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10-14-13 CC WS MinutesCITY OF SHOREWOOD CITY COUNCIL WORK SESSION MONDAY, OCTOBER 14, 2013 MINUTES 1. CONVENE CITY COUNCIL WORK SESSION 5755 COUNTRY CLUB ROAD COUNCIL CHAMBERS 6:00 P.M. Mayor Zerby called the meeting to order at 6:00 P.M. A. Roll Call Present. Mayor Zerby; Councilmembers Hower, Siakel and Woodruff; Administrator Joynes; City Clerk Panchyshyn; Finance Director DeJong; Planning Director Nielsen; Director of Public Works Brown; and City Engineer Homby Absent: Councilmember Sundberg B. Review Agenda Woodruff moved, Siakel seconded, approving the agenda as presented. Motion passed 4/0. 2. 2014 CAPITAL IMPROVEMENT PROGRAM AND ENTERPRISE BUDGETS Administrator Joynes explained this evening he will talk about components of the 2014 Capital Improvement Program (CIP) and the 2014 Enterprise Budgets. He will relate that to the discussion about the City's fiscal situation eight years out that took place during the March 2013 Council and staff retreat. The budget assumptions staff used during March 2013 were no increase in the tax levy over 2013, no fee increases, no utility rate increases, 2 percent inflation in expenditures each year, and current service levels would be maintained (no new services, equipment for facilities). For the March retreat staff prepared a graph of projected fund balance surpluses /deficits in 2021 for the City's various funds. For the Water Fund the graph reflects a desired reserve of $295,000 and an estimated cash balance at the end of 2021 of $5,108,507 which results in a surplus of $4,813,507. The projected total deficit at the end of 2021 based on the desired reserves and estimated cash flow for all of the funds combined yields a deficit of $2.255,531. The activities and actions taken between the March retreat and to date based on Council's direction were reviewed. During the retreat staff explained there was a need for a minimum tax levy increase over 2013 of 1.5 — 2 percent. During September Council certified a maximum levy increase of 3 percent. Council approved sewer and storm water utility rate studies to determine what the rates need to be to eliminate the projected deficits for the Sewer Fund and Stormwater Management Fund. The recommendations from the studies will be presented to Council during its October 28 work session. Staff was directed to sell the City -owned property located at 5795 County Club House. It was sold for an amount of $317,182. The net proceeds after preparation costs and commissions were $288,596. The proceeds have been deposited in the General Fund. The rental earned on the property between 2007 and the sale was $69,921. The total return on the property was $358,571. The original purchase price for the property was $305,517. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES October 14, 2013 Page 2 of 8 Councilmember Woodruff stated it's his recollection the City spent about $18,000 on the house in 2007 to bring it to a rentable condition after a problem rental. Administrator Joynes continued with his review of actions taken since March with regard to the budget and CIP. He explained Council and the Park Commission have had discussions about improvements to Badger Park. The improvements have been scaled back slightly. Some of the improvements are a realignment of the ball field, realignment of the access to parking, and an increase in the amount of parking. There is an estimated $312,000 gap between the projected cost of improvements and the balance in the Park CIP Fund. The review of the Southshore Community Center (SSCC), the Equipment CIP and CIP technology upgrades are in progress. There is a semi proposal out to Minnetonka Community Education (MCE) regarding the possibility of co- programming the SSCC. There will be a meeting with ICA Food Shelf the week of October 21 to discuss its need for space. The draft 2014 budget will fund, at a minimum, the current level of service at the SSCC which is provided by part-time professional help from City staff and hourly building coordinators. That cost for that would be $50,000 — $60,000. The equipment replacement schedule has been revised. The actual/estimated construction costs of the three committed trail projects are: Smithtown Road west sidewalk— $1.46 million; County Road 19 trail /sidewalk — actual $80,397 (the budget is $72,000); and, Excelsior Boulevard — $180,000 (the budget is $30,000). The total cost for the three committed projects is $1,720,397. The estimated costs of the next priority trail segments are: Galpin Lake Road — $806,800; Mill Street — $735,000; and, Smithtown Road east — $938,000. The total cost for the three future trail segments is $2,580,550. The estimated costs for the future projects have been adjusted upward based on the actual costs for the three committed projects. The Future projects will all have complexities similar to the Smithtown Road west project. The three future trail segments will be built to Minnesota State Aid (MSA) standards so MSA funds can be used to help fund them. Therefore, the cost for them is higher. The total amount for the committed and planned trail projects is $4,300,947 and the cash available at the end of 2012 was $1,633,908. That leaves a funding gap of $2,637,039. There was review of some options that could be used to reduce the aggregate funding gap for things such as trails, Badger Park improvements and so forth. The $288,596 in proceeds from the sale of the City - owned property could be used to help