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HomeMy WebLinkAboutCity Council Minutes 08-14-1996 SpecialMINUTES Special Council Meeting August 14, 1996 A special meeting of the Plymouth City Council was called to order by Mayor Tierney at 7:05 p.m. in the Public Safety Training Room, 3400 Plymouth Blvd., on August 14, 1996. COUNCIL PRESENT: Mayor Tierney; Councilmembers Black, Anderson, Wold, Lymangood, and Granath. Councilmember Preus arrived at 7:20 p.m. ABSENT: None. STAFF PRESENT; City Manager Johnson, Assistant City Manager Lueckert, Community Development Director Hurlburt, Public Works Director Moore, Finance Director Hahn, Public Safety Director Gerdes, Park and Recreation Director Blank, Finance Office Supervisor Leitner, Financial Analyst Kohn, and City Clerk Ahrens. Mayor Tierney announced that the purpose of the meeting is to review the 1997 proposed budget. Manager Johnson said that the Council must adopt a proposed budget and a preliminary tax levy before September 15. The tax levy can subsequently be reduced, but not increased. He requested that Councilmembers provide feedback on the proposed budget and indicate any areas of concern. He presented the City of Plymouth tax rates from 1992 through 1997: 1992 15.88 1993 18.04 1994 16.67 1995 15.84 1996 14.94 1997 14.59 (proposed). He noted that Plymouth has the lowest tax rate of the 77 cities over 10,000 population in Minnesota. Manager Johnson also presented the city taxes paid on an average value home from 1993 to 1997: 1993 $406.62 1994 $393.08 1995 393.15 1996 395.61 1997 407.59 (proposed). Assistant Manager Lueckert said that the average value home in Plymouth is $175,700. Special Council Meeting August 14, 1996 Page 2 Manager Johnson stated that the bond issue for open space and trails is included in the amount of city taxes projected on an average value home for 1997. Councilmember Lymangood noted that Plymouth residents have had an 18 percent increase in market value since i993; however, the city taxes on an average value home has increased only 97 cents. He would like the Council to set the goal of reducing the city taxes payable on an average value home to the same level as 1993. Councilmembers indicated they supported this goal. Finance Director Hahn stated that a reduction of approximately $29,000 from the proposed budget would be required to accomplish this. Councilmember Lymangood stated that 5'/s new full-time, General Fund tax -supported positions are included in the proposed budget. He asked if staff has explored ways to engage the private sector to do these tasks, rather than hiring additional employees. In particular, he asked for additional information about the positions of Information Technology Coordinator and Appraiser. He said that using the private sector would give the City more flexibility in the future. Manager Johnson said the proposed budget includes about $5,000 for private sector appraiser involvement during the Board of Review period. Finance Director Hahn stated that the City previously contracted for commercial appraisal work; however, a full-time commercial/industrial appraiser was later hired. Councilmember Preus arrived at 7:20 p.m. Councilmember Anderson requested that a cash flow projection for ice arena operations be provided. He believed that staff had indicated that the fees generated from the sale of ice time would be sufficient to fully fund the operation costs. Park Director Blank stated that it is anticipated that the operation costs will be fully covered. It is estimated that the cost of four new ice arena positions in 1997 will be 160,000. He said that the ice arena estimated income is based on ice time of $120 per hour; however, the hourly rate has not yet been established. No ice time is leased yet, but he is confident that all of the available time will be sold. The new ice arena manager is working on these projections. Councilmember Anderson requested a report on projected revenues and expenditures relating to the ice rink. Manager Johnson stated that under the 1997 proposed budget, city taxes payable on an average value home would increase $11.98 from 1996 to 1997. He explained how taxes are calculated on a residential homestead property. The tax capacity value is increasing faster than the market value. Information was presented on city taxes on selected value Special Council Meeting August 14, 1996 Page 3 homes. The city taxes on a $175,700 home were compared with various communities. He stated that a number of tax increment finance districts are scheduled to come off next year which will result in additional tax base for all affected local jurisdictions. The City Council requested information on the amount of the tax increment finance districts coming off over the next three years. Discussion was held on commercial/industrial values and future construction. Community Development Director Hurlburt said that vacancy rates are currently very low. Manager Johnson said that the fluctuations in commercial/industrial values and resulting taxes tend to go in cycles. Tax