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08-26-13 CC WS MinCITY OF SHOREWOOD CITY COUNCIL WORK SESSION MONDAY, AUGUST 26, 2013 MINUTES 1. CONVENE CITY COUNCIL WORK SESSION Mayor Zerby called the meeting to order at 6:32 P.M 5755 COUNTRY CLUB ROAD COUNCIL CHAMBERS 6:30 P.M. A. Roll Call Present. Mayor Zerby; Councilmembers Hotvet, Siakel, Sandberg, and Woodruff; Administrator Joynes; City Clerk Panchyshyn; Finance Director DeJong; Planning Director Nielsen; and Director of Public Works Brown Absent: None B. Review Agenda Woodruff moved, Siakel seconded, approving the agenda as presented. Motion passed 510. 2. 2014 BUDGET DISCUSSION Administrator Joynes noted the core structure of the 2014 General Fund Operating Budget (2014 Budget) discussed during the August 12, 2013, Council work session remains intact. The assumptions used when preparing the budget are the same as those presented during the August 12 work session. He reviewed the assumptions. No new services or staff changes are budgeted. Administrator services and engineering services will continue to be contracted out. The budget includes an estimated health insurance increase based on past negotiating history with Local 224, Council 5, of the American Federation of State, County and Municipal Employees labor union. That is part of the salary reserve of 2.5 percent budgeted for union and non -union employees. A $60,000 transfer to the Southshore Community Center (SSCC) has been maintained in the budget to subsidize SSCC operations. There was discussion about putting money aside for restructuring of SSCC based on the outcome of the discussions by the Southshore Center Advisory Committee (SCAC). He stated a 1.5 percent increase in the tax levy increase was recommended for the budget. An additional 1.5 percent Budget was recommended to be added to provide Council with some flexibility during future 2014 Budget discussions. He reminded Council the budget gap in the 2014 Budget recommended by staff on August 12 is $172,358. He stated staff continues to recommend using $102,848 in General Fund reserves to help reduce the unfunded gap. He explained that would leave a remaining gap of $69,510. A levy increase of 1.5 percent would basically balance the 2014 budget. Based on the 3 percent levy limit the maximum increase the City could have is $142,889. The remaining $73,389 ($142,889 — $69,510) of the allowable 3 percent levy increase could be set aside for potential use for the SSCC or for other things that may come up during discussions about the Capital Improvement Program (CIP) that will occur in September and October. The preliminary 2014 Budget expenditures presented on August 12 will go up by $73,389 for a total of $5,594,687. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES August 26, 2013 Page 2 of 4 He explained when staff proposed the 2.5 percent reserve fund for salary increases and insurance increases they thought it would be consistent with a 2 — 2.5 percent increase for salaries for cities and counties in the metropolitan area. Last week the State of Minnesota settled at 3 percent with its two major union groups - AFSCME and MAPE (Minnesota Association of Professional Employees). Those groups represent about 30,000 — 40,000 employees. The 3 percent increase was a surprise to most city administrators /managers; they did not think it would be that high. Based on his professional experience, 3 percent will become the target for most of the unions that have not settled; particularly if it is an AFSCME union organization. It is likely negotiations will slow down because they will become more difficult. He is sponsoring a meeting at Hamlin and will participate in one for the lake area cities to talk about projected increases. He then explained the City's Public Works employees who are represented by the AFSCME union are considered to be a nonessential unit. That means the unit does not have a right to go to an outside third party neutral for determination. The outside neutrals will pay very close attention to the State's settlement because it gives them reason to support 3 percent as a safe settlement. If the Public Works union does not agree with what the City is proposing the employees would have to strike to press its position. It's unlikely that would happen in this situation. It is likely the union will put up a strong fight; he would do the same if he was in their position. He noted that going from a 2.5 percent increase to a 3 percent increase for City staff in general it would amount to about $7,000 more. That amount is not significant to the budget. It could be handled with the use of reserves. He noted the City has a signed purchase agreement for the City -owned property located at 5795 County Club Road. He stated there was an inspection walkthrough earlier in the day. He then stated there are a number of expenses associated with preparing the house for market. He went on to state that in March staff conservatively estimated the proceeds of the sale to be around $250,000. It appears the proceeds will be closer to $275,000 — $300,000. He explained staff is in the process of calculating what the positive impact of the new state law on sales tax exemption effective January 1, 2014, for cities will be. Purchases from each vendor must be reviewed. That process is about one -third complete. So far savings of about $9,000 have been identified if the same purchases were to be repeated in 2014. He stated the two utility rate studies are in progress. The financial firm Ehlers will present Council with a preliminary recommendation for utility rate changes during its September 23 meeting. He stated the SCAC will meet on August 27. For that meeting each representative for the cities that co- own the SSCC is to comment on their city's position. Mayor Zerby has been diligently working to provide options for them. He noted people are going to be meeting with Minnetonka Communication Education (MCE) to talk about another option on September 10 or 11. He then stated the intent had been to talk about Public Works this evening. Council can ask questions about it if it wants. He noted that the City has to certify its maximum tax levy for 2014 with Hennepin County by September 15. The 3 percent levy can be reduced in December but it cannot be increased. Council can adopt a resolution during the Council meeting immediately following this work session which sets the preliminary 2014 General Fund Operating Budget and maximum tax levy or it can do so during its September 9 Council meeting. Council will also be asked to set the date for the Truth -in- Taxation hearing during this evening's regular meeting. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES August 26, 2013 Page 3 of 4 Director DeJong stated that at the dais this evening Council was presented an updated 2014 General Fund Budget summary which highlights two changes. Revenue /Taxes was increased by $73,389 to reflect a total tax levy increase of 3 percent. Expenditures /City Council Transfers was increased by that same amount. Those two changes reflect the changes agreed to during the August 12 work session. Councihnember Woodruff stated he views the $73,389 as funds Council can decide how to use before the final levy is sett. He does not at this time think it will be used solely for SSCC operations. For him it is a general place holder. He then stated he attended the Metro Cities Revenue and Taxation Policy Committee meeting last week. A lot of comments were made during the meeting about the sales tax exemption and there was concern it would not apply to joint powers organizations. He indicated that he thought the Minnesota Department of Revenue may be softening its position on some things, but not the joint powers situation. Councihnember Siakel stated she continues to be comfortable with a 1.5 percent levy increase and using some reserves to fund the budget gap. She noted she supports certifying a maximum levy of 3 percent. She stated from her perspective it's not about funding the SSCC; it's about how it will be funded. She then stated she plans on attending the SCAC meeting tomorrow to find out how discussions about funding SSCC operations and maintenance is progressing. She went on to state the framework for the 2014 Budget presented makes sense to her. She expressed confidence that the final budget will come together over the next couple of months. Councihnember Sundberg expressed her support for certifying a maximum levy of 3 percent. She stated she looks forward to seeing how discussions about the SSCC move forward. Councilmember Hotvet stated it sounds like all of the Councilmembers are in agreement. Councihnember Siakel asked if the equipment replacement schedule in the CIP meets the City's needs. Director Brown stated he discussed the schedule with the Public Works staff. He explained that trimming trees is very expensive and many of the City's rights -of -way have become overgrown with vegetation. He noted the equipment replacement schedule may at some point need to be modified to include a bucket truck and brush shredder. Mayor Zerby stated the budget for Snow and Ice Control indicates that so far in 2013 a little more than half of the budget has been spent. He asked if that spend rate is what it usually is for this time of year. Director Brown stated the year -to -date actual is ahead of schedule. Brown explained people tend to remember the significant snowfall events. Yet, the smaller snowfall and refreeze events can ice up roadways just as much. Director Brown explained the City has moved from a chloride based de -icing solution to a magnesium chloride based solution. Theoretically it is more cost effective. It's a pre - wetted solution and therefore not as much as to be applied. The City has not gone to a total chemically based system. Chlorides started showing up water bodies after transportation departments opted to go with pure salt or other chemicals. He noted that when the Minnesota Pollution Control Agency did its audit of Public Works it complimented the department for deciding not to go to a total chemically based system. He noted the cost of the chemical is a little more expensive and that is reflected in the budget. In response to a question from Mayor Zerby about the Parks Maintenance /Personnel line item, Director DeJong explained that starting in 2012 Recreation was broken out from Parks Maintenance activities. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES August 26, 2013 Page 4 of 4 3. ADJOURN Woodruff moved, Sundberg seconded, Adjourning the City Council Work Session of August 26, 2013, at 6:56 P.M. Motion passed 510. RESPECTFULLY SUBMITTED, Christine Freeman, Recorder Sc t Zerby, Nl ATTEST: Jean Panchyshyn, City lcr