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06-14-21 CC WS MinutesCITY OF SHOREWOOD 5755 COUNTRY CLUB ROAD CITY COUNCIL WORK SESSION MEETING COUNCIL CHAMBERS MONDAY, JUNE 14, 2021 6:00 P.M. MINUTES 1. CONVENE CITY COUNCIL WORK SESSION MEETING Mayor Labadie called the meeting to order at 6:00 P.M. A. Roll Call Present. Mayor Labadie; Councilmembers Johnson, Labadie, Gorham, and Callies; City Attorney Keane; City Administrator Lerud; Finance Director Rigdon; Director of Public Works Brown; and City Engineer Budde Absent: Councilmember Siakel B. Review Agenda Johnson moved, Gorham seconded, approving the agenda as presented. Roll Call Vote: Ayes — all. Motion passed 4/0. 2. EXCELSIOR SEWER CHARGES City Administrator Lerud noted that he had included a summary in the packet and noted that Finance Director Rigdon and Public Works Director Brown and City Attorney Keane can also weigh in on the discussion. He said that late last year, the City Council reviewed this information and appointed two representatives from the Council to meet with two representatives from Excelsior's Council to determine if an agreement could be reached on the question of the overpayment of sewer charges to Excelsior and a new agreement to replace the current two agreements. He explained that several meetings were held, and the City had thought that progress was being made. However, in April 2021, the City received an invoice from Excelsior that was more than three times the amount of any prior invoice. He stated that lately the invoice has been around $50,000 and the invoice received in April was for over $160,000. He stated that the City remitted a check in the same amount of the 2019 service and explained that they believed that was fair payment. He stated that following meetings between staff and the representative group, they felt it was time to go before the full Council to get some direction on next steps. Councilmember Callies asked about the reference in the staff report to "a new interpretation of the agreement". City Administrator Lerud explained that there are three components to the 1991 formula: Excelsior's budgeted collection cost, plus Excelsior's budgeted capital outlay, plus Excelsior's budgeted administrative general cost at 24%. They have stated in the previous meetings that they have been underestimating the actual capital outlay amount. Their new interpretation is that their capital costs are not limited to just the facilities that Shorewood is using and are taking their entire capital budget and putting it into the formula. Councilmember Callies asked if Excelsior had a personnel change and if that is why there is a new interpretation. City Administrator Lerud stated that they did have a personnel change because their treasurer left but he does not know if that is the reason for the invoice. CITY OF SHOREWOOD WORK SESSION COUNCIL MEETING MINUTES JUNE 14, 2021 Page 2 of 5 Councilmember Callies stated that she understands that there is not really a statute of limitations, but these charges are going back a long time. City Administrator Lerud stated that as staff have been looking at this, it has never been a legal issue. He stated that they are not proposing that they go back and seek a court judgement for these amounts. He stated that the City believes that Excelsior have not incurred the overpayment costs that Shorewood has paid to them, as Shorewood has not been provided service. He stated that the City has been paying this since 1991 and believe that they have been overcharged and can document it going back to 2005. Councilmember Callies asked if a sewer meter was the same as a flow meter. Public Works Director Brown stated that there are meters that can be installed that will measure wastewater similar to a water meter. City Administrator Lerud stated that he wanted to be clear that when they are talking about basing the flow or sewer charge, they are talking about a water meter reading. He explained that what he is talking about in that instance is that there are Shorewood residents who are Excelsior water customers, so their water is metered. It is billed to the City of Shorewood and is billed back against those properties. Councilmember Gorham stated that on the last page, it lists an overpayment of $270,000 and then interest is added to get to about $330,000. City Administrator Lerud explained that what they believe and can document for overcharges are $229,273. Councilmember Gorham asked why the city would not look to go back to 1991 and charge interest. City Administrator Lerud noted that neither City has good information or records between 1991 and 2004 so those numbers are estimates. Councilmember Gorham asked if Excelsior has explained why they are pushing back on a straight reimbursement to Shorewood. City Attorney Keane stated that they have not advanced any rationale for their actions. He noted that the only thing they have heard is from their City Attorney Staunton who stated that, in his opinion, this would be subject to a statute of limitations claim and that anything beyond six years should not even be talked about. He stated that his reply to that comment was that this issue is not being litigated and Shorewood is simply stating the facts. Mayor Labadie noted that this has been a very frustrating process. She noted that Councilmember Johnson and former Mayor Zerby were involved in the representative discussion, and she has