abatements are going down with the turn -around in commercial and industrial values. He believes these cycles will continue, but perhaps with less highs and lows than in the past. Manager Johnson suggested that the City's lobbyists could be asked to support legislation to adopt a rolling average system for the values of commercial/industrial property over three to five years to lessen the impact of large changes in value. The City Council indicated that this proposal is worth pursuing. Manager Johnson will bring the proposal to the Twin West Manager and Mayors meeting. Manager Johnson reported on major factors in tax base growth. The City's market value has increased by 10.4 percent to $3.77 billion. The residential segment has increased by 8.8 percent, while the commercial segment has increased by 15.3 percent. Overall tax capacity value has increased by 17 percent. This provides flexibility to deal with potential state aid loss or declining development revenues. He noted that Plymouth has already absorbed a loss of growth in single family residential. Community Development Director Hurlburt estimated that, based on historical averages, the City has about 5 to 8 years remaining of commercial/industrial property to develop, and about half that amount of residential. This does not include expansion of existing buildings, redevelopment, or any development activity in Northwest Plymouth. Manager Johnson projected that overall building permit revenues will remain strong in 1996, largely due to strong commercial construction activity. The 1997 budget projects an 11.9 percent increase over the 1996 budgeted levels. These projections include a 20 percent permit fee increase which was approved in 1995 for the 1997 calendar year. Manager Johnson discussed strategies for meeting possible revenue losses: Expenditure Options Do not spend general contingency 100,000 Do not spend new CIP Fund 400,000 Limit 1997 spending to continuation 500,000 Street Reconstruction HACA 500,000 Eliminate Water Quality Levy 130,000 Freeze spending at 1996 levels 450,000 Special Council Meeting August 14, 1996 Page 4 Revenue Options Surface Water Utility Fee $500,000 Utility Franchise Fee $2,500,000 Other Options Bond for Street Reconstruction $1,050,000 Raise Property Taxes Manager Johnson explained that this budget proposes to designate $400,000 for a Capital Improvement Fund. Historically, the City has used outside revenues for capital improvements. He proposed that none of the $400,000 in funds would be committed to a project until the 1997 legislative session has ended. If there is a reduction in Plymouth's HACA allocation, these funds could be used to fund general operations. Councilmember Preus asked how the fund would be established. Finance Director Hahn responded that it would be established as a Project Fund supported by General Fund revenues. Councilmember Anderson asked why a new fund would be established when the City has a Community Improvement Fund that was established under the City Charter. Director Hahn stated that the Community Improvement Fund was established from old debt service funds, and the City Charter establishes specific requirements on how that fund can be used. Mayor Tierney stated that legislative changes relating to state -aid to cities could quickly occur, and a separate fund would allow the Council flexibility in finding alternative funding options for operations. Manager Johnson said that if the funds are placed in the Community Improvement Fund, they would not be readily available to fund operations in the even of a state -aid reduction. He said the City would be setting aside $400,000 that could become a permanent replacement for lost state aid. Councilmember Wold stated that the City should be fiscally prepared to fund some state aid reduction. He asked why $400,000 was the recommended amount. Manager Johnson responded that there is no particular significance to the $400,000 amount. It is part of an overall strategy recommended by staff to fund $1.81 million, should Plymouth lose all of its HACA allocation. If no HACA reductions are made by the legislature, the funds could be spent on needed capital improvements. Special Council Meeting August 14, 1996 Page 5 Assistant Manager Lueckert stated that it is not unusual for local governments to levy for funding of capital improvements. Also, bond agencies do not like fluctuations in taxes to fund revenue losses; therefore, the City should have a planned revenue stream to deal with possible future state aid losses. Councilmember Lymangood asked if the Council is restricted from establishing this Capital Improvement Fund from this year's General Fund surplus. He suggested that 200,000 from the 1996 surplus could be initially designated for the Capital Improvement Fund. Manager Johnson responded that this could be done, but the City could be using short- term funds to finance a loss in state aid that would be ongoing. The City would have less protection from future loss. Councilmember Lymangood asked if staff is anticipating a worst-case