Loading...
04-09-15 CC Retreat MinCITY OF SHOREWOOD CITY COUNCIL /STAFF RETREAT THURSDAY, APRIL 9, 2015 MINUTES 1. Convene City Council/Staff Retreat 24150 SMITHTOWN RD SOUTH LAKE PUBLIC SAFETY FACILITY TRAINING ROOM 8:30 A.M. Mayor Zerby called the retreat to order at 8:31 AM. A. Roll Call Present: Mayor Zerby; Councilmembers Labadie, Siakel, Sundberg and Woodruff, City Attorney Keane; City Administrator Joynes, City Clerk Panchyshyn, Finance Director DeJong, Planning Director Nielsen, Director of Public Works Brown, and City Engineer Homby Absent: None Administrator Joynes noted a copy of the Springsted, Inc., PowerPoint presentation regarding tax abatement was included in his presentation for this meeting which was distributed to Council and staff. He stated during the January 29, 2015, Council and staff retreat a number of somewhat related items about financing for some major projects in the 10 -year Capital improvement Program (CIP) were tabled for discussion in a future retreat. The funding of some projects is complicated because of the potential redevelopment of the Minnetonka Country Club (MCC) property. The redevelopment opens up a number of opportunities for the City to capture some of the additional tax revenue that would be generated by the redevelopment and use it to fund some of the major projects that there is no funding for at this time. That is the purpose of the retreat. He clarified the intent is not to allocate specific amounts to projects. Staff needs Council to provide philosophical direction on where the funding should come from for various projects. Once that is done staff will provide Council with specific dollar amounts and the logistics for putting the funding in place. Joynes introduced Springsted Senior Vice President Terri Heaton and Vice President Mikaela Huot. He explained they had been asked to evaluate if the City could take advantage of tax increment or tax abatement options from the additional tax revenue that would be generated by the MCC redevelopment. Early on it was determined that tax increment financing (TIF) would not be appropriate. There are a number tax abatement options that Council could consider. 2. Springsted Abatement Opportunities Following are the highlights of Sprinsted's presentation (a copy of the presentation is on file). ➢ The redevelopment of the MCC property will generate additional revenues in the City's tax base. That provides the City with an opportunity to use some of the revenue to finance public improvement projects that are somehow relatable to the MCC project and project area. Examples include the Smithtown Road east sidewalk extension, the construction of a trail along Strawberry Lane, Badger Park improvements, and possibly renewable energy opportunities. ➢ The assumption is that 100 new houses will be constructed with about 25 being built per year. A $600,000 taxable market value was used for each house. ➢ No incentives will be offered to the developer. ➢ TIF Districts are a way to capture growth. There are a lot of criteria that have to be met in order to create a TIF District. There are a number of types of TIF Districts. For a Redevelopment District City Council/Staff Retreat Minutes Thursday, April 9, 2015 Page 2 of 11 certain tests have to be met related to occupancy in order to qualify. A Soils District is very specific about soils deficiencies per statute. A Housing District is for affordable housing; there are income restrictions. A Renovation and Renewal District is another type. An Economic Development District is for job based types of projects. There are also restrictions on the use of the TIF District proceeds. Based on their analysis TIF District financing was put to the side. TIF financing would allow the City to capture all of the new tax base generated by the redevelopment — the City's share, the Minnetonka School District's share and Hennepin County's share. ➢ The City's tax capacity is about $15.649 million. The additional tax capacity generated from the redevelopment would be about $625,000. With tax increment it does not get added to the City's tax base during the time it is in the TIF District. The base remains at $15.649 million. The incremental tax remains separate and is used to pay for public improvements. ➢ With tax abatement the new tax revenue is added to the City's tax base. The tax base would increase to approximately $16.274 million. The City has to levy against the abatement. The tax rate remains the same because the tax base grows and the levy grows. ➢ Tax abatement only allows the City to use only its share of the new tax base. That would add about $192,000 of levy ability. The City could ask the School District and the County to participate. The School District and County could generate abatements for the MCC property to help the City pay for improvements. ➢ They focused their analysis on just the City's abatement. ➢ Tax abatement was established as an economic development tool and to some extent morphed into somewhat of a public financing tool for public improvements and infrastructure. It is not a true abatement or non - payment of taxes. Property owners for