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02-27-12 CC WS MinCITY OF SHORE WOOD CITY COUNCIL WORK SESSION MONDAY, FEBRUARY 27, 2012 MINUTES CONVENE CITY COUNCIL WORK SESSION 5755 COUNTRY CLUB ROAD COUNCIL CHAMBERS 6:00 P.M. Mayor Lizee called the meeting to order at 6:02 P.M. A. Roll Call Present. Mayor Lizee; Councilmembers Siakel, and Zerby; Administrator Heck; Finance Director DeJong; Planning Director Nielsen; and Engineer Landini Absent: Councilmembers Hotvet and Woodruff B. Review Agenda Zerby moved, Siakel seconded, approving the agenda as presented. Motion passed 310. 2. 20 -YEAR MUNICIPAL WATER PLAN Mayor Lizee thanked Staff for preparing a very impressive and extensive 20 -Year Water Plan and accompanying report for expanding the City's municipal water system throughout the City. She stated the report is very easy to understand. Administrator Heck noted that preparation of the Water Plan was a group effort. He explained that Director DeJong and Engineer Landini worked closely with Director Brown on preparing the detailed spreadsheet for watermain extension (a copy of which is included in the meeting packet). Brown also prepared the details, definitions and assumptions section of the report. He asked DeJong and Landini to walk Council through the spreadsheet. Director DeJong stated the Water Plan spreadsheet is fairly thorough and it mirrors the spreadsheet prepared for the 20 -Year Pavement Management Plan (PMP) for each segment of roadway in the City. DeJong explained the Water Plan spreadsheet shows each segment of roadway in the City and whether or not watermain is installed. Director Brown identified what size watermain pipe would be needed and how deep the pipe would have to go down into the ground based on information lie had available. Brown also estimated the cost per segment of roadway to extend watermain. The Water Plan spreadsheet includes one column for the estimated cost to install watermain by cutting open an existing roadway section that is not scheduled for reconstruction and to restore the pavement. There is another column for the estimated cost of installing watermain at the same time a segment scheduled for full reconstruction in the PMP is reconstructed. The costs to install watermain are significantly less when done in conjunction with a reconstruction effort. DeJong then explained that Brown has identified segments where the watermain installed will have to be over sized to meet water system demands over and above meeting the domestic supply demand (the supply used by the consumer). The larger watermain is called a trunk watermain and it is 12 inches in CITY OF SHOREWOOD WORK SESSION MEETING MINUTES February 27, 2012 Page 2 of 6 diameter. It is needed to provide adequate flow to properties further away from the water towers. The domestic supply watermain is 8 inches in diameter. The spreadsheet identifies what size pipe is needed for each segment. It breaks out the installation cost for domestic supply as well as the cost to oversize the watermain. For example, the estimated cost for installing watermain by cutting open an existing roadway section and restoring the pavement along Country Club Road is $339,000 with $28,000 of it being for oversizing the pipe. Ile stated property owners that will be served by the extension should not have to pay the costs of oversizing. DeJong went on to explain the spreadsheet identifies the number of existing lots per segment that will be served. It calculates the cost per lot based on the cost for the domestic supply per segment. The per -lot costs very significantly. The lowest cost is $6,108 and the highest cost is $118,000 (for a watermain segment that would only serve one lot). He stated extending watermain to serve just one property doesn't make financial sense. He explained the average per -lot cost is $15,093 based on 2012 dollars. The average per -lot cost factors in the per -lot cost for segments that would serve only one property. DeJong noted there aren't any watermain installation projects scheduled for 2012. They would have to be in progress by now. He stated an attempt was made to coordinate watermain installation projects with other pavement maintenance activities (seal coating as well as mill and overlay projects), noting that has not been done in a lot of detail. If Council decides it wants to move forward with the Water Plan, Staff can adjust the PMP so that maintenance will not be done to a roadway segment where watermain will be installed a year or three later. For example, the PMP schedules Club Lane to be sealcoated in 2012 and the Water Plan schedules watermain to be installed along that segment in 2013. He noted the meeting packet contains a copy of a map prepared by Engineer Landini which shows where watermain is currently installed, and it depicts where and when watermain will be installed based on the Water Plan. Mayor Liz&e reiterated the Water Plan is very impressive. Councilmember Zerby asked if the capacity of the two existing water towers and the current wells could serve the expansion of municipal water throughout the City. Engineer