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08-13-12 CC WS MinCITY OF SHOREWOOD CITY COUNCIL WORK SESSION MONDAY, AUGUST 13, 2012 MINUTES 1. CONVENE CITY COUNCIL WORK SESSION Mayor Liz6e called the meeting to order at 6:01 P.M 5755 COUNTRY CLUB ROAD COUNCIL CHAMBERS 6:00 P.M. A. Roll Call Present. Mayor Liz6e; Councilmembers Hotvet, Siakel, Woodruff and Zerby; Interim Administrator Joynes; Finance Director DeJong; Planning Director Nielsen; Director of Public Works Brown; and Engineer Landini Absent: None B. Review Agenda Zerby moved, Woodruff seconded, approving the agenda as presented. Motion passed 5/0. 2. 2013 BUDGET DISCUSSION Interim Administrator Joynes acknowledged a typographical error in his budget overview memorandum dated August 8, 2012. He noted the amount for Salary & Insurance Charges under Updated Budget Gap Calculations should be $31,080 instead of $1,080. Joynes highlighted the 2013 Operating Budget discussion that occurred during Council's July 23, 2012, work session. There were a member of budget assumptions that were used. All staffing and service levels for 2013would remain the same as in 2012. There would be no tax levy increase for 2013. An inflation factor for goods and services of 1.7 percent was factored into the Budget. The 2013 AFSCME contract increases of I percent for salary and $25 in the City's portion of the contribution to health insurance premiums will is also factored in for non -union City staff. [AFSCME is the American Federation of State, County and Municipal Employees, AFL -CIO labor union and it represents the City's Public Works employees.] The Budget reflects the use of $87,135 in General Fund balance. Based on the assumptions expenses exceed revenues by approximately $107,354. Joynes explained the draft of the 2013 Budget included in the meeting packet incorporates the following changes in expenditures. Salary & hrsurance Changes was increased $31,080. That comes from applying the AFSCME contract settlement amounts to the 2012 wages. The Council Contingency line item was reduced by $9,525. That is derived by subtracting 1 percent of the 2012 non -union wages from the $20,000 that had been budgeted for performance pay in the draft budget discussed on July 23` An expenditure line item in the amount of $5,437 was added for the City's share of $10,000 request from the South Lake Minnesota Police Department (SLMPD) member cities to fund the long -term care and maintenance of the public safety facility located in Shorewood. 2013 is the first year of funding for that need. The cost of receiving services from the Mound Fire Department was reduced $1,517. Based on these changes there was a net expenditure increase of $25,475. That in turn increased the budget gap to $133,009 from the July 23 ` amount of $107,534. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES August 13, 2012 Page 2 of 4 Joynes then explained this current draft of the 2013 Budget incorporates the following changes in revenues. An additional $110,000 transfer in of cellular antennae revenue was factored into the Budget to increase it to $150,000 from $40,000. In the line item Refunds and Reimbursements, $10,000 was added for a refund from the League of Minnesota Cities Insurance Trust. Building permits was increased by $12,000 (from $80,000 to $92,000). The line item Plan Check Fees was increased $3,000 (from $12,000 to $15,000). There was a $75 increases in the line item Recreation Fees and a $4 reduction to compensate for rounding changes. These result in a net change in revenue of $135,071. Joynes reviewed the proposed option for balancing the Budget. The revenues generated from the 2013 tax levy, based on a zero percent increase, would be $4,763,319. The total revenues recommended for the Budget are $5,128,900. With the enhancements just discussed in the amount of $135,071 and the use of General Fund reserves in the amount of $85,703, the total revenues would be $5,349,404. The recommended expenditures are $5,349,044. If the proposed changes are adopted by Council the Budget would be balanced. Joynes explained how things would comply with the City's General Fund Balance Policy (the Policy) adopted in 2007. The 2011 year -end General Fund balance is estimated to be $3,460,021. The proposed 2013 operating expenditures are proposed to be $5,349,044. Therefore, the General Fund reserve level ($3,460,021 / $5,349,044) is approximately 64.7 percent. The Policy requires a reserve level of 55 — 60 percent of the next year's budgeted expenses. Therefore, there is 4.7 percent above the maximum amount. The Policy also stipulates that only 3 percent of reserves can be used in any one year. For 2013 that amounts to $159,954. Joynes then explained the proposed budget already includes the use of $85,073 in reserves. Therefore, an addition $74,881 in General Fund reserves should be used based on the Policy to bring the reserve level to close to 60 percent. The excess reserves can be used for specific one -time projects, acquisitions, or transfers to any City capital fund (e.g., the Equipment Replacement Fund or the Trail Fund). It is at Council's discretion how to use those excess reserves. Joynes stated that on the meeting agenda for the Council meeting following this work session there is an item about the potential write -off of uncollectable accounts receivables. He noted that Staff is going to ask that it be pulled from the agenda until more historical investigation can be done. The write -offs will have a minor impact on this draft of the budget. The will have some impact on the 2011 audit. He then noted the budget numbers presented this evening will be within $1,000 - $2,000 of what they will actually end up being. Joynes stated that during this meeting Council may want to discuss how to use the approximate $74,900. Council may want to move forward with some part of the Trail Plan. Or, the equipment Replacement Fund could also use additional funds. Mayor Liz6e asked the other Councilmembers members for their comments and suggestions. She also asked Staff for any additional suggestions. Councilmember Zerby stated he is pleased that there are General Fund reserves above the Policy level available for use. He thought it appropriate to adhere to the Policy and use the excess reserves. He clarified that when he discussed the use of cellular antennae revenue during Council's July 23` budget work session he was not suggesting that all of the revenues earned in 2013 be transferred into the General Fund. His recommendation was to use a portion of the approximate $150,000 in revenue and to use reserves to help balance the Budget. He stated he was open to using some of the excess reserves for trails. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES August 13, 2012 Page 3 of 4 For example, the short segment of trail proposed for along Country Road 19 from the LRT Trail to the shopping center in Tonka Bay. Councilmember Siakel expressed her appreciation for being provided options for how to balance the Budget. She noted she does not want the reserve level to go below 60 percent. She stated when the Policy was adopted in 2007 the City did not have a Community Infrastructure Fund. The City had not sold its liquor operations at that time and the proceeds from that sale and liquor operations contributed significantly to the balance in that Fund. She then stated Council has the option to use some of that Fund to initiate a trail project. She went on to state she would prefer to take an approximate $85,000 to balance the Budget and leaving the approximate remaining excess of $75,000 in reserves. She noted that she can accept transferring all of the approximate $150,000 in cellular antennae revenue into the General Fund in 2013, but she is not endorsing doing that in subsequent years at this time. Councilmember Woodruff stated he was surprised to find the Budget includes a performance pay salary pool for non -union employees equal to 1 percent of non -union wages in 2012. . He commented that the minutes for the July 23 budget work session reflect that Councilmember Zerby asked that a performance pay pool of $20,000 be restored. He thought a performance pay pool equal to 2 percent is nominal. He noted that he thought t percent is too low. He clarified that lie is not in favor of spending a lot of money, and stated he would like the pool restored to a 2 percent level. That could be funded by using more reserves. He stated the entire 2 percent pool does not have to be spent. Woodruff then stated from his perspective Council can decide what to do with the reserves in excess of the 60 percent level, after approximately $85,000 have been used, at the end of 2012. He thought $1.8 million was set aside for trails in the Capital Improvement Program (CIP); therefore, he does not think there is a need to allocate any of the excess reserves to trails. He went on to state if a decision is made to transfer some of the excess reserves to some other fund he thought transferring them into the Street Reconstruction Fund would help fund the increase in funding into that Fund to support the spending level in the CIP. He thought there is a transfer of $42,000 into the Park Capital Fund and part of the approximately $75,000 in excess could be transferred into that Fund and not tax to fund the transfer. That may make it possible to not raise the tax levy next year. He reiterated that because $1.8 million is set aside for trails he does not think there is a reason to increase that balance until it is determined there is a need. Councilmember Siakel read an excerpt from the approved July 23, 2012, Council work session minutes which read "Director DeJong clarified there is approximately $1.8 million in the Community Infrastructure Fund. That was going to be transferred on an as- needed basis to the Trail Fund. The transfers were included in the 20 -Year FMP at the full amount because there was no way to know what grants could be available to help offset the cost of trail construction." She suggested Council have a discussion about trail funding at a future meeting. She thought some clarification of intent is needed. Councilmember Woodruff asked if there is an escalator factored into the Budget besides the Street Reconstruction Fund. Director DeJong stated that is the only place. He reiterated that he supports waiting until year -end to decide what to do with the approximate $75,000 in reserves because things can change throughout the year. Councilmember Hotvet stated based on what she has heard this evening the City does have to spend 3 percent in reserves to bring the level of reserves closer to 60 percent. She then stated there are projects that are reflective of the input received from the resident survey and she would like to hear about the costs to do them over the next few months. For example, what is the cost of a feasibility study for a trail segment? CITY OF SHOREWOOD WORK SESSION MEETING MINUTES August 13, 2012 Page 4 of 4 Mayor Lizce stated funds can be assigned to a specific use to adhere to the Policy, noting where it is assigned can always be changed. Councilmember Siakel stated she thought Council has some discretion in how it interprets the Policy. Interim Administrator Joynes stated the only thing that has to be done before September 15, 2012, is the preliminary 2013 Operating Budget has to be approved and the maximum tax levy has to be certified with Hennepin County. Based on discussions it is his understanding that the levy will reflect a zero percent increase when compared to 2012. Between now and the Truth-1 -Taxation public hearing in December Council can finalize some of the items discussed this evening. He noted that to increase the performance pay pool to a 2 percent level would require an additional approximate $10,000. Joynes explained there are other funding options that Council could consider. One is funding part of City staff out of the utility operations. This was discussed during the July 23` work session. Also discussed during the work session was the way the City calculates its reserve level is very conservative. Most other communities calculate it the way the Office of the State Auditor (OSA) recommends. The OSA recommends calculating the reserve level after transfers are made to Capital Funds. The City calculates the level before transfers are made. Doing it the way the OSA recommends would bring the City's reserve level up to 77 percent. Joynes stated that based on the discussion this evening Staff will adjust the performance pay pool to the 2 percent level and it will certify the maximum tax levy Hennepin County. Councilmember Woodruff stated in the past Staff has prepared a resolution for Council's consideration that adopts the General Fund Operating Budget and property tax levy, and levy is then certified with the County. He asked that be done during Council's August 27 ° i meeting. Mayor Liz6e thanked Interim Administrator Joynes and Staff for its efforts. UNMENTIMITFRIT01 Zerby moved, Siakel seconded, Adjourning the City Council Work Session of August 13, 2012, at 6:27 P.M. Motion passed 510. RESPECTFULLY SUBMITTED Christine Freeman, Recorder e Christine Liz6e, Mayor