each property identified in the tax abatement area still pay taxes. It is established by a resolution adopted at a noticed meeting and indicates the amount, length, public benefit and so forth. A list of property identification numbers which are included in the abatement area are published in the newspaper. The abatement does not require property owner consent. The abatement does not show up on the property tax statement. The abatement calculation is based on the tax capacity of each of the properties in the tax abatement area multiplied by the current tax rate. The abatement is a fixed levy for the term of the bonds assuming a bond issuance. It is against all residential properties in the City. ➢ A tax abatement is defined in Minnesota Statures §469.1812 to §469.1815 (as amended). ➢ Tax abatement eligible costs include: improvements to private property; financing for public infrastructure; and acquisition or construction of public facilities. If bonds are issued the eligible costs include: public improvements that benefit the property; acquisition and conveyance of land or other property; reimbursements to the property owner for the cost of improvements made to their property; and the cost of issuance related to the tax abatement project. ➢ If the City asked for tax abatement from the School District or County it could be the entire amount, a percentage or specific dollar amount. ➢ If the City issued Abatement Bonds the City could, for example, ask the School District to pay a certain amount. The School District would levy abatement and give its levy amount to the City. It would be combined with the City's $192,000 to pay off the City's bonds. That is done frequently. ➢ There are abatement constraints. Eight years must pass before a new abatement may begin on the same property. Abatement cannot be applied to a TIF District but it can be used after TIF decertification. A taxing entity can abate existing value and redirect the taxes from those properties in a similar manner as the abatement for the MCC property. The maximum duration of an abatement is 15 years if the City, School District and County all apply and 20 years if only one or two of them apply. The analysis shows 15 — 20 years. If Tax Abatement Bonds are issued the principal may not exceed the estimated sum of the total abatements. The maximum aggregate annual abatement for any taxing entity is the greatest of either 10 percent of the net tax capacity �� -- or $200,000. For the City it would be about $1.5 — $1.6 million. The maximum parcel abatement is the subdivision's tax rate times the net tax capacity of the parcel. City Council/Staff Retreat Minutes Thursday, April 9, 2015 Page 3 of 11 ➢ Some examples of how tax abatements have been used are: new interchanges; highway improvements; new frontage roads; construction of community /senior centers; and construction of recreational facilities and park facilities. ➢ A nexus, or the relationship between the properties that are being abated for the actual improvements, can be as simple as when a community center is constructed the properties located near the community center may become more valuable. What needs to be said is there is a public benefit to enough properties that justify providing public incentive. Once there are enough dollars to equal what the debt service is then the test has been met. ➢ Abatement does not require proof that it increases the value of the property. ➢ By including only the needed properties in the abatement it allows for future tax abatements or TIF Districts. ➢ The City cannot automatically issue general obligation (GO) bonds; that requires passing a referendum. By creating the abatement tool the City has the authority to issue the Abatement Bonds without a referendum. ➢ The total cost for the Smithtown Road east sidewalk extension and Strawberry Lane sidewalk projects is about $2.192 million and once issuance costs are included the total amount is $2.265 million. ➢ The debt service schedule for the 20 -year term and the 15 -year term Abatement Bonds with a GO level backing do not factor in that about 25 houses will be built in a year as part of the redevelopment effort. Housing construction would start in 2016 and the first abatement taxes would be payable in late 2017 or in 2018. The interest and principal payments that would have to be made prior to receiving abatement taxes are not factored in either. The 20 -year term indicates the total debt service over time would be about $3.1 million. About $152,000 would have to be levied each year for 20 years. For a 15 -year term the total debt service would be about $2.85 million and about $190,000 would have to be levied each year for 15 years. ➢ Now would be a reasonable time to sell bonds. The average bond rate for all the bonds over the last five years is about 3.5 percent and that is high at this time. ➢ A number of abatement revenue assumptions were used for the analysis. The maximum principal amount of bonds cannot exceed the estimated sum of abatements. The properties that would be included in the abatement are the residential properties located in the MCC redevelopment project