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11-24-14 CC WS MinCITY OF SHOREWOOD CITY COUNCIL WORK SESSION MONDAY, NOVEMBER 24, 201.4 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 Siakel, Sundberg, and Woodruff; Administrator Joynes; City Clerk Panchyshyn; Finance Director Delong; Director of Public Works Brown, and City Engineer Hornby Absent: Councilmember Hotvet B. Review Agenda Woodruff moved, Siakel seconded, approving the agenda as presented. Motion passed 410. 2. FINAL GENERAL FUND BUDGET REVIEW Administrator Joynes noted the meeting packet contains a copy of the PowerPoint presentation for the December 1, 2014, Truth -in- Taxation hearing for the City of Shorewood 2015 Budget as well as related General Fund budget documents. He explained there was one substantive thing that has changed since Council's last budget related work session. The Excelsior Fire District (EFD) recommended amended 2015 Operating Budget and 2015 — 2035 Capital Improvement Program (CIP) were approved by all five member cities. The amended budget included an agreement to return some of the excess operating fund reserves to the member cities. Shorewood share of those funds will be $11,500. That will be put into the General Fund and the City's 2015 General Fund Budget reflects that. From his perspective the Budget is virtually the same as the 2014 Budget. It includes a 2.5 percent increase in personnel services costs. He has not concluded negotiations with the Public Works employees union. represented by AFSCME (American Federation of State, County and Municipal Employees) Local 224. He is having difficulty getting a second meeting with the union schedu.lcd. He continues to be relatively confident that the 2.5 percent increase will be adequate. The Budget includes the addition of a 0.75 FTE (full time equivalent) forester and public works assistant, Approximately $55,000 of the cost for that position is included in the Public Works Budget and the remainder is in the Stormwater Management Budget. The transfers into the Equipment Replacement Fund and the Street Reconstruction Fund have been increased by a collective amount of $30,000. The General Fund Budget reflects that. He noted the meeting packet contains a copy of a General Fund Balance Available Calculation document. He also noted that earlier this year Council decided to eliminate the 3 percent transfer cap from the CITY OF SHOREWOOD WORK SESSION MEETING MINUTES November 24, 2014 Page 2 of S General Fund Balance Policy for reserves in excess of 60 percent, He reviewed the document. If the Policy requirement of a 60 percent maximurn reserve level is used, the reserves in excess of that level is estimated to be $533,534 at the end of 2014. That amount is unencumbered and it can be used for anything Council would like. He suggested discussing how to use that money during the January 28, 2015, Council and staff retreat. He stated that 60 percent level is very conservative. If the Office of the State Auditor (OSA) methodology were to be used, which is the one the State recommends, there would be $1,593,540. That is a 50 percent reserve of expenditures and it uses transfers out in a different fashion. He noted he thought the City is in very good shape financially. Joynes walked through the draft presentation for the Truth -in- Taxation hearing. There is a legal requirement for the City to hold a Truth -in- Taxation public hearing. It is scheduled for December 1, 2014. The Truth -in- Taxation requirements are to present the City's 2015 General Operating Budget, discuss the budget and 2015 tax levy changes, to take public comment and to adopt a balanced budget. The City's portion of the property taxes pay for a number of services funded out of the General Fund. They include police and fire protection; street and park maintenance; recreation programs; building inspections; transfers to the Southshore Community Center (SSCC) and capital funds; and, administration, finance, planning and zoning, elections, and other miscellaneous services. The assumptions used in preparing the 2015 Operating Budget are as follows ➢ A 2.5 percent tax levy increase is included (the second increase since 2009) for general operations (primarily personnel costs). ➢ A 0.75 FTE forestry position has been added.. ➢ Other staffing levels remain the same. ➢ A 2.5 percent salary increase is budgeted for to fund salary increases and benefit changes. ➢ Transfers to the Street Improvement Fund and the Equipment Replacement Fund were increased by 3.75 percent (or $30,000) collectively, ➢ The use of $93,192 in General Fund balance reserves is included to balance the Budget. That is down $9,656 from 2014. The City's General Fund Balance Policy stipulates maintaining a reserve level of 55 -60 percent of the upcoming year's operating expenditures. The December 31, 2013, General Fund .Reserve was $3,943,342 and it is estimated that $23,850 of that will be used in 2014. It's estimated that the 2014 year -end General Fund Reserve will be $3,919,492 (or 69.5 percent). The Policy maximum of 60 percent would equate to $3,385,718. Therefore, the amount in excess based on the Policy is $533,774. If the reserves are higher than 60 percent