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	Mayor and City Council Work Session June 14, 2006 – 5:00 p.m. A101 Present: Mayor Brown(joined meeting in progress), Bob Brooks, Doug Christensen, Hal Gershman, Gerald Hamerlik, Dorette Kerian (joined meeting in progress), Curt Kreun. Absent: Eliot Glassheim. Others Present: Rick Duquette, John Schmisek, Roxanne Fiala, Pete O’Neill, Greg Hoover, Brad Gengler, Al Grasser, Al Morken, Mark Aubol, Don Shields, John Packett. Gershman called the meeting to order at 5:00 p.m. 1) 2007 Budget Resolution. Duquette stated that he and Schmisek have been working through the department budgets and wanted to give the Council an update on where we were at in working toward the goal of a 7 mill cut. Schmisek stated that for 2007 there is a projected need for a 6% increase in the wastewater utility fund, but all other funds will have a zero increase. He added that there may be an exception in the Sanitation Fund depending on the result of our discussions with regional customers at the end of the month. Schmisek continued that if the rumors that are circulating about some of the regional customers leaving us and beginning to haul elsewhere, we may be looking at an approximate increase of 5% in the sanitation rates and that at this time we are working on a dual path to insure that we are prepared for whichever outcome occurs. He noted that if our current customers all continue with us then we would not have an increase. Christensen inquired why the need for the increase. Schmisek stated that he did not have a detailed breakdown with him but will forward that on to Council. Gershman inquired whether we have some set aside to build to fit with the customer base we currently have, as if people do abandon us, we will then need a smaller landfill. Schmisek said we have some, but may also need an increase if we need to begin hauling our own garbage to another landfill. Duquette stated that we are looking at a variety of options including size changes. (Kerian arrives.) Kreun commented that we are also reviewing our regional status as well as exploring other disposal options such as increased composting, burning, and a decreased size, and are looking at both revenue and expenditures for all the options that we’re considering. Brooks commented that those invited to the meeting are coming from outside the city limits and we really need to key in on getting people there and in particular decision makers and that given the time of year we have many that might be on vacation, short staffed, working during the day and having a 2:00 p.m. time for the meeting may be problem for some. Christensen added that it may be hard to get answers from some even if they are decision makers because we do not know the costs for what we can offer at this time, versus cost information for competitors is known. He encouraged work to be done on firming up what we are going to be able to offer to the customers should they stick with us and try to get cost information available so they will be able to evaluate. Duquette responded that Feland has some cost ranges available and that will be part of the presentation for those that come. He added that we will not expect an answer from anyone that day, but want to get them the information and then will be asking them to let us know within a short period of time after the meeting. Christensen stated that the date for them to respond and then our decision date shortly after are important to finalize. Brooks commented that for many the cost number is maybe not as important as just knowing that we will have a place for their garbage. Duquette explained that initially it had been intended that an update be brought to the Council, but a decision was made to rather bring the update to the Public Service/Safety Committee on June 22 and encouraged all Council members to attend that meeting so they could be fully informed of the current information. Kerian stated that in response to Brooks’ comments, that yes, we will have a place for others garbage, but we need to know who we will be serving so that we make plans accordingly, and if necessary we need to take special steps to get the information to the decision makers. Duquette responded that the meeting time was set following feedback that Feland received from those involved and consensus was they preferred an afternoon meeting. Schmisek added that Feland has also made the offer to all the regional customers to visit with them in their offices or at their Council meetings if that is more convenient for them. Kreun added that our main focus now is to let them know that we are here and then once we know who’s in we will talk with them about price. He continued that he has heard that East Grand Forks looked at taking their garbage to a couple of other sources, but the numbers that they were quoted were more than what we are looking at in the projected ranges and that we need to get our information out to our customers so they can share with their people and make their decisions. Hamelik encouraged that two videos be made, one of the actual presentation that is done at the meeting on June 28, and a second one of questions and answers and that we could then make these videos available for other communities to review with personnel that may be unable to make the meeting. Christensen commented that at one time we built a landfill and chose to become a regional site and that we now can choose to continue or not and that his concern is if we elect to continue as a regional site, then make sure that we are charging appropriate costs so that our citizens don’t have to subsidize the service for outside customers. Brooks stated that we will have to do something with our garbage, but some may be interested in what our fall back plan is. Duquette stated that will also be discussed at the meeting on June 22. Schmisek stated that he wanted to return focus to the 2007 budget and in particular to the mill levy associated with the General Fund and Dike Fund. He reviewed with the Council the revenue increases that are projected - $136,000 from sales tax, $136,000 from building permits (which is partially offset by the additional inspector that is budgeted in 2007), $134,000 from state aid, and $41,000 from health fees. In addition, he stated that there is good news/bad news in the cable franchise fee area due to proposed federal legislation and that we are projecting a $435,000 increase in fees collected, but the possibility of losing the authority to regulate this area. Kreun added that there would also be increased costs for monitoring and regulating this area if we are the responsible party. Grasser commented that if there is too much uncontrolled in this area it could increase our infrastructure repair costs, as we will have less accessibility to get into right of way area in the case of needed repairs since we loose control of it. Schmisek continued that we are projecting an increase in xcel energy franchise fees of $515,000, but also a projected increase of 120% in costs. Schmisek continued that for the last three years we have done a budget amendment to cover contributions to the Defined Benefit Plan to go towards the unfunded liability and that this funding has come from the Loan and Stabilization Fund and would be looking at $283,000 from this fund in 2007. Schmisek stated that on the expenditure side there are some increases that he is projecting including: Market/PFP adjustment, which the Council has stated is a priority to meet at 100%, will require $486,000 and that he has also included in the budget a total of $643,000 to go towards the unfunded pension liability, which is made up of $360,000 from the general fund and $283,000 that he described earlier from the loan and stabilization fund. (Mayor arrives.) Schmisek continued that he is projecting increased utility expense of $180,000. He explained that he looked at current actual expenses, which appear like 2006 budget will end up being about $216,000 short in 2006 which will need to be covered through budget transfers/amendments. In addition, we have added $340,000 over what the departments have requested for gasoline, as the costs seem to be escalating. He added that this is not a luxury item, as the only way to reduce the cost is to park the plows, police cars, fire trucks, etc. which is a lowering of our current service level and he believes that to keep service level where we currently are, we will need the increase. Schmisek stated that overall this brings our net increased income down from $1.9 million to $152,000. He added that this also includes some changes made by departments in staffing. Schmisek explained that in the planning department there was a planner position that was to be added in the 2007 budget and that in visiting with the department they will be adding only a seasonal intern rather than the full time position and then will reevaluate after the 2007 year to see if can make that work. Schmisek stated that the Inspection budget does include a recommended addition of a new inspector position which will serve the extraterritorial area and the work with the new requirements on the rental properties and noted that this position expense will be offset by the increased revenue that comes from permit fees. He continued that in the Human Resources Department there is a change from a Human Resources Technician to a Human Resources Specialist, which does have a net savings for the department over 2 years due to the elimination of the assistant director position. The Police Department budget includes a contract CSO for $38,000. Schmisek noted that there may be a need to look at some policies in this area, since we are writing more tickets, but receiving less revenue due to the current policy of forgiving one parking ticket for each person that calls. Hamerlik suggested that maybe we should make it the responsibility of the resident to make sure their guest is aware of the parking regulations in the neighborhood. Christensen asked whether the new inspector will be inspecting all 1,300 rentals each year and if any comparison had been done to see if we could outsource this inspection to a private company for a lesser rate. Duquette responded that the hope is the additional inspector position will get us to a 3 year rotation for inspections and noted that another large area to be considered is in the extraterritorial area, as the County is not doing anything in that area. Hamerlik stated that one of the problems is that people do not come in and take out permits when they should and a small fine that we currently have is not enough to be a deterrent and maybe we need to look at this and make the fine substantial enough that if the property owner doesn’t come for the permit, the contractor will as they don’t want to have to pay fine. Schmisek explained that there are also 2 positions in the Police Department that will be coming over to the City in 2007 – the Juvenile Accountability Officer ($1,900) and the Narcotics Task Force Officer ($25,000). He noted that these have been gradually been phased over to the City from being grant funded, so not a major budgetary addition. Schmisek stated that there is $125,000 remaining after these expenses and that he has included an inflationary increase of ½% only on capital. Based on the items outlined above and other budgetary work, the proposed budget at this time includes a 3.63 mill cut. Schmisek continued that the other funds that receive mills are very minimal except for the dike. He stated that in the Special Assessment on City property levy he is proposing a 1 mill cut, but need about a ½ mill. He continued that last year we cut 1 ½ mills from the Public Building fund and currently there is not funds available there and would propose adding back in ½ mill and that this would be coming separately to the Council when the CIP is discussed. Schmisek explained that in the Dike Fund we have gone from 15 mills to 14 mills to 11 ½ mills. He stated that there is potential to cut an additional 2 ½ mills, but the concern is that by not cutting these mills could save the taxpayers long-term by paying off the bonds early, in 2014, but would need $17 million in the fund to be able to do that and that if leave until 2022 will cost us $1.9 million more to the taxpayers. Gershman stated that he is more concerned with current taxpayers and their desire for tax relief, especially those like senior citizens on a fixed income. Christensen stated that future dollars saved don’t count as actual dollars now and in 15 years maybe could still do by doing a due to/due from from another fund, like a utility fund. Christensen continued that citizens are upset with continued increase in tax bills and Council decided on 7 mill cut and should try to get that and further, that he is not sure about the addition of the