area; owner - occupied new construction houses that are not currently within a TIF District or Tax Abatement. The estimated taxable market value of the proposed 100 residential properties would be approximately $60 million. The total abatement revenues used in the analysis equals debt service principal plus interest and based on current identified infrastructure costs. ➢ In summary, the City -only estimated revenue for the 15 -year term debt service is $2.592 million and it is $3.355 million for the 20 -year term. The estimated total debt service is estimated to be $2.81 million (105 percent over levy) and the 15 -year term and $3.1 million for the 20 -year term. Because some people may not pay their property taxes State Statute requires an additional 5 percent be levied to cover the delinquencies. The annual debt service for the 15 -year terms is $190,000 and is $155,000 for the 20 -year term. The estimated annual abatement revenues for the City -only is about $192,000. ➢ If the City participates alone with tax abatement its taxpayers as a whole are still benefitting from the increased tax base from the development if it is not captured from the County or School District. Councilmember Siakel stated the tax abatement concept makes sense to her. She asked if the MCC Planning Advisory Committee (PAC) has identified any other improvements that it would like the City to consider. Administrator Joynes stated the PAC is discussing land use. There are differing opinions about what the land use should be and that could take things in a different direction. The intent at this time is for the PAC to concentrate on the area around the MCC property. The future ownership of the SSC and improvements to Badger Park could be justified as benefiting the MCC redevelopment. The Smithtown City Council/Staff Retreat Minutes Thursday, April 9, 2615 Page 4 of 11 Road east sidewalk extension also would be of benefit. The Strawberry Lane trail makes sense. The abatement revenues could be used for paying for some or all of those projects and then the money the City allocated to fund those projects could be used for other projects. Councilmember Siakel stated that in addition to the SSC and Badger Park improvements something has to be done to improve Country Club Road and the area along side of it. She stated she would like a more robust list of improvements needed in the MCC property vicinity. Administrator Joynes sated the PAC will discuss Country Club Road during its next meeting and noted that the tax abatement will not cover all the needed improvements in that area. Councilmember Sundberg asked what the timeline is for the PAC to present its recommendations. Director Nielsen stated the PAC will have its recommendations for the MCC property ready to give to Council by the end of May or early June. Engineer Hornby stated the renewable energy recommendations should be done towards the end of the year. Councilmember Siakel asked if the City will have additional requirements of the MCC planned unit development (PUD). Director Nielsen stated the developer is well aware that trails are a key element for the City. Not just the Smithtown Road east sidewalk extension but also a perimeter trail around the property. Nielsen noted that the developer attends the PAC meetings. In response to a question from Councilmember Labadie, Director DeJong explained that the price a house sells for is not necessarily what it is assessed for. Director Nielsen stated there could be some risk that the market will not support $600,000 properties. Ms. Heaton stated there is a risk that City will not have the money to pay the bonded debt if bonds are issued. When GO Abatement Bonds are issued the City has special authority to levy outside of levy limits. It can do that to compensate for less abatement revenues. Councilmember Woodruff stated that because there are so many unknowns about the project he asked what criteria have to be met in order for the City to issue Tax Abatement Bonds. What do GO bond holders want? When could the City get some bond money? Ms. Heaton explained if the City thinks that the MCC redevelopment project is going to come to fruition it can create an abatement area now. The property identification numbers need to be known therefore the property needs to be platted. Then the abatement process can move forward. The City does need to have reasonable assumptions before it puts the GO bonds out there. If it doesn't happen the City would have to levy for the entire cost. Woodruff asked if a state agency has to approve the tax abatement. Ms. Huot responded there is no state reporting requirement. The abatement is based on the legal opinion in the adopted resolution. She explained the absorption would be fine -tuned to factor in other items. Councilmember Siakel stated if there is a gap between the abatement revenues and the bonded debt amount the City would have to rely on reserves in the General Fund or a loan from, for example, the Water Fund until the revenue from the increase in tax base for the MCC redevelopment is fully realized. Ms. Heaton explained the first two years of interest could be