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04-19-10 CC WS MinCITY OF SHOREWOOD CITY COUNCIL WORK SESSION MONDAY, APRIL I9, 2010 CONVENE CITE' COUNCIL WORD SESSION Absent: None B. Review Agenda 5755 COUNTRY CLUB ROAD COUNCIL CHAMBERS Emomim Turgeon moved, Zerby seconded, approving the agenda as presented. Motion passed 4/0. 2. CAPITAL IMPROVEMENT PROGRAM Administrator Heck stated this evening he would like to review the 2010 Capital Improvement Program (CIP) projects and get feedback from Council on 2011 CIP projects, in particular 2011 roadway projects. With regard to CIP equipment replacement purchases, Director Brown stated the last major equipment purchases the City made were a dump truck, a one -ton truck and a pickup truck. The pickup truck has not been put in operation because Public Works has been working on getting things ready with the larger pieces of equipment. Public Works staff has not started to focus on 2010 equipment replacement projects. He noted that equipment replacement purchases are frequently made in the fall. He stated he has shifted a lot of responsibility for the pre - purchase work to Brad Mason to try to speed up the projects. Unfortunately, Mr. Mason is out on sick leave for an extended period of time due to recent surgery. Director Brown explained there have not been any changes made to the list of 2010 equipment replacement projects. There is one big change in the 2011 projects and it relates to the need to replace the backhoe. Staff is exploring replacing the backhoe with a track excavator rather than another backhoe. There is more flexibility with a track excavator. There have been more situations where it's necessary to get into ditches and boulevard areas. The excavator serves those situations better. He stated Staff researches the market for used equipment as well as new equipment when a piece of equipment has to be replaced. He noted the last two skid steers were demonstration pieces that had been lightly used, the sewer jetter was a used piece of equipment, and the water truck was a used vehicle. Councilmember Turgeon asked what the status was on the used dump truck the City purchased which ended up having some issues. Director Brown explained the truck's hood was defective from the dealer and he refused delivery on the truck. It's currently at the equipment manufacturer's site. The vendor asked if it could take the truck to a trade show at its cost. Doing this has made it possible to refuse delivery and hold all payments on the truck until it is repaired. He has been reassured that the cab and chassis supplier will make good on their promise. CITE' OF SHOREWOOD WORK SESSION MEETING MINUTES April 19, 2010 Page 2 of g Councilmember Woodruff stated he thought Director Brown and the Public Works staff have done a. great job in projecting equipment replacement purchases in the past. Ile commented that many of the projected costs for 2010 -- 2014 purchases are less than those in the CIP adopted in 2009; he thought that was good. Brown explained that in the past Staff has used an approximate 5 percent inflationary factor from year to year. That has been reduced to approximately 3.2 percent, which is the consumer price index for equipment. Estimates were also updated to reflect what is offered in the State contracts. With regard to CIP local street reconstruction projects, Administrator Heck stated Smithtown Lane is a carryover from 2009. Contracts are out for the Nelsine Drive roadway reclamation project and the Meadowview Road and partial Wild Rose Lane roadway reconstruction project. Director Brown stated there are no major surprises with the projected roadway improvement projects. He noted the cost for a mill and overlay of one -half of Vine Hill Road (the City's portion) in 2011 is estimated to be $176,800. hl response to a question from Councilmember Zerby, Director Brown stated Yellowstone Trail is scheduled for a bituminous overlay in 2010. In response to a comment from Councilmember Turgeon, Brown explained Yellowstone Trail is classified as a Minnesota State Aid (MSA) roadway between Lake Linden Drive and Country Club Road. The $171,600 budgeted for 2010 bituminous overlays comes out of the Road Fund. There should be an additional $65,000 available in the City's MSA maintenance find that could be used for maintenance of MSA roadways. The MSA construction find was used and borrowed from for the County Road 19 project. Councilmember Zerby asked why the 2011 budget for bituminous overlays was zero. Engineer Landini explained those funds go to the Vine Hill Road mill and overlay project. In response to a question from Councilmember Woodruff, Engineer Landini explained in 2010 Eureka Road, from Smithtown Road to Highway 7, and Yellowstone Trail will get a bituminous overlays. Councilmember Woodruff stated the estimated cost for the Star Circle and Star Lane roadway reconstruction project in 2011 has gone up $150,000 over the CIP approved in 2009. He asked why. Engineer Landini explained he used actual costs from more recent large projects to estimate the cost. In response to a comment from Councilmember Woodruff, Engineer Landini stated the