amount for the pension plan at this time. Schmisek responded that the average age in the plan is 46 years and that we have 20 years to get the funds paid in and right now we are structured in a 30 year timeline for payment and that the liability goes up each year. Brooks commented that this is the type of philosophical discussion that needs to take place and see if we want a cut here then what gets affected there and need to decide what is best for the City after looking at all these things. Christensen inquired where funding came from in 2005 for the pension payment. Schmisek responded that there has been a budget amendment for the last two years to cover the amount paid in. Hamerlik inquired how much more may be possible to take from dike fund. Schmisek stated that he could look at that and send out info to the Council. Schmisek commented that he agrees that taxes continue to rise and that some services are not staying the same or improving, but that part of this comes from the decision to not keep tax dollars from new growth over the last seven years and that we had a reason to try and get by without that as we were in flood recovery, but that we now have more to serve and with that comes increased costs and need to look at this. Hamerlik inquired how much we would be saving if we didn’t meet 100% on market, but rather went to 95%. Schmisek stated that each % of increase equates to $161,000. Kreun commented that we do need to contribute to the pension plan and that this could become a large problem if we don’t begin to address it now and he believes that we should keep that expenditure in the budget. In regards to the dike, this is a philosophical decision on the part of Council, do we want to save money now or save money in the long-term and Council will need to decide. Kerian agreed with Kreun on the pension and stated that she also feels it is a mistake to not stay on track with meeting the obligation to the retirees. She stated that she also agrees with the dike and maybe should revisit later and as far as employees, that it would be a mistake to reduce the market amount, since we want to continue to be competitive in the market and to attract good employees and that the only way to retain and attract is to stay on track and that is easier than to try and catch up later. Kerian also pointed out that thus far Council has not passed a resolution for a mill cut, but rather was just a consensus at the prior meeting to have a goal of 7 mills and if staff can get to 6 mills then maybe need to see if that is o.k. Schmisek added that the amount he is proposing to add for utility increases is for a pooled account and would be allocated to departments as their requested budget is depleted would then transfer from that pooled account to the individual departments. Duquette commented that all together the proposed budget right now is at a 6.13 mill cut and that was not arrived at easily, but feel we are proposing a sensible budget. He added that he supports the pension concepts that were proposed. Mayor Brown stated that for this year we are getting to the end of the process, but would like to see us move to long-range planning, maybe a six-year plan, and realizes that each year we struggle with the budget numbers and promise to start working on more long-term approach for the next year. Brooks agreed that he would like to see the Council and staff begin looking more long-term and encouraged others to also agree to look at that type of process. Christensen commented that regardless of what steps we as a committee take we won’t stop the complaining about the property tax rates on our own and that we need to get to the state and take an advance position to fund education. He continued that inflation is going to start affecting things and we need to keep paying our people, as far as the Defined Benefit Plan, if we don’t pay in now, people later will find a way to get the money in there and maybe even sell bonds to cover if needed, but even if took 1 mill from proposed pension area and then if want to pay in full proposed amount just take more from loan and stabilization this year and with that extra mill have met the 7 that Council had set as a goal. Christensen added that he is in favor of working on a six-year plan. Hamerlik commented that there also needs to be consideration given to those who have paid off their dike specials. He continued that he is disappointed because read the minutes from last meeting and there was consensus and a resolution was going to be written and should have been available to this meeting and also that the statement be brought to the other agencies letting them know our position. He added that if each of those smaller entities just reduced a ¼ of one mill from taxes and all did proportional amount could get to a total cut of 25 mills, and that even at only 6 mills we are still proportional. Hamerlik added that he would like to see the resolution get drafted. Gershman commented that the City set a goal of using only growth and excess sales tax and likes that we are trying to stay with that. He continued that he is not in favor of reducing the market from 100%. Hamerlik responded that he would like to see fairness and equity in cuts for all entities. Christensen commented that we should have draft of resolution for next week’s meeting. Duquette inquired whether they would also like to see the Advisory Committee on the agenda, as that had been tabled from the prior meeting and some outgoing Council members had wanted to discuss it before they went out of office. The group consensus was to just have the agenda for next week include only the budget and then look at the advisory committee for a future agenda. Schmisek stated that he also wanted one final clarification on the budget expectation in the area of fees and fines and that he has included an inflationary increase in the budget based on the discussion held last year and wants to be sure that is the intent of the Council. The group consensus was to increase these by an inflationary percent each year. Schmisek also corrected that based on a review of a revised wastewater rate schedule there is actually no proposed rate increase for 2007, so the only potential utility fund increase could be in the sanitation fund, dependent on the course taken with the landfill. 2) Adjourn. Meeting adjourned at 6:15 p.m. Respectfully Submitted, Sherie Lundmark Admin Specialist Sr.