added to the bond issue to help address that gap. Principal can be deferred for up to two years. The principal payments could be set up on a graduating scale. If Council decides against that extra cost the City could borrow from a fund. Ms. Heaton noted the City can have more than one issue of Abatement Bonds. Councilmember Sundberg stated she likes that concept because there would be fewer unknowns. City Council/Staff Retreat Minutes Thursday, April 9, 2015 Page 5 of 11 Director DeJong noted there are some spend down requirements on bond issues. He stated that there is a large enough time gap between when the Smithtown Road east sidewalk extensions will be constructed and when the Strawberry Lane trail will be constructed so the City may have to have two bond issues. Councilmember Woodruff stated the timing for the Strawberry Lane trail is arbitrary. DeJong clarified the timing for that is tied to the reconstruction of Strawberry Lane. The cost to construct the trail would be about 50 percent more if it was a standalone project. Discussion ensued on the process to enter into discussions with the School District and the County on supporting tax abatement for the city. Attorney Keane explained the need to show there would be benefit to those jurisdictions. Heaton cited an example where streets were so bad school buses got stuck. Other Some examples of benefit that were discussed include the Strawberry Lane and Galpin Lake Road trails which lead to the schools; and traffic issues around the Hwy 7 exits that lead to Country Club Road, Strawberry Lane and Eureka Road. Administrator Joynes stated before the City approaches the School District or County there has to be a reasonable understanding of what the projects are. He stated the City is not aware of what projects will come about because of the MCC redevelopment in terms of streets and cul -de -sacs. Joynes asked Council if it is willing to use the tax abatement financing tool to help fund existing projects in the CIP. Councilmember Sundberg stated it sounds as if Council is comfortable with the abatement concept. She asked if Council needs to decide on the bonding amount at this time. Administrator Joynes stated he does not think the amount can be decided at this time. Administrator Joynes stated later during the retreat he will go over a retreat funding worksheet that shows sources of funding that might be available and the needs and associated costs that are known to date. He wants Council to philosophically decide how it wants to associate funds with projects. Joynes noted that there is immense flexibility with the tax abatement tool and the timing of the MCC redevelopment is good for the City. Attorney Keane asked how the creation of the abatement area affects the fiscal disparities pool. He stated if there were any excess proceeds over debt he asked if there would be any restrictions on the use of those proceeds. Ms. Huot explained that because the abatement would only focus on residential so there will not be any fiscal disparities assumptions; they won't be contributing to the pool. Councilmember Woodruff commented that the City receives a minor amount of money from fiscal disparities. In response to a question from Councilmember Sundberg, Ms. Huot explained an Economic Development District is very specific about what can be built in it. Sundberg asked if a TIF District could be used for redevelopment of the Smithtown Crossing Redevelopment Area. Ms. Heaton explained that TIF could potentially be used for that area or other different types of projects In response to a question from Councilmember Woodruff, Ms. Heaton explained it would be prudent to know what projects tax abatements would be used for and a reasonable understanding of what the amounts would be. There can be a contingency included. The City needs to be fairly specific about the projects. Mayor Zerby thanked Ms. Heaton and Ms. Huot for their great presentation. Mayor Zerby stated he hears Council say it wants to move forward with the tax abatement approach. City Council/Staff Retreat :Minutes Thursday, April 9, 2015 Page 6 of 11 There was a short recess from 9:48 — 9:59 A.M. 3. Review of City Finances Administrator Joynes provided a brief review of financial status of various City funds. The graphics he displayed were the same as the ones he displayed during January 29, 2015, Council and staff retreat. They depicted the level of expenditures and cash balance of the various funds based on their 10 -year Financial Management Plans (FMPS). The Recycling Fund has a significant cash reserve, albeit a small amount of money, because of a change in the recycling contract. The Water Fund is the City's healthiest fund. The City could borrow about $2.5 million from the fund without causing a problem. The City has a history of having excess balance in its General Fund that can be used. The balance in the Equipment Fund is based on the schedule for equipment replacement purchases. From a general perspective the Fund is well off. There is a significant balance in the Sewer Fund. The City could borrow money from that Fund as well. Southshore Center (SSC) operating