Loading...
11-12-24 CC WS MinutesCITY OF SHOREWOOD 5755 COUNTRY CLUB ROAD CITY COUNCIL WORK SESSION MEETING COUNCIL CHAMBERS MONDAY, NOVEMBER 12, 2024 6:00 P.M. MINUTES 1. CONVENE CITY COUNCIL WORK SESSION MEETING Mayor Pro-Tem Callies called the meeting to order at 6:00 P.M. A. Roll Call Present. Councilmembers Callies, Maddy, Sanschagrin, and Zerby; City Attorney Shepherd; City Administrator Nevinski; Parks and Recreation Manager Czech; City Clerk/HR Director Thone; Finance Director Schmuck; Planning Director Darling; Director of Public Works Morreim; and, City Engineer Budde Absent: Mayor Labadie B. Review Agenda Zerby moved, Sanschagrin seconded, approving the agenda as presented. Motion passed 4/0. 2. ENTERPRISE FUND BUDGETS Finance Director Schmuck gave an overview of the City's proprietary funds, also known as Enterprise Funds which are intended to be self-sufficient, including: Water Fund; Sanitary Sewer Fund; Stormwater Management Fund; and the Recycling Fund. She reviewed the analysis that has been done on rates, discussions at the 2024 Council Retreat, proposed budgets, and proposed rate increases that staff was recommending. Councilmember Sanschagrin asked to dig deeper into the change in net position that was depicted in the presentation for the Water Fund. Finance Director Schmuck gave a brief explanation and reviewed the projected revenues, projected expenses, and the projected shortfall, based on those numbers. Councilmember Zerby stated that the difference in revenues for the Water Funds seems to have changed quite a bit from year to year and asked if that was based on having a dry season. Finance Director Schmuck explained that the numbers shown for 2021, 2022, and 2023 were actual numbers and during those years there were some significant dry seasons. She noted that the numbers depicted for 2024 and 2025 were budgeted numbers and noted that the 2024 budget was somewhat overinflated and was based on the dryness in 2022 and 2023. She noted that what they have seen in 2024 is that water revenues have dropped significantly because there was such a wet spring. She explained that in order to be a bit more accurate, they went back to the 2023 budget, instead of the 2023 actuals in order to project the 2025 revenues which is why it shows a decrease in comparison with the 2024 budget. She noted that the utility revenues for user fees in CITY OF SHOREWOOD WORK SESSION COUNCIL MEETING MINUTES NOVEMBER 12, 2024 Page 2 of 6 2023 was six hundred fifty-eight thousand two -hundred forty dollars and the actual was nine hundred forty-five thousand one -hundred and twenty-two dollars. Mayor Pro -Tern Callies asked why Finance Director Schmuck had used the budgeted number for 2025 rather than the actual budget. Finance Director Schmuck explained that it was because the actual numbers were based on a dry season and the City cannot project forward based on the presumption of weather activity. She stated that in order to be more conservative they chose to go off of the budget figures of the ten percent rate increase because it will be more accurate. Mayor Pro-Tem Callies stated that, to her, it seems the biggest issue with the Water Fund is that there are not enough people connecting to water and the City has had the same rate of ten thousand dollars per connection for the last twenty-five years. She stated that she thinks this is a complicated issue because the City has not been motivated to raise rates because the public has been opposed to it. She noted that it is a bit like the assessment process because some people have not had to pay when it was part of the construction for a street project, but others have had to pay and asked about the fairness in those situations. She stated that she felt it was something that really needed to be worked on in order to be fair to people. City Administrator Nevinski stated that at the next meeting, staff would like to have a discussion with the Council about an incentive program to help residents connect. He stated that as they get into the next year and start taking a look at their long-term financial plan they will need to talk about what they are doing with water connections. He noted that he felt that the Council needed to develop a philosophy or vision for what they would like to have happen. Councilmember Zerby asked if the City had any information from other communities that have had similar objectives. City Administrator Nevinski stated that it was possible that they could find some examples, but also felt that many cities built out as they developed. Councilmember Zerby suggested that they look into communities such as Nowthen or Norwood - Young America. Public Works Director Morreim stated that when they were going through this last winter, he believes Medina just went through this because they are connecting to Plymouth water and are requiring people to connect. He stated that he did not know the exact details but did know that there was no option to opt of out the connection. He stated that other than that example he does