the available excess reserves may be used for items such as one -tirne projects, acquisitions, or transfers to any City capital fund. The City's General Fund budgeted expenditures total $5,643,263. Of those expenditures 38 percent is for public safety services (police and fire), 22 percent is for general government services, 18 percent is for public works, 17 percent is for capital transfers and 4 percent is for parks and recreation. Expenditures and transfers have been fairly consistent with some ups and downs between 2007 and 2015. The City's General Fund budgeted revenues total $5,549,671. Of those revenues 89 percent is from property taxes, 4 percent is from transfers and miscellaneous revenues, 2 percent is from licenses and permits, 2 percent is from General. Fund balance reserves, 1 percent is from charges for services, l percent is from fines and forfeitures, and 1 percent is from intergovernmental. CITY OF SHORE WOOD WORK SESSION MEETING MINUTES November 24, 2014 Rage 3 of 5 The tax assessment and levy timeline for residential property taxes payable in 2015 has been as follows, Hennepin County collected data on property sales from October 1, 2012 — September 30, 2013, The market: value was established on January 2, 2014. The Board of Review process to hear appeals took place from April 2014 — June 2014. The City certified its maximum tax levy of 2.5 percent for 2015 to Hennepin County in September 2014. The levy cannot be increased after that; it can be decreased. The County mailed out Truth -in- Taxation notices to property owners in November 2014. The Truth -in- Taxation hearing is being held this evening. In 201.5 .final property tax bills will be mailed to property owners. The properties in the City experienced an average increase in value of 6.6 percent. That decline was about 1.5 years ago. The average City tax impact is as follows. For a property valued at $250,000 in 2014 its value increased to $266,500 for 2015, and the tax increased by $16. For a property valued at $375,000 in 2014 its value increased to $399,750 for 2015, and the tax increased by $21. For a property valued at $500,000 in 2014 its value increased to $533,000 for 2015, and the tax increased by $44. For a property valued at $750,000 in 2014 its value increased to $799,500 for 2015, and the tax increased by $55. For a property valued at $1 million in 2014 its value increased to $I.,066,000 for 2014, and the tax increased by $67. That will be different depending on the individual property value. The 2015 property tax distribution for a property in the City located within Minnetonka School District 276 is: 35.2 percent to the school district, 35.1 percent to Hennepin County, 22.5 percent to the City, and 7.2 percent to other smaller taxing jurisdictions. It is based on a home in the District valued at $360,000. The 2015 total property tax percent change compared to the 2014 total tax for residential homestead properties in the City based on statistics from the Hennepin County Assessor's Office is as follows. Approximately 35.0 percent of the parcels (812) will see a decrease. Approximately 33.2 percent of the parcels (768) will see an increase of $0 — $300. Approximately 10.3 percent of the parcels (239) will see an increase of $301 --- $600. Approximately 7.0 percent of the parcels (162) will see an increase $601 — $900. Approximately 14.5 percent of the parcels (335) will see an increase of more than $900. There are three tax relief programs available through Hennepin County and the State. There is a homestead credit refund which is based on income and taxes paid. That refund is available if taxes exceed 2 percent of income for household with income up to $65,409 and 2.5 percent for those over $65,409 and below $105,500. There is a special property tax refund available if taxes increase more than 12 percent and the increase is over $100. There is a renter's refund for those with household income of $57,169 or less. Joyn.es noted that the meeting packet contains a copy of the Financial Management Plans (FMPs) for the Park improvement .Fund, the Street Maintenance Fund and the Trail Construction Fund. Mayor Zerby stated the Street Maintenance Fund FMP graph is labeled I — 6 rather than years. He assumes the years should be 2014 — 2019. Couneilmember Woodruff asked what month is year -to -date (YTD) in the General Fund Budget Summary document. Director DeJong responded September 30, 201.4. Woodruff stated that in the Administration Budget in line item Employee Insurance City Share the YTD arnount is zero. And for some of the other budgets the number the amounts are very low. He asked if something is not being posted correctly. DeJong stated the way the financial system was set up that is posting into the salaries directly so the total salary and benefits is coming out correctly. He asked DeJong if he is confident the health insurance numbers are in the totals someplace, DeJong responded yes. CITY DE SHOREWOOD WORK SESSION MEETING 'MINUTES November 24, 2014 Page 4 of 5 Woodruff noted that in the Protective Inspections Budget the heading for the 2014 YTD personal services expenses is labeled May 2013. . Director DeJong stated that is a typographical