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HomeMy WebLinkAbout2020 07-20 FCMMINUTES 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 20, 2020 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. The meeting was conducted via Webex. APPROVAL OF AGENDA There was a motion by Councilmember Ryan and seconded by Councilmember Butler to approve the agenda as submitted. The motion passed. OVERVIEW/INTRODUCTIONS Mayor Elliott welcomed the City Council and Financial Commissioners who joined the meeting. He added tonight’s meeting is to review the Capital Improvement Plan for 2021-2025. He noted this year’s budget process is incredibly important due to current economic challenges caused by the COVID-19 pandemic. Present were Mayor Mike Elliott and Councilmembers Marquita Butler, April Graves, Kris Lawrence-Anderson and Dan Ryan. Also present were Financial Commissioners David Dwapu, Dean Van Der Werf, and Emanuel Kpaleh. Also present were City Manager Curt Boganey, Finance Director Mark Ebensteiner, Assistance Finance Director Andrew Splinter, Doran Cote, Public Works Director, and City Clerk Barb Suciu. Mayor Mike Elliott called for introductions from those who have joined the meeting. Councilmember Ryan stated he has served on the City Council since 2007. He added he is a 45-year resident of the City of Brooklyn Center. Councilmember Lawrence-Anderson stated she has served on the City Council since 2013. She added she and her husband and two children have lived in Brooklyn Center since 1987. She welcomed the new Financial Commissioner. Councilmember April Graves stated she has served on the City Council since 2015. She added she has lived in Brooklyn Center since 2011. She noted she serves as the City Council Liaison to the Community & Recreation Services Department. Councilmember Butler stated she has served on the City Council for four years. She added she has lived in Brooklyn Center on and off for about 25 years and is a graduate of Brooklyn Center High School. She added she is the City Council Liaison to the Financial Commission and serves on the Brooklyn Bridge Alliance and the 252 Collaborative with other cities and leaders working on that project. Commissioner Van der Werf stated he has served on the Financial Commission since 2012. He added he has been a resident of Brooklyn Center for 52 years. Commissioner Dwapu stated he has served on the Financial Commission since 2018. He added he has lived in Brooklyn Center for 12 years. Commissioner Kpaleh stated this is his first meeting with the Financial Commission. He added he has lived in Brooklyn Center since 2012. He noted he is an Accountant and has a lot of experience in Finance, and is happy to be joining the Financial Commission. CAPITAL IMPROVEMENTS PLAN 2021-2025 City Manager Curt Boganey stated this meeting is the first of the 2021-22 budget planning sessions. He added, as noted by Mayor Elliott, the upcoming fiscal year will be different from any that have been previously experienced. He noted tonight’s meeting will focus on the 15-year capital improvement plan and capital project budgets for the upcoming year, which are the foundations upon which the City operates. Mr. Boganey stated the global pandemic has caused some delay in the budget planning process. He added this is the first Brooklyn Center budget for new Finance Director Mark Ebensteiner. He welcomed Assistant Finance Director Andrew Splinter and Public Works Director Doran Cote. Public Works Director Doran Cote stated the Capital Improvement Plan is non-binding and intended to be fluid. He added priorities can change dramatically from year to year. He noted, ultimately, 2021 CIP projects will be incorporated into the budget, and approval of the budget. Mr. Cote highlighted Capital Improvement Projects in four categories: public utility projects including water tower, lift stations; street projects, including reconstruction and overlays; parks improvements, including trails, shelters and equipment; and capital maintenance building projects. He added a variety of funding sources include utility fees, special assessments, franchise fees and liquor operations. Mr. Cote stated proposed projects for 2021 include parks improvements, lift station improvements, and street improvements, including the Bass Lake Road corridor. He added stormwater improvements are planned, and Hennepin County has requested replacement of the signal at 65th Avenue, as well as a new turn lane at 63rd Avenue. He noted the public works shop will be updated and brought into OSHA compliance, and projects adjacent to the Opportunity Site will be delayed to 2022. Mr. Cote stated one of the big changes for 2021 is the Brooklyn Boulevard project. He added watermain replacement at Dupont Avenue and I-94 is necessary due to pipe failures. Finance Director Mark Ebensteiner reviewed proposed 2021 projects in the CIP fund, costs for which would total $16.1 million, primarily related to two projects: $14.4 million for Brooklyn Boulevard Phase 2, $11.5 million of which would come from external sources; and the 53rd Avenue improvement project in connection with the City of Minneapolis. He added the remaining funding