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08-08-11 CC WS Mtg MinCITY OF SHOREWOOD 5755 COUNTRY CLUB ROAD CITY COUNCIL WORK SESSION COUNCIL CHAMBERS MONDAY, AUGUST 8, 2011 6:00 P.M. MINUTES CONVENE CITY COUNCIL WORK SESSION Mayor Liz6e called the meeting to order at 6:01 P.M. A. Roll Call Present. Mayor Liz6e; Councilmembers Siakel, Woodruff and Zerby; Finance Director DeJong; Planning Director Nielsen; Director of Public Works Brown; and Engineer Landini Absent: Councilmember Hotvet; Administrator Heck B. Review Agenda Woodruff moved, Siakel seconded, approving the agenda as presented. Motion passed 4/0. 2. 2012 GENERAL FUND BUDGET Director DeJong stated the meeting packet contains a spreadsheet showing how staff time is allocated for the 2012 General Fund budget. He explained the allocations are based on the average of the actual recorded time for 2008 — 2010 and the actual for the first half of 2011. In the revised 2012 General Fund budget included in the meeting packet General Government and Elections budgets have been merged into the Administration budget. Also, the budgets for Sanitation/Weeds /Waste Removal, Streets and Roads, Traffic Control, and Tree Maintenance have been merged into the Public Works Services budget. Under priority - driven budgeting these two groups are each under one function. He and Administrator Heck discussed possibly splitting Parks and Recreation into two budgets with one being for parks maintenance and the other for parks - recreation. Councilmember Zerby stated it appears to him that some of the staff allocations don't add up correctly. He cited the communications coordinator position as an example. Director DeJong explained that position is budgeted at 0.6 but the individual worked closed to 0.67 in 2008, 2009 and 2010. Zerby noted that the employees in part -time positions appear to be working more hours than they are budgeted to work. DeJong agreed they exceeded the 2010 allocated amount. Councilmember Siakel asked if the work load has increased enough to warrant that. Councilmember Woodruff didn't think the overage is significant enough to worry about. DeJong stated he thought management was going to try and keep the hours worked at the hours allocated. Councilmember Woodruff stated he thought the allocation sheet was "super ". For example, the allocation shows how much staff time is being spent on recycling. Director DeJong noted staff time is being spent on Southshore Community Center (SSCC) related activities but that staff time is not being charged to the SSCC budget. It's charged back to General Government at year end. Councilmember Woodruff explained when the City entered into an arrangement to manage the SSCC for three years Council decided not to charge the SSCC budget for staff time at that time. Woodruff stated at some point staff time should be charged back. Woodruff commented that in 2010 approximately $17,000 in staff time was spent on SSCC related activities. Councilmember Siakel asked why three people are spending time on SSCC related activities when there is a Director for the CITY OF SHOREWOOD WORK SESSION MEETING MINUTES August 8, 2011 Page 2 of 4 SSCC. DeJong explained the communications coordinator works on SSCC newsletter items and the web designer works on SSCC web items. Woodruff stated staff provides backup phone support. Zerby noted that the Southshore Senior Partners also provide phone support. Mayor Lizde recommended Council discuss the City's role in managing the SSCC during its August 22 "d work session. Councilmember Woodruff stated if the SSCC budget is going to be merged into the Parks and Recreation budget in the future the staff time being spent on SSCC related activities should also be put in that budget. Director DeJong stated he has asked staff to continuing to code where they spend their time. The goal is to make the budget reflect reality. That is the only way to provide Council and staff with accurate decision making information. Councilmember Woodruff stated it appears to him that the reallocation of labor had almost no impact on the enterprise budgets. He then stated if General Fund departments are combined as stated above there will be people responsible for functional areas sharing a budget. That could present a management problem. He noted he doesn't have a problem with it as long as management doesn't. Director DeJong responded Administrator Heck will be responsible for Administration and Director Brown will continue to be responsible for Public Works Services. Councilmember Woodruff stated the most recent 2012 General Fund budget reflects a $227,000 deficit and that needs to be fixed this evening. Mayor Lizde stated that doesn't have to be solved this evening. Councilmember Zerby asked why there is nothing budgeted for cellular antenna revenue in 2012. Director Brown explained the City earns approximately $18,000 in revenue for each tower; a total of $36,000. Director DeJong stated a previous Council chose to put that revenue in the Water Fund. Councilmember Woodruff stated the Water Fund is over funded and that revenue could instead be put in the General Fund and that would reduce the deficit some. Director DeJong stated municipalities budget such revenues in various places. Mayor Lizde asked what is included in Miscellaneous Revenue. Director DeJong stated he would have to research that. Councilmember Zerby noted that General Fund expenditures have increased over $54,000 when compared to the adopted 2011 General Fund budget and that is close to 25 percent of the 2012 budget deficit. Director DeJong explained the Council budget includes approximately $34,000 for wage and benefit adjustments. There is 2 percent for salaries and $25 per month per employee for benefit increases. In response to a question from Councilmember Zerby, Director DeJong explained there are 3.85 full -time employees budgeted for in the Administration budget. The total persomlal services budget in Administration for 2012 is $360,000. Director DeJong explained that for 2012, 70 percent of his salary and benefits are in the General Fund budget and the rest, 30 percent, is allocated to the enterprise budgets. Councilmember Woodruff stated the Ice and Snow Removal / Materials and Supplies budget for 2012 is approximately $45,000 (the same as the 2011 budget). The 2011 year -to -date actual amount spent is approximately $14,000. Director Brown explained motor snow falls can create ice conditions and that results in a greater use of salt and ice than heavier snow falls do. The 2012 budget is based on tonnage used over the years and the increase in costs for transporting it. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES August 8, 2011 Page 3 of 4 Woodruff then stated the transfer into the Local Street Reconstruction Fund for 2012 is $21,000 higher than the 2011 transfer amount. He recommended that additional amount could be funded out of General Fund reserves or even the Community Infrastructure Fund. Woodruff went on to state for a number of years there has been a transfer of $40,000 from what used to be called the Liquor Fund into the General Fund. Funds in the Liquor Fund were transferred into the Community Infrastructure Fund at the end of 2010 for accounting reasons. The City has been transferring funds out of the then Liquor Fund for at least eight years. From his vantage point one of the premises of the sale of the liquor operations was once they were sold the City could make enough money on the interest earned on the proceeds of the sale to continue to transfer $40,000 from the Liquor Fund to the General Fund. The interest earned for the last few years has not amounted to $40,000, but that doesn't mean the City shouldn't continue to transfer funds from what had been the Liquor Fund to the General Fund. In some ways, that transfer has been paying for the $42,000 transfer to the capital Park Capital Improvement Fund. He recommended a $40,000 transfer from the Community Infrastructure Fund to the General Fund in 2012 or using $40,000 in General Fund reserves instead. Mayor Liz& asked what interest has been earned on the funds from the City's liquor operations (approximately $825,000). She stated this Council needs to decide how those funds should be used. She noted the City has been transferring $40,000 to help balance the General Fund budget for quite some time. She stated she thought those funds could be put into a community and environmental fund. There are projects down the road that must be paid for that deal with things such as water quality, stormwater management, and water issues. Issuing grants for neighborhood environmental projects that would be approved by the Park Commission and the City Council would be a good investment. Those projects could possibly be done in partnership with the Minnehaha Creek Watershed District. She expressed she is not in favor of continuing to take $40,000 from the funds from the liquor operations because she does not think that is a prudent thing to do. Councilmember Woodruff suggested using $40,000 in excess General Fund reserves instead. He commented that there is $400,000 more in the General Fund balance than is required by the City's General Fund Balance Policy which is 55 — 60 percent of the next year's budgeted expenditures. He again suggested using $21,000 of the excess to fund the $21,000 increase in the transfer to the Local Street Reconstruction Fund. Councilmember Zerby stated he thought the use of $21,000 for roads would be okay. Woodruff stated that the City receives property tax revenues twice a year and for the first half of the year the City has to fund operations out of its reserves. Councilmember Siakel stated during the last Council meeting the auditor explained that based on information from 120 cities of similar population their 2010 average General Fund balance, as a percentage of expenditures, was 63 percent. She stated she could support bringing the balance down to 63 percent of the 2011 budgeted expenditures. Councilmember Woodruff commented 63 percent is an artificial number. Woodruff stated the Office of the State Auditor's recommendation and the City's auditor's recommendation on the reserve level are both below the City's policy. Councilmember Woodruff stated the City keeps taking money from its residents every year and it doesn't spend all of it. At best the City is earning 0.02 percent on those monies. From his vantage point that is a travesty. He then stated the City couldn't spend General Fund reserves in 2010. Director DeJong clarified the City spent approximately $29,000 in reserves in 2010. Woodruff stated the plan was to spend $155,000. Therefore, the City put another $125,000 in the "sock ". DeJong clarified the City didn't put anything additional in the "sock'; it just didn't take as much out as anticipated. Director DeJong explained that in essence the City's history for the last couple of years says the City has the ability to have a balanced budget with the planned use of $125,000 in General Fund balance. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES August 8, 2011 Page 4 of 4 Expenditures have been budgeted higher than actual and revenues have been budgeted lower than actual. The gap becomes a surplus. If the directive was to take those discrepancies out of department budgets it would be challenge to budget because the department budgets are close to actual expenditures and revenues. Because there is consistently a surplus in the General Fund budget the use of General Fund balance can be used to fund the General Fund balance without actually taking any of it out. That goes a long way toward solving the $227,000 deficit problem. Councilmember Woodruff asked Director DeJong if he was saying that about 60 percent of the $227,000 is already in the budget because there is always a surplus. Woodruff said you can't put that into the budget; the budget has to show where the money is going to come from. The budget would have to show it will come from reserves but reserves will probably not have to be used. Councilmember Zerby stated he supported using $21,000 in reserves to fund the increase in the transfer to the Local Street Improvement Fund and putting the approximate $36,000 in cellular antenna revenues into the General Fund. Councilmember Woodruff stated he could support taking $21,000 from the Community Infrastructure Fund for road improvements, putting cellular antenna revenues into the General Fund, and taking the rest out of General Fund reserves to balance the budget. He could explain that to residents. He commented he hasn't heard anyone say they want to reduce expenditures. Councilmember Zerby stated lie is not sure there is much fat in the 2012 budget. Councilmember Woodruff agreed with that statement. Councilmember Zerby then stated it may be possible to reduce the Parks budget or staff but he doesn't think anyone wants to do that. Councilmember Woodruff suggested the public safety organizations, the City's Public Works Department and the other South Lake cities look into the feasibility of a group buying agreement for buying fuel. Director Brown explained that has been done and so far the savings that could be gained by buying through Hennepin County would not cover the cost of creating the infrastructure that would be needed. Brown noted that the South Lake Minnetonka Police Department Chief Litsey is researching alternative fuels. 3. ADJOURN Zerby moved, Siakel seconded, Adjourning the City Council Work Session of August &, 2011, at 6:57 P.M. Motion passed 510. Christine Liz6e, Mayor RESPECTFULLY SUBMITTED Christine Freeman, Recorder