expenditures are relatively consistent from year to year but there is a rapidly declining balance in the Southshore Center Fund. It is anticipated there will continue to be a $70,000 deficit in operating funds annually under the current operating structure. There is nothing in the projections about the City purchasing the SSC and there are no capital expenditures included. The Stormwater Management Fund is the most uncertain when it comes to projecting what projects will be on the horizon. It is difficult to anticipate what the new mandates will be from the State. Funding for stormwater management mandates will become a major issue in a couple of years. The balance in the Park Improvement Fund will basically be depleted after the Badger Park improvements are partially completed. It will need to be replenished somehow. The balance in the Trail Fund is not sufficient to completely fund the construction of the Smithtown Road east sidewalk extension. He then reviewed the deficits for the major projects over the next 10 years. These include the Southshore Center facility, Badger Park improvements; Smithtown Road east sidewalk extension; Galpin Lake Road trail segment; Strawberry Lane trail; and five streets scheduled for reconstruction between 2019 and 2022. They are Strawberry Lane /West 62 d Street, Eureka Road North, Seaman's Drive, Glen Road East and Wild Rose Lane. Director DeJong clarified that Eureka Road North is a placeholder for reclamation of the street. Joynes noted that the deficits for 2015 -2024 total approximately $8.5 million, not including the decision on the Southshore Center. Council has not made any decisions on how to fund those initiatives. Joynes reviewed the possible funding sources relating to the MCC redevelopment project for the 10 -year period. These include park dedication fees revenue; building permit fees revenue; and the use of tax abatement funds. He then reviewed availability from excess fund balances the City has control over. The City has a General Fund Balance Policy that stipulates it maintain reserve level in the range of 55 — 60 percent. If the City were to bring the balance in the General Fund down to 60 percent it would free up $533,000 to use. There is flexibility in the Water Fund of about $2.5 million. The City could take out a loan from that Fund for non -water related uses at a to- be- determined interest rate and make contributions back to that Fund over a period of time. The Sewer Fund has about $1 million in flexibility that could be borrowed against. Over the next 10 years the City will have approximately $2.209 million in undesignated Minnesota State Aid (MSA) funds that would have to be used for MSA related projects (roads and trails). The bonded debt for the public safety facilities will be paid off starting in 2023. That relieves the City from paying about $500,000 for debt retirement in 2023 and 2024. After putting $150,000 of that aside in 2023 and 2024 for capital improvements to the facilities it in a sense frees up about $350,000 in 2023 and 2024 (or $700,000) from the General Fund. City Council/Staff Retreat Minutes Thursday, April 9, 2015 Page 7 of 11 He noted Council will have to make some philosophical policy decisions. For example, does Council want the City to use funds from the Water Fund and Sewer Fund? The sources of revenue for the two Funds come from users of the two utilities. The borrowed funds may be used for projects benefitting other residents. If the money used is in the form of a loan that is not an issue. Council could decide to grant the money from those Funds, which some cities do. Some residents have already indicated they would not like that because they pay for City -water and they do not want their money to be paying for the construction of trails. He explained the City could bond for public improvements. Staff calculated that GO Bonds would cost about $155,000 annually in levy for each $1 million of 10 -year bonds issued. That cost would be paid for out of the general tax dollars. The City could also increase the General Fund levy to help pay for the projects. A 1 percent levy increase in 2016 would yield $450,000 over 10 years (a $50,000 impact per year starting in 2016). That 1 percent is in addition to the 2 percent annual increase reflected in the General Fund IMP. A 20 percent property assessment for street reconstruction has generally been supported by the court system when challenges have been made to public improvements. Appraisals prior to the street improvements and appraisals after are taken into consideration. That is what most cities use if they assess for street reconstruction. The City has never assessed for street improvements before. An assessment of 20 percent of street reconstruction costs over the next 10 years would yield $779,000. If the School District were to participate in abatement staff has estimated that the City could possible receive slightly more than 1.9 million from the School District. If the County participated the City could possibly receive about the same amount. Councilmember Woodruff stated that maybe the proposed LRT Trail overpass at County