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01-20-10 CC WS MinCITY OF SHOREWOOD CITY COUNCIL WORK SESSION MONDAY, JANUARY 20, 2010 n 1._. 5755 COUNTRY CLUB ROAD COUNCIL CHAMBERS 6:00 P.M. Mayor Liz6e called the meeting to order at 6:00 P.M. A. Roll Call Present. Mayor Liz6e; Councihnembers Bailey (arrived at 6:04 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 Liz6e moved, Zerby seconded, approving the agenda as presented. Motion passed 4/0. 2. LAKE MINNETONKA COMMUNICATIONS COMMISSION BOARD REPRESENTATIVE INTERVIEWS The following candidates were interviewed for the consideration of appointment to the Lake Minnetonka Communications Commission Board. A. David Cross, 5305 Shady Island Road 6:00 p.m. B. Ken Hendrickson, 21125 Radisson Road 6:15 p.m. Patrick Hodapp withdrew his letter of interest earlier in the day. 3. WATER CONNECTION POLICY DISCUSSION Administrator Heck explained the current ordinance stipulates that for City initiated water service extension projects a special assessment public hearing must be held and benefiting properties will be assessed for the improvements. Council had previously asked Staff to review the City's current water ordinance and suggest amendments to the ordinance that would allow the City to extend water service without having to assess the benefiting properties. The impetus for this is to allow Council to extend water service as part of roadway improvement projects without a special assessment. Heck then explained that Staff identified two options for amending the ordinance to accomplish this. The first is to expand Section 903.18 by adding a new Subdivision 3 for City initiated water service extension which is done as part of a roadway improvement project without a special assessment. The second is to add a new Section 903.181 which would outline the process for such City initiated projects. After speaking with the City Attorney about the pros and cons of the two options Staff concluded the first Option would be the preferred option. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES January 20, 2010 Page 2 of g Heck stated a copy of the ordinance that includes the proposed amendment for the new Section 903.18 Subd. 3. and some other minor changes has been provided. One of them is the change to the new minimum water usage amount of 5,000 gallons; it had been 10,000 gallons. Staff proposes changing the ordinance amendment process Section 903.29 to allow the ordinance to be amended by a simple majority vote of the City Council; currently a public hearing must be held to amend. Other than the Zoning Ordinance this is the only other regulatory ordinance that requires a public hearing be held to amend it. Staff also proposes deleting Section 903.08 Subd. 6 relating to calibration of water meters. Heck recommended Council focus discussion on Section 903.18 this evening. Staff would like feedback from Council as to whether or not it agrees with the proposed amendments to the ordinance. The discussion about the connection charge and fees will occur at a future meeting, noting the fees are addressed in a different ordinance. Councilmember Turgeon stated she wanted to discuss the number of owners in the improvement area that are required to favorably petition for extending water service. The requirement in Section 903.18 Subd. 2.a (3) is at least 67 percent (or a super majority) of the property owners must favorably petition for the improvement. She questioned if it may be more appropriate to consider changing that to a simple majority as the 67 percent is an arbitrary number the City identified. She noted the City Council can override the 67 percent requirement if it wants to. She commented the requirement in Section 903.18 Subd. 2.a (1) is 100 percent of the property owners must favorably petition. In Section 903.18 Subd. 2.a (2) owners of at least 35 percent of frontage property abutting the improvement area must favorably petition; the property owners must be willing to pay for the entire cost of the improvement. Director Brown stated one of the challenges when doing improvement projects be it roadway or water service extension, is to have a predictable and consistent process to use. He thought that there are likely many differing opinions on what the majority petition requirement should be. He assumed it would be frustrating for residents to watch council members and staff members discuss varying perspectives about the City's policy during an improvement project public hearing. Staff hopes consensus can be reached on a predictable process and petition majority requirements. Councilmember Turgeon questioned why a super majority of property owners is required to petition for the improvement when the ordinance requires only a simple majority of Council to initiate a project. She thought the majority requirement should be consistent. Administrator Heck explained Staff did not discuss petition language in the ordinance. Staff focused on how to draft an option whereby the City Council could initiate an improvement project without an assessment. Director Brown stated State Statute stipulates certain petition process percentages, noting the requirement of at least 35 percent frontage requirement is one. Director Nielsen noted the 67 percent requirement is identified in the Comprehensive Plan (Comp Plan) and it is a City initiated requirement. He stated Staff needs to research what the rationale was for the 67 percent. He thought it was to ensure that a good majority of the abutting property owners that would be assessed for the improvement wanted the improvement. The 67 percent requirement is based on the premise that water will be provided on a demand basis. Councilmember Turgeon requested