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HomeMy WebLinkAbout2019 07-15 CCM Joint WorksessionMINUTES OF THE PROCEEDINGS OF THE CITY COUNCIL/FINANCIAL COMMISSION OF THE CITY OF BROOKLYN CENTER IN THE COUNTY OF HENNEPIN AND STATE OF MINNESOTA JOINT WORK SESSION JULY 15, 2019 CITY HALL — CITY COUNCIL CHAMBERS CALL TO ORDER The Brooklyn Center City Council/Financial Commission Joint Work Session was called to order by Mayor Elliott at 6:30 p.m. ROLL CALL Mayor Mike Elliott and Councilmembers Marquita Butler, April Graves, and Dan Ryan. Also present were Financial Commissioners David Dwapu, Tia Hedenland, Abate Terefe, and Dean Van Der Wer£ Also present were City Manager Curt Boganey, Deputy City Manager Dr. Reggie Edwards, Director of Fiscal & Support Services Nate Reinhardt, and Director of Public Works Doran Cote. O VER VIE W/INTRODUCTION City Manager Curt Boganey stated the purpose of the joint Financial meetings is to review the 2020 budget process and receive feedback and direction as the budget develops. He added this evening's presentation relates to capital funds, which is probably the most important budget under consideration as it ensures that the City has solid infrastructure. He added the capital funds investments are not often seen by the general public. He noted capital expenses are increased greatly if investment is neglected. Councilmember April Graves arrived at 6:36 p.m. CAPITAL IMPROVEMENTS FUNDS Finance Director Nate Reinhardt stated tonight's presentation would cover capital projects for 2020 and 15 -year Capital Improvement Plan (CIP). He added priorities could shift and change, so the CIP document is a prioritized list of projects based on year and funding opportunities. He noted the CIP covers public utility projects and infrastructure improvements connected with street reconstruction, including roadways, curb and gutter, parks improvements, building, and facility improvements, and various funding sources used depending upon the project. Mr. Reinhardt stated $10.8 million in capital improvement projects are planned for 2020. He added the total includes four bridge rehabilitation projects that will be addressed as two separate projects, as well as ADA improvements to Xerxes Avenue and Bass Lake Road and the Shingle Creek Improvement Project. Councilmember Graves asked whether it is common practice to include everything above $50,000. Mr. Boganey stated the City has a policy of a minimum $50,000 investment instituted by the City Council. He noted he would provide a copy of that policy for the City Council. Mr. Boganey stated neighborhood construction projects would be split into different projects over multiple years due to escalating costs. He added he has heard from other cities that capital projects are coming in exceptionally high over budget. He noted this is due to increasing construction costs as well as many contractors are working on the light rail projects. Mr. Reinhardt stated the Capital Improvement budget funds $1.3 million in projects, including replacement of retaining walls, new playground equipment, and City building improvements. Mr. Boganey stated this is a relatively new fund, established within the last ten years, earmarked for building improvements. This fund ensures that building maintenance and repair projects are completed when they become necessary. Mr. Boganey stated the types of funding used include the City's share of local govermnent aid as well as an estimated amount of revenue from liquor fund. He added there had been a conversation about what happens to the liquor fund, so it is important to note that liquor fund proceeds go into this fund to offset projects, including playground equipment. Councilmember Graves stated there had been some discussion regarding playground equipment that is outdated and has a plan for addressing parks that need improvement. She added she would support ensuring that parks that are in the most need of improvement are addressed first, taking into consideration criteria such as area demographics and proximity to other parks. Mr. Boganey stated there is an existing plan that has been formulated based on recommendations from the Parks Commission and City Staff. Commissioner Terefe asked whether local government aid can be spent at the discretion of the City. Mr. Boganey stated cities receive this type of funding based on a formula that is established at the State level and is based on need, so not all cities can qualify. Commissioner Dwapu asked whether the amount of local government aid is an estimate. Mr. Boganey stated the State legislature increased the total amount of funding available to cities that qualify, and the City of Brooklyn Center should receive a specified amount. Mr. Reinhardt stated it has been beneficial for the City to have local government aid funding. He added there had been years when this type of funding has been cut at the State level, and cities have to make up the difference in budget cuts. He added the City of Brooklyn Center does not put 100% of their local government aid estimate into the general operating budget. Mayor Elliott stated he testified at the State legislature regarding local government aid funding. He added legislators were interested to know whether the projected increase would have an impact on the City's ability to keep taxes down. Councilmember Ryan stated there should not be any problem defending the City's