scenario that all HACA funds will be lost. He expressed concern about levying $400,000 for a new capital improvement fund in 1997. Manager Johnson said the impact to the City of loss of all HACA funds would be about 1.8 million. The $400,000 could cover a portion of a possible loss, and other expenditure and revenue options could be used to cover the remainder. Councilmember Anderson stated that the City Charter establishes regulations on the use of the Community Improvement Fund to prevent misspending by the City Council without public input. He expressed concern that the Council would be establishing a separate capital improvement fund that would not have these restrictions. Finance Director Hahn suggested that this year would be a good time to begin to levy for a new capital improvement fund because it could be done without creating a tax increase for citizens. He said that balances in the Community Improvement Fund and Project Administration Fund have been substantially reduced over the past several years due to building improvements, trails, and other projects authorized by the Council. This could be an opportunity to begin replenishing capital improvement funds. Manager Johnson recommended that the tax rate should be relatively stable, and that the City should plan gradually to respond to future declining revenues. He noted that the City's auditors advised the Council to reduce reliance on state aids. Manager Johnson recommended that a permanent revenue stream be identified to address possible future state aid reductions. Councilmember Lymangood suggested that the 1996 surplus could be placed in a reserve fund for 1997, and the decision of whether to levy for a capital improvement fund could then be made for 1998. Special Council Meeting August 14, 1996 Page 6 Councilmember Anderson stated that the legislature will not eliminate Plymouth's HACA funds. Mayor Tierney stated this year is a good opportunity to establish the capital improvement fund and to ensure some money is available for possible HACA reductions. This can be done without increasing the tax rate. Councilmember Wold supported the proposal to establish a capital improvement fund with 400,000 in 1997. He reminded the Council that the auditors have advised the City to avoid one-time fixes for revenue losses. In response to a question by Councilmember Anderson, Finance Director Hahn said the current cash balance is approximately $80 million. Councilmember Preus said that the proposal to place the 1996 surplus in reserve for 1997 would be a more gradual approach. He believes that HACA reductions may be made by the legislature over several years. He asked what staff would propose if the legislature eliminated HACA for 1998. Manager Johnson responded that a similar scenario would be proposed for 1998 as for the 1997 budget. The City has a couple of years of continued growth revenues in order to establish an ongoing revenue stream to replace the potential loss of HACA. He stated that if the HACA reductions do not occur, the. City has capital improvements that need a funding source. Councilmember Granath said that the capital improvement fund is an excellent proposal and could help in the event of declining state revenues. However, this is a philosophical issue, and he does not want to commit to a position yet. Discussion was held on whether it is prudent to set aside money now to prepare for possible future state aid reductions or whether budget cuts should be made and/or taxes increased at the time reductions are made. Councilmember Lymangood suggested that the levy amount to establish a capital improvement fund could be reduced from the proposed $400,000 to $200,000 for 1997, with an additional $300,000 from the 1996 surplus. Manager Johnson said this will make no difference for the 1997 budget, but it would increase the likelihood of a future tax increase. Councilmember Black asked what has traditionally been done with a budget surplus. Manager Johnson responded that budget surpluses have traditionally been used to replenish reserve finds or to make a one-time purchase. Special Council Meeting August 14, 1996 Page 7 Councilmember Lymangood noted that $500,000 in expenditures would need to be reduced to match 1996 continuation levels. He asked what portion of that amount is salaries. Manager Johnson said that, in most cases, hiring of any new positions will be delayed until the legislative adjournment. He reviewed other strategies for meeting possible revenue losses. He said the water quality levy could be eliminated for 1997. This is estimated at 130,000. This is a new levy proposed for 1997 with expenses mainly attributable to the watershed districts. The street reconstruction program could also be scaled back by 500,000, if cuts are necessary. Manager Johnson explained the purpose of the new Surface Water Utility Fee proposed for 1997. It is estimated to generate $500,000 in revenue for storm drainage and water quality improvements. Other cities typically have a fee of $1 to $2 per month for residential dwellings, with