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07-25-16 CC WS MinCITY OF SHOREWOOD CITY COUNCIL WORK SESSION MONDAY, JULY 25, 2016 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 6:08 P.M. A. Roll Call Present. Mayor Zerby; Councilmembers Labadie, Sundberg, and Woodruff; Administrator Joynes; Finance Director DeJong; Planning Director Nielsen; Director of Public Works Brown; and, Engineer Hornby Absent: Councilmember Siakel B. Review Agenda Labadie moved, Woodruff seconded, approving the agenda as presented. Motion passed 4/0. 2. CAPITAL IMPROVEMENT PROGRAM AND 2017 GENERAL FUND BUDGET DISCUSSION Administrator Joynes explained that during Council's July 11, 2016, work session staff briefly reviewed the Capital Improvement Program (CIP) and 2017 General Fund Budget. Based on that discussion this evening he wants to start with an explanation of the Street Reconstruction Fund because it is one of the funds that will go into a deficit state in 2017. The Street Reconstruction CIP had been adjusted over the last few years based on discussions with Council. After the discussion about streets he will talk about the General Fund and available resources. Director DeJong explained the Equipment Replacement, Water, Sewer and Stormwater Management Funds are all stable over the course of the CIP timeframe. It is possible some may enter into a minor deficit state at some point but they should be close to being balanced by the end of the CIP timeframe. The Park Improvement Fund will enter into a deficit state if more than about $200,000 in improvements is made to parks after 2016. The Trail Fund will go into a deficit state in 2018. The funding plan assumes the City will issue Abatement Bonds in the amount of $1 million to fund the construction of the Smithtown Road east sidewalk extension. In 2015 Council adopted a reimbursement resolution. That resolution indicated the City's intent to fund the sidewalk with bond proceeds. That has to be done within 18 months of construction of the project. It has to be done in 2016 or 2017. There is also an assumption that the construction of a trail along Strawberry Lane will be funded with abatement from the Minnetonka School District. If that does not come to fruition then funding for that sidewalk becomes a problem. The Street Reconstruction CIP has the following roadways scheduled for reconstruction between 2017 and 2020: 2017 — Riviera Lane; 2018 — Mann Lane; 2020 — Seamans Drive. In 2021 Amlee Road, CITY OF SHOREWOOD WORK SESSION MEETING MINUTES July 25, 2016 Page 2 of 6 Manitou Lane and Glen Road are scheduled for reconstruction. There is a lot of stormwater management work that must be done in conjunction with the reconstruction of those three roadways. Bonding will have to be done to fund those projects. The revised 2017 CIP reflects that the improvements for roadways on Enchanted Island and Shady Island have been advanced to 2017 provided the City of Minnetrista makes improvements to the section of Enchanted Lane located in Minnetrista in 2017. The improvements would mainly be mill and overlay but one roadway would be reconstructed. The estimated cost for those improvements is $509,000. Advancing those improvements would result in the Street Reconstruction Fund having an approximate deficit of $500,000 at the end of 2017. If the schedule for the improvements to the roadways on the Islands is put back to 2023/2024 then there would not be a deficit in that Fund until 2019 or 2020. Director Brown explained roadways are scheduled to be maintained and replaced based on the PASER (Pavement Surface Evaluation and Rating) System rating to a great extent. The roadways are rated in the fall after the vast majority of patching has been done and sealcoating is complete. The newly patched and sealcoated roadways will get a higher rating. A number of years ago staff developed a decision flowchart that would help in determining what type of improvements should be made to a roadway — sealcoat and overlay, reclamation or reconstruction. Council approved that flowchart. There has been general agreement that the City's goal would be to maintain its roadways to a level 4 rating or higher. There are seven City roadways that are currently rated below a 4. He asked if Council wants to continue to use the PASER rating and flowchart to help determine when reconstruction should be done or does it want to use some other criteria. He encouraged Council to have a serious discussion about how to fund roadway reconstruction. Mayor Zerby stated the information in the meeting packet indicates the 2015 rating is 6 for Riviera Lane, for