reduce the funding gap. Staff has determined that approximately 25 percent of the Smithtown Road west trail cost could be legitimately charged to the Stormwater Management Fund. That would amount to approximately $735,000 for the Smithtown Road west project. Staff believes that rough percentage will hold true for the next three future projects. There is about $130,000 in MSA Cash and Allocations available at this time. The yearly allocation is about $280,000. Of that 25 percent is earmarked for roadway maintenance or MSA quality trails. The only MSA classified roadway in the 20 -Year Pavement Improvement Plan (PMP) scheduled for reconstruction is Eureka Road North. Most of staff thinks that roadway will not end up being reconstructed to MSA standards. In order to do that it would require widening the road significantly resulting in a lot of tree removal. Cities often put roadways in their MSA roadway improvement plans as placeholders. There would be approximately $1,098,044 in MSA Cash and Allocations available if the current cash balance and the 2013 — 2016 cash allocations are combined. Mayor Zerby asked about outside funding sources from agencies such as Hennepin County and the Minnehaha Creek Watershed District (MCWD). Administrator Joynes stated outside funding sources have not been factored in, noting staff will pursue any possible funding source. Councilmember Woodruff clarified the City has more than one City -owned roadway that is classified as an MSA road. Eureka Road North is the only one scheduled for reconstruction in the PMP. He asked if CITY OF SI3OREWOOD WORK SESSION MEETING MINUTES October 14, 2013 Page 3 of 8 staff has re- estimated what it would cost to reconstruct Eureka Road North if it were not reconstructed to MSA standards. That cost should be substantially less. Councilmember Woodruff stated the Stormwater Management Fund will have an approximate $750,000 deficit by the end of 2021. Therefore, there is no way to take $735,000 out of that Fund to pay for stormwater management improvements made as part of the Smithtown Road west sidewalk project. Administrator Joynes explained that staff has directed Ehlers, the firm that is doing the storm water utility rate study, to present two scenarios. One with rates that would meet the stormwater management improvements needs not including improvements made as part of trail projects and one with the 25 percent cost of the improvements made as part of trail projects. Woodruff stated if funding stormwater management improvements made as part of trail projects out of the Stormwater Fund becomes reality then significantly new revenue will have to be raised somehow. Joynes noted it will look like a significant percentage increase but the rate for stormwater is not significant. Woodruff stated he did not want this to be a shell game where expenses were moved from one fund to another. Joynes noted that is not the intent. Joynes stated each of the choices have consequences. Administrator Joynes stated this evening staff is looking for direction from Council. Councilmember Siakel stated she has no issue funding some level of stormwater management improvements made as part of a trail project out of the Stormwater Management Fund. She thought the improvements made as part of the Smithtown Road west sidewalk project will help meet future stormwater needs. She asked if there are things that should be included in the stormwater management plans to address things such as serious flooding that are not currently included. Director Hornby stated that some of the weather related catastrophes that have occurred around the country were because of heavy and/or prolonged rain events. He explained that typically the storm sewer system in the City is designed to handle 5 — 10 year storm events. To design for a 100 -year event would be extremely expensive. Often times what is done instead is to have the overland flow handle the stormwater. He then explained Minnesota has updated the hydrology information. It's likely that the 100 - year -rain events have more volume to deal with than they did before based on the hydrology patterns. Councilmember Siakel stated the League of Minnesota Voters sponsored Paul Huttner, a meteorologist, to talk to its membership and the topic was rain events and their changing pattern. The 100- year -rain event may be less frequent but there is more rain. Director Homby stated for some of the subdivisions in the future staff will have to look at different hydrology curves to design from than those used in the past. More easement will have to be purchased for storage and handling volume. Director Brown reiterated the storm sewer system is designed for a 10 -year event. He stated that when the larger events occur the assumption is the storm sewer system will be inundated and the runoff will be carried by roadways and roadside ditches. He then stated the ditch along Grant Lorenz Road carries stormwater runoff from about one -third of Shorewood. Over the years property owners along that area have been asked if it would be okay for the City to stabilize the area so there is no catastrophic problem from a significant event. Councilmember Woodruff stated on the meeting agenda for the regular Council meeting following this meeting there is an item related to Municipal Separate Storm Sewer System (MS4) design services. That project is about the new MS4 rules that must be complied and that compliance will cost money; money CITY OF SHOREWOOD WORK SESSION MEETING MINUTES