would go toward replacement signage, playground equipment and office updates, for which $4.3 million would be funded by the City of Brooklyn Center. Mr. Ebensteiner stated the capital improvement funding policy provides resources of funding from capital improvement funds and is a very formal and specific policy. He added the City Council has typically directed these funds toward municipal facilities including parks, trails and buildings, but also some improvement projects like Brooklyn Boulevard. He noted Local Government Aid can be used on a project by project basis with Parks District, Watershed District, County, and State funding. Mr. Ebensteiner reviewed the capital outlay of $60 million over the next 5 years, with $15.3 million to be funded internally. Bond sales are projected in 2021 and 2025 which will provide funding for Brooklyn Boulevard Phase 2 and the City’s share of the Highway 252 project. This will likely be repaid with property tax and could require $850,000 annually in additional property tax funding. Additional funding is being sought to lessen that load. Municipal State Aid (MSA) funding can be used for four projects in 2021: Grandview Park area improvements; 53rd Avenue improvements from Penn Avenue to Lyndale Avenue; Lyndale Avenue; and Brooklyn Boulevard Phase 2, for a total of $3.5 million. Mr. Ebensteiner stated Municipal State Aid (MSA) provides funding for maintenance of streets that are on the State system, and this funding comes from highway fees. He added there are 21.3 miles of MSA streets in Brooklyn Center. He noted there has been an 8% reduction Statewide in MSA funding due to COVID-19, and cities are not eligible for advances. Mr. Ebensteiner stated the City has a healthy cash balance, but in the future, City Staff intends to take advantage of the advance if it is made available, and the City is eligible to receive it. He noted this is an interest-free loan that allows the City to complete projects without running up a large debt. Mr. Ebensteiner stated cash balances remain healthy. He added MSA funding may be reviewed as a means to decrease bonding in 2025. He noted additional MSA and other funding may be available due to the Highway 252 project, and it may not be necessary to issue full bonds. Mr. Ebensteiner stated the City Council approved the franchise fee increase effective January 1, 2020 with $1.5 million debt issued for this fund. He added, in 2021, that will increase to $2 million in funding from additional debt service property levy, repaid with property tax. Mr. Ebensteiner stated a substantial franchise fee will relieve some of the pressure of the levy. Mr. Ebensteiner stated the special assessment fund of $1.78 million is used to fund street projects and then allocate the funds. He added revenue varies from year to year, based on projects, and the City often issues special assessment bonds to be repaid by assessments. He noted that requires a lot of tracking, and there is sufficient cash flow to support the debt service. Mr. Ebensteiner stated costs for larger utility projects is estimated at 12 million in 2021 including Grandview Park south area reconstruction and total utility replacement for $5.57 million; the northwest mill and overlay project for $1 million, and Brooklyn Boulevard Phase 2 for $ 2.9 million. He added utility funds have not been finalized in the 2021 budget and are currently in the process of being evaluated so the CIP Plan can be updated for each utility. He noted utility rates in the water fund have increased over the last few years related to debt payment for the water treatment plant as well as capital projects. Payments will be allocated over future years for users of the system to keep rate increases as smooth as possible. Mr. Ebensteiner stressed the importance of ensuring that there is sufficient cash available to fund CIP and operations, allowing future users to pay for utilities and infrastructure, while operating at a cash balance that is lower than target. Mr. Ebensteiner stated each utility has a target cash balance based on factors including quarterly City billing. He added it is a good idea to have three months of following year's operational costs available at the end of the year. He added the following year’s debt service is also important to have on hand. Mr. Ebensteiner stated Mr. Splinter has done a great job reviewing the plan and maximizing use of cash for operations. He added the City will average $500,000-800,000 over the next 10 years in internal cash and utility fees that can be used for projects. He noted a 10-year average is included in the balance. Mr. Ebensteiner stated the sanitary sewer fund has debt issues this year, and is anticipated to continue until 2030, for a total of $10.9 million over 10 years. He added these debt issues help stabilize the need for significant jumps in sanitary sewer rates. Mr. Ebensteiner stated the storm drainage fund will have a small increase based on projects for upcoming budget cycle. He added debt issuances have been identified in storm drainages in 2021, 2022, 2029 and 2030. He noted quarterly rates will increase from $15.52 increase to $15.98. Mr. Ebensteiner stated it