policy, as the overriding fact is that costs go up if you delay capital improvements. He added the absence of tax 07/15/2019 Page 2 capacity has more bearing on the City's share of local government aid and the impact of cuts in funding. Mr. Boganey stated property taxes generally increase when local goveinment aid is reduced, to make up for cuts across the State. MUNICIPAL STATE AID FUND Mr. Reinhardt stated 2021 projects include Brooklyn Boulevard corridor improvements which will use mostly federal funding. He added projected bond sales in 2021 and 2023 will cover the City's share of Highway 252 improvements as well as Brooklyn Boulevard Phase 2 and would likely be repaid with a property tax levy. Mr. Reinhardt stated Minnesota State Aid (MSA) funding is used for street repairs and comes to the City through State revenues. He added MSA funding would be required for projects on Bass Lake Road and Xerxes Avenue in 2020. Director of Public Works Doran Cote stated the City of Brooklyn Center is close to the maximum amount of MSA funds that can be generated for street reconstruction. Mayor Elliott requested clarification regarding State revenues used for MSA road repairs. Finance Director Nate Reinhardt stated the City is capped at an annual amount that comes as a reimbursement to the City after the proj ect is complete. He added the City of Brooklyn Center requested their State revenues in 2017 in advance to continue to do projects without falling into a negative cash balance. Mr. Reinhardt stated street reconstruction projects are generally funded with franchise fees, but often property tax funding is used as well. He added project costs have increased. He noted over $2 million is earmarked for projects in 2020, including the Grandview development and two bridges on Shingle Creek Parkway, Mr. Boganey stated the City of Brooklyn Center has a generous formula for street reconstruction costs, with 1/3 paid by individual property owners based on an assumed increase in property values. He added residents in other cities often pay a bigger share. He noted this policy has been in place since the inception of the street reconstruction program in 1993. Mr. Boganey stated nearly every neighborhood would be complete by 2023 at which point it will be appropriate for the City Council to decide whether to continue the same policy. Mr. Boganey stated he feels confident that increased property values as a result of street reconstruction will be higher than annual assessment amounts. Councilmember Ryan stated many cities do assessments for street utility projects. He added this is tied to issues of equity and fairness in assessments as well as property tax improvement values. 07/15/2019 Page 3 SPECIAL ASSESSMENTS FUND Mr. Reinhardt discussed the special assessment fund. We have some larger projects, so in the process of issuing bonds that would include a portion of the project with special assessment cost and in 2024 would be paid by special assessment revenues Mr. Reinhardt reviewed 2020 utility projects totaling $6 million. Mr. Boganey asked why is it expensive to paint the water tower. Mr. Cote stated paint is expensive, and the existing coating has to be blasted off, structural repairs completed, welding done in the tank interior and four coats of paint. He added it could take an entire summer to rehabilitate a water tower. Commissioner Van Der Werf asked whether there is a breakdown of costs associated with the rehabilitation of the water tower. Mr. Cote stated there is no specific dollar amount until the project goes out for bid. He added there is a cost estimate, but specific items are added as they come up, and estimates are generally based on similar past projects. Mr. Boganey agreed to provide a breakdown of costs based on previous water tower projects. Commissioner Abate asked what the useful life of a water tower is. Mr. Cote stated water towers are generally expected to last for 30 years. He added they are inspected internally every five years, and the project life is estimated based on the inspections. He noted the cost of anew water tower is over $1 million. OVERVIEW OF UTILITY FUNDS Mr. Reinhardt stated the 2020 budget is not completed for utility funds, but 2019 data has been updated to show its impact on the capital improvement plan. He added the City Council recently discussed potential changes to rate penalties, and those changes have not been included. He added rates were raised significantly from 2015-2017 for the new water treatment plant. He added, based on current data, an increase is possible in 2020. Mr. Reinhardt stated sanitary sewer rates have increased at an annual rate of 3%. He added the sanitary sewer fund is in a strong cash position with a projected balance of approximately $2 million at the end of 2021, after which there will be significant decrease due to projects planned for that year. Mr. Reinhardt stated a $350,000 grant related to stormwater improvement projects is listed under "Intergovernmental" in the 2020 budget. He added this includes Shingle Creek improvements. Mr. Reinhardt stated lighting projects are covered under the streetlight fund, under which no rate change is anticipated. Mr. Boganey stated streetlights owned by utility companies do not fall under this fund. Mr. Cote confirmed this, adding only streetlights that are owned by the City are replaced by the City. He added Excel Energy has different lighting options for cities, and the majority of streetlights are leased. Commissioner Abate asked why the cash balance flow stays the same in the streetlight fund. Mr. Reinhardt stated there are not as many projects planned after 2027. 