Staff research how the 67 percent was arrived at. Mayor Lizee stated the purpose of the discussion this evening is to discuss amending the water ordinance such that the City Council could initiate a project to extend of water service without a special assessment as part of a roadway improvement project. Councilmember Woodruff stated he did not come to discuss the percentage requirements for petitioned projects. The water ordinance already addresses the policy for handling improvement projects which are assessed. The issue which is hying to be resolved is people don't want to pay for something they don't want; they don't want to be assessed for water service extension when they did not request it. He thought the discussion tonight was how to amend the water ordinance such that City Council could initiate the extension of water service and the property owners would not pay anything until they decided to hook up to the service. He stated he would be astounded if property owners would object to the extension if they did not have to pay for it until they hooked up to the service. Councihnember Woodruff stated there is a roadway improvement project in the design phase that includes the installation of watermain. Council had decided to have a discussion about the current water ordinance and decide if the ordinance should be amended to allow the installation of the water main without assessing the property owners at the time of installation. The proposed new Subdivision 3 in Section 903.18 would allow Council to have that option. The decision to assess or not assess may influence including the installation of water main in the bid that is let out for that project. Administrator Heck stated under the current water ordinance if water main were to be installed the City would have to follow the Minnesota Statute Chapter 429 assessment process. He asked if Council thought the proposed new section allowing the extension of water main without assessing for it was okay. Councilmember Woodruff stated he was fine with the new Subdivision 3 in Section 903.18. Councilmember Woodruff stated he expected that very quickly there will be a Council meeting when Council will consider the policy that gives the City the latitude to initiate a water service extension project without assessment. The project would be paid for out of the Water Fund. He noted the proposed amendment to the water ordinance allowing this does not specify such projects would be paid for out of CITY OF SHOO , OOD WORK SESSION MEE MINUTES January 20, 2010 Page 4 of 8 the Water Fund and he thought that should be added. He stated he thought other then the added Subdivision 3 he thought the rest of the ordinance should be left as is. He expressed he did not want to change the $10,000 connection charge. He stated he did want to discuss how to deal with property owners who already have water main past their property. He wanted to know how they should be "grandfathered" in. Councilmember Bailey asked if it is advisable not to charge property owners at the time water service is extended. They would be charged when they decide to connect to the service. If the decision is made to allow for that option then he thought the proposed language for Section 903.18 Subd. 3 is fine. Mayor Lizee stated the Water Fund has the capacity to fund such projects for a limited number of years, noting she thought it is three years. She questioned how to fund the projects after that. Councilmember Woodruff stated he thought the Water Fund could fund projects for more than five years and maybe up to ten years, noting that is what the findings in the utility rate study reflected. He expressed there are long -term risks with the City's ability to sustain this approach. He has convinced himself that to overcome the objections property owners have with having to pay for something they won't immediately use and to deal with the "public good" of having water service available, the City should have the option to initiate a project to extend water service and not immediately charge property owners for it. He stated the current language is intended for use as part of roadway improvement projects. The City should have the option to immediately assess for the extension or defer the cost to property owners. He indicated he would like the option to be able to go back and extend water service along Harding Lane and not assess for it, noting the road was just improved. The proposed amendment does not allow for that. Councilmember Zerby asked if Council is prepared to in effect give property owners interest free loans. He stated for the purposes of this discussion, the connection charge would remain as is. He stated funds would be deferred from other projects by doing this. Council has to decide if that is how the taxpayers' dollars should be used. Councilmember Woodruff stated he did not foresee that funds would be deferred from other projects, noting he thought there was a lot of money in the Water Fund. Woodruff then stated there will be water projects that are not currently included in the capital improvement program, such as water treatment systems. Zerby commented that if there is a lot of money in the Water Fund such that it could in the interim pay for the extension of water service, then maybe the City charged too much for the water service. Councilmember Bailey stated if the current users of the water system were considered a club" he asked what the reason would be to expand. One reason could be to average the fixed costs for the water system over more members. He asked what the cost to join the club should be. He stated another reason to want to increase the number of users is if the system is not sustainable with the current number of users. He asked if the water system is sustainable given the current number of subscribers Director Brown stated there was a time when the Water Fund was in trouble. It's now sustainable and making a reasonable profit. During his 15 -year tenure with the City, the City has made an average amount of improvements to the system. Councilmember Bailey stated there is no financial need to increase the number of users. As part of roadway improvement projects, the only reason to want to increase users is if are willing to pay. As a current water customer, he doesn't want to subsidize the expansion of the system. He explained one of the risks with extending water service without an immediate assessment /charge to property owners is they may never connect to the water service and the current municipal water users would have funded the cost for the extension without any return. He stated there appears to be an assumption that there is a huge public good in having more water customers. Councilmember Turgeon stated from her vantage point Council appears to be going in a circle when it comes to roadway improvement projects (should the roadway be reclaimed or reconstructed) and the extension of water service as part of reconstruction projects. Councilmember Woodruff asked Councilmember Turgeon what she suggested. Mayor Liz& asked Councilmember Turgeon what she supports. Councilmember Turgeon stated she was okay with extending water service as part of a roadway project. She thought the number of potential users should factor into such a decision. She expressed she is not supportive of the $10,000 connection charge or the 67 percent petition number. Water service extension has been an issue for many City Councils. From her vantage point, logic goes by the wayside when water service extension is discussed because emotions take over. Mayor Liz6e recommended that in the near future Council needs to discuss the $10,000 connection charge. She stated the topic at hand is should the City have the option of extending water service as part of a roadway reconstruction project and not immediately assess /charge property owners for it. In response to a comment by Councilmember Woodruff, Administrator Heck stated the water ordinance must be amended if Council wants the City to have the option of extending water service as part of a roadway reconstruction project and not immediately assess /charge property owners for it. The current ordinance requires a special assessment for City initiated projects. Woodruff stated he supports adding the new Section 903.18 Subd. 3 to the water ordinance. Councilmember Zerby stated maybe there is an alternative in between the assessment and delay of charge approach. For example, in the City of Waconia (where he owns some land) property owners paid for one - half of the cost of a roadway improvement project and the other one -half was paid for out of Waconia's general fund. He thought the $10,000 charge results in sticker shock for property owners. They may be more receptive if the City shares in the cost. Councilmember Woodruff stated he thought if property owners were told it would cost them $1,375 there would be serious pushback. He also thought if there was no immediate charge to the property owners for the project to be done, objections from property owners would be eliminated or at least minimal. CITY OF ` H REWOOD WORK SESSION MEETING MINUTE January 20, 2010 Page 6 of° Administrator Heck stated Council can decide what portion of a project cost it wants to assess to the property owners. That is a policy decision. Director Nielsen stated at one time the cost was shared on a 50-50 basis with the assessment being $5,000, noting there are still a -amber of property owners who are paying that $5,000 assessment. Councilmember Woodruff stated there are property owners who have already been assessed and paid the connection fee and he questioned if their neighbors who have not yet connected will be treated differently. He expressed he can't support treating property owners differently. Administrator Heck stated that is an issue that has to be discussed as part of the connection charge discussion. He asked if Council has any changes to the proposed Section 903.18 Subd. 3 language. Councilmember Bailey stated Staff has done exactly what Council asked for. He expressed concern about spending monies in the Water Fund to help people who had not put monies into the Fund. If something like that were being done City -wide with a general bond he maybe could view it differently. Director Nielsen stated the Comp Plan contains a set of guiding principals about the City's water policy. One of them is residents without municipal water service will not have to pay for the service. He explained there is a rationale for the $10,000 connection charge. The cost to extend the service in front of each property abutting Nelsine Drive was $8,500 per property and that would have been the most efficient roadway to extend it down as part of a reconstruction effort. The $8,500 does not include paying anything towards the water system. The difference between the $10,000 connection charge and the $8,500 assessment is for that purpose. The $10,000 is referenced in the Comp Plan and is intended to be a uniform charge throughout the City. He thought the $10,000 may be low, but it is higher than the cost to install a well. Councilmember Turgeon suggested the charge be reduced. Nielsen stated that would be unfair to those property owners who have already helped fund the installation of some of the water system infrastructure. Mayor Lizee stated she would like Staff to present to Council at a future meeting how the $10,000 charge was arrived at. She asked Staff to research what the connection charges are in neighboring communities. She stated the price residents pay for living in a civil community is having a well maintained infrastructure in place. She commented when she moved to the City twenty years ago there was a paved road which other property owners had paid for. Someone else had paid for the school. It's not appropriate to say property owners should pay only for those things that directly benefit them. The $10,000 charge needs to be justified, and maybe it needs to be adjusted up or down. Councilmember Turgeon asked the Councihnembers if they are in support of having a deferred assessment /charge option available for use. Councilmember Bailey stated he is not in favor of Council having the option. Mayor Lizee stated Councilmember Bailey's is saying something different then he said a month ago. Councilmember Bailey stated that is true but lie has rethought it. Bailey commented that Rusty Fifield's comments were very seductive at the time the rate study was discussed it seemed the like the easy way out for dealing with the issue of water service extension. Councilmember Woodruff stated he could argue on both side of this issue. He then stated he did not think it would be a good idea to add the option to the ordinance without dealing with the issue of equity for those that have already paid to have the water service extended. That would just cause discontent in the community with most of that being directed at the Councihnembers. He recommended the idea be dropped. Woodruff stated he disagreed with Mayor Lizee's comment that paying for infrastructure is a CITE' OF SHOREWOOD WORK SESSION ME TING INUTES January 20, 2010 Page 7 or price residents pay for living in a civilized society, He explained he could not count the number of residents, who have told him that they knew they were going to have well water when they moved into the City, and they don't and never will want access to municipal water Councilmember Woodruff stated he had some other changes to recommend for the water ordinance. Administrator Heck stated Council needs to finalize the decision about the issue of not immediately assessing for the extension of water service. If that option is not going to be added to the water ordinance then the only necessary change to the ordinance is the change in the minimurn water usage charge to a 5,000 gallon usage rate. Councilmember Zerby stated he was conflicted. He has frequently heard residents ask why the City did not install water service throughout the City when it installed the sewer system. A roadway is reconstructed once every thirty years or more so that is the opportunity to extend water service. He thought the way of the future is to have a City -wide municipal water system. He preferred to have more properties connected to the water system, but he appreciates there is sticker shock associated with a $10,000 cost. He would like the City to find a more palatable way to get that service to the property owners, but he doesn't know what the answer is. He would like City Councils to have more flexibility. But, at this time he is not in favor of this option because he wants consistency across the board, Councilmember Turgeon stated she agrees with Councilmember Bailey's position. Mayor Lizee stated she thought adding Section 903.18 Subd. 3 to the water ordinance may cause trouble down the road. Councilmember Bailey thanked Staff for doing what Council asked Staff to do. Mayor Lizee recapped there was Council consensus to not include the proposed subdivision in the ordinance. Councilmember Woodruff stated Council will have to decide if it wants to extend water service as part of the Meadowview Road improvement project by mid March. He then stated he would email his comments about other changes to the water ordinance to Administrator Heck. Administrator Heck stated Staff will make the technical changes to the water ordinance based on the water rates established by Council in November 2009. Councilmember Woodruff suggested Section 903.09 Subd. 1(a)(2) be deleted. He did not think it served any purpose. In response to a question from Councilmember Turgeon, Administrator Heck stated because the water ordinance will not be amended to allow the City to extend water service without a special assessment he questioned if Council still wants to discuss the $10,000 connection charge / special assessment policy. Heck explained the $10,000 connection fee is reduced by any special assessment paid up to $10,000. There was Council consensus to have Staff prepare for discussion about how the $10,000 connection charge was arrived at and if it is still an appropriate amount at a future meeting. Administrator Heck asked if Council can interview applicants for the Park and Planning Commissions during a special meeting on February 1, 2009. In total there would be nine applicants to interview. Bailey stated if all applicants are to be interviewed during the same evening he recommended the Planning Commission applicants be interviewed first because a current Park Commissioner is interested in both the Park Commission and Planning Commission. Mayor Liz6e again stated all the interviews could be conducted during the same meeting, and she suggested the special meeting be conducted on an evening when there is not a regular meeting. A special meeting will be scheduled for 6:00 P.M. on February 1, 2010. 4. ADJOURN Councilmember Woodruff moved, Councilmember Zerby seconded, Adjourning the City Council Work Session of January 20, 2010, at 8:10 P.M. Motion passed 5/0. RESPECTFULLY SUBMITTED, Christine Freeman, Recorder ATTEST: Christine Liz6e, Mayor Brian -Heck: 00 Adihinistrator/Clerk