is anticipated that the streetlight fund can be covered with current rates and will remain at $6.55. He added there is sufficient cash balance for current needs. He noted some additional capital could come in that would utilize cash balances. Mr. Ebensteiner state the total for 2021 to fund Capital Improvement Projects would be $10 million, repaid from the property tax levy, water utility and sanitary sewer. He added the bonding would be $15.2 million in 2021 and 2022. He noted this is a big number, but it is a small portion of the funding. Mr. Ebensteiner stated funding increases over the next two years due to neighborhood reconstruction and Brooklyn Boulevard Phase 2 will have a financial impact on the property tax levy. He added increases are based on bond issuances and how they affect debt service. He noted the debt service portion of the levy would increase by 2.1% for 2021 and 19.4% for 2022, and the impact of the levy as a whole would be .15% for 2021 and 1.44% for 2022. Mr. Ebensteiner stated the quarterly utility bill will increase from $177.67 to $185.95, or an increase of $8.27 increase. He added there will be some change, but this is a good way to move forward, as no change would be difficult to recover from. Mr. Boganey stated the street reconstruction projects will start after 2022, and the franchise fee agreement with Xcel Energy expires December 8, 2023. He added the City Council has considered adjusting special assessments almost every year for as long has he has been the City Manager. He noted the City Council has been consistent in their resolve to maintain the special assessment policy out of fairness to 80% of residents who have already been assessed. Mr. Boganey stated it has been discussed that once the entire assessment cycle is completed and starts again in 2022, that would be the appropriate time to change the policy. He added City Staff is planning a Work Session Agenda item to discuss this issue, to receive feedback and comments from the City Council and take the next steps if necessary. Mr. Boganey stated many communities, including Brooklyn Park, have adopted franchise fees that cover the entire cost of the City’s share of a street reconstruction project. He added property owners would pay through their utility bills, and there would be no special assessments. He noted costs would be covered by bond issuance and levy adjustments. Commissioner Kpaleh stated he has heard about the property tax increase. He added the COVID-19 pandemic has caused dire conditions across the country, and a lot of people are losing their jobs, and things are getting really hard. He asked whether the property tax could be adjusted instead of increased. He asked whether some projects could be delayed until 2022. He noted that would be a way to give a break to Brooklyn Center property owners. Mr. Boganey confirmed the property tax levy can be increased or decreased by a vote of the City Council. He added tonight’s discussion is related to the debt service levy of approximately $1.2 million, or 5% of the total levy of $19 million. He noted an option is for the City Council to complete projects that require a levy increase for debt service but reduce the levy that pays for operations. He noted another option is to delay the projects, after reviewing this question more closely. Mr. Boganey stated, based on his experience, cities decide not to do capital projects as a way of saving money, and do not complete infrastructure projects. He added a sewer or water main may need to be replaced but it is not visible to the public, or funding for roads reconstruction is spent on other services, and projects are delayed. He noted cities keep their taxes low by doing this, but the projects will end up costing taxpayers more in the long run as infrastructure costs get more expensive over time. Mr. Boganey stated, however, a project can be delayed by one or two years. He added the City Council can make those types of decisions. Mayor Elliott stated he would like to see some analysis on what it would cost to postpone some of these projects by one or two years and have some numbers to support these decisions and not just pontifications. He added there may be some historical data available. He noted Commissioner Tpaleh raised an important point that some projects may not need immediate action. Mayor Elliott stated it is important to review information, rather than acting out of fear-based decision-making. He added the City should be prudent in making decisions, and if infrastructure needs to be replaced and cannot wait one year, the City Council needs to know that to help make sound decisions that are not based in fear. Mayor Elliott stated several projects are slated for the upcoming year. He added he would like to consider delaying projects for another year, to determine what the economic crisis will mean in terms of people’s ability to pay increased taxes. He noted the City Council should delay non-essential projects and will need information to make these decisions. Mayor Elliott stated the City is nearing the end of the 30-year cycle for roads improvements. He added the impact of increasing the tax burden for