Print VersionStay Informed
MAYOR COUNCIL WORK SESSION
Wednesday, August 20, 2008 - - 4:30 p.m.
Council Chambers

Present: Mayor Brown, Bjerke, McNamara, Glassheim, Gershman, Christensen, Kreun.
Absent: Bakken.

Gershman called the meeting to order at 4:35 p.m.

Matter of 2009 Budget Discussion.

Schmisek stated that the handout distributed today contains information that was requested by Council Members. The first sheet details the Airport overtime in Fund 2163, the last two sheets give comparison for an 8,000 gallon user in a home valued at $100,000 and $200,000 and the difference to them for either a mill cut at 2, 4, or 6 mills versus the utility fee increase that would result from a transfer of an extra 1, 2, or 3% from the utility funds to the general fund.

The group discussed the amount of expenses that are reimbursed from the utilities and that this has always been done, however that in 2006 a government accounting rule change causes them to now be shown differently in the accounts. Schmisek stated that the transfers that are done currently are a calculated amount to reimburse the general fund for expenses that are incurred in support of the utilities. The group discussed that some Council Members had not been aware of the level of transfer being done now due to the way it must be shown and that perhaps should look more closely at the current expenses being reimbursed before making any changes to the amount of transfer that is being done.

Kreun stated that it would be helpful to receive more information on those reimbursements and do at a later meeting and noted that based on the utility information it appears that if any additional is transferred from the utility funds then the rates would need to be increased to cover the additional amount being transferred.

Bjerke stated that in regard to the special event amount he had a question as to the amount, as earlier had been talking about a larger amount. Storstad responded that the amount on the sheet distributed today is for the airport only, and the earlier sheets also included amounts that are billed to using entities and then the payments for those services are shown as revenue. Bjerke stated that if the airport is using our services regularly and not fully reimbursing for the cost of those services would like to see that brought up for discussion, as seems to be not a City service, but an airport service and could save us money to discontinue, and would support that opinion for any entity utilizing City services for their benefit. Gershman stated that he would bring up the matter with the airport board for their information as well.

Bjerke stated that he knows the City has had a policy whereby positions are eliminated through attrition, and that he would like to see the City look at using limited buyouts for individuals that are at or near retirement and in jobs that will be eliminated when the person leaves, but they are just delaying retirement due to issues with cost of health insurance. He proposed that the City would offer to pay the cost of insurance for the employee so then they can go ahead and retire and the City saves the money from the position. Gershman stated that he thinks that could be a good idea, and would also like to study options for early retirement in positions that are not being eliminated and we could pay the health insurance and then new employee that comes in would be at lower salary so be a cost saving to the City. Bjerke stated that he would also like to discuss the Alerus Center portion of the sales tax ( ¾ %) and that it generates about $7.2 million and so backing out seems that they could cover their debt requirements with only ½ % and maybe have discussion about whether could change this allocation, with vote of people, to allow ¼ % to go to infrastructure with very targeted uses. He added that he is not in favor of looking at a new sales tax and can say that there would be considerable public fight to that issue, but would like to see discussion of a change to existing and that if accomplished, could be a long-term source for general fund revenue.

Schmisek responded that would need to do some research on that with the bond counsel, and probably also with the insurer, review bond covenants and see if it were possible, which it may not. Christensen stated that he would like to see a written opinion as to whether this is an option.

Bjerke stated that he had a number of items that he would like to see discussed and will be making a series of motions on some of those items to refer them when the budget comes to the Council. He questioned the Beautification allocation, knows it has been in the budget for a number of years and no one brings up changing and taking it out, but if did could have more for property tax relief. He stated that in regards to the road near LM Glassfiber, thinks that repair of that road is direct benefit to that company and in state it is due to their use and therefore, should be economic development for funding source not Highway Users and will be making a motion to refer that to the Finance Development Committee for discussion. Similarly, he stated that the budgeted amount for a road to service a potential expansion in the industrial park also seems to be a better fit with funding from the Economic Development dollars than federal highway dollars and will also be motioning to refer that. Regarding the Smiley Water Tower line item, will be motioning to refer that to Service Safety Committee for discussion, as sees no need to rehab this when it is not used to hold water and rather say leave it alone until it becomes a safety hazard and then scrap and tear down. Christensen agreed with Bjerke. Schmisek stated that there are somethings included in the budget because Council needs to make a decision on them.

