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01-13-14 CC WS Mtg MinCITY OF SHOREWOOD CITY COUNCIL WORK SESSION MONDAY, JANUARY 13, 2014 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 6:03 P.M. A. Roll Call Present. Mayor Zerby; Councilmembers Hotvet, Siakel, Sundberg, and Woodruff; Administrator Joynes; City Clerk Panchyshyn; Finance Director DeJong; and, Director of Public Works Brown Absent: None B. Review Agenda Administrator Joynes noted that some of the depreciation calculations in the 2014 Capital Improvement Program (CIP) and 2014 Enterprise Budget materials included in the meeting packet are incorrect. Therefore, staff recommends skipping over Item 2.13 on the agenda. He then noted that the approval of the 2014 CIP and Enterprise Budgets and the Rate Study will be removed from the agenda for the meeting immediately following this work session. He stated Director DeJong will correct those calculations and the materials will be provided to Council for its consideration during its January 27, 2014, regular meeting. Councilmember Woodruff stated he would like the opportunity to raise some questions he still has about the information in the packet during this work session. If those are addressed to his satisfaction then there would not be a need to have another work session about this on January 27. Woodruff moved, Sandberg seconded, approving the agenda as presented. Motion passed 510. 2. CAPITAL IMPROVEMENT PROGRAM AND ENTERPRISE BUDGETS Administrator Joynes noted the meeting packet contains a copy of the 2014 — 2023 Capital Improvement Program (CIP) and the 2014 Enterprise Budgets. It also includes a copy of a staff memorandum regarding proposed sewer and stormwater utility rate increases and a copy of Ehlers' Utility Rate Study Presentation that was made to Council during its October 28, 2013, work session. Joynes clarified that the CIP is a planning document. It schedules capital projects for a number of years out into the future and the projected costs to do those projects. It helps in determining if there will be adequate financial resources to fund the projects. He then clarified Council is being asked to approve the projects for a specific year; in this case 2014. Each project scheduled for 2014 will be brought to Council for approval prior to making any expenditure on the project. He explained the enterprise and capital fund budgets have been reviewed in conjunction with the CIP and the rate study. They follow previous year's budgets for operating expenses and incorporate changes CITY OF SHOREWOOD WORK SESSION MEETING MINUTES January 13, 2014 Page 2 of 5 based on the CIP and rate study. During the February 2013 Council and staff retreat there was discussion about the need to make changes to various funds. Things were adjusted throughout 2013 based on ongoing discussions. For example, Council decided to fund the Smithtown Road west sidewalk project in 2013. It also decided to schedule the construction of the Galpin Lake road trail segment in 2014 and the Smithtown Road east trail /sidewalk segment in 2015. A number of the budgets were adjusted accordingly to accommodate that. Also, in some instances equipment replacement purchases were moved out of the Equipment Replacement CIP to the appropriate CIP for which that equipment would be used. The rate study recommended increases were factored into the Sewer and Stormwater Funds to provide a clearer picture of the adequacy of those Funds. Councilmember Woodruff stated Council was not provided with fund balances for any of the UP accounts with the exception of the water, stormwater and sewer. He then stated there are many equipment purchases scheduled throughout 2014 — 2023. Yet, Council does not know what the starting balance or ending balance are projected to be based on the scheduled purchases. Council was not provided with that information for 2013; it had been provided with that information in years before that. Woodruff then stated the Parks Improvements CIP has a $100,000 placeholder in 2014 for Badger Park improvements. Yet the staff memo states that does not include relocating the lights. The field in Badger Park would be useless without lights, for the most part, in the winter time. He related that Director DeJong has told him that he has not been able to get that cost information. He asked staff to estimate the cost for lighting. Director DeJong explained that Council had asked WSB & Associates to come back with a modified plan for Badger Park improvements. WSB has indicated that the City may not want to reorient the field because an east /west orientation would not be good for sports teams that use the fields in late afternoon and early evening when the sun is setting. Mayor Zerby stated it is his recollection that Council supported reorienting the field to east /west from north/south. Councilmember Woodruff stated the 2014 Park Improvements CIP indicates the field will be reoriented. That would require the lighting be moved. If the lighting is not going to be moved then the reorientation of the filed should be taken out of the CIP. If the field is to be reoriented then the cost for lighting should be included in the CIP. Councilmember Siakel asked how much it would cost to move or replace the lighting. Councilmember Woodruff stated $50,000 — $80,000. Administrator Joynes stated staff does not know what it will cost. Administrator Joynes noted that after a presentation from WSB about the sun issue if the field is reoriented the Park Commission has recommended against reorienting the field. The Commission and the Council have not made a final decision. Mayor Zerby asked staff to make some estimate on the lighting cost. Director Brown noted that the key staff players involved with that project are not in attendance. He suggested using a placeholder of $70,000 for the lighting. Director DeJong noted that if the field is remodeled in 2014 there will be no night use in 2014 because the field will be torn up and reconstructed and grass will be planted that needs mature. The lighting could be installed in 2015. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES January 13, 2014 Page 3 of 5 There was Council and staff consensus to include a $70,000 placeholder for lighting in 2015. Councilmember Woodruff stated the MSA Road Reconstruction Fund has a placeholder for the Smithtown Road west sidewalk project in an amount of approximately $349,000. Yet that project is basically paid for. It's his understanding that money will used to reimburse some other fund for what has already been paid for. Based on the CIP it appears the City is going to pay another $349,000 for that project. He asked staff to reevaluate if that is the appropriate way to show that. Director DeJong clarified that the project has not been closed out; there are some significant expenditures that will be incurred in 2014. He is not sure if that amount will approximate $349,000. Director Brown noted there is a punch list of items that will have to be addressed for that project in 2014 but lie does not think the associated expenditures will be even close to that amount. Woodruff stated the Stormwater Management CIP includes a placeholder in the amount of $381,000 in 2016 for Amlee Road /Glen Road. From his perspective he does not think it would be possible to spend that amount of money for stormwater improvements for Amlee Road which is only 250 yards long, noting that it is his understanding that Glen Road is no longer being considered. He asked staff to reassess that. Mayor Zerby stated the Water CIP includes a placeholder in the amount of $450,000 for rehabilitating and repainting the West Water Tower. Based on the overruns from when the same thing was done to the East Water Tower he asked Director Brown if he is relatively comfortable with that estimate. Brown responded he thought it is reasonable provided it can be done in a year when the water usage allows it to be done. Director Brown explained that when the East Water Tower was done the project was started later than planned and the Tower had to be heated on the inside so that the inside paint would cure properly. Brown then explained that those projects cannot be done during the summer months because of the high water usage. When the project will actually be done will be in part driven by weather. Councilmember Woodruff stated that the packet includes a copy of a list of potential technology upgrades /additions and the initial and ongoing costs for them. In 2014 there is a placeholder of $6,000 for Customer Response Management (CRM) software and there is an ongoing annual cost of $4,000. He noted he cannot support that purchase. Mayor Zerby noted that he expressed concern that he did not think the City would get enough value from spending that amount of money during Council's November 12, 2013, work session. He stated he spoke with the City's Communication Coordinator about this and learned that the City has a non - emergency form on the City's website. The Coordinator said when it was first implemented there were about three people who used it but there has not been any use since then. Councilmember Woodruff stated another item on the list is for wiring for cable service in the Council Chambers, large conference room, kitchen /break room and lobby with a flat panel monitor(s) and high definition projector in the Chambers for a cost of $5,000 in 2014. He questioned if there is a need for that. That expense does not make sense to him. Councilmember Siakel stated she would not mind if this is kept as placeholder, noting she understands there needs to be more discussion about it. Woodruff stated he would like staff to provide some rationale for doing that. Mayor Zerby stated he thought it would be worthwhile to have a monitor in the conference room. Director Brown stated in the event of a significant emergency event Council may want to be at City Hall to stay up on events and serve a different function. Woodruff suggested having a stack of iPads available to follow things online. Siakel reiterated her desire to keep money as a placeholder and to have further discussion about this. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES January 13, 2014 Page 4 of 5 3. RATE STUDY DISCUSSION Administrator Joynes stated the City selected Ehlers to conduct sewer and stormwater utility rata studies in the fall of 2013. Director DeJong explained there needs to be a significant increase to the stormwater rate. Ehlers originally proposed a 20 percent increase annually (about $3 per quarter) for the next five years to get them to where the Stormwater Fund will be sustainable in the future. The 2013 residential quarterly rate for a property that is greater than 10,000 square feet and less than 50,000 square feet is $15.12 per quarter. Based on the 20 percent increase the 2014 rate would be $18.14, the 2015 rate would be $21.77, the 2016 rate would be $26.13, the 2017 rate would be $31.35 and the 2018 rate would be $37.62. The City would reach its target working capital for the Stormwater Fund in 2018. The City would not be overcharging current customers for future use of the Fund. Council had suggested starting with a higher rate increase initially and then having a lower increase annually. Ehlers came back with a second scenario to increase the rate increase to about $6 in 2014 and then an increase of 15 percent in 2015 — 2018. Based on the this scenario the 2014 rate would be $21.12, the 2015 rate would be $24.29, the 2016 rate would be $27.93, the 2017 rate would be $32.12 and the 2018 rate would be $36.94. The City would reach its target working capital for the Stormwater Fund in 2015 and it would remain above it though 2018. He noted that staff recommends going with the more conservative approach which is the 20 percent annual increase scenario. The City can reevaluate the rates as the actual project costs become known. He then noted that Council can pick anything in between the two scenarios presented and the rates can be monitored and adjusted going forward. Councilmember Siakel stated she favors the 20 percent annual increase scenario. Councilmember Sundberg concurred. Director DeJong explained that Ehlers recommended a 3 percent annual increase in the sewer rate form 2014 — 2018. It identified three approaches to getting there: 1) keep a flat rate for all customers; 2) base rates off all water usage; and, 3) base rates off winter quarter water usage. Currently there is a flat sewer rate primarily because one -half of the residential properties in the City are not on City water. Those customers do not have a water meter to measure water usage. For those customers not on City water staff recommends the 3 percent increase as recommended by Ehlers. For those customers on City water they could remain on a flat rate, their rate could be based on their actual yearly water usage or their rate could be based on winter quarter water usage. Water usage fluctuates dramatically throughout the year. Summer usage is about three times higher than the customer's base usage in the winter (January — March) in Large part because of the outside water usage which does not flow into the sewer system. Basing the residential rate off of winter water usage would result in predictable quarterly sewer bills. The customers' bills will change once during the year in the spring. It would also be a more predictable revenue source for the City. Staff recommends going with Ehlers recommendation of a 3 percent increase based on winter water usage. Councilmember Siakel asked if the winter water usage would be captured on April I. Director DeJong explained the City reads the water radio read meters at the end of each quarter. That will be done at the CITY OF SHOREWOOD WORK SESSION MEETING MINUTES January 13, 2014 Page 5 of 5 end of March and it will be used to calculate the customer's winter usage rate which will then be used to determine their sewer rates. Administrator Joynes noted that is typical for most metropolitan cities. Director DeJong noted that the way Ehlers designed its study is so that the average residential metered user would be paying approximately the same rate as the average non- metered user. Also, the typical residential usage is around 18,000 gallons per quarter. He explained a rate example included in for those customers on City water using the winter usage. For 2014 those customers will pay a base charge of $8.25 per quarter plus a rate of $3.40 per 1,000 gallons of water used based on winter usage. The base charge base rate and usage rate would each increase 3 percent in 2015 — 2018. Councilmember Woodruff stated the Ehlers study reflected money being transferred from the Sewer Fund to the Stormwater Fund. He asked if that will be treated as a loan. Director DeJong responded it is calculated as an inter -fund loan in the rate study with the repayment starting in 2015. Woodruff then stated there is a low- income sewer only rate. He asked if anyone uses that. DeJong stated there are a couple of people on that but he has not seen anyone use that recently. Woodruff recommended not advertising that rate and he suggested Council and staff discuss that in the future. Director Brown stated there are a few people that use that rate and that it came about because a few homeowners had petitioned the then - Council to implement that rate Director DeJong explained the commercial rate would continue to be based on the same basis as it is now. The commercial customer would have a minimum charge that would be equal to the flat rate residential (i.e., $72.85 for 2014). If their fixed fee plus their usage exceeds the minimum charge they would pay that higher charge. Director DeJong stated that besides the inter -fund loan to the Sewer Fund there are two transfers to the Trail Fund from the Sewer Fund. He noted the sewer rates will not be enough to cover the operating costs until about 2017. 4. ADJOURN Woodruff moved, Siakel seconded, Adjourning the City Council Work Session of January 13, 2014, at 6:51 P.M. Motion passed 510. RESPECTFULLY SUBMITTED, Christine Freeman, Recorder ATTEST: Jean Pauchyshyn, City let r'C k S' tt Zerhy, M ty r - ... -.