City has been using a seal coat product that does not contain coal tar for a number of years. With regard to CIP municipal water system projects, Director Brown stated the 2010 CIP projects include the installation of a Superior Control and Data Acquisition (SCADA) System for both the water system and sewer system, and the re- roofing of the SE Area Water Treatment Plant. Shortly after the SE Area Water Treatment Plant well was installed residents started to complain about the amount of iron in the water. An iron removal plant was installed to address the issue. The iron removal plant has its own set of controls. The 2011 CIP includes a project to replace those controls; the computer system that supports the controls is no longer being supported by the vendor. All but one of the other projects in the CIP for 2011 — 2015 are watermain extension projects that would be coupled with roadway reconstruction projects. In response to a comment from Councilmember Turgeon, Director Brown explained that the West Water Tower rehabilitation project should cost less than the rehabilitation of the East Water Tower but the cost for the East Tower was used for budget purposes because that cost was known. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES April I, 2010 Page 3 of Councilmember Woodruff suggested the SE Area Water Treatment Plant's iron plant controls be moved from 2011 to 2010 because the software that supports the control is no longer supported. He explained the 2010 CIP for the water system has been reduced by over $300,000 because watermain is not going to be extended along Meadowview Road and part of the Wild Rose Lane when they are reconstructed this year. The estimated cost to replace the controls system is $ 160,000. Director Brown stated he would like to do that if Council supports doing so. Brown noted the iron plant can be run manually if need be. Councilmember Turgeon cautioned against moving the project into 2010 if it is going to impact the ability to get the other 2010 City -wide CIP projects done. Brown stated Staff will look at the burden that would be placed on them by moving the project forward and he will get proposals for the project. Turgeon stated she didn't want to add to Brown's work load and then criticize him later if all of his projects don't get completed in 2010. She indicated it should be up to Brown to determine if he has the capacity to take on another project this year. Councilmember Woodruff asked why the rehabilitation of the West Water Tower has been added to the CIP; it was added in 2013. Director Brown explained the average life span of the coating is approximately 15 years. Staff thought it appropriate to put a placeholder in the CIP. Woodruff then asked why there are no dollars budgeted for the two 2015 watermain extension projects. Brown explained that staff thought water main along Garden Road would not be feasible. Staff has since figured out a way that could potentially be feasible. He then explained there is watermain along Gillette Road. There aren't any maintenance projects proposed for 2015 CIP. There could possibly be some operational maintenance projects, such as residing the SE Area Water Tower, that would have to be done but they would be funded out of the operating budget. Mayor Lizee stated the 2012 CIP includes watermain extension along Valleywood Circle and Valleywood Lane, and along Sunnyvale Lane in 2013. Some of the Councilmembers chose not to extend watermain as part of the Meadowview Road and partial Wild Rose Lane roadway reconstruction project that will be done this year. She asked if it would be wise to use directional boring to loop watermain from Valleywood Lane along Meadowview Road on to Wild Rose Lane. The City may want to extend watermain down Wild Rose Lane at some point. She did not think it would be prudent to invest in another dead end watermain that would come off of Eureka Road down Valleywood Lane around in a circle without bringing the watermain south. Councilmember Turgeon stated she agreed with Mayor Lizee's position of not wanting to reconstruct any more roadways unless watermain is extended as part of the project if it does not already exist. If watermain is not going to be installed then the roadway should be reclaimed at best. She said there are residents who are questioning why the City is even reclaiming a roadway when there are just a few properties abutting a roadway and the roadway has a cul -de -sac at the end of it. Mayor Lizee again asked if directional boring from Eureka Road down Wild Rose Lane and between Valleywood and Wild Rose Lane along Meadowview Road would be possible. Director Brown stated directional boring can be considered, noting he thought there were a lot of issues with directional boring. He indicated Staff will look into that option. Councilmember Woodruff stated he was comfortable with the project lists in the CIP. Whether or not the roadways should be reclaimed or reconstructed will have to be discussed at a fixture date. Councilmember Turgeon stated she was okay with the plan as it stands. But, she thought Council still needs to have a further philosophical discussion about the extension of watermain and the reclamation versus reconstruction of roadways. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES April 19, 201€ Page 4 of g Director Brown stated he did not think having watermain dead end down Wild Rose Lane or Valleywood Lane was an issue. What is critical is to loop the Howard's Point system to the Eureka Road system. Mayor Lizee stated there is nothing in the Parks CIP for the Southshore Community Center (SSCC). She asked Administrator Heck to meet with the operations manager for the SSCC to discuss if there should be. She then asked if the cost estimates for replacement of hockey rink lights, a swing set and hockey rink boards was for one -half the cost with the other one -half being paid for by the City of Chanhassen. Administrator Heck said the estimates are for the total cost with the Shorewood paying the entire cost. Lizee stated the Park is Shorewood's park but the Park is located in Chanhassen. Heck explained Staff spoke with Chanhassen representatives who indicated Chanhassen is not interested in sharing the cost of improvements to the Park. Lizee stated she had a hard time having Shorewood pay for all the improvements to a park that is not located in Shorewood even though Shorewood residents use the park. Councilmember Turgeon echoed Mayor Lizee's comments. She stated she thought the SSCC was to have its own CIP. She then expressed her disappointment that Council did not receive enough information about tot lot equipment when the Park Commission brought it before Council in 2009. She commented that signage at the entry points into the City, at City Hall, and at the entry points into the City's parks has been discussed for some time. She wondered if the $30,000 in the 2011 Parks CIP was for parks signage only. She stated it was her recollection that there would be some type of stone pillar near the County Road 19 and Smithtown Road intersections. Director Nielsen explained the City's Comprehensive Plan talks about signage at entry points into the City. In 2009, Park Coordinator Anderson and he researched different types of designs for signs. They found a design that was acceptable to them and the Park Commission and to Council, and they received estimates for the signs from the company that did the design. Unfortunately, that company is no longer in business. The theme for the signs at the entry points into the City, at City Hall and at the entry points into the parks was to be the same. He stated the sign project will be resurrected this summer. The $30,000 won't cover the costs for all the signs. The estimate for the City Hall sign was $7,000 - $8,000. Councilmember Woodruff stated it was his recollection that the $30,000 in the Parks CIP for signage was adequate based on vendor estimate at that time. He suggested that cost be revalidated. Councilmember Turgeon questioned the budget amount of $50,000 to replace the hockey rink lights in Cathcart Park. It's her recollection that the cost to replace the Badger Park hockey rink lights was $90,000. Engineer Landini clarified that the cost to replace the Badger Park hockey rink lights was $48,000, and the cost for the football field lights was $90,000. Councilmember Turgeon stated the signage project keeps getting pushed back. She would like to see it done. Councilmember Woodruff explained the project was pushed to 2011 because of the cost of the other projects in 2010. CITY OFSHOREWOOD WORK SESSION MEETING MINUTES April 19, 2010 Page 5 of With regard to CIP sanitary sewer system projects, Director Brown stated every project in this CIP has been in the CIP in the past. With regard to CIP stormwater management projects, Director Brown stated all the projects in the CIP are connected to roadway improvement projects. Councilmember Turgeon stated the Boulder Bridge Pond project planned for 2012 has no budgeted amount and there is a comment that the project will be assessed to the property owners. She has no recollection of Council making a decision to assess adjacent properties for the project, noting Council had discussed that topic a number of times. She stated the City will have to determine what properties would be assessed. Director Brown stated there are a maximum of 12 homes on properties near the Pond. This project would be similar to the Lake Mary outlet project, which was cancelled because of the limited amount of benefit to be received by the property owners in comparison to the amount that would have been assessed to them. Councilmember Turgeon stated it was her recollection that properties on Minnetonka Drive would have also benefited from the Lake Mary project. It's her understanding that only some of the properties near the Pond would benefit. She recommended against having a zero dollar amount for the project in the CIP when there is no agreement benefiting properties would be assessed for the cost. She suggested potential assessment be discussed. Director Brown stated he anticipated changes to the Stormwater CIP for 2011 — 2015 because of mandates being considered. Councilmember Woodruff suggested the note about assessing for the Boulder Bridge Pond be replaced with a