taken Mayor Zerby's place at those meetings. She stated that there has been no meeting of the minds between the two cities. She explained that the City felt that they went into these meetings and negotiations with good numbers that could be backed up and felt that Excelsior came back and blindsided them with this most recent invoice and could not even back it up, which was been very frustrating. City Administrator Lerud noted that one thing he thinks both sides agree to is that the 1991 agreement was a poorly written agreement and explained that it was cancelled at the end of 2020. He stated that he also believes both sides agree that there should be an updated agreement for both water and sewer. The biggest issue that there is not agreement on is the overpayment and how it will be reimbursed to Shorewood. Councilmember Callies asked if what happened was that the representative group was negotiating and then Excelsior got mad and sent the City the bill that is three times larger than any other bill. City Administrator Lerud stated that he does not know the motivation for their sending the bill. He stated that it was sent via e-mail and it was surprising because it was out of the blue, and had expected the 2020 bill to be sent once negotiations were done. CITY OF SHOREWOOD WORK SESSION COUNCIL MEETING MINUTES JUNE 14, 2021 Page 3 of 5 City Attorney Keane stated that he feels it is very important to note that Excelsior has never made an offer to Shorewood. City Administrator Lerud reviewed the five point `proposal' from Excelsior that was completely based on the $169,000 invoice that they just submitted. Mayor Labadie reiterated that this has been very frustrating and thinks that both Councilmember Johnson and City Administrator Lerud would agree that they would go to the Zoom meetings and Shorewood was prepared and it was almost like the Excelsior individuals had not read anything that was written, nor put any thought into it. She does not think it is accurate that they came back to the City out of anger because there have been cordial exchanges, but reiterated that it felt like no one from Excelsior was doing their homework. She stated that she has not gotten the impression that they have done this out of spite or retaliation which is what made receiving the invoice even more shocking. City Administrator stated that he believes it is incumbent on the City to work to have that money returned in whatever form is agreed upon. He explained that Shorewood had proposed to have it sit as a credit, that would be drawn down by the a future agreed -upon formula, which he felt was a reasonable solution. He noted that staff has worked up a few proposal ideas that they are comfortable with and reviewed the details of discussions and the differences between the 1971 and 1991 agreements. Councilmember Callies stated that she appreciates the firm stance that staff has taken to this point because the City needs to protect the interests of the residents who have paid, but she can sort of see where this is headed. She stated that she is supportive of option two, but thinks that the Council will be back in an attorney -client session in a few weeks. Councilmember Gorham stated that he would assume that Excelsior would also want option two. He stated that this all seems very straight forward to him and for the City to be offered a settlement does not really sit right with him. He stated that it is straight forward that the City has been paying for this and has overpaid. He noted that he would compare it to a situation where you have overpaid your Verizon bill and it is simply credited for a future bill and is just that simple. He stated that he is not ready to commit it to lawyers just yet but asked if the feeling was that it had reached the end of the line for negotiating in the smaller group with Councilmember Johnson and Mayor Labadie. Mayor Labadie stated that she thinks it is pretty close to the end of the line. She stated that she was hoping that if this was discussed as a full Council, they could go back and present a consensus form the entire Council so there is a unified front. She stated that her hope is that this may prevent it from coming back in a few weeks to a closed session, but she is not overly optimistic about it. Councilmember Johnson agreed and noted that he was also not optimistic and explained that he questioned whether the latest invoice was a known entity by the Excelsior Council but has not gotten a clear answer to that question. Councilmember Callies reiterated that she would support option two and would just hope for the best. City Administrator Lerud stated that he thinks he has enough direction from the Council and suggested that Mayor Labadie and Councilmember Johnson present the Council's thoughts at the next joint meeting. CITY OF SHOREWOOD WORK SESSION COUNCIL MEETING MINUTES JUNE 14, 2021 Page 4 of 5 3. ATTORNEY PROPOSALS City Administrator Lerud explained that the City had received six proposals to provide criminal and five proposals civil services to the City. He stated that he believes the understanding was that the Council would discuss the interview process tonight and determine whether the entire Council would be involved and other details surrounding the interviews. He noted that the statute says that the name of the firm is considered public information at this time, but the content of the proposal is not, until the