residents should be considered, as a 20% unemployment rate is projected. He noted the City Council should review options that will show what it would look like to push projects out another year. Mr. Boganey stated, as the City Council has done in the past, a maximum levy is discussed and potentially established at the next joint City Council/Financial Commission meeting. He added this sets the upper limit for taxes, which provides parameters for City Staff for staying within the levy amount, including capital projects and operating costs. Mr. Boganey stated it was not his intention to make anyone fearful about not investing in infrastructure. He added infrastructure conditions are assessed annually, and recommended projects are based on assessments, and not the assumption of deterioration. Mayor Elliott stated a number or percentage of increase chosen out of thin air by the City Council is bad practice. He asked whether the City Council can get a written analysis of each of the projects, where they are now and what will happen over the next year or two if nothing is done about them. He added that is a more prudent way to approach this, rather than selecting a number with very little information. He noted the City Council has yet to see the other budget presentations. He asked whether this information can be available at the next Joint Budget meeting. Mr. Boganey stated City Staff can provide information before the City Council is required to vote on capital project plans. He added it would be difficult to get the information together before the next Finance meeting. He noted it is not possible to provide a prediction of what will happen in the next year if a project is delayed. Mayor Elliott stated, if this analysis has already been completed, as indicated by City Staff, then the analysis should be available for the City Council to review. He added he is referring to assessments about whether or not projects need to be done. Mr. Boganey stated that information is available. Mayor Elliott stated the analysis should include some statement about the projects, and what would happen if they were delayed for one year. Mr. Boganey stated City Staff does not have the ability to predict that type of outcome, as these are long-term projects with 30-40 year life spans. Mayor Elliott stated it is important to have additional information, so the City Council can make sound decisions with the advice and support of the Financial Commission. Councilmember Butler stated she agrees with the comments that have been made. She added the City is not even halfway through with COVID-related repercussions, including financial impacts to residents and the City. She noted it will be key to get assessments on what projects can be delayed, and what savings will be realized. Councilmember Ryan asked whether projects that are recommended receive extensive evaluation in terms of how they are prioritized. He stated some projects that are not pressing may be deferred. He added perhaps City Staff could go back and provide that type of evaluation. He asked whether failure can sometimes be anticipated. Public Works Director Doran Cote stated the City’s street projects are rated every year or every other year, to determine their condition or trends and some predictions can be made. He added, for instance, the Grandview Park area is scheduled for 2021, and all of its roads are a 1, 2 or 3 on a scale up to 10, which is not very good. He noted City Staff can gather additional information. Councilmember Ryan stated he would not generally agree with delaying projects in a normal economy, but it's incumbent upon the City to do everything possible to make prudent decisions. He added he is not acting out of fear, but rather on a maximum of caution. He noted he would appreciate it if City Staff could go back and see what savings can be netted. He stressed the importance of keeping in mind that this discussion relates to 5% of the net levy, and the real money is somewhere in the General Fund. Mayor Elliott stated 5% of the budget will be approximately $900,000. Mr. Boganey clarified the 5% relates to the levy, not the budget. Mr. Elliott asked what 5% of the levy would be. Mr. Ebensteiner stated the current debt service levy is around $1.2 million, or 5% of the total levy of $19 million. Councilmember Graves stated the total levy includes $16 million in Local Government Aid funding. She added the debt levy is what the City issues as debt to cover proposed projects. Mr. Ebensteiner confirmed this. Councilmember Graves asked why the City must issue such a big debt levy if much of the funding comes from other sources. Mr. Ebensteiner stated the local costs portion must be funded with available cash, or the City will need to bond for that portion. He added the majority of the $19 million goes to the General Fund, to support operations, including public safety, administration, and community development. He noted property tax collection is the primary source of funds for general operations. Councilmember Graves stated she would like to have a deeper assessment on projects that can wait a year or two. She added the City Council has made sound decisions in the