Bjerke continued that in regards to economic development, we are budgeting to spend $14.65 million in 2 years and that is more than we will see come back to the City during that period and would like to see an overall debate on how much we should be spending on this. Bjerke suggested that for funding for a new Airport, that JDA has money and maybe look at only bonding half of the cost and then for rest borrow from JDA at no interest loan and Airport pays them back, which keeps debt down and eliminates interest expense from project. He concluded that he has some other money saving ideas and ideas for some user fees but are smaller items and will be setting a meeting with Duquette to discuss them in the near future.

McNamara stated that he would like to discuss the policy of this budget, as is bothered that we keep spending money when we see the “perfect storm” could be coming. He continued that he had made a motion to delay the purchase of $215,000 of Christmas lights, but failed because others said was saved for over two years and doesn’t see why unwilling to change some things when see that there may be other needs and might have to tighten spending. He added that has done research on other municipalities and some are cutting back, but we’re not cutting spending and jobs and is also concerned with budgeting for a fire house that has not even been approved to be constructed yet. McNamara continued that it is disturbing to him to continue and no one wants to talk about changing and cutting back and feels should not be budgeting for non-approved items.

Gershman stated that since 2000 have decreased 28 mills, $3.8 million in expenses have been cut, and 30 positions decreased. He continued that he does agree that there is room to do more, but takes exception with perfect storm comment, as thinks we have good financial standing and that is thanks to the staff and the work that they do. He continued that we have cut out mills when other entities have continued to raise them and thinks we will come out this year with a cut when done. He added that he believes that there are homeowners under stress due to the rising costs and the City could be too.

Schmisek responded that it is his job to provide information to the Council and make the recommendation that is in the best interest of the City when bring the budget forth. He continued that we are not in the shape that some cities, such as Duluth, are in and that if we were he would not have been doing his job.

Christensen commented that he has brought up some of Bjerke’s concerns in the past and agrees would like to see some debate, especially on things like S. 48th Street, as to put in road, but not have ability to acquire land around it doesn’t seem prudent. He continued that also agrees that we need to make the decision on some of these items and seems that North Dakota is not going to be able to get the State share together for that project in timing that we are planning for so won’t do project anyway. He continued that he had reviewed a letter from Brenda Kreuger, Springsted dated July 1, and he and Gershman had written a letter about being able to extend the time of the bonds for project and then could cut mills further.

Christensen stated that in June there was a presentation given that showed could do a two mill cut and now question what could have changed that would require no cut and that thinks there is support for a four mill cut, but very disappointed that the 2 mill cut proposal was done away with. He stated that he has another issue with the ½ mill increase in the public building fund and thought that when the fire station was proposed was to be budget neutral. Schmisek explained that at the time stated could cover with existing mills was before the mills were cut in previous years. He continued that the prior two mill cut was proposed based on estimated resale of the bonds, and came in better than expected and that’s where were able to cut the six mills from the dike bond fund. He continued that when take away the wages, utility and fuel costs, capital purchased with cash carryover, and $150,000 one time transfer to cover parking project, the remainder of the budget increases only .26%, which shows that staff is holding the line except for what’s forced and can’t control. Christensen responded that need to get the issue of reserves on the Finance Committee agenda and determine what level those should be at and also study the utility transfers and get good handle on what those are before pursuing a change there.