Landini stated Director Brown has indicated the two towers and the wells would be able to serve the residential watermain expansion identified in the Water Plan. Director DeJong clarified with the exception of the Islands in the City because there is no infrastructure out there. Mayor Lizee asked if the Cities of Minnetrista and Mound have municipal water that could be extended to the Islands. Engineer Landini responded Mound has City water close to the area but he is not sure about Minnetrista. Mayor Liz& noted Council has asked Staff to develop the Water Plan. She clarified that Council is not being asked to approve the Water Plan this evening. She asked Council if it wants the City to implement a 20 -Year Water Plan. She then asked if Council has any thoughts about what the water connection charge should be. She noted the current connection charge is $10,000. Councilmember Zerby suggested hiring an outside consultant with expertise in this area to help with marketing municipal water and to help identify what the connection charge should be in order to entice people to convert from private wells to City water. He commented older communities like the Cities of Rochester and Red Wing have transitioned to municipal water. He expressed confidence that there must be someone with the expertise and broader insight to help the City with this. Councilmember Siakel noted she found the information provided to be very helpful. She appreciated the fact that the information in the Water Plan and PMP are cohesive. She stated she does like the idea of CITY OF SHOREWOOD WORK SESSION MEETING MINUTES February 27, 2012 Page 3 of 6 having a 20 -Year Water Plan. She asked when the 20 years begins. She suggested focusing on the first 3 — 5 years of the 20 years. She recommended engaging the community in discussions about expanding the City's water system. She stated she thought property owners would connect to City water if it was available based on the residential survey results. She then stated communication to the residents is critical and she thought that should be started sooner versus later. She commented that if she had the opportunity to connect to City water she would do that and she noted she thought it would increase the value of her property. She stated if property owners are provided with a 3 — 5 advance warning that water will be extended to their area and options for when that does occur property owners would be more receptive to the idea. She expressed her support for luring a consultant with expertise in this area to help with this effort. She thanked Staff for their efforts. Councilmember Zerby stated if property owners know what City water will be extended to their area in a few years they may decide to do minor things to keep their wells functioning until that time. He then stated there are a lot of opportunities to help entice property owners who have the option to connect to City water but haven't done to do so. He also stated there is a definite need for a long -term water system expansion plan. Mayor Lizee asked if looping the water system (to ensure there is backup) was 'factored into the Water Plan. Engineer Land ni explained the original water plan developed in the 1990s factored in a strategy for creating loops in the system. That was factored into the PMP. Landini explained installing watenmain along Country Club Road and Yellowstone Trail would create an excellent loop. They are some of the first roads on the watermain installation schedule. He stated the first five years of the schedule are hitting the loops and that will create the efficiencies for the Water System. Mayor Lizee stated the next steps should be to focus on the next 3 — 5 years and soliciting public input. She asked Staff to provide Council options for dates for a meeting with residents at the Southshore Community Center regarding City water and the potential plans for expanding the City's water system. Councilmember Siakel requested Council be provided an opportunity to preview a presentation for the meeting. The presentation should address the history of City water and the plans for expansion. Council should be present at the meeting to demonstrate its support. She suggested addressing the first few expansion segments during the first meeting. She asked how to move forward with finding outside expertise to help with this, noting this is a complicated and expensive issue. Councilmember Zerby asked Director DeJong if he has done any analysis of the benefits of additional revenues from new connections to City water. DeJong responded that to date no analysis has been done of the revenue. DeJong explained that because there is sufficient water system infrastructure in place the cost to produce more water is limited. There will be a slight increase in the use of electricity, and the amount of chemicals used to treat the water. There will not be a need to add staff to support 100 — 200 additional users of the system. lie noted he thought it would be cost effective to add more users. Zerby commented that many service providers offer subsidies or incentives to new