error and the numbers are okay. Woodruff stated that needs to be fixed. In response to a comment from Councilmember Woodruff about the accuracy of the Trail Reconstruction Fund FMP, Administrator Joynes stated the FMPs will not be shown to the public during the Truth -in- Taxation hearing. Councilmember Woodruff stated it is his recollection that Council discussed budgeting for a full -time forester position with the understanding that it would start out as a 0.75 FTE position when first hired. Administrator Joynes stated Council and staff discussed the position would likely evolve to full time but it would start out as a 0.75 PTE position. Councilmember Woodruff noted that the General Fund Balance Policy suggests a reserve level of 55 — 60 percent. Therefore, there may be more reserves available than discussed earlier, Councilmember Siakel stated she is somewhat uncomfortable with approving the forester position, She would like to discuss the position more. Before the City brings on another employee she wants to make sure there is a solid plan for how to utilize that person and what the expectations of that person would be. Council has talked about that position having forester, stormwater management and Public Works responsibilities. She suggested that item be added to the agenda for the January Council and staff retreat. Councilmember Woodruff concurred and asked that a general work plan be provided for that position. Siakel then stated that she thought at a minimum the City contract for seasonal work for tree services. She clarified she agrees there is a need for some of the services. But, she is not sure what that would look like for the City. She wants to have a clearer understanding of what the expectations are. She stated she can support leaving at least some of the funding for the position to erasure there are funds available for seasonal work in 2015. Councilmember Sun.dberg suggested leaving funding in as a placeholder and discussing it more during the retreat. Mayor Zerby stated the Trail Reconstruction Fund IMP includes an $852,000 capital item in 2018 and 2019. He asked what projects that is for. Director DeJong stated that is for the Strawberry Lane Trail and it should only be in 2019. Zerby noted that changes the FMP projection quite a bit. Councilmember Woodruff stated that FMP does not include any capital expenditures for trail projects in 2015 or 2016. Mayor Zerby stated that during Council's November 10 work session Council indicated it would like move forward with the Smithtown Road East Sidewalk Extension Project and to discuss the others during the January 28 Council and staff retreat, Director DeJong stated that currently the plan is to construct the Smithtown Road East sidewalk extension and the Excelsior Boulevard Trail in 2015. There should be no trail projects in the FMP in 2016 — 2018. There is capital expense in the FMP for 2014 because the Smithtown Road West sidewalk was budgeted for in 2013. . There is a minor amount of actual expense incurred in 2014 for that sidewalk. Mayor Zerby stated he thought there is more money that could be used out of reserves provided the number presented is correct. He understands money is needed for the trail projects. He noted that he does not like to do what he is proposing, but he asked what additional amount of reserves would be needed to CITY OF SHOREWOOD WORK SESSION MEETING MINUTES November 24, 2014 Page 5 of 5 bring the levy increase down to 2 percent. Administrator Joynes stated every 0.5 percent reduction takes about $25,000. Zerby noted he could support using another $25,000 — $50,000 in reserves in order to bring the levy down based on the level of reserves staff said the City will have. Councilmember Siakel supported increasing the use of reserves to keep the levy increase lower. She said even if and additional $50,000 were used that would still leave a lot of unallocated reserves for the Smithtown .Road East sidewalk extension based on the numbers presented. Councilmember Woodruff stated he has heard that the cost of living this year has gone up around 1.7 percent. He noted that he thought a tax levy increase of 1.5 — 2.0 percent is appropriate. Cou.neilmember Siakel stated the City delivers a lot of value to its residents for the services provided. Based on the Tru.th-in- Taxation notice she received the school district and county take a significant chunk of her tax payment. Administrator Joynes stated staff will present a 1.5 percent, 2.0 percent and 2.5 percent tax levy increase for December 1. Councilmember Sundberg asked where one -time expenditures such as the Green Energy study and the consultant for the Minnetonka Country Club redevelopment project get paid out of. Administrator Joynes stated that study will be paid for out of the Community Infrastructure Fund. Staff has anticipated that the consultant will be paid for out of reserves and some portion of that will be charged back to the developer. 3. ADJOURN Woodruff moved, Sundberg seconded, Adjourning the City Council Work Session of November 24, 2014, at 6:35 P.M. Motion passed 410. RESPECTFULLY SUBMITTED, Christine Freeman, Recorder ATTEST: A iv Je A Panchyshyn, City Clleer`U Sc&t ze by—,.- y6