HomeMy WebLinkAbout2008/06/09 - ADMIN - Minutes - City Council - Study Session I// St. Louis Park OFFICIAL MINUTES
MINNESOTA CITY COUNCIL STUDY SESSION
June 9, 2008
The meeting convened at 6:30 p.m.
Councilmembers present: Mayor Jeff Jacobs, John Basill, C. Paul Carver, Phil Finkelstein, Paul
Omodt, Loran Paprocki, and Sue Sanger.
Councilmembers absent: None.
Staff present: City Manager (Mr. Harmening), City Clerk (Ms. Stroth), Finance Director (Mr.
DeJong), Assistant Finance Director (Mr. Swanson), Police Chief (Mr. Luse), Director of Public
Works (Mr. Rardin), and Recording Secretary (Ms. Hughes).
Guest: Steve McDonald,Abdo Eick & Meyers, LLP
1. Future Study Session Agenda Planning—June 23, 2008
Mr. Harmening presented the proposed Study Session agenda for June 23 and stated they will meet
at 5:00 p.m. for a canoe trip; Council will be accompanied by representatives from Three Rivers
Park District and the Minnehaha Creek Watershed District as well as representatives from
Minnetonka City staff. He stated the focus of the canoe trip will be to discuss creek and park trail
issues. He added after the canoe trip, Council will meet for a brief Study Session.
Councilmember Finkelstein asked that the Three Rivers Park District provide Council with an
update on bike trails.
Councilmember Sanger asked that they also provide an update on the initiative previously
mentioned about trying to do some things for the inner part of Hennepin County and not just the
periphery.
2. Presentation of 2007 Consolidated Annual Financial Report (CAFR) —Audit
Mr. DeJong introduced Steve McDonald and Brad Falteysek from Abdo Eick & Meyers, LLP, the
City's auditors.
Mr. McDonald presented the 2007 financial report and explained that one significant change in this
audit over prior year's audits included the way in which they planned the audit. They spent more
time getting an understanding of the City's internal controls, which adds some context to the
findings discussed in the report. He stated based on their objectives in the process and from all tests
performed, everything looks good.
Mr. McDonald presented their management letter and provided an overview of the significant audit
findings.
Preparation of Audit Findings
Mr. McDonald stated it is important to make sure all appropriate disclosures are in place; their
preliminary draft includes a finding that internal controls should be in place to provide reasonable
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assurance over financial reporting. He explained they have recommended that the City utilize a
disclosure checklist to ensure all required disclosures are presented and they are satisfied that the
appropriate steps have been taken by the City to complete the disclosure checklist.
Limited Segregation of Duties over Cash Disbursements, Cash Receipts, and Payroll
Mr. McDonald stated they found the City to have limited segregation of duties related to cash
disbursements, cash receipts, and payroll. He explained the existence of these limited segregations of
duties increases the risk of fraud and error and they recommend the City review responsibilities of
staff to limit the number of duties in more than one category that one person can perform in each of
the major transaction cycles. He stated City staff is aware of the risks and plans to have further
discussion in the current year to reduce the risk and put more efficient controls in place.
Limited Segregation of Duties Relating to Offsite Material Transactions
Mr. McDonald stated the audit reviewed procedures for scheduling, billing, and collecting ice time
and building rental and found limited segregation of duties. In addition, there are no procedures for
tracking concession inventory. He stated they are recommending the City review the responsibilities
of the Rec Center to limit one person performing more than one of the categories within segregation
of duties; in addition, they are recommending that the Rec Center utilize the finance department for
finance related transactions such as billing and collection of rentals. He added the City is purchasing
a point of sale software package for the Rec Center and they encourage the use of the inventory
tracking capabilities that this software will allow in order to increase efficiencies and reduce risks of
lost inventory.
General Fund Balance
Mr. McDonald presented an overview of the General Fund Balance compared to budget and stated
there is an adequate balance in the fund and includes favorable results both on the revenue as well as
the expenditure side. He noted expenditures are under budget by approximately $604,000, and half
of that came from a positive variance in the Police Department.
Special Revenue Funds
Mr. McDonald reviewed the Special Revenue Funds and noted the balance has remained
consistently level for the last several years; the largest fund in this category relates to police and fire
pensions.
Capital Projects Funds
Mr. McDonald reviewed the Capital Projects Funds and noted one deficit in street capital projects,
which will be eliminated with future revenue sources.
Debt Service Funds
Mr. McDonald reviewed the Debt Service Funds and stated the debt service funds are in good shape.
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Mr. DeJong interjected the City does not have a lot of debt per capita compared to most peer groups
of cities and stated the City has a low debt ratio and a lot of debt capacity.
Enterprise Funds
Mr. McDonald provided an overview of the Enterprise Funds and stated these funds showed good
improvement in operating ratios. He explained on a percentage basis, the City went from 2.3% to
6.1% and this increase is entirely