Road 19 could be added to the project mix and those dollars could be aimed at constructing the overpass. Councilmember Siakel noted she thought that would be a great idea. Administrator Joynes stated if the City can identify a benefit for the County, that would increase the chance of the County participating. If the City were willing to participate with the overpass construction to some extent, then that could improve the likelihood also In response to a question from Mayor Zerby, Administrator Joynes explained that the only three entities written into the abatement legislation are cities, school districts and counties. Administrator Joynes summarized the alternate sources of funding amounts to $6.079 million — $1 million from bonding, $450,000 from a General Fund levy increase of 1 percent; $779,000 from assessing street reconstruction at 20 percent; and, $3.850 million from School /Country abatements. Joynes summarized that the total amount of unfunded projects that Council would like to have done is $8.396 million. The total resources currently available are $9,179,171 (the City currently has control over that). Additional resources from policy changes or other jurisdictions are $6.079 million. There is a potential maximum of $15 million in resources available. Councilmember Woodruff noted that from a big picture perspective Administrator Joynes has done a good job of describing things. He stated the Park Commission is assessing major projects which are not included in the Park Improvement CIP. There is a defined use of funds but not a complete project list for the next 10 years. Administrator Joynes stated hypothetically if Council decides it wants to use the $650,000 in park dedications fees for Badger Park improvements then the funds currently earmarked for those improvements could be used for other park improvements. City Council/Staff Retreat Minutes Thursday, April 9, 2015 Page 8 of 11 Councilmember Woodruff suggested the retreat funding worksheet exhibit be modified to show all of the costs on one side and the resources on the other side to bring more clarity. Administrator Joynes asked Council to tell staff today which funding resources it wants to use to fund which projects. The amounts do not have to be exact. There was consensus that the list of projects for the next 10 years is not complete. Administrator Joynes asked Council if it wants to create a bonding mechanism and noted, for example, there will be other streets to reconstruct after the 10 -year period is up. They are not funded. In clarification of a comment from Councilmember Woodruff, Administrator Joynes stated that if it is General Fund bonds for street improvements and if the City assesses for part of the improvements it does not have to go before the voters. Director DeJong clarified the current balance in Park Improvement Fund is enough to fund base replacements over the next 10 years. That leaves all Badger Park improvements totally unfunded. Councilmember Labadie stated if the reconstruction of Strawberry Lane and the construction of the associated trail were moved up in the schedule from 2019 that make help Council in making a case for abatement by the School District more attractive. Mayor Zerby explained he has some discomfort with talking about projects Council has not approved. There is no business plan for the SSC. He had asked for value engineering to be done for the proposed Galpin Lake Road trail segment to determine if the very high construction cost can be reduced to a level he is comfortable with. A feasibility study has not been done for the reconstruction of Strawberry Lane and construction of the associated trail. He is uncomfortable with borrowing from the Water Fund because it is specific to a subset of users in the City; about half of the City's residents are on City- water. He has no issue with borrowing from the Sewer Fund because it is a City -wide utility. Director Brown stated that having Council earmark funding sources to projects does not mean that is what will ultimately happen. But, it does help with moving the process forward because resources would be available should a project move forward. Mayor Zerby stated that from his perspective Council is being asked to provide direction about policy regarding funding mechanisms and tools. He then stated there is a desire to expand the City's water system. He noted that are many property owners who could connect to City -water but have not done so. That is a challenge the City needs to solve. Council and staff need to incorporate watermain extension more effectively into its street reconstruction policies. He suggested leaving the excess balance in the Water Fund for that purpose. In response to a question from Councilmember Sundberg regarding assessing for street reconstruction, Administrator Joynes explained benefitting properties can be assessed by a lineal foot or it could be a unit price. Philosophically every street benefits the community at large as well as the individual benefitting properties. The 20 percent assessment amount is defendable in terms of added benefit. The property can pay the assessment off