not know of many metropolitan cities that are the same path as Shorewood with half on and half off and no required connections. Finance Director Schmuck that in her experience with other cities what she has seen is as the watermain comes, the connection is required. She stated that some cities will do something similar to Shorewood as far as allowing the connection fee to be assessed, but everyone was required to actually connect. She noted that in Shorewood, they originally had everybody pay the connection fee and then somewhere along the line, half of the connection fee had to be paid and the other half could be assessed, but then somewhere else along the line, a determination was made that the entire connection fee could be assessed and there was not a requirement to CITY 0FSH0REVVQKJQWORK SESSION COUNCIL MEETING MINUTES NOVEK8BER12.2O24 Page 3mfG connect. She stated that now, people donot have topay the connection fee and you donot have tDconnect until they choose tnrather than when the water line comes through. Mayor Pro-Tem Callies stated that these were all good discussion points for the retreat and asked if the Council was comfortable with the plan that was presented by Finance Director Schmuck. Counci|nnemnber 8anmchogrin stated that one thing that may he|p, especially with pricing for residents, is the comparative analysis which shows that Shorewood's rates are significantly lower than other cities, with the exception ofChanhassen. Henoted that he felt that this would beadata point that the City could point to in order to justify rate increases in the future. Finance Director Schmuck stated that would only be for the participants that are already connected no they would only be capturing the rate increase with the erna|| amount of uoera, venous all City-wide people who have access tothe structure. Public Works Director K8orneim stated that e vast majority of communities have treated vveter, for example, Excelsior. Councilmember Sanschagrin agreed that would be a bit of an apples -to -oranges comparison. Public Works Director yNornaim stated that only parts of the City'e water was treated. Mayor Pro-Tem Callies moved the discussion onto the Sanitary Sewer Fund. C}ounui|rnennberSanaohagrin stated that the main driver in this fund was the fees that the City gets from MCES. He noted that the City had been trying to reduce water infiltration as a way to manage those fees and asked ifthere were other opportunities. City Engineer Budde stated that the Met Council has an annual grant that is awarded to cities in order to help reduce this and the City has app|ied, and been ouooeaofu| in receiving the grant every year. Hestated that in comparison with other communities, the City does not have huge |&| imaueg, but itiaalways a concern. Public Works Director Morreim stated that the wastewater flows have decreased since their peak, during CC]V|[} and noted that |&| has helped. He noted that they were able to reduce it by one hundred million gallons, but the Met Council fees have gone up about twenty-two percent in that same time period. He stated that they have been able to reduce the costs a little bit, but the costs are going up rather significantly. Councilmember Sanschagrin asked if there was any indication about whether this would continue. Public Works Director Morreim noted that he would anticipate that it will because it is mostly labor and energy. Finance Director Schmuck explained that the City had almost doubled since 2017 for Met Council expenses. Mayor Pro-Tem Ca||iea asked if the Council felt the proposed nine percent was adequate for budgeting purposes. CITY OF SHOREWOOD WORK SESSION COUNCIL MEETING MINUTES NOVEMBER 12, 2024 Page 4 of 6 Councilmember Zerby stated that he did not think it was adequate. Councilmember Maddy asked if he wanted to increase it. Councilmember Zerby explained that he felt that the City needed to increase it because he sees a lot of parenthesis at the bottom of the chart which shows that they are negative. Finance Director Schmuck noted that the City was continuing to do rate reviews and explained that staff was just recommended what was in the last rate study. She stated that after they get through doing the long-term financial management plan and rate analysis, they may be able to look at making a rate adjustment. She reminded the Council that they can always change their fees at any time through an ordinance. Councilmember Zerby asked if there was a way to build the Met Council fees into the City's formulas. Finance Director Schmuck stated that they could do it as part of the rate analysis process. She stated that she felt that was what City Administrator Nevinski was touching on when he talked about coming up with the philosophy of the Council and what their goals are. She stated that if they establish some of those rules along the way, when they go through this process they would have a benchmark and a guiding tool and noted that it would make this process a lot more efficient. Councilmember Zerby explained that his philosophy would