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09-28-15 CC WS Mtg MinCITY OF SHOREWOOD CITY COUNCIL WORK SESSION MONDAY, SEPTEMBER 28, 2015 MINUTES 1. CONVENE CITY COUNCIL WORK SESSION 5755 COUNTRY CLUB ROAD COUNCIL CHAMBERS 6:30 P.M. Mayor Zerby called the meeting to order at 6:30 P.M. A. Roll Call Present. Mayor Zerby; Councilmembers Labadie, Siakel, Sundberg, and Woodruff, Administrator Joynes; City Clerk Panchyshyn; Finance Director DeJong; Director of Public Works Brown; and, City Engineer Hornby Absent: None B. Review Agenda Woodruff moved, Labadie seconded, approving the agenda as presented. Motion passed 510. 2. 2016 ENTERPRISE BUDGETS AND CAPITAL IMPROVEMENT PROGRAM Director DeJong noted that the Capital Improvement Program (CIP) has been adjusted since the last time Council has discussed it because of new information Director Brown received. He highlighted the Enterprise Funds. With regard to the Water Fund, he explained he reduced the projected revenues in the budget when compared to the 2015 adopted budget. The 2016 Budget anticipates $500,000 in revenues; the 2015 Budget anticipated $600,000. In 2009 a water rate study was done. At that time Council adopted water conservation rates. There are three rates tiered to encourage water conservation. They were designed to be revenue neutral. Residents responded to the rates and used less water that last few years. He thought $500,000 is much more in line with what residents are consuming. He commented there has been quite a bit of rain the last few years and that likely impacted the amount of water residents were consuming. He noted that Fund has a balance in excess of $3 million. There may be a need to increase rates at some point. With regard to the Recycling Fund, he predicted there would be a healthy surplus in the Fund. The recycling services provider reduced the rates when the contract was renewed for 2014 — 2016 because it dropped its Recycling Bank Program. The recycling program has been run on a breakeven basis. In addition to revenues from residents the City has been receiving a grant from Hennepin County in the amount of about $20,000. He thought it would be possible to reduce the rates slightly. With regard to the Sewer Fund, he stated there is a substantial balance in the Budget. With regard to the Stormwater Management Fund, he explained the City is operating on a breakeven positive basis on expenditures. Because stormwater management is an enterprise fund the way CITY OF SHOREWOOD WORK SESSION MEETING MINUTES September 28, 2015 Page 2 of 3 accounting works is the City amortizes project costs over a number of years (generally 10 - 15 years). Because of that the cash has been decreasing at a fairly substantial rate. He noted that the City has used funds from the Sewer Fund to fund stormwater management projects in the past. There needs to be some analysis done to determine what the transfer amounts should be over the next few years. Councilmember Siakel stated she thought the fee the City charges for recycling services in very much in line. She suggested Council consider expanding recycling services rather than reducing recycling rates. She questioned if tree and shrub recycling services could be included as recycling. Siakel asked what happened to the Recycle Bank Program. Director DeJong noted Republic Services, the recycling service provider, discontinued that Program and reduced its recycling rates because of that. Councilmember Woodruff noted that if residents still have Recycling Bank points they need to use them by the end of the year. Woodruff stated the Stormwater Management Budget does not reflect the assessment income the City will receive from the watermain extension along Star Lane and Star Circle. That would be at a rate of about 10 percent a year for 10 years. He then stated the Water Fund. Budget shows a deficit of over $92,000 in 2016. He explained that is not a cash deficit because there is $280,000 in depreciation that is not reflected in that accounting budget. That would add about $190,000 to the cash budget. The Sewer Fund also has about $100,000 in depreciation. That offsets about one half of the deficit in the Sewer Fund Budget. Woodruff then stated that because all residents pay for recycling services Council could consider reducing the recycling rate and increasing the stormwater management rate so there would be no change to the residents. Councilmember Siakel asked Director DeJong to explain what the Special Assessment revenue line item in the Recycling Fund Budget is. DeJong explained that is the delinquent utility amounts that are certified to Hennepin County and the County assesses those amounts to property taxes. The City then receives those delinquent amounts from the County. The delinquent amounts carry an interest rate of 8 percent. Mayor Zerby stated the 2015 Water Meter Supplies line item in the Water Fund Budget is $15,000 and year -to -date (YTD) just over $3,000 has been spent. The budget for 2016 is $15,000. He asked if that is realistic. Director DeJong responded yes. DeJong clarified that also includes components that go along with the water meters. A number of those will have to be put in for the development on the former Minnetonka Country Club property. He stated there may be some commercial water meters that may need to be replaced and they are more expensive than residential meters. Zerby asked staff if it anticipates the purchase of $12,000 for meters in 2015. Director Brown responded yes. Councilmember Sundberg stated the Other Services & Charges Communications line item in the Water Fund Budget is 186 percent higher than in the adopted 2015 Budget. She asked what the rationale is for that. Director Brown explained the City used to contract out for maintenance of its water system. The City took over responsibility for that maintenance because staff did not think it was being adequately maintained. Over the last 10 years a lot of work has been done to bring the facilities up to where they should have been. The City uses the SCADA (Superior Control and Data Acquisition) System. Currently the City is relying on telephone lines to communicate between the well houses and the water towers. Often when it rains communications fail. The goal is to get to an online system. Unfortunately, to have an internet service provider host that is somewhat costly. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES September 28, 2015 Page 3 of 3 Mayor Zerby asked why the 2016 Other Services & Charges Contractual line item in the Water Fund Budget doubled to $60,000 from $30,000 in 2015. Director Brown explained staff is trying to be less reactionary and be more proactive in providing services. The City has not been having inspections of wells done in a timely matter. The goal is to get wells pulled and brought in to a vendor for inspections and then reinstalled more regularly. Councilmember Woodruff noted that the Stormwater Management CIP includes $230,000 in 2016 for improvements that would be made when the Galpin Lake Road trail segment is constructed. Yet, the Parks Improvement CIP has that project slated for 2018. He suggested the stormwater improvements be moved out to 2018. Administrator Joynes noted that the City has certified a 3 percent maximum tax levy increase for 2016 with Hennepin County. Council can reduce that levy before it adopts the 2016 budget in December but it cannot be increased. Councilmember Woodruff stated he has been reading about there being significant health insurance premium increases for 2016. Administrator Joynes stated the City's increase given the plan the City would likely select would be about a 6.4 percent for 2016. Woodruff asked if that can be accommodated in the budget. Director DeJong responded yes. DeJong explained that a few years ago the City decided to renew employee insurance plan coverage in December rather than January. Therefore, the City will get this year's increase for 11 months of 2016. The increase for December 2016 would be significantly higher. Administrator Joynes stated the City may try to join a group. One group option is the LOGIS (Local Government Information System) Health Care Group. LOGIS is a consortium of government agencies. Woodruff moved, Sundberg seconded, Adjourning the City Council Work Session of September 28, 2015, at 6:50 P.M. Motion passed 510. RESPECTFULLY SUBMITTED, Christine Freeman, Recorder " °" c tt Zerb ayor Jean Panchyshyn, City Clete