over a period of 5 — 10 years. The remaining 80 percent will be funded through the general City system. Sundberg stated she assumes assessing for reconstruction would be quite controversial with property owners. Councilmember Woodruff stated some property owners have resisted the extension of watermain as part of street reconstruction projects. Councilmember Siakel noted that a lot of the streets that need to City Council /Staff Retreat Minutes Thursday, April 9, 2015 Page 9 of 11 be reconstructed do not have watermain under them. Therefore, there would be dual assessments for property owners. That will be very problematic. Administrator Joynes stated that property owners were not assessed for reconstruction in the past and that creates a problem also. He then stated reconstruction is being paid for by taxes collected from property owners and many of them have moved out of the City. In response to a question from Councilmember Woodruff, Director Brown stated there are about 25 properties along Strawberry Lane. Woodruff stated the reconstruction of that street is estimated to cost $1 million. That would result in an approximate per property assessment of $8,000. Woodruff noted that he would like the City to have the opportunity to create Street Improvement Districts but that has not made its way through the State Legislature yet. Woodruff stated that the City would be borrowing money from the Water Fund and therefore it is irrelevant that only of subset of residents have contributed to the Fund. He then stated that Council could decide to earmark some of the excess balance in the Water Fund to fund the Smithtown Road east trail extension and that will be done as a loan from the Fund. Further on in the process other funds could be earmarked for that construction. He noted that the City borrowed from the Sewer Fund to purchase the residential property next to City Hall which it has since sold. Councilmember Labadie stated that when she participated in trail site walks she heard from residents that they did not want to the City to use funds in the Water Fund to fund the trails. They did not express concern about using funds in any other fund. She clarified she is not disregarding the idea. Director DeJong stated if the City borrows money from one of the funds then the general tax levy will have to be increased to pay for the loan. Councilmember Woodruff stated the Smithtown Road east sidewalk extension would require an approximately 1.3 percent levy increase. Administrator Joynes noted that the City does not having a funding mechanism for street reconstruction after 9 — 10 years. Attorney Keane stated that the City of Oakland has a 30 -year street reconstruction plan. It has a fixed assessment amount and when a street is reconstructed in front of an owner's property the property is assessed that fixed amount and the total amount assessed is close to about 20 percent of the overall project. It is like a street utility but it is collected as a 429 special assessment as a benefit to the property at the time the street is reconstructed. Year after year no one shows up at the public hearing to complain because everyone will get a new street and pay substantially less than the actual cost. It is a predictable revenue stream. Director Nielsen noted that the Smithtown Road east sidewalk extension, the Strawberry Lane trail and the Galpin Lake Road trail would all benefit the School District. Administrator Joynes stated it is not possible to make all decisions right now because there is not a clear understanding of what is going on with the MCC property. There was more discussion about which funding sources are readily available today. Engineer Homby explained that the City has to compete against other cities for MSA funding. If there is funding available the City can borrow against its future MSA funds. There is a limit to the amount a city can borrow. The State's fiscal year goes from, July 1 to June 30. City Council /Staff Retreat Minutes Thursday, April 9, 2015 Page 10 of 11 Councilmember Sundberg stated it is her recollection that Council has not made an official decision about the Badger Park improvements. Director Nielsen stated it is his recollection that Council has authorized moving forward with Concept 1.5. The only reason it is on hold at this time is there is not a good understanding of what is going to happen with the MCC property. Councilmember Woodruff stated the detail design work has not been started because Council has not authorized that. That is the next step in the process. Administrator Joynes reaffirmed that design work has been put on hold because of all of the unknowns with the MCC redevelopment project. Joynes stated he had asked Springsted representatives if the City could move forward with the project and then reimburse itself at a later date and he was told that is possible. But, there is the risk that something major could go wrong with the redevelopment. Sundberg questioned if Badger Park improvements should be a high priority for the City. Because the future of the SSC is not known, she does not think it makes sense to move forward with the