October 14, 2013 Page 4 of 8 that is not budgeted. Director Brown stated some of the new rules are being challenged be many communities. Woodruff stated that the new rules will not be known until mid -2014. Administrator Joynes continued with describing funding sources for filling the immediate funding gap. He explained the City has the ability to transfer funds from the Water Fund (for an approximate amount of $3 million) and the Sewer Fund (for an approximate amount of $2 million). Some amount of increase in the storm water rate is assumed. Joynes explained there are some philosophical issues that must be considered. One is the Water Fund is funded by only half of the City; those on municipal water. The full City funds the Sewer Fund and Stormwater Management Fund. Council should discuss the fairness of using money from funds that are funded by the entire City versus those funded by only a portion of the City. The trails are probably considered a City -wide benefit. From an equity perspective it may make more sense to transfer money from the Sewer Fund because it is funded from the City as a whole. He noted the City has the ability to do both. The City could gift the money to the Trail Fund to build trails. He highlighted items staff would like Council to give direction on. He explained one is if Council wants to fund all or part of the following — the Galpin Lake trail segment, the Mill Street trail segment, the Smithtown Road east trail segment, Badger Park improvements, the SSCC, and funding the equipment gap. It's assumed that the City will finish the three trails it has committed to for 2013. . He stated the amount of money identified for Badger Park improvements in the Park CIP was over $500,000. The cost of the improvements has been downsized by about $100,000, but he is not comfortable saying the amount in the CIP should be reduced. Badger Park improvements have been talked about in conjunction with the SSCC. It is still not known what the SSCC will be like in the future. Therefore, it may make sense to phase in improvements to Badger Park. If improvements are going to be made to the Park the ball field has to be reoriented. The field will have to sit fallow for a year. Therefore, it will be at least a two -year process. He stated if improvements are going to be made he suggested reorienting the field and taking out the hockey rink first. By the second year hopefully the City will have a better understanding about the character of the SSCC and then the access and parking improvements can be made. Depending on what is decided about the character of the SSCC other amenities on the park land can be added between the ball field and the SSCC. There are options on the table for the SSCC that may change it to a significant extent. He recommended going into this slowly. There is no urgency to make a decision about the access to the SSCC and parking for the SSCC and Badger Park. The draft budget does not include funding for capital improvements to the SSCC. There are funding issues for City equipment and technology purchases. Additional funding options are the proceeds from the sale of the house, paying for stormwater management improvements done made as part of trail projects in part from the Stormwater Management Fund, using MSA cash and allotments, rate increases, and transfers from the Water Fund and the Sewer Fund. Administrator Joynes stated the actions taken during this budget process will solidify the major funds and activities over the next 2 — 3 years. Some minor adjustments will have to be made in a few years. He noted this funding exercise is a progressive task. The decisions made this year will go a long way to achieving that. He again asked Council what it wants to do with the major items talked just about and what combination of funding sources it wants to use. When that is known staff will then come back the exact dollar amounts. Councilmember Siakel stated she thought that constructing the Galpin Lake Road, Mill Street, and Smithtown Road east trail segments is out of the City's reach. She suggested putting the Mill Street CITY OF SHOREWOOD WORK SESSION MEETING MINUTES October 14, 2013 Page 5 of S segment to the side for a least a few years. She asked staff which of the other two trails would have more traffic. Maybe those two trails could be done over the next two years. Administrator Joynes suggested constructing the Galpin Lake Road trail segment in 2014 because work has been done on it. The planning work for constructing Smithtown Road east trail segment in 2015 could be done next year. Councilmember Hotvet asked what the priority for the Smithtown Road east trail segment is in the Trail Implementation Plan. Director Nielsen responded it's after the Galpin Lake Road and Mill Street trail segments. Director DeJong stated there is a small section basically from CUB Foods to the trail in the City of Chanhassen near Minnetonka Middle School West that was originally scheduled for 2016 and then Smithtown Road east is scheduled for 2017. Councilmember Woodruff stated from his perspective addressing the Equipment Fund gap is the top priority. If the City does not have the money to purchase the Public Works equipment that is scheduled to be replaced the City cannot provide the level of service it does today. He would put the SSCC on the back burner for now. He would like to have some of the Badger Park improvements done. If a trail is going to be constructed then he recommends doing the Galpin Lake Road trail segment