past in collaboration with City Staff and the Financial Commission, which is why the City has such a good rating. She noted she is personally excited about the Brooklyn Boulevard project which is a huge portion of the project funding. She noted she lives on Brooklyn Boulevard, and reconstruction will improve sewers as well as safety, with better sidewalks and center medians. Councilmember Graves stated she is interested in discussing the next 15 years capital improvement plan, and potential significant changes in how assessments are handled, as well as discuss franchise fees, as suggested by Mr. Boganey. Councilmember Graves stated, in the past, the City Council has set a cap or percentage over which they would not go. She added it sets a good framework for City Staff to work with, and bring other options for the City Council to consider. She noted City Staff has provided support for the City Council in making good sound budget decisions in the years that she has been involved. She noted, however, she knows this year is different, and she would be interested in getting additional information. Mayor Elliott stated he is looking at the budget from a “zero based budgeting” perspective, where everything is assessed based on the current budget. He added this is a best practices method that a lot of institutions use. He noted it is incumbent upon us to really analyze the budget. Councilmember Lawrence-Anderson stated she has trusted the recommendations of City Staff for many years. She added, due to the pandemic and the financial crisis that many families face, the City must ensure that money is spent the best way possible. She noted she appreciates improvements that are being completed on the City’s infrastructure, and she is hesitant to delay projects, but agreed it would be prudent to take a look at what can be delayed at least one budget year. Mr. Boganey confirmed that projects could be delayed. He added the point of his original comment was that as a matter of routine, delay could be bad decision-making. He noted, however, the City Council can decide to delay projects. Commissioner Kpaleh asked whether City Staff can provide a report showing actual expenditures and life spans for each of these projects. He added, if projects are rated, it would be helpful to review which projects are more urgent than others. Mr. Cote stated agreed to provide information that is used to determine which projects should be moved forward. Mr. Boganey agreed. Commissioner Kpaleh stated he believes this information will help the City Council understand which projects should move forward, and which can wait. Councilmember Graves stated she assumes that a project assessment provided by City Staff would not be simply an abstract number on a scale of 1 to 10 with no related information or data, and some projects may not be a good investment right now. She added some projects should be considered from a regional perspective, or social and environmental context. She noted some parks may have already had some improvements done or may be located in a smaller community. She requested that City Staff provide information about these types of considerations when they offer their assessments. Councilmember Ryan stated, with all the factors that go into property taxes, 5% of the levy does not compute to 5% of a residents’ City portion of the property tax. He added the 5% calculation does not amount to very much money. He stressed the importance of keeping that scale in mind. Councilmember Ryan stated it would be unwise to defer projects to get 5% less on the levy, considering the long list of projects, which would put the City right back to what is critical. He added the City’s street utility replacement plan was stretched to 30 years due to the amount of bonded debt the City could reasonably carry, and because of what was needed to fill that gap. Councilmember Ryan stated he echoes the comments of Councilmember Lawrence-Anderson, that he places a lot of trust in recommendations made by City Staff. Councilmember Graves stated, to add to Councilmember Ryan’s comment, she has found it helpful in the past the way (former Finance Director Nate Reinhardt) would present information, giving a breakdown of the percentage points for increases for the City budget and how it breaks down for a family of four. She added it is helpful because it makes it more real when making a decision. She requested that Mr. Ebensteiner offer that kind of data as part of the upcoming presentations. Mr. Boganey confirmed that is the kind of information that will be provided by City Staff at future budget discussions. Mayor Elliott stated he would like to acknowledge all the staff members and everyone who took the time to join the meeting. He added he appreciates the time and effort that goes into this process, especially in this time of economic calamity. He apologized if his earlier comments sounded coarse, as his intention was to make the point that there needs to be some hard work done on the budget this year. He noted everyone will work together as a team to figure it out. FUTURE BUDGET DISCUSSIONS -None. ADJOURNMENT Mayor Elliott adjourned the meeting at 8:23 p.m.