finalist is selected. Councilmember Callies stated that her preference is that the interviews are held off until the Council can meet in person. She stated that there are a few proposals that, in her opinion, should not move forward. Mayor Labadie stated that she agreed and would like to conduct the interviews live versus via Zoom and she also flagged a few firms on both the civil and criminal as having a conflict of interest. She would suggest that the Council look at the two sides, civil and criminal, as two entirely separate issues. She stated that she would also like to see it happen not at a City Council meeting but to have its own session in order to give it the time it deserves without having a cut off time because there is another meeting starting at 7:00 p.m. She reiterated that she would like to see the interview sessions be separate for both the civil and criminal entities and to not piggyback them on the same night as a Council meeting. Councilmember Gorham stated that he would support giving them their own separate meeting. Councilmember Callies stated that she would agree with the idea of not holding the interviews on the same night as a Council meeting and noted that it may even be possible to hold those meetings during the daytime hours, depending on schedules. She noted that she would also support the suggestion of handling the civil and criminal aspects separately. Mayor Labadie stated that she would like the Council to discuss the potential conflict of interest that she had flagged because she thinks some of them are significant enough that they could eliminate that firm from even getting called for an interview. She stated that for the civil firms and she believes that the following firm has a potential conflict: Kennedy & Graven - because they have served as city attorney for Tonka Bay, as well as being general counsel for the Lake Minnetonka Conservation District, and the Lake Minnetonka Communications Commission. For criminal firms, she believes that the following firm has a potential conflict: Chestnut Cambronne — because they are representing clients who have pending issues within the City. Councilmember Callies stated that she thinks it was disingenuous that Chestnut Cambronne had not called out this situation. Mayor Labadie stated that she does not think Chestnut Cambronne should be brought forward for an interview. She asked if anyone else flagged any firms for discussion about potential conflict of interest. There was consensus of the Council to eliminate Chestnut Cambronne from the criminal firm interviews. The Council discussed the potential conflicts with Kennedy & Graven because they serve as city attorney for Tonka Bay as well as for LMCD and the LMCC. There was consensus of the Council to eliminate Kennedy & Graven from the civil firm interviews. Mayor Labadie asked if the Council wanted to interview all the remaining candidates or narrow the field a bit more. Councilmember Callies stated that she feels the rest of the candidates are CITY OF SHOREWOOD WORK SESSION COUNCIL MEETING MINUTES JUNE 14, 2021 Page 5 of 5 entitled to an interview. Councilmember Johnson asked if a fifteen -minute interview would be sufficient, for example of there are 4 interviews scheduled for the same night. Councilmember Gorham stated that, in his opinion, it depends on whether it is the whole dog and pony show of their whole firm, or whether it is just meeting the `main guy' that will represent the City. Councilmember Callies stated that she does not want them to repeat their whole proposal because the Council is capable or reading the information that was already submitted. She stated that she feels the goal would be to meet the main people and see how they come across to the Council. She stated that fifteen minutes may be too short and suggested that it be extended to twenty minutes. Councilmember Gorham stated that there were some stand -outs for him and if the Council can agree that there are a top three, it would be good to give everyone twenty to thirty minutes. He stated that he would support interviewing three candidates and the interview could be the main representative and some key staff members. He stated that he would support bringing in a smaller number of candidates and giving them each more time. Mayor Labadie noted that Police Chief Meehan has expressed an interest in sitting in on the criminal firm interviews and asked for Council feedback on this idea. Following discussion there was consensus from the Council that the Police Chief should not be part of the interview process as he submitted a letter of support for one of the firms. Councilmember Callies noted that she thinks the Council should interview the remaining firms. Councilmember Gorham explained that his recommendation for narrowing down the candidates was because if there are firms that really do not have a chance, he would not want to cloud the Council's judgement. Mayor Labadie confirmed that the City will offer interviews with the entire Council to four of the civil firms and five of the criminal firms that will last twenty minutes. City Administrator Lerud noted that he will send out surveys of the best days/times for the interviews. 4. ADJOURN Callies moved, Johnson seconded, Adjourning the City Council Work Session Meeting of June 14, 2021, at 6:58 P.M. Motion passed 5/0. ATTEST: 4��A 1'�t&L Sandie Thone, City Clerk 6ZA V6_L_'1 J nifer Itabadie, Mayor