note indicating that the funding is to be determined and put a $1 in for the cost. He asked how CITY OF SHOREWOOD WORK SESSION MEETING MINUTE April 19, 2010 Rage 6 of critical the 2013 and 2014 projects are, noting the Stormwater Fund runs out of money somewhere in there. He stated if the goal is to build that Fund's balance that has to begin soon. Director Brown explained the drainage mitigation project costs in 2013 and 2104 are the star water improvement costs for improvements that will be made as part of the reconstruction of those roadways. If the roadways are reclaimed rather then reconstructed the costs would be reduced. Councilmember Woodruff suggested the fund balances for the various CIP funds be discussed. Administrator Heck stated it was not his intent to discuss all of the fund balances this evening, noting funding for roadway improvements will be discussed this evening. The next time Council discusses the CIP the other fiord balances will be part of the discussion. With regard to the CIP technology /office equipment projects, Councilmember Woodruff stated the purchase of laptop computers for Councilmembers is slated for 2012. He recommended moving the project to 2011 if it's worth doing. He thought by the end of the year the Councilmembers will have had sufficient time to test the ease of use of receiving their council meeting packets electronically. Administrator Heck stated Staff wanted the Councilmembers to have sufficient time to evaluate that to make sure it would be worthwhile. Councilmember Turgeon stated she was okay with leaving the project in 2012. Administrator Heck stated that during its March 22, 2010, work session Council discussed the different scenarios Staff had developed for funding the 20 -Year Pavement Management Plan (PMP). Council requested Staff develop two more scenarios. Heck stated the first Minnesota Legislative Budget Bill has been signed by the Legislature and Governor. The bill did not extend, make permanent or remove levy limits that are currently set to sunset after 2011. The League of Minnesota Cities (LMC) has successfully gotten language added to one of the Legislative bills that would set the minimum amount the Implicit Price Deflator (IPD) at 1.17 percent (the amount the Department of Revenue is using to do its calculations). That bill has not passed. Councilmember Bailey arrived at 7:06 P.M. Administrator Heck explained that the first of the two new scenarios reflects borrowing $150,000 from the Community Infrastructure Fund (CI) Fund in years 2011, 2013, 2015 and 2017. The transfer in from the General Fund is also increased over the previous year's transfer by 75 percent of the amount the base levy could increase each year. The yearly debt payment back to the Community Infrastructure Fund cannot considered a special levy; it must be paid out of the base levy. Under this scenario, the Road Fund will enter into a deficit state in 2017 and come out of that deficit stated in 2021. Heck then explained the second new scenario includes borrowing $150,000 from the Community Infrastructure Fund in 2011 — 2014. It also includes using a portion of the City's General Fund reserves in excess of 60 percent of the subsequent year's budgeted operating expenditures for roadway improvements. This would be in addition to other transfers into the Road Fund. The transfer from General Fund reserves is currently programmed to be $90,000 in 2011 — 2015 and it decreases in subsequent years. The transfer in from the General Fund reserves would keep the Road Fund solvent. Heck stated the issue is how to capitalize the Road Fund for the next few years. Council needs to decide if the City should bond for improvements or borrow from the Community Infrastructure Fund for the next few years for roadway improvements. He explained bonding for roadway improvements will only CITY OF SHOREW OD WORK SESSION MEETING ETING MINurEs April 1 , 010 Page I of S increase the debt to the City's residents and the more debt there is per capita the worse off the City will be, In response to a question from Councilmember Zerby, Administrator Heck explained the scenarios reflect the planned increase transfer into the Load. Fund from the General Fund based on the allowable levy increase would be compounded. Zerby expressed he was not comfortable with doing that. Councilmember Woodruff stated he thought it made sense to transfer excess General Fund reserves into the Load Fund. He did not think the second new funding scenario is realistic. For example, the General Fund reserves increased $15,000 in 2009. The funding scenario reflects a transfer in of $90,000 in 2011 — 2015 and then it drops down after that. He then stated he like the idea of borrowing from the Community Infrastructure Fund. He suggested the amount borrowed should be more than the $600,000 reflected. He asked Administrator Heck if in the two scenarios all of the allowable levy increase is allocated to the Load Fund. Heck explained very little of the eligible levy is left for other purposes. Woodruff stated at some point salary increases for employees need to be reinstated, and there will be increases in other expenses. Woodruff