Glassheim stated that the City is a small part of the overall tax bill, we cut 28 mills which is a lot, and does show the City is operating lean, that we have reduced over 12 full-time positions and that administration has denied 6 new positions that departments had requested before the budget even came to Council and thinks there were probably more requests that also were denied and Council doesn’t even know about all of those that administration does good job looking at needs. Glassheim continued that we are talking about 1 mill, which is $4.50 for $100,000 home or $9.00 for $200,000 home and that translates to $350 cost for homeowner to receive Fire, Police, Streets, Engineering, etc. and shows that we are doing a good job. Glassheim added that we need to balance the property tax relief need with the need for the City to keep pace with inflation and growth needs. He proposed that need to look at having a financial base in mills going forward so stays more smooth and would like to see us commit ourselves to looking at efficiencies where can and know that staff is already doing that and we don’t even hear about it. He continued that we need to be more visible with those efficiencies to give the electorate assurance that we are working the best we can. Glassheim agreed that the six mills could be reduced from the dike bond allocation and that years ago had reduced mills from the general fund to fund the dike and now are just returning those to the general fund, but also need to be mindful of valuation increase and effect on homeowners.

Glassheim made a motion to recommend that six mills be reduced from the dike bond, with the general fund being increased by three mills and three mills being reduced from the budget and returned to the taxpayers and to refer to Finance Committee items as discussed above and to discuss other potential efficiencies. Kreun seconded.

Kreun asked the Council to keep in mind what they would like the City to be and look like. He continued that the discussion of reserve levels has been held in the past and agreed upon 15% as cash flow balance to carry, but if want to revisit we can. He added that overall, we have very little control over the General Fund dollars due to the nature of the costs and reminded members that have cut over $3 million in prior years and not even taken the amount should have from new growth and that overall revenue has only increased 1.6% overall, whereas the CPI was 3.6% and need to be careful. He added that we need to make sure we are adequately funding police and fire. He noted that for police coverage rule is 2 officers per thousand, but for Midwest can get by with 1.5 per thousand, and that we are at 1.46 and need to be mindful as we grow that don’t continue to decline. Kreun stated that Williams had given a report on 32nd Ave S traffic improvements and will make tremendous fuel saving to City and public by improved flow on the road and just one instance of when you need to spend money to make money. He agreed that there are a number of cuts that staff make that Council and the public do not become aware of and thinks that even if take another 3 mill cut thinks there is room to tighten the belt a little more, but still be able to get job done.

Schmisek stated that he appreciates hearing the comments as we move through the budget process and would also welcome policy discussion and decision making discussion on items. He noted that in regards to the CPI in March it was at 4.8%, April increased to 5.8% and in June up to 6.5% so in comparison to City’s overall increase of only 1.5% is notable.

Christensen stated that he still has question on the ½ mill for the public safety building in the public building fund. Schmisek stated that he would prepare a report detailing this item and distribute to Council. Christensen stated that he sees a continued buildup of cash in the Mosquito Fund and if we are trying to keep taxes down then why not charge more of costs for facility to that and keep cash stable instead of charging and raising taxes. Christensen stated that he will vote for the three mill decrease, but is also planning to move for a ½ mill decrease in the public building fund.

Duquette stated that a fiscal policy discussion can be held and is critical to have that conversation and make decision so staff has guidance on direction that Council would like to go.

Gershman stated that the vote taken today is advisory only and goes as a recommendation to the full Council. The group discussed the various impacts on the budget and that some revenue sources are decreasing, which causes the need for more general fund dollars to meet expense needs. Schmisek noted that traffic fines are down due to court ruling, building permits are down due to less aggressive building in the community, valuations are not rising at rates as in previous years, as well as some other revenue sources, but that some expenses keep increasing such as utility rates and fuel costs. The group noted that valuation increase this year was about 2% residential and 3% commercial.

Upon call for the question, Aye: Bjerke, Glassheim, Gershman, Christensen, Kreun – 5; Nay – McNamara – 1. Motion Carried.

Christensen noted that at the Council Meeting he will be planning to motion to reduce the ½ mill for the training center.

Meeting adjourned at 6:00 p.m.

Respectfully submitted,

Sherie Lundmark
Administrative Specialist Senior