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HomeMy WebLinkAbout2026/07/20 - ADMIN - Minutes - City Council - Study SessionOfficial minutes Special study session St. Louis Park, Minnesota July 20, 2026 The meeting convened at 7:08 p.m. Council Members present: Daniel Bashore, Sue Budd, Tim Brausen, Paul Baudhuin, Jim Engelking, Mayor pro tem Yolanda Farris Council Members absent: Mayor Nadia Mohamed Staff present: city manager (Ms. Keller), deputy finance director (Mr. Olson), administrative services director (Ms. Brodeen), deputy city manager (Ms. Walsh) Guests: Rebecca Petersen, Redpath and Company Discussion Item 1. Review 2025 Annual Comprehensive Financial Report Ms. Keller expressed pride in the finance team's work and noted the city's achievement of a clean audit, crediting sustained improvements in internal controls and organizational practices over several years. Ms. Petersen presented a summary of the four reports issued in conjunction with the audit of the city’s 2025 finances. 1. Opinion on Financial Statements: Ms. Petersen noted the city received a clean, unmodified opinion — the highest level of assurance available — and that no material misstatements were identified during the audit process. 2. Internal Control Report: Ms. Petersen reported no internal control findings, a notable improvement from prior years in which numerous matters had been identified. 3. Minnesota Legal Compliance Report: Ms. Petersen reported no instances of non- compliance identified in testing, again contrasting positively with prior years. 4. Communication to Those Charged with Governance: Ms. Petersen reviewed required communications including accounting policies, estimates and a single recommendation. On accounting policies, she noted no significant changes in the current year but flagged two new accounting standards requiring implementation in the coming year. On estimates, she highlighted two items of note: a pollution remediation liability related to the Cedar Lake and Louisiana Avenue construction project, and the city's share of the PERA net pension liability, estimated at just over $16 million for 2025. She provided context for the pension figure's volatility, noting that the same liability stood at $52 million in 2022, with fluctuations driven by actuarial discount rate changes, investment market performance and state contributions to pension plan funding. She also noted that the city recognizes revenue in its financial statements for the state's contributions to PERA on the city's behalf. The sole recommendation was to memorialize the city's Docusign Envelope ID: A10D92F0-4C13-8349-8148-91CB7E159C45 Special study session minutes - 2 - July 20, 2026 existing capital asset capitalization thresholds in formal policy, which she noted was not an audit finding but a best-practice suggestion. Council Member Budd asked whether the capitalization thresholds currently in use were reasonable. Ms. Petersen confirmed the thresholds were reasonable and consistent with those used by other metro-area municipalities. Council Member Budd asked for further explanation of the pension liability's dramatic fluctuation between 2022 and 2025. Ms. Petersen explained that the actuarially determined figure responds to changes in the discount rate, investment market performance relative to actuarial assumptions and the state's direct contributions to reduce plan liabilities — particularly for the police and fire pension plan. Council Member Budd asked whether the pollution remediation liability applied only to city- owned land. Ms. Petersen clarified that accounting standards require a liability to be accrued whenever a government commits to remediating pollution regardless of land ownership. Ms. Petersen noted that a fifth report — the single audit on federal program compliance — remained in process with a due date of Sept. 30, 2025, and that no issues were anticipated. Mr. Olson presented financial highlights from the 2025 Annual Comprehensive Financial Report (ACFR). Mr. Olson noted the city received a Government Finance Officers Association (GFOA) Excellence in Financial Reporting Award for its 2024 financial statements and anticipated the same for 2025. He also highlighted a third-consecutive Popular Annual Financial Report award and a newly received Distinguished Budget Presentation Award, noting the city now holds all three GFOA awards. He indicated the city is positioned to pursue the GFOA “Triple Crown” — all three awards in the same year — in 2024, which only 14 governmental entities in Minnesota have achieved. The city ended 2025 with $115 million in total cash and investments, a gain of approximately $5 million from 2024. The General Fund held the largest governmental fund share at approximately $33 million of a total $89 million in governmental funds. The Affordable Housing Trust Fund held $9.2 million, the Development EDA Fund held $12 million, enterprise funds totaled approximately $20 million and internal service funds totaled $6 