example, yet it is scheduled for reconstruction in 2017. Director Brown explained that the PASER System recommends a roadway rating be increased to 8 or 9 after it has been patched and sealcoated. He traditionally rates a recently patched and sealcoated roadway a 6 or 7 because it is not the same strength as a brand new roadway that has been overlaid. In a few years that roadway will begin to show serious deterioration. He thought Riviera Lane had been patched up tight and sealcoated which increased its rating but its rating is going to drop quickly. Zerby asked if that follows the flowchart for determining a roadway should be reconstructed. Brown stated he thought it would and noted he thought there may be one or two inconsistencies in the list of ratings of roadways. Zerby then stated that because Riviera Lane is the only roadway scheduled for reconstruction in 2017 he assumes it must be in the worst condition. Brown explained some cities reconstruct the lowest rated roadways first. That may not be the best thing to do because it does not pay to patch and sealcoat roadways in very poor condition. Other cities invest in their mid -range roadways because they still have good value and the investment reaps the best return. Councilmember Woodruff stated Riviera Lane was rated a 7 in 2014 and a 4 in 2013. Yet there are other roadways that carry a much higher volume of traffic. He then stated there is a PASER table that lists the roadways in the order from the lowest ratings to the highest ratings. Shorewood Lane in the only one of the lower rated roadways that is in the CIP. That makes no sense to him. It is a dead -end cul -de -sac in a small residential area. He went on to state that Mann Lane was rated 6 and Maple Street a 5 in 2015. They are scheduled for more significant improvements in 2018 yet there are lower rated roadways that are not. With regard to the roadways on the Islands, Woodruff stated two of them are rated 3 and 4 are rated 4 and the chart indicates they show rapid deterioration. If an opportunity presents itself to do a joint project with Minnetrista he thought it makes sense to do so. He explained the City closed out 2015 with a $412,000 surplus. The plan had been there would have been a deficit that would have to be covered with CITY OF SHOREWOOD WORK SESSION MEETING MINUTES July 25, 2016 Page 3 of 6 the use of reserves which he thought was close to $187,000. The $412,000 combined with the $187,000 would more than fund the improvements to the roadways on the Islands. Director Brown stated past councils have encouraged staff to limit adjustments made to the Street Reconstruction CIP because it makes it difficult to plan. He noted changes have to be made periodically to the CIP because it is a living document. He explained that roadway conditions change from year to year because of, for example, frost conditions. Therefore, inconsistencies can arise between the 20 -Year Pavement Improvement Plan (PMP) and the CIP. He encouraged Council to pay more attention to how a roadway is reacting than to its rating. He noted that Amlee Road, Manitou Lane and Glen Road have passed the point of deterioration. Mayor Zerby noted the City has 52 miles of roadways. He explained past councils and the current Council have tried to use some logic in planning for improvements to roadways 20 years out. He appreciates the benefits of having expert opinions influence the planning. Yet, Council has been trained to rely primarily on the PASER ratings. Therefore, it is somewhat difficult to understand why roadways rated as a 6 or 7 are going to be reconstructed or reclaimed before those rated a 3. He stated he always thought it was the goal to have a PMP that was somewhat economic because it would be cheaper to improve a roadway before it became quite deteriorated while at the same time getting as much life as possible out of the roadways. Engineer Hornby stated he thought it was prudent to maintain some of the roadways that have a higher rating so they do not become too deteriorated. The different types of improvements have to be balanced out over the years. He then stated that Director Brown knows a lot of history about the roadways because of his long tenure with the City. He noted he drove on a roadway earlier in the day that looks fine but as he drove it his vehicle was going up and down. That indicates to him that it has been patched a number of times. That is why it is prudent to also factor past history into the ratings. Director Brown noted staff will attempt to resolve any inconsistencies. He then stated that during the July 11 council work