next. But, that would be contingent on what the costs are projected to be after the design work is done. Woodruff noted that based on information provided by Director DeJong there is an approximate $8 million deficit for all of the trails. He suggested Council consider bonding. If trails are so important the voters should be asked consider a bond issue and pay for the trails over a 20 -year time period. He stated for every $1 million bond issue it will cost the City about $80,000 a year to service a bond over 20 years. That would be a 1.5 percent tax increase. Councilmember Siakel stated that is something that can considered. If residents truly want to have more trails throughout the City then that would be the way to do it. If the trails would be phased in, then there are the two that are being considered as the next priorities. There is a lot of support for them. She then stated the City issued bonds for the City Hall renovation a few years back. The bonded debt for the public safety facilities will be paid off in 2023. Some trails could be built over the next few years and then others could possibly be funded with a bond issuance. Councilmember Woodruff stated when bonded debt for the public safety facilities is paid off the approximately $500,000 yearly payment [the aggregate amount funded by the various member cities] will free up money for the City. Councilmember Siakel noted there are things that will need to be done to the facilities and there has been discussion about using some of that money for various purposes. Woodruff stated the City should consider reallocating some of or all of its share of that payment to City projects that have been on the back burner for the last 10 years. Councilmember Woodruff stated the yearly bonded debt payment for City Hall is about $90,000. Councilmember Siakel asked when the bonded debt for City Hall will be paid off. Councilmember Woodruff stated he thought the bonds have a 20 -year payoff. Councilmember Woodruff stated the City could use the money it contributes to paying the bonded debt for the public safety facilities for things such as trails when the debt is paid off. Councilmember Siakel stated the facilities are going to age and need capital repairs. And, the level of reserves for police and fire are not that large. She cautioned against believing that all of payment can be used for things not related to police and fire. She stated she does think maybe some of it can be used for the City's infrastructure. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES October 14, 2013 Page 6 of S Mayor Zerby stated he agrees that addressing the Equipment Fund gap is important. He then stated lie continues to encourage staff to work with the MCWD in partnership on the Badger Park improvements. A lot of the improvements are contingent on getting the MCWD involved. That may take another year for staff and the Park Commission to share their vision for the Park with the MCWD and for the MCWD to share its vision. He noted he is not interested in making a huge investment in the Park without getting help from the MCWD. He explained the land the Park is on used to be swampland. There is a lot of water that drains directly onto Lake Minnetonka off the City Campus and County Road 19. The MCWD has mentioned before that it would be interested in being involved. Councilmember Siakel asked if the desire to work with the MCWD is about parking and runoff or the improvement to the ball field. Mayor Zerby stated from his perspective it is about both. The ball field is a large flat surface and the stormwater has to drain somewhere. The field is a big water conveyor. There is what he calls Badger Creek to the east of the field and that is part of the project. Parking is important with regard to managing runoff. There is an opportunity to clear the ponds and create trails around the Creek. He noted that he thinks this would be a great project to get the MCWD involved with. Zerby then stated he supports moving forward with the Galpin Lake Road trail project in 2014. He recommended working with the State to find out if there may be any funding opportunities. A big part of the trail goes along side of Highway 7. He stated he agrees with putting the Mill Street trail project off. He thought it beneficial to wait until the City of Excelsior wants to partner with Shorewood on that. He expressed his support for doing the Smithtown Road east trail project in 2015. He noted the entire Smithtown Road sidewalk/trail project is close to half of the City in terms of connecting to parks and trails. Zerby went on to state he thought the proceeds from the sale of the City -owned property should go into the Trail Fund. Paying for stormwater management improvements made as part of a trail project out of the Sewer Funds makes sense to him. It also makes sense to use MSA funds for trail projects. He questioned the fairness of using Water Funds to help pay for trails when only one -half of the City contributes to that fund. Councilmember Woodruff stated he also agrees it's a fairness issue when thinking about using funds in the Water Fund for projects not related to the municipal water system. He then stated he could argue that it would be okay to use funds from the Water Fund to help pay for Smithtown Road trails because there is water along the roadway. That same logic could be used for other trail projects where there is City water. Councilmember Siakel stated she agrees with both of Councilmember Woodruffs comments. She then stated she continues to believe that the proceeds from the sale of the City -owned property should be used for the City campus for the SSCC access and parking and/or Badger Park. The house was purchased to help build the campus. She then stated although it would be nice to work with the MCWD she would like there to be some progress on Badger Park in 2014 even if it just the removal of the hockey rink and the building. Councilmember Woodruff stated the Park Commission has its heart set on getting the proceeds from the sale of the City -owned property. Councilmember Hotvet stated she agrees with the majority of what has already been stated. She then stated from her perspective the improvements for the SSCC and Badger Park go hand in hand. She suggested moving forward with a solution for Badger Park but waiting to make improvements until the CITY OF SHOREWOOD WORK SESSION MEETING MINUTES October 14, 2013 Page 7 of 8 SSCC issue is resolved. She stated she supports addressing the Equipment Fund gap. She supports moving forward with the Galpin Lake Road and Smithtown Road east trail segments per the schedule. She agrees with Councilmember Siakel's recommendation to use the proceeds from the sale of the City - owned property for improvements to Badger Park and the SSCC access and parking. Administrator Joynes stated if the Mill Street trail segment is taken out of projects to do in the next few years it significantly lessens the funding problem. He noted he agrees that the proceeds from the sale of the property should go toward Badger Park improvements. He stated that by eliminating the Mill Street trail segment it allows for enough flexibility for staff to come back with a plan that is very doable. He then stated the City could bond off of the revenue stream that will be available when the bonded debt for the public safety facilities is paid off. Staff will identify what can be done with regard to trails over the next 2 — 3 years and then the City will have to stop until additional revenue streams are available. Councilmember Woodruff stated if the Galpin Lake Road and Smithtown Road east trail segments are done over the next two years that will cost about $1.8 million. But, right now there is no funding for that. That amount of money cannot be raised from stormwater funding in the next two years. Overtime that amount of money can be raised. He commented that the storm water rate should not be raised substantially. Administrator Joynes stated Council will be provided options for increasing the storm water rate over time. Administrator Joynes stated staff needs Council to indicate it wants to construct the two trails and to identify which funding sources to use and then staff will come back with a plan for doing that. He noted staff has to come up with what is needed to fund equipment replacement and technology needs. Director DeJong stated there has been discussion in the last few years about transferring funds from the Sewer Fund into the Stormwater Management Fund because they are collected on roughly the same basis. They are collected City -wide and they are a flat rate charges. All of the reserve balance in the Sewer Fund is not needed for that purpose. That would allow for the storm water rats to be increased gradually over time. Councilmember Woodruff stated he has concern that complying with the new MS4 rules will be a significant, unknown cost. He cautioned against reducing the Sewer Fund reserve balance too far. Director Nielsen stated when Council accepted the feasibility reports for the Galpin Lake Road and Mill Street trail segments it also approved holding neighborhood meetings on those two trails. He asked if Council wants the neighborhood meetings to move forward and to have staff advise residents that the Mill Street segment will be pushed out. Councilmember Woodruff stated three weeks ago Council asked staff to inform residents that come to the neighborhood meetings that Council and staff are trying to figure out how to fund the projects and that they won't necessarily happen in 2014. Mayor Zerby stated he thought there is value in collecting resident input. Mayor Zerby thanked Administrator Joynes for the presentation. He stated that he would like to have had more clarity in the report included in the meeting packet. He noted that he is used to seeing reports showing the impact of decisions over time. He expressed hope that will be provided for the next meeting. Councilmember Woodruff concurred and stated he struggled with the balance sheet type presentation in the packet. Councilmember Woodruff expressed concern that the March 2013 may have changed quite a bit. Administrator Joynes stated the direction provided by Council this evening will help staff clarify things. He then stated that providing ten solutions would just cause confusion. CITY OFSHOREWOOD WORK SESSION MEETING MINUTES October 14, 2013 Page 8 of 8 Mayor Zerby stated there are residents that look at the meeting packets online and if he was a resident without a lot of background he would struggle with what the City is discussing at this time. Councilmembers, for the most part, are those residents off of the street and they need that same clarity. Therefore, the more clarity there is in the reports the better. 3. ADJOURN Woodruff moved, Siakel seconded, Adjourning the City Council Work Session of October 14, 2013, at 6:56 P.M. Motion passed 410. RESPECTFULLY SUBMITTED, Christine Freeman, Recorder Scott.. rli-y, Maym ATTEST: Jean Panchyshyn, City Clerk