calculated fees for other types of property based on the amount of storm water runoff. Councilmember Lymangood asked if the proposed $130,000 water quality levy would eliminate the current deficit in that fund. He supports a surface water utility fee to help fund water quality improvements. Manager Johnson said the program needs a consistent revenue stream which could be property taxes or a surface water utility fee. He said that the draft Surface Water Management Plan indicates that over $4 million may be needed in the next five years. Councilmember Wold said that the Council has not yet received the draft Surface Water Management Plan. He does not want to establish the fee amounts until the needs are known. Public Works Director Moore said that one advantage of a Surface Water Management fee over a regular levy amount is that the fee will be charged against all property in Plymouth, including the 20-25 percent of tax exempt land. Councilmember Black suggested that it may be possible to include in the Surface Water Management Plan a grant provision for homeowners to avoid paying the fee if they keep all runoff on their property. Manager Johnson said there is $300,000 of existing tax -supported spending that would be eligible for funding from the Surface Water Utility fee. In the event of state aid reductions, the funds generated from the new fee could be used for improvements in the sewer division. It will take about six months to conduct a study to establish the Surface Water Utility fee. Special Council Meeting August 14, 1996 Page 8 Councilmember Wold stated that staff should begin the study now so that the fee can be instituted early in 1997. Councilmember Preus said the fee should be set at a level that is comparable to the expenses being incurred. Manager Johnson discussed the option of a utility franchise fee which could generate $2.5 million in revenue. The franchise fee would be based on the gross utility bills for gas and electric service. The fee raises a lot of money and could be a future option if the legislature adopts a levy limit or freeze. Public Works Director Moore said that franchise fees would be vigorously opposed and no city has instituted such a fee for the last 10 to 15 years. Staff will provide the City Council with a memo on franchise fees. Manager Johnson said that another strategy for accommodating revenue losses is to bond for street reconstruction. However, over several years this does not help because interest accumulates. Councilmember Lymangood asked for clarification on which strategy options for dealing with revenue losses are included in the proposed 1997 budget. Manager Johnson said that all expenditure options outlined in the staff report are included in the proposed budget. The revenue and other options are not contained in the budget, but could be considered as alternatives for the expenditure options. Councilmember Anderson suggested that the budget surplus should be used, rather than building on the surplus the following year. Assistant Manager Lueckert suggested that the Council could set the levy to include the expenditure options for revenue losses and then meet with area legislators following the November election. The levy could be further reduced, if desired, with the final adoption in December. The Council reviewed the major operating funds for 1996 and proposed 1997. Councilmember Lymangood asked why the HRA fund shows a considerable increase. Community Development Director Hurlburt explained that Plymouth absorbed administration of the Section 8 voucher program. The HRA Fund reflects federal funds that are transferred in and out of the fund, and the increase over 1996 does not affect the local tax levy. Councilmember Anderson asked about increases proposed for the Water, Sewer, and Risk Management Funds. Special Council Meeting August 14, 1996 Page 9 Public Works Director Moore explained that the water and sewer funds are increased to reflect additional customers due to growth. Finance Director Hahn stated the Risk Management Fund reflects an anticipated premium increase, as well as more exposure each year from additional assets. City Manager Johnson summarized the new personnel requests for 1997: Police Officer, Planner, Senior Clerk Typist, Street Maintenance Worker, Information Technology Coordinator, Appraiser (half-time), and Sewer Maintenance Worker. He presented the costs for the new positions, which included salary and benefits. Two-thirds of the Police Officer position will be funded by Wayzata School District 284, and 35 percent of the cost for Information Technology Coordinator would be paid from the General Fund. Councilmember Anderson asked if the staff had considered hiring the appraiser and information technology coordinator on a contract basis from the private sector. He requested that staff investigate and provide a report on the possibility of contracting for these two positions. Finance Director Hahn explained that the Information Technology Coordinator would be a highly technical position that would solve data