commented the City does not need to bond right away based on the two new scenarios, and if the levy limits sunset at the end of 2011 the City will be able to increase the amount levied. Woodruff stated he likes the plan although it may need a little tweaking. Councilmember Bailey stated the City will have to tax for what it spends. What the residents are taxed is the issue. He then stated the first thing that must be validated is if the projected roadway improvement costs are correct. He went on to state he could support borrowing from the Community Infrastructure Fund in the short term provided the levy limits go away. If levy limits remain in place, he did not think it was a good strategy. If the goal is to get through 2011 and then increase the levy then he thought the strategy was good. He thought it is a fair bet the levy limits will go away. He expressed the entire levy increase can't be dedicated to just roadways. There need to be funds available for other operating expenses. Councilmember Turgeon stated she likes the first new scenario the best. She indicated she thought the levy limits would go away after 2011. Councilmember Zerby stated he was not comfortable with an escalating levy year after year. He is uncomfortable with the notion that if the levy limits are removed, the City can tax residents more. He questioned if the 20 -Year PMP is more ambitious then it needs to be. In some instances, residents have questioned why repairs were being made to their roads. He noted he agreed that if a project has to be done it needs to be taxed for. He expressed he does not support a continual tax increase for the next 20 years. Councilmember Turgeon stated the City has not taxed its allowable amount in 2009 and 2010; there was a levy limit for both years. She then stated the City can't continue forever to provide the current services without taxing. She questioned if the PMP is too ambitious. Councilmember Woodruff stated the City doesn't have to borrow from the Community Infrastructure Fund in 2011 and maybe not in 2012. He thought that borrowing should be pushed out a little. That would allow Staff time to "scrub" the project cost estimates and it would make money available for other things. He commented that when the City borrows from its Community Infrastructure Fund the interest and principal will be paid back to that Fund. Councilmember Bailey asked why the City would have to pay itself interest. Director Burton explained auditors like to treat each fund as if it's a standalone business. It would be one business borrowing from another business. Bailey asked why an exorbitant rate of 4.5 percent is planned. Burton commented she CITY OF SHOREWOOD WORK SESSION Tl G MINUTES April 19, 2010 Page g of thought the interest rate Administrator Heck selected was generous. Councilmember Woodruff stated the interest rate should be comparable to what could be earned in the market. Bailey stated he did not think the auditors approach made any sense. completely Councilmember Bailey indicated he was open to discussing what the appropriate size of the roadway budget should be. But, he thought that was a stated the City needs to tax for what it spends. He stated roadway improvements are an ongoing cost to the City. He indicated that after the project estimates were "scrubbed" the costs could be higher. He stated the City has under served itself when it came to taking e of its roadways. Administrator Heck stated based on this discussion he will revise scenario one. He will move the start of the borrowing from the Community Infrastructure Fund to 2013. He will work with Director Burton to adjust the payback time and rate. He will also re- evaluate the allowable levy limits. Councilmember Bailey asked if after 2011 levy increases would be based on need. Administrator Heck stated the two scenarios reflect the levy limits would remain in place and they are based on the IPD. He explained Governor Pawlenty wants permanent levy limits. The Senate Tax Chair is not in favor of doing that. In the first of the three budget bills there are no levy limits. Councilmember Bailey requested another scenario be developed without levy limits beyond 2011. Councilmember Zerby requested yet another scenario be developed that reflects no levy increase. That would determine what level of roadway improvements could be done each year. Councilmember Woodruff stated roadway reclamation and reconstruction would stop part way into 2012. Administrator Heck stated if Council wanted to continue with some of the improvements it would then have to take funds for improvements from other funds. Councilmember Turgeon stated there is the option of assessing for roadway reclamation and reconstructions. Councilmember Woodruff stated starting in 2012 and 2013 the projected combined cost for seal coating and overlay roadways is about $700,000. That is the current amount of the transfer from the General Fund to the Road Fund. 4. ADJOURN Turgeon moved, Woodruff seconded, Adjourning the City Council Work Session of April 19, 2010, at 7:31 P.M. Motion passed 5/0. RESPECTFULLY SUBMITTED Christine Freeman, Recorder Christine Lizee, Mayor