improvements. Mayor Zerby stated it is his recollection that Council felt comfortable with doing the parking lot reconfiguration and removing the hockey rink and facility at that time. The remaining improvements would be considered after the ownership issue was resolved. The MCC project has delayed doing the parking lot reconfiguration and removing the hockey rink and facility. Councilmember Woodruff stated everyone is committed to extending the Smithtown Road trail to the east. There is $662,000 in funding available to start that. Another $678,000 is needed to fully fund that. Before the retreat is over today he would like Council to agree on where that will come from. He expressed openness to borrowing from the Water Fund. Councilmember Siakel stated if the City borrowed the $678,000 from the Water Fund now she asked if the repayment of that could be made from the monies from the abatement for the MCC redevelopment. Director Nielsen stated as long as the loan will be paid back that should mitigate residents' concerns. Siakel stated it's appropriate that the remaining $678,000 come from the MCC redevelopment abatement because that redevelopment will directly benefit from it. She can support borrowing from the Water Fund until the abatement funds are available. Administrator Joynes stated that if he is charged with negotiating the MCC Planned Unit Development (PUD) with the developer one of the first items on his list would be to get the developer to pay for the sidewalk extension. Councilmember Siakel stated it would be nice if the developer would pay for a sidewalk along County Club Road. Councilmember Woodruff stated Council and staff do not have to finalize where the $678,000 needed for the rest of the Smithtown Road east sidewalk extension will come from until next year because of the timing of construction. Director DeJong stated when Council authorizes the construction of the trail extension it can at that time adopt a reimbursement resolution that states the City intends to cover part of the cost of it at some later point with the issuance of Tax Abatement Bonds. Discussion ensued on the MCC proposed development, including other potential improvements around the MCC site, including the SSC, Badger Park, and Smithtown Road east trail. Councilmember Sundberg suggested taking the County abatement and the street assessments off of the funding sources list. Joynes suggested taking a $1 million loan from the Sewer Fund to construct the Smithtown Road east sidewalk extension. He recommended writing something in the abatement agreement noting the City is going to reimburse itself for that construction. He also suggested staff and Springsted prepare a presentation to give to the School District Board. Councilmember Woodruff suggested it be a $678,000 transfer out of the Sewer Fund because the former Infrastructure Fund was created with a $1 million City Council /Staff Retreat Minutes Thursday, April 9, 2015 Page it of 11 transfer from the Sewer Fund and from the proceeds from the operation and sale of the City's liquor stores. The Infrastructure Fund helped fund the construction of the Smithtown Road west sidewalk. Further discussion ensued on funding and construction timing of the Smithtown Road east sidewalk, in relation to the MCC proposed development. Councilmember Woodruff stated it is likely the City will have to build a water treatment facility sometime. The property near the Badger Well House might be the best location. The Water Fund could own that property and develop it into a water treatment plant. Director Brown stated a treatment facility may be required in 15 — 20 years. Brown explained that every year the Federal Safe Water Drinking Act has more standards added to it. Engineer Hornby stated that two water treatment plants are being built in the City of Minnetrista now and a third will be coming on line. Brown stated Shorewood will likely have to build one on the east side of town and one on the west side. He noted that the cost of one plant will be $4 — 4.5 million per plant; $2.5 — 3 million would be for the facility not including land costs. Administrator Joynes stated the Water Fund could pay the City for an option on the property or the Water Fund could own the property. Administrator Jaynes stated based on this discussion some of the General Fund reserves over the City's General Fund Balance Policy could be used to for the SSC. Money will be taken out of the Sewer Fund (there are a variety of ways to do that) and it will be used for SSC improvements or the Smithtown Road east sidewalk extension and the City will try and find a way through the abatement to pay itself back for the extension or substitute another project for the extension during negotiations with the developer. Joynes noted that officially the PAC is at this time discussing the property around the MCC site. 4. Financial Planning Discussion This was discussed as part of Item 3. 5. 2015 Work Plan This was not discussed. 6. Adjourn The City Council/Staff Retreat was adjourned at 11:47 A.M. RESPECTFULLY SUBMITTED, Christine Freeman ATTEST: r"CIUVIAT-111-- ---' va-� Je. Panchyshyn, City lerk