million. Council Member Budd asked where these figures could be located in the ACFR. Mr. Olson referred to pages 62–64 for cash and investment notes and pages 40–41 for fund-level balances. Ms. Keller noted these figures reflect balances as of Dec. 31, 2025, and that some funds would be subject to future discussions about needed adjustments. The General Fund's unassigned balance sat at $28,494,628 — exactly at the 45% policy target. An excess of $165,366 above the target was available for use in 2026 or future years. Mr. Olson noted significant reorganization in 2025 related to the transition to a traditional internal service fund chargeback model in preparation for the 2026 budget, which involved one-time fund balance adjustments. Docusign Envelope ID: A10D92F0-4C13-8349-8148-91CB7E159C45 Special study session minutes - 3 - July 20, 2026 The Housing Rehab Fund increased by approximately $290,000. Mr. Olson noted that most programming had migrated to the Affordable Housing Trust Fund and that remaining activity consists primarily of special assessment revenue collections and HIA debt payments. Council Member Brausen asked whether the intention was to wind the Housing Rehab Fund down to zero. Mr. Olson indicated that question was one for community development staff and that a $5 million cash balance remained — a topic likely to surface during the upcoming budget season. The Affordable Housing Trust Fund balance increased by $4 million, though Mr. Olson cautioned this was not a good measure of money available in the fund because loans issued create receivables rather than outflows. The cash balance is a better indication of funds available and was just under $10 million. Revenue sources included TIF fund transfers, LAHA aid and property tax levy. In the Debt Service Fund, a net gain of approximately $800,000 was attributed primarily to timing between November–December 2024 levy collections and February 2025 debt payments. The ending fund balance was approximately $9 million. The Development EDA Fund balance decreased by $3 million, largely due to land transactions including the Beltline property sale, which resulted in a recognized loss with proceeds to be received as a long-term loan. The ending cash balance was $12.9 million. All TIF redevelopment districts combined saw a net decrease of $1.5 million, reflecting the timing of distributions to developers and excess fund returns to the county. The combined non-utility capital funds saw a net decrease of $176,000, with some funds awaiting reimbursement for expended project costs, including Cedar Lake and Louisiana Avenue project federal aid. In other governmental funds, Cable Television increased $156,000, driven by interest earnings and a delay in ParkTV renovations. Special Service Districts increased $187,000. The Climate Investment Fund declined $339,000, driven by strong program utilization; Mr. Olson flagged that the fund's cash balance was nearing depletion and would require a funding decision in the 2027 budget cycle. The Opioid Settlement Fund increased $118,000. The former Permanent Improvement Revolving Fund — holding approximately $3 million since 2010 — was reclassified as the Special Assessment Cost Recovery fund and funds were transferred to operating accounts. Among Utility Funds, water declined approximately $350,000 in cash, sewer increased approximately $620,000, storm water increased approximately $1.3 million and solid waste declined approximately $450,000. Mr. Olson highlighted that solid waste cash had declined for three consecutive years totaling roughly $1 million and flagged this for discussion at the upcoming utility rates session. Council Member Bashore asked for a general assessment of the city's financial condition. Mr. Olson characterized the vast majority of funds as very strong and identified the Climate Docusign Envelope ID: A10D92F0-4C13-8349-8148-91CB7E159C45 Special study session minutes - 4 - July 20, 2026 Investment Fund and utility funds — particularly solid waste — as the areas requiring near-term attention. Council Member Budd noted the city had raised solid waste rates significantly in recent years and asked whether the increases had been insufficient. Mr. Olson confirmed that declining cash in the solid waste fund continued despite the rate increase and attributed contributing factors to residents downsizing to smaller carts — which reduces revenue — among other variables. He indicated the topic would be addressed more fully at a future study session discussion on utility rates. Council Member Brausen noted the city had used the best information available to them at the time when the five-year rate structure was set for solid waste. Council Member Engelking added that the rate projections had not anticipated the impact of significantly elevated diesel fuel costs. Ms. Keller acknowledged these dynamics and noted the rate structure was the best available estimate at the time. Ms. Keller confirmed that the Climate Investment Fund had paused