07/15/2019 Page 4 Mr. Reinhardt stated debt issue would be paid from various sources in 2020. He added the Capital Improvement Plan gives an idea of projects, but realistically things may change. Mr. Reinhardt stated $14.4 million in bond issues would be anticipated in 2020 and 2021. Mayor Elliott asked whether there concern regarding the City's debt based on projections and whether it will have any effect on the City's bond rating. Mr. Reinhardt stated the City is below average for debt, and City Staff does not expect there to be an impact on debt rating over the next few years. Mr. Boganey confirmed this, adding the City has a Double -A (AA) bond rating, which is a good indication that debt is not excessive. Mr. Boganey stated utility rates are increasing compared to 10 other cities that were identified by the Financial Commission for comparison purposes. He added, however, the City of Brooklyn Center is still in the lower quartile of those cities. Mayor Elliott asked what portion of investment funds go to repaying debt. Mr. Reinhardt stated payments are made annually, and the percentage is not very high. He added he would have to get the numbers on that. Mr. Boganey stated City Staff could provide information regarding annual debt service payments. Councilmember Ryan stated interest rates are very low, which is a big advantage, but cash will have less yield. He added this is not going to drive a big part of the budget. Commissioner Abate asked whether there is a maximum amount the City can reclaim as debt. Mr. Reinhardt stated that is 3% of total market value, or $56 million. TECHNOLOGYFUND Mr. Reinhardt stated the capital improvement fund for technology covers software upgrades and purchases and audio/visual equipment. He added five years' worth of projects is identified. , EBHC CAPITAL FUND Mr. Reinhardt stated there are expenses related to renovating the pond area near the Earle Brown Heritage Center (EBHC). Mr. Boganey stated several property owners would benefit from improvements to the pond, as they all share the amenity. He added it would be problematic to try to get individual property owners to voluntarily agree to share the costs, and City Staff recommends that the City should fund the improvements if it falls within the budget. He noted the trailway at the pond adds to the City's trails system and overall walkability. Mr. Reinhardt reviewed cash flow analysis for Earle Brown Heritage Center (EBHC) operations. He added there is a policy in place, providing a minimum amount for operations. He noted City Staff 07/15/2019 Page 5 feels that the performance of EBHC operating fund will result in sufficient funding of projected amounts based on a five-year average. Mayor Elliott asked whether weddings make up a large portion of their business. Mr. Boganey stated he guessed that wedding sales is generally around 20% of annual sales. Mr. Reinhardt stated much of their business is seasonal, based on the type of event, but they try to ensure they are not relying on one type of business. Mr. Boganey stated corporate business events might be the highest contributor, and other meetings and events, as well as weddings. He added the return on investment is higher for corporate business events than for weddings. He noted corporate events generally have a bigger budget. Mayor Elliot stated additional information could be made available to the meeting attendees. Councilmember Ryan stated it would be useful for the City Council to have information on LOGIS as the technology fund is reviewed. He added LOGIS is a significant expense, and the service provided is very significant and beneficial. He noted this information should be made available to the public. Mayor Elliott stated he would like to find out about alternatives to LOGIS. Mr. Boganey agreed to put some information together. Mr. Reinhardt stated the next Joint Financial meeting would include a budget overview as a kick --off to the budget process. He added department heads would present individual budgets for review and comment. Mr. Boganey stated the City Council would be required to adopt the preliminary maximum levy by the end of September. He added general direction from this group will be helpful in that respect and for decisions regarding general fund expenditures. Mayor Elliott stated, throughout the process, there will be opportunities to review and comment on previously presented information. Mr. Boganey agreed. ADJOURNMENT The Brooklyn Center City Council/Financial Commission adjourned at 8:30 p.m. 07/15/2019 Page 6 STATE OF MINNESOTA) COUNTY OF HENNEPIN) ss. Certification of Minutes CITY OF BROOKLYN CENTER) The undersigned, being the duly qualified and appointed City Clerk of the City of Brooklyn Center, Minnesota, certifies: 1. That attached hereto is a full, true, and complete transcript of the minutes of the City Council from the City of Brooklyn Center Joint Work Session with Financial Commission held on July 15, 2019. 2. That said meeting was held pursuant to due call and notice thereof and was duly held at Brooklyn Center City Hall. 3. That the City Council adopted said minutes at its August 12, 2019, Regular Session. City Clerk Mayor 07/15/2019 Page 7