be to provide the lowest cost service possible without going into the negative numbers. Councilmember Maddy stated that the City's goal was to have a balanced budget. Finance Director Schmuck noted that usually most Enterprise Funds are a balanced budget, but she has not been able to find a balanced budget within the Enterprise Funds for Shorewood from any point in time. She stated that she was not sure why this was the case, which is also why she would like to have the discussions about the City's philosophy and how they can get to the point where there is a balanced budget. Mayor Pro-Tem Callies asked how the rate analysis was done. Finance Director Schmuck explained that in 2013 and 2019, the City had them done by external consultants. She stated that if the City establishes a long-term financial management plan, she can build that within the plan or they can look at hiring an outside consultant. Councilmember Maddy asked if Finance Director Schmuck was saying that the City paid the consultants to not deliver a balanced budget to the City. Finance Director Schmuck stated that the City had paid them to do a rate analysis, but the City's finance directors have always been the ones that have put together the budget. Councilmember Maddy asked Finance Director Schmuck what she wanted because he felt she was a professional that would be capable of getting the City out of this hole. CITY OF SHOREWOOD WORK SESSION COUNCIL MEETING MINUTES NOVEMBER 12, 2024 Page 5 of 6 Finance Director Schmuck stated that is what she would like to do which is why she wanted to look at the long-term financial management plan, establish a rate analysis, and figure out the rules and regulations that the Council would like to see. She stated that the City really did need to get people that have watermains in front of their homes to actually get connected and will be part of their discussion at an upcoming Work Session meeting. She stated that without users connected, the City was putting in very expensive infrastructure and if they are not connecting to it, the City is not capturing the dollars back. She reiterated that the current connection fee has been the same for many years and has not been increased or grown with inflation. Councilmember Maddy noted that the City was essentially just waiting until people's wells break because when that happens it will be cheaper for them to hook up to City water than to fix the well. Finance Director Schmuck stated that the City does have a significant number of wells that are older and outlined several ideas for incentivizing people to hook up to City water. City Administrator Nevinski stated that the Council will be talking about this at the November 25, 2024, Work Session meeting. Councilmember Zerby stated that he would like to know how many households are not connected that could be connected. Finance Director Schmuck explained that the City has the potential of three -thousand customers for sewer connections and was actually billing about one -thousand six -hundred water users. City Engineer Budde noted that there are about five hundred households that have water availability, but are not connected and the other one thousand do not have water in front of them. Councilmember Zerby stated that if they are going to try to come up with a way to incentivize people, he wondered how fast they needed to get them in order for the City to break even or make the system sustainable. Public Works Director Morreim asked the Council to keep in mind is that when someone's well fails, that household is out of water, but the process to put in a new service line is not instantaneous and can actually take weeks. City Administrator Nevinski stated that the bigger picture questions about philosophy will require a lot of meetings and noted that what is in front of the Council tonight was really the budget for 2025. He reminded the Council that if, in 2025, they feel that the rates needed to be adjusted, they have that ability. He stated that he felt that the City needed to spend 2025 hammering out some solutions and a strategy. Mayor Pro-Tem Callies stated that she felt that right now they do not they do not have a basis for this, other than there is a shortfall, and picking another number without doing any analysis seems premature. Councilmember Sanschagrin stated that he felt it would be easy to just take the Sewer Fund and make it break even by increasing the fee by whatever it took to do that and get rid of the deficit. Finance Director Schmuck stated that would make sense for the Sewer Fund. CITY OF SHOREWOOD WORK SESSION COUNCIL MEETING MINUTES NOVEMBER 12, 2024 Page 6 of 6 There was consensus of the Council to increase the fee for the Sewer Fund to get rid of the deficit and balance the budget and move forward with a two -dollar rate increase for the Recycling Fund. 3. ADJOURN Zerby moved, Sanschagrin seconded, Adjourning the City Council Work Session Meeting of November 12, 2024, at 6:42 P.M. Motion passed 4/0. ATTEST: Je fifer abadie, Mayor Sandie Thone, City Clerk