accepting new applications due to the depleted balance. She added that a wait list had been established and that she was actively reviewing salary savings and other 2026 budget flexibility to potentially reopen the fund before year-end. She confirmed no separate study session would be needed, as the authority to reallocate already-appropriated general fund dollars rested with the city manager, with transfers subject to council approval. Council Member Brausen noted this was his thirteenth annual financial presentation and affirmed the city remained in strong financial condition, with no audit findings and maintained fund balances, despite ongoing challenges from inflation and program demand. Council Member Budd credited newer technologies — specifically OpenGov — for improving departmental financial analysis and contributing to the clean audit outcome. Ms. Keller agreed and noted the system had been a meaningful tool, though the transition had been challenging. Council Member Engelking commended staff for the quality and precision of the 170-page document, noting the formatting and presentation work required was substantial. Council Member Baudhuin acknowledged that while internal controls can be frustrating at the staff level, they were clearly contributing to a clean audit and organizational integrity. Mr. Olson concluded by sharing that the 2025 Annual Comprehensive Financial Report would come before the city council for a vote at their next regular meeting. Ms. Keller indicated the 2025 ACFR would be placed on the consent agenda for Aug. 3, 2026. Council Member Brausen suggested it be listed as an action item rather than consent to give it appropriate visibility. Ms. Keller offered both options — a consent item with the ability to comment from the floor, or a regular agenda item with a staff presentation. Council Member Brausen withdrew the suggestion of a regular agenda presentation to avoid creating additional staff work in preparation for Aug. 3, 2026. Docusign Envelope ID: A10D92F0-4C13-8349-8148-91CB7E159C45 Special study session minutes - 5 - July 20, 2026 Written Reports 2. Budget to actuals Q2 for fiscal year 2026 3. Development update Q3 2026 4. Broadway Street Development’s proposal for redevelopment at 8800 Highway 7 – Ward 3 Ms. Keller noted three written reports were included in the agenda and asked the city council for any comments. Council Member Engelking commented on the Development Update Q3 2026, noting that 2645 Louisiana Avenue appeared to be missing from the report. He asked whether the project had lost financing. Ms. Keller agreed to follow up with staff for a specific answer. Council Member Brausen asked for an update on the Arlington Row East and West projects. He noted the developer, Robert Cunningham, had passed away approximately one month prior. Ms. Keller acknowledged this and indicated community development staff would have the most current information. Council Member Brausen added the developer had held the land since 2016 without completing financing and that the city had sold the land without a reverter clause, which he characterized as a learning experience that had since been incorporated into future development contracts. Council Member Budd noted she had not had an opportunity to fully review the Broadway Street Development report and indicated she would follow up directly with Ms. Keller and community development staff. Ms. Keller flagged this item as time-sensitive, noting that the developer would be requesting a Tax Increment Financing (TIF) district and emphasized the importance of council signaling early interest or disinterest to avoid unnecessary expenditure of staff and developer resources. She encouraged all council members to review the report and reach out with any questions or concerns. Council Member Engelking noted the project faced a hard deadline; the developer needed to issue bonds and begin construction in 2026 or risk losing the low-income housing tax credit bond financing entirely. Council Member Brausen described the project as exciting based on the materials. Council Member Brausen noted he had previously worked in the building at that site and expressed some personal sentiment about its demolition. He asked whether the current proposal differed substantially from prior concepts. Ms. Keller indicated she would follow up with staff for a specific answer. Docusign Envelope ID: A10D92F0-4C13-8349-8148-91CB7E159C45 Special study session minutes - 6 - July 20, 2026 Council Member Baudhuin expressed appreciation for the project's use of the development “game board” framework used by staff to communicate project status. The meeting adjourned at 7:55 p.m. ______________________________________ ______________________________________ Melissa Kennedy, city clerk Nadia Mohamed, mayor These minutes were created with the assistance of a generative AI transcript service, then edited and finalized by a city staff person. Docusign Envelope ID: A10D92F0-4C13-8349-8148-91CB7E159C45