session and again earlier in this discussion Councilmember Woodruff brought up traffic volume on roadways. If Council wants volume to be factored into the scheduling of improvements staff would like to know that. Councilmember Woodruff stated that 6 to 7 years ago a former member of Council asked what the difference was in the longevity and cost of reclaiming a roadway versus reconstructing a roadway. It was his recollection that at that time Director Brown explained a reclaimed road would last about 15 — 20 years and a reconstructed road would last 30 plus years and a reclaim would cost about one -third the cost of reconstruction. The same amount of service life could be achieved for about two- thirds the cost of reconstruction. There was also discussion about what other reasons there would be to reconstruct a roadway and stormwater management needs was mentioned. Woodruff expressed his preference to reclaim a roadway twice and get a 30 — 40 year service life rather than spend 30 percent more for a roadway with the same service life. Mayor Zerby noted he recollected having that discussion. Stormwater management issues and edge issues are factored into the decision flowchart for determining reconstruction versus reclamation. Councilmember Woodruff suggested transferring the 2015 budget surplus into the Street Reconstruction Fund and then Council can decide the priorities for fixing roadways. The money is needed in that fund anyway. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES July 25, 2016 Page 4 of 6 Woodruff stated that Strawberry Lane was rated a 7 in 2014 and 2015. He questioned the appropriateness of reconstructing a roadway for $1 million in order to build a trail. Mayor Zerby stated he thought there are drainage issues with Strawberry Lane and clarified that he was not an engineer or a public works director. Director Brown explained Strawberry Lane was the first roadway that was reconstructed when he first started with the City 21 years ago. At that time a reclaim project was modified to deal with a roadway that was not in very good shape. It has been a very stable roadway because of that. He noted the proposed trail along Strawberry Lane cannot be constructed economically without tearing up the roadway. That is why Strawberry Lane and West 62nd Street are currently slated for 2017. Director DeJong highlighted the funding graph for the Street Reconstruction Fund. It shows about a $500,000 deficit in 2017, 2018 and 2019. The deficit gets a little bigger in 2020. Some hard choices about funding have to be made in 2021 when it comes to paying for reconstruction of Amlee Road, Manitou Lane and Glen Road. He reiterated the funding plan for the Trail Fund assumes the City will issue Abatement Bonds for the Minnetonka Country Club (MCC) in the amount of $1 million to fund the construction of the Smithtown Road east sidewalk extension. It also assumes that the construction of a trail along Strawberry Lane will be funded with $852,000 in abatement from the Minnetonka School District from the MCC development. The Galpin Lake Road trail segment is scheduled for reconstruction in 2018 and the assumption is it will be funded with Minnesota State Aid (MSA) funds. It will take four years of the City's MSA allocation to pay for that. Mayor Zerby asked if staff thinks the City can meet the abatement funding needs by the end of 2016. Councilmember Woodruff explained the City will have to pay the contractor for the Smithtown Road east sidewalk extension this year but it does not need to receive the abatement funds until 2017. Director DeJong clarified it would require a short-term interfund loan from one of the funds to the Trail Fund until the City issues the Abatement Bonds. Director DeJong displayed a graph of the projected balance in the Trail Fund through 2024. He noted the balance goes into a deficit state with the construction of the Galpin Lake Road trail segment and comes out of a deficit state in 2021. DeJong reviewed the major elements in the draft 2017 General Fund Budget. ➢ The preliminary General Fund levy increase is 2 percent. That is the base level needed to maintain services. ➢ It includes a salary reserve of 0.5 percent for office staff and Public Works union personnel. The union contract has to be renegotiated for 2017. ➢ It includes $40,000 for contract forestry activities; the same as in 2016. ➢ The $50,000 included for a compensation study and transition planning in 2016 has been removed for 2017. That work will be completed in 2016. ➢ It includes $85,000 for consultant services to update the Shorewood Comprehensive (Comp) Plan. ➢ Those changes will put the 2017 anticipated deficit at $194,735. That compares to $180,148 in 2016. DeJong explained General Fund reserves were e $4,502,000 at the end of 2015. The City's General Fund Balance Policy stipulates a reserve level of 55 — 60 percent of the next year's operating expenditures. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES July 25, 2016 Page 5 of 6 Sixty percent of the year -end balance would be $3,608,000. That leaves $894,000 available for use (the difference between the two amounts). For 2016 the budget anticipates the use of approximately $180,000 in reserves. That leaves an undesignated balance of $714,000 above the 60 percent that could be available for use. Councilmember Woodruff stated the General Fund Budget Summary Municipal Buildings Materials and Supplies line item is $21,300; the same as the 2016 budgeted amount. In prior years the actual expenditures had been between $54,000 and $60,000. He asked staff to review that. Director DeJong explained the contract with Warner Connect is about $35,000 annually and that has been recoded into Support Services and Charges. Woodruff asked why the budget for Police went up. Administrator Joynes stated Shorewood's portion of the funding is 49.5 percent and the increase accounts for that. Joynes noted the Police budget reflects the costs for an additional officer. Woodruff stated the Public Works Services Personnel, Materials and Supplies, and Support Services and Charges categories include the same amounts for 2017 as were budgeted for 2016. The amount for Personnel is more than $100,000 higher than the actual expenditures for 2013 — 2015. The budgeted amounts for the other two categories are much higher than the actuals for 2014 and 2015. He asked staff to look at the run rate for those three categories. He noted the same thing applies to the same three categories in Parks Maintenance and in Recreation; the 2016 approved budget amounts are the same as the proposed 2017 amounts. Mayor Zerby stated the Revenues Licenses and Permits 2015 actual amount was $275,567 yet the 2017 budgeted amount is $209,180. With the MCC development starting he thought 2017 should be higher than 2015. Director DeJong stated past practice has been that revenues should be budgeted such that there is a 50 percent chance the actual amounts would be higher. For expenses there should be a less than a 50 percent chance that they would higher than budget. Zerby expressed his preference to have a tighter forecast. DeJong stated when there is a downturn in those revenues it usually lasts for a few years. He thought it was a lean budget. Zerby stated based on the average of 2014 and 2015 actuals a minimum of $30,000 could easily be added to the 2017 budgeted amount. Zerby expressed his opposition to budgeting $85,000 in 2017 to outsource the update of the Comp Plan. That amount is a salary. He thought the new planner should be able to do some of that. Councilmember Woodruff noted he agrees with Zerby and stated he could support either taking it out or leaving it in. Woodruff stated if it is left in the budget it presents an opportunity to underspend significantly. He then stated that Director Nielsen intends to retire early in 2017 and maybe the City could hire him as a consultant to work on that update. He assumed those services would cost less than $85,000. Zerby expressed his preference to take it out of the 2017 budget and noted that if there is a need for consulting services he thought Council could find a way to fund them. Director DeJong stated staff will try to and resolve the anomalies in the 2017 Street Reconstruction CIP. Staff will also make adjustments in the General Fund Budget. Mayor Zerby stated the South Lake Minnetonka Police Department ( SLMPD) Coordinating Committee has recommended a 2017 SLMPD Operating Budget for approval by the SLMPD member City Councils. Councilmember Labadie stated the Public Services Support Services /Charges includes a line item for drug testing. The 2016 and 2017 budgeted amount is $1,800 yet actual amounts for 2013 — 2015 ranged from $50 to $504. She asked who gets drug tested. Director Brown explained federal standards require random drug testing of Public Works personnel and that is done by an independent organization. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES July 25, 2016 Page 6 of 6 3. ADJOURN Woodruff moved, Sundberg seconded, Adjourning the City Council Work Session of July 25, 2016, at 6:53 P.M. Motion passed 4/0. RESPECTFULLY SUBMITTED, Christine Freeman, Recorder ATTEST: i L JeWn Panchyshyn, Ci let Scott ffby, M or