. He welcomed the assistance from anyone that could help with accomplishing that. He explained he had made a suggestion about using the savings from the bond refunding for the facility to help fund a building maintenance find. That was not well received when the suggestion was first made. He stated he and EFD Chief Gerber both would like to have the projections. The projections should be done independent of what organization will hold the money. Having no funding available is a liability for the departments and the member cities. Councilmember Turgeon suggested the City Administrators and Manager determine how to approach developing the plan for the long-term care and maintenance of public safety facilities. She thought both police and fire should be discussed at the same time. They share one of the two facilities, and there should be one capital fund for that facility. Councilmember Bailey stated he would like to have the cost projections done. He also wanted the City to have a line item in its municipal facility budget to fund the repairs and maintenance. Councilmember Turgeon stated that because the problem with the sidewalk was a contractual issue she questioned who should have been responsible for paying for the repair. Mayor Lizee stated the Strategic Planning Group identified the need to address the long-term care and maintenance of the facility. Chief Litsey stated.the Group and other council members as well agreed it needed to be addressed; there was not agreement on how that should happen. He would be fine with only having to make recommendations to the cities' representatives, noting it's a community asset. If the cities want to manage their own funds to pay for the necessary work, it would be less for him to do. He noted C1 ..ANUTES Pa he would do what ever is required of hi to help with the process. He recommended the cities hire someone with the experience to establish a replacement schedule, noting that is not his area of expertise. Councilmember Bailey stated he appreciated the effort to get the proposed SLMPD 2010 budget increase over 2009 down from a 3.1 percent increase to a 0.7 percent increase. He expressed his disappointment that the increase is not zero percent. He noted zero percent is an arbitrary number, but it is an important number this year. The increase to the City is about $7,000; the City will survive that increase. He stated the Excelsior Fire District's 2010 total budget reflects a zero percent increase over 2009. Councilmember Turgeon expressed concern that the fire department may conclude that the cities think the police department is more important than the fire department. She stated the police and fire departments are going to pay attention to what happens with each other's budget, as well as with each city's budget. Councilmember Zerby stated the proposed 2010 SLMPD Operating Budget reflects a 0.3 percent decrease in operating expenses over 2009. It's not getting a 0.7 percent increase in expenses. The EFD and SLMPD are completely different. The majority of the EFD's expenses are capital related. The majority of the SLMPD's expenses are personnel related. Councilmember Turgeon stated the Coordinating Committee approved raises for SLMPD non-union personnel for 2009 in February 2009. She suggested the impact on the budget of such raises should be evaluated. She explained the contractual step increases for police officers have to be honored. Those increases are 3 percent, 6 percent and 12 percent in the first three years respectively. The impact of the step increases also needs to be evaluated. She asked if the salaries and benefits for SLMPD personnel are comparable. She suggested there should be more focus on line items that can potentially be reduced. She commented the Coordinating Committee Chair had suggested possible reductions in the amount of $60,000, yet the Chair voted for the proposed budget. Chief Litsey clarified the Chair and he had discussed the items, and a lot of it had to do with personnel costs that were already factored into the budget. After he reviewed the individual items with the Chair she was comfortable with the proposed budget. He noted it is the Chair's first year on the Coordinating Committee. He explained the SLMPD does its due diligence when it negotiates contracts. Comparisons are made to other cities. For both union and non-union personnel market rate comparisons are made for any proposed raise. The goal is to achieve wages that are in the middle or slightly above the market rate. Retention is a major factor for the SLMPD. SLMPD is a smaller organization when compared to some of those in the area. The SLMPD has to continually look for creative ways to recruit and retain the best. If the SLMPD's staffing level is compared to the staffing level of some of the surrounding organizations, the member cities would have paid well over $1 million over the last 10 years to staff at their staffing levels. It would have been a huge additional cost. A market rate analysis will be done as part of the negotiations this year. Councilmember Turgeon stated she was only asking that due diligence be done. She commented she thought Administrator Heck had a lot of experience in this area, and she thought he could help the process along. She stated the City cannot continue to use its reserves. Chief Litsey stated he had a good discussion about the budget with Mayor Lizee and Administrator Heck during a previous meeting, and he also discussed the budget with Councilmember Zerby. He also thought there had been good dialogue this evening. He suggested if Council wants the policies about things such as fund balances discussed he would be happy to work with the Coordinating Committee and the City Administrators and City Manager on that. He thought that should occur after the budget process is completed. He thought it appropriate to revisit policies periodically. He suggested the auditor should also be asked to provide input. He thanked Council for its input. I ~gK Chief Litsey respectfully excused himself from the meeting at 6:43 P.M. B. 2010 General Operating Budget Director Burton stated the meeting packet for this meeting contains the third draft of the 2010 General Fund operating budget for the City as well as a summary document. This draft includes the changes discussed to date. She noted that the City has not yet received confirmation from the State on