customers because they will recoup the costs in the new subscription fees for their services. He asked if there is some short- term subsidy the City can offer to entice people to connect to City water. DeJong responded that would be a challenge because that could cause equity issues. DeJong stated he would have a difficult time justifying charging new customers less than the $10,000 connection charge being that is what people have paid most recently. He noted the average cost according to the spreadsheet calculations is that much more. Zerby stated it may be helpful to add a column for additional revenue to the spreadsheet. He thought it would grow exponentially over the years. DeJong stated that could be an interesting analysis but he has CITY OF SHOREWOOD WORK SESSION MEETING MINUTES February 27, 2012 Page 4 of 6 not had time to do that. DeJong suggested putting that on hold until Council decides if it wants to continue to move forward with a 20 -Year Water Plan. He stated Staff will assemble some additional information prior to a presentation at a public meeting. Administrator Heck asked Directors DeJong and Nielsen and Engineer Landini if they think Council has provided them with enough information to move the Water Plan forward. Ile also asked if they had a clear idea of what type of outside resource assistance is needed. Is it to help market the plan or to cost out the plan? He stated one of the questions that will be raised in the public meeting will be about the cost to residents. He then stated he doesn't get the sense from Council that it wants to assess the property owners for 100 percent of the cost to install the watermain. It's his understanding that Council wants Staff to identity policy options for paying for the cost to expand the water system. I-Ie asked how the costs for the expansion should be spread between the benefiting property owners, the City's residents and the City. He reminded everyone of the resident who not too long ago told the City that he thought the $10,000 connection charge is too high because the watermain is already in place near his property. Heck asked Councilmember Zerby what skill sets are needed for a consultant to help with this effort. Zerby stated a person who has helped another municipality go through a similar process. Councilmember Zerby agreed that Council needs to reassess the policy regarding the water connection charge. He noted sometimes the City has subsidized the cost to some extent. He stated there has been push back from property owners because of the $10,000 connection charge. He noted that the City of Waconia splits the installation costs equally between the property owners and Waconia. He noted the City doesn't assess for roadway maintenance; that cost is born by the entire City. He stated he would like to be provided with what type of cost recovery strategies have worked for other municipalities. Councilmember Siakel asked if the schedule in the PMP is fairly firm. She then asked if the consultant could focus on watermain extension projects and associated roadway maintenance projects for the next five or ten years. Administrator Heck stated Council can decide what time period starting in 2013 a more firm and detailed Water Plan and PMP should focus on. Siakel then asked when in 2013 the Plans would start. Siakel reiterated a good communications plan is critical and she stated she supports hiring a consultant with the necessary expertise to help with that. Councilmember Zerby stated he would like there to be a Water Plan that goes out 20 years. He noted any future Council can change things. Councilmember Siakel clarified she thought having a 20 -Year Water Plan is a good idea but she thought the main focus should be on the first five years of the Plan. Mayor Lizee and Zerby agreed with Siakel. Mayor Lizee suggested Council agree to a 2012 goal of refining the water policy and confirming which projects will be done in 2013. Councilmember Siakel asked Staff if it has what it needs from Council to continue to move forward Director DeJong stated during its regular meeting following this work session Council is going to consider a resolution approving the specifications and estimate and authorizing the advertisement for bids for the 2012 mill and overlay project. Club Lane is one of the roadways in that project, yet it is scheduled for watermain installation and sealcoating in 2013. Fie suggested that before Council awards the bid it decide if it wants to include Club Lane in that project should the 2013 watermain installation come to fruition. He stated it makes sense to consider watermain installation when reconstruction occurs. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES February 27, 2012 Page 5 of 6 DeJong explained that last week the City received a call from someone who was relocating their elderly parents and needed to sell their property. The child found out there is a deferred assessment against the property for watermain that was installed in 1996. The parents did not want to hook up to City water at that time and they were over 65 years of age at that time so they qualified for the deferral. The assessment at that time was $5,000. It is now over $10,000 when interest is factored in. DeJong questioned how to ensure enough property owners will hook up to the watermain after it is installed to make it pay off. He stated there is no way to project that. Therefore, there is no way to project when the City will receive the additional water revenues. He noted there are a number of properties that could be connected to City water but the property owners have chosen not to connect to it. He asked Council if it wants to create a policy that requires property owners to connect to City water within a defined number of years after watermain being installed. Councilmember Zerby stated he thinks the reason that there are around 300 properties that are not connected to available watermain is because the cost to connect is too high. From his vantage point it is a conversion problem; converting from well water to City water. He then stated the City is trying to find the answer to that problem. He went on to state being on City water is the way of the future for a number of reasons with one of them being safe water. Hopefully outside expertise can help the City figure out how to entice property owners to convert. He also stated the City could mandate property owners connect to City water as soon as it is available to them. Or the connection charge could be lowered to something they will accept, noting that is his desire. Director DeJong stated it makes Staff nervous to hear it is too expensive to hook up to City water for a cost of $10,000 knowing the calculated average per -lot cost to install watermain is slightly over $15,000. He then stated that lie knows of other municipalities that when they have installed city water have run into opposition from residents. He indicated he anticipates similar opposition to the 20 -Year Water Plan. He stated using modest inflation assumptions the cost to implement the Water Plan will be close to $30 million. Mayor Liz6e agreed there are a lot of policy items that have to be addressed. Administrator Heck summarized his understanding of the concerns and desires he heard Council express this evening. There is a desire for Staff to identify meeting date options and to prepare a presentation about the history of the water system and plans for expanding it. Staff is to find out what outside resources are available for hire to help refine the 20 -Year Water Plan with a strong focus on the first five years; and, to review and refine if necessary the financial analysis including revenues. There is desire for Staff to identify various policy options regarding installing watermain, connecting to watermain and charging for the connections for Council to consider. Heck stated the Water Plan provides Council with a lot of information but not enough for it to approve the Plan. Before that can be considered Council needs community input and additional financial analysis. Council also needs to consider options about how to pay for the expansion over the next few years. He noted that it will take at least 2 — 2.5 months at a minimum to get policy related options together and to do some additional financial analysis. He explained Rusty Feld, Senior Vice President with Northland Securities, worked with the City on developing a new water rate structure. He asked Director DeJong if Mr. Fifield could do the cash flow analysis and how long it will take to do that. DeJong stated he isn't sure if Mr. Fifield is the right person to do ensure looping of water system expansion is factored in appropriately, but he is capable of doing the financial analysis. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES February 27, 2012 Page 6 of 6 Heck indicated there may be a need to hire two consultants with different areas of expertise; one with engineering expertise and one to do additional financial analysis. He stated he thought it will take at three months to do what Council is asking for. Director DeJong stated Staff will need to obtain formal authorization from Council to engage a consultant. That will not happen until Council's March 12, 2012, meeting. After that it will take time to get proposals from various consultants and authorization to accept a proposal. Administrator Heck stated he thought WSB & Associates conducted the 1990s water study. Engineer Landini clarified WSB & Associates did not exist at that time, and he stated he thought OSM did that work. Heck then stated the next step for Staff is to provide Council with a proposal for getting outside consulting services for consideration during its March 12` or March 26 meeting. Staff will research when the Southshore Community Center is available for a public meeting. Mayor Liz& suggested giving Staff until the March 26` meeting to present a proposal for consultants. 3. ADJOURN Siakel moved, Zerby seconded, Adjourning the City Council Work Session of February 27, 2012, at 6:49 P.M. Motion passed 310. RESPECTFULLY SUBMITTED Christine Freeman, Recorder it J ATTEST Christine Liz6e, Mayor , fi t 7 arLe it 2? , Je 9 n Panchyshyn, Deput City 6erk