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HomeMy WebLinkAbout08/09/2006 Council MinutesCOUNCIL FINANCIAL RETREAT AUGUST 9, 2006 APPROVED CITY OF LINO LAKES MINUTES DATE : August 9, 2006 TIME STARTED : 6:04 p.m. TIME ENDED : 9:03 p.m. MEMBERS PRESENT : Council Members Carlson, O'Donnell, Reinert (6:04), Stoltz (6:43) and Mayor Bergeson MEMBERS ABSENT : None Staff members present: City Administrator, Gordon Heitke; Finance Director, Al Rolek; Community Development Director, Mike Grochala; and Terri Heaton, Springsted City Administrator Heitke stated the Council should determine if any of the staff recommendations for the long-term issues would be included in the 2007 budget process. Staff also needs to continue work on the Five Year Plan and some of the financial issues would be included in the completion of that plan. Staff is requesting direction regarding several of the City's funds. Finance Director Rolek reviewed the status of the General Fund and indicated finance strategies are important for this fund. This is the fund that is most focused upon during the budget cycle; it is the fund that the City is most aware of and that has the most direct tax impact. Staff recommendation is to monitor the General Fund for possible weaknesses in the future and to employ the consultant's recommendations as needed to curtail any unfavorable affects. The Council indicated they are comfortable with the staff recommendation and directed staff to set up reserves within the General Fund for possible future liabilities. It was noted that setting up reserves will not affect the overall budget and will possibly improve the City's rating. The Council also directed staff to inquire about a time frame when ice time is sold for the Super Rink. Staff will also bring back recommended policies regarding borrowing from other funds and repayment of those loans. Finance Director Rolek referred to the Facilities Replacement and Maintenance Fund noting the major source flowing into this fund is from the antenna lease revenues - about $105,000 — 110,000 per year. Staff recommends these funds be dedicated to the maintenance and repair and the eventual replacement of City building facilities. This amount can be supplemented with tax revenues in future years. The Council concurred with the staff recommendation regarding the Facilities Replacement and Maintenance Fund. • COUNCIL FINANCIAL RETREAT AUGUST 9, 2006 APPROVED Finance Director Rolek advised following the Pavement Management Plan (PMP) for maintenance and reconstruction of the City's road infrastructure would save $11,000,000 over the next 10 years. Following the plan would also improve the average condition of the road system and spread the costs of maintenance and replacement more gradually though the use of debt financing. This has been an area that has been among the first to cut out in the annual budgets when the City is looking for effective areas to cut; however, it is also among the greatest future cost impacts if not addressed as needed. The Charter provisions relative to funding street reconstruction further inhibit the Council's ability to initiate and complete these projects. Finance Director Rolek advised the Council should recognize road maintenance and repair as a priority to avoid sharp increases in cost and tax impact in the future. Staff recommends budgeting annual road maintenance (seal coating, overlay, etc.) at the recommended level stated in the PMP, and to take a proactive approach to addressing necessary reconstruction projects, perhaps through a strong education and communication effort. Finance Director Rolek reviewed the history of the SAC Revolving Fund. He stated the potential impact of this liability on the City in the future would be quite heavy at over one-half million dollars. The only sources available to relieve the liability are utility fees or property tax revenue. In any case, it falls on all other residents of the City to pay the difference in SAC costs attributable to these properties. Staff recognizes that residents were given an option in the past, that properties have changed ownership over time, and that it may be many years before sewer service is available for these properties, or maybe never. However, given the potential magnitude of this liability, staff recommends that these property owners be made aware of the situation and that a refund be issued to the affected property owners, thereby eliminating the potential liability. The Council directed staff to obtain an opinion from the City Attorney regarding issuing refunds. If there are no legal issues, staff should proceed with the refunds with a one-year option for the affected residents. Finance Director Rolek advised in terms of the Dedicated Parks Fund, staff is recommending establishing a repayment plan for the interfund loan for the 67 -acre parcel of property purchased for a recreational facility. An outright transfer of the funds would not be an appropriate use of the Area and Unit Funds, which were collected to implement trunk sewer and water facilities. In addition, the Area and Unit Fund is having its own financial challenges. Therefore, a repayment plan seems to fit best. The loan can be repaid over a 10-15 year period with a moderate rate of interest. There will be an impact on the rate of park development over this time frame due to this plan. If, at some point in the future, it is determined that the City should divest itself of this property, the proceeds would flow to the Dedicated Parks Fund for use of repaying any unpaid loan balance or in any of the remaining City parks. • COUNCIL FINANCIAL RETREAT AUGUST 9, 2006 APPROVED The Council directed staff to further investigate options for repayment of the loan including increased Park Dedication fees, valuation of the land and possibly selling a portion of it and other revenue sources. Finance Director Rolek provided the background of the Storm Management Fund noting it is clear that the use of storm water development fees for maintenance purposes is not an appropriate or intended use of these funds. It is also clear that there are ever-increasing regulations relative to surface water standards and the clean water act. These are unfunded mandates, which the City will need to find a way to fund. Finance Director Rolek advised staff is recommending that a permanent funding source be established to pay for ongoing maintenance of this storm water system. Because there is equity to the system where those who have the most impervious surfaces have the most runoff and should pay the most, and vice -versa, staff is recommending continuing to pursue a storm water utility. It is the most equitable — though not perfectly equitable — method to finance maintenance of this system. If the utility is not implemented, property taxes will need to be levied to maintain the system. The costs are there and they are real; the only question is how to pay them. Staff feels a storm water utility is the best way at this time. The Council agreed staff should continue exploring the possibility of a storm water utility that includes an educational plan for residents as well as more equitable ways to implement the plan such as assessments. Council also requested staff look into possible grants as a way to offset those costs. Finance Director Rolek referred to the Area and Unit Fund noting the sharp decline in fund balance over the last five years. It is clear that this fund no longer has the capacity to carry capital improvement projects until an event occurs that triggers payment of hook-up and trunk fees. In the absence of a large infusion of capital from a future development, the full cost of projects, less oversizing and City -borne costs, must be assessed to benefited properties. Finance Director Rolek stated staff is in the process of collecting policies used in other communities to model a new policy for consideration by the City Council. This is an important issue that needs to be addressed and changed in order to maintain the integrity of this fund and to continue to service debt attributable to this fund. The Council directed staff to continue collecting other city policies and bring forward a recommendation. The Council also requested information regarding the amount of deferred assessments and a timetable relating to those assessments. Finance Director Rolek advised staff would like Springsted to conduct a Utility Rate Study. • COUNCIL FINANCIAL RETREAT AUGUST 9, 2006 APPROVED The Council determined the August 16, Finance Work Session would be rescheduled to allow staff ample time to obtain more information regarding the above issues. The meeting was adjourned at 9:03 p.m. These minutes were considered, corrected and approved at the regular Council meeting held on August 28, 2006. `Cit Clerk, Juli. e Bartell Transcribed by: Kim Points TimeSaver Off Site Secretarial, Inc. • • 4 P4P60,4•Pu John Bergeson, Mayor