what the City's levy limit will be. The State has until September 1s` to do that. Burton then highlighted a few of the budget items. The budget represents an increase in the base levy of $34,462 over the 2009 base levy (or 0.83 percent). The total anticipated General Fund revenue is approximately $5.4 million. This revenue includes a $10,000 transfer from the Liquor Fund; the first draft contained a $40,000 transfer. As of June 30, 2009, the year-to-date interest earned on the Liquor Fund balance was $9,100. The revenue also contemplates the use of $155,000 in General Fund reserves; the first draft contemplated $160,000. Numerous adjustments have been made to the General Fund budget. Those adjustments have been reviewed with Council during a previous work session, and a list was included in the meeting packet. The items that have been placed on a list for consideration are as follows. ➢ The Mayor and Council budget includes $2,500 for the employee recognition event. ➢ The Administration budget includes a $24,000 place holder for potential merit increases. Council has discussed the possibility of reducing this by 50 percent or eliminating it entirely. The budget line items highlighted are as follows. ➢ The number of voting booths that will be purchased has been reduced to two from four for a savings of approximately $600. ➢ The miscellaneous services line item in the Professional Services budget has been reduced by $10,000. ➢ The budget includes some reallocation of employee staff. The Parks Secretary is allocated to spend more time on parks activities and less time on administration activities. ➢ Equipment maintenance in the Municipal Buildings budget was increased to reflect the new agreement the City has with WarnerConnect for support of the phone system and Information Technology systems. ➢ The Municipal Buildings budget includes a $20,000 transfer from the Technology Fund for the purchase of a copier. ➢ The Administration budget includes a $2,500 transfer from the Technology Fund for the purchase of a replacement computer for the City Administrator. ➢ The General Fund budget includes a $2,500 transfer from the Technology Fund for the purchase of a replacement computer for the Communications Coordinator. ➢ The Police budget is the one reviewed earlier in the meeting as well as the debt service component. ➢ The City Engineer budget includes a $1,000 capital outlay line item for a personal digital assistant (PDA) device and a global positioning system (GPS) data phone. ➢ The Public Works budget includes a $3,800 capital outlay line item for a replacement base radio. P~ - _ - -1T A - ; : ansfer to the Park improvement fund was reduced to $42,000 from $45,000 and $3,000 was added to the Parks and Recreation operating budget for programs. Burton stated Staff hopes Council will adopt this draft budget as presented during its August 24, 2009, meeting. During that same meeting Council will have to schedule a Truth-In-Taxation public hearing. Both of these actions will be done in the form of resolutions. Councilmember Bailey stated in this budget expenses and revenues are the same. The $24,000 place holder for merit increases could either be used for that or it could be reallocated for other initiatives. This is the largest amount Council has to make a final decision on. Director Burton noted that Council will have additional opportunities to discuss the 2010 General Fund operating budget again in the fall. Councilmember Woodruff stated although the $24,000 is a worrisome item, Council has up until when it adopts the final 2010 General Fund operating budget to determine what it wants to do with the $24,000. It can decide to reallocate it, leave it as budgeted, eliminate it entirely or a combination of these. The decision does not have to be made now. The transfer to the Park capital fund was reduced by $3,000. Council could consider restoring the $3,000. He indicated he could support adopting the proposed budget and tax levy for certification to Hennepin County at the August 24`1' meeting. Director Nielsen stated the last time Council reviewed the draft budget the potential reduction to staff in the Planning Department was listed as a secondary item. The suggestion at that time was the budget was balanced with those items being a potential reduction. This draft of the budget includes the reductions. He expressed concern about that. He questioned why the Planning Department was singled out, and why he (the department head) wasn't consulted about it. Director Burton explained Administrator Heck had instructed her to reduce the Planning Department staff even further. She did not think it was appropriate to do that without discussing it with Director Nielsen first. She stated that employees would not have a reduction in hours, but rather the time was being re-allocated to other areas. For example, the budget reflects that four hours of Planning Department staff resources will be reallocated to web services activities. Councilmember Turgeon stated Council needs to have a discussion with Administrator Heck regarding reallocation of personnel. Councilmember Zerby stated Council has discussed the need for Planning Department services has decreased in the current economy. But, he thought more discussion is needed about this. Mayor Lizee stated it's appropriate to solicit Director Nielsen's input oil this. Councilmember Zerby stated he can support certifying the proposed tax levy. He questioned if it would be possible to use the $24,000 as an incentive fund that would proportionally be distributed based oil equal amounts being saved in the operating budget. Councilmember Woodruff stated that could be discussed over the next few months. He then stated Administrator Heck has previously discussed the possibility of giving one-time merit payments to staff rather than increasing base pay, and he thought that is similar to what Zerby had discussed. In response to a comment from Director Burton, Councilmember Bailey stated he liked the new format for the departmental budget summary pages. There was consensus that there is no need to have a Council budget work session on August 17, 2009. . 1 J: q er y moved, Woodruff seconded, Adjourning the City Council Work Session of August 10, 2009, at 6;57 P.M. Motion passed 5/0. RESPECTFULLY SUBMITTED, Christine Freeman, Recorder C'~ Christine Lizee, Mayor ATTEST: Administrator/Clerk t