processing problems, network diagnostics and network management. He said that the City has been contracting for such a person recently and paying $100 to $125 per hour for the service. Manager Johnson reviewed the proposed capital equipment for 1997: Continue Equipment Replacement Program - $857,000 (includes fire truck $450,000), Dump Truck with Plow Equipment - $90,000, and Computer Equipment - $175,000. Councilmember Wold stated that the weight of some of the current public works vehicles was found to be excessive by the public safety department. He requested a report be provided at the next meeting to include whether fines were levied, options for reducing the vehicle weight, and the issue of damage to the roadways due to excessive weight. The Council discussed the computer equipment proposed for purchase in 1997. They requested additional information on what is proposed for purchase, the cost per workstation, and whether the number of replacement workstations are truly needed. Manager Johnson explained that a three-year replacement policy has been adopted, and the software currently being run requires high level equipment. Councilmember Lymangood stated he would prefer the purchase of higher level computer equipment and a longer replacement period. He referenced the city-wide cost of office supplies and stated that one year ago the price of paper was very high. However, due to market fluctuation, paper prices are now significantly less. This should be reflected in the Special Council Meeting August 14, 1996 Page 10 budget. He suggested that the City investigate buying items such as paper in bulk from a company that will hold the inventory, or bidding such items on an annual basis. He believes there are other procurement issues that could be addressed. Finance Director Hahn said that many items are currently bid through Hennepin County on the state bid contract. Councilmember Lymangood asked how the City is progressing on reducing paper. He would like to pursue placing the Council packet on the City web site. Manager Johnson said the size of the Council Information Memorandum has been reduced, and he receives some draft Council reports from staff electronically. Assistant Manager Lueckert explained that the Council packets currently contain much graphic information, as well as information that is not produced on the City's computer system which would make it very difficult to place the packet on the web site. Councilmember Wold stated that this "data flow bottleneck" could be opened at any time by new technology. He would like to receive Council information via e-mail or floppy disk. Councilmember Granath stated he is pleased that the Council agendas and results of the meetings are on the web site. Councilmember Anderson requested that staff check the status of the lease on the high speed copier with the purpose of ending the lease or obtaining better service. Councilmember Anderson stated that he would like the proposed City Council salary increase eliminated from the budget. Mayor Tierney suggested that staff obtain information on Council salaries and benefits in other communities. She has no concerns with a 3 percent salary increase in City Council salaries. She suggested that if savings are desired, the Council consider reductions in hospital and dental benefits. Mayor Tierney stated that she would prefer to increase the City Council's training budget and reduce health and dental benefits. Councilmember Lymangood stated he will not favor a City Council salary increase for 1997 and suggested that the item be placed on an upcoming agenda for consideration. Councilmember Black stated she has attended one or two training sessions and has found them useful. Special Council Meeting August 14, 1996 Page 11 Councilmember Wold favored no salary increase, and stated that reduction or elimination of health and dental benefits can be considered. Councilmember Granath also opposed the 3 percent salary increase. Councilmember Preus said that the City Council should be treated the same as other employees, and employee contracts have recently contained about a 3 percent increase. Councilmember Anderson stated he will not vote in favor of a salary increase. Councilmember Lymangood requested that consideration on whether to increase City Council salaries be included on the next Council agenda, along with a report on whether the City is legally obligated to provide health and dental benefits to the City Council. He does not want a salary survey conducted. Councilmember Anderson stated that he would like a long-range financial plan to address the future declining revenue stream. This plan should include tax increment financing and address reductions in growth revenues. Councilmember Lymangood suggested that staff investigate and report on whether the City could develop a list of possible items that could be donated by the private sector. Motion was made by Councilmember Preus, seconded by Councilmember Lymangood, to adjourn the meeting at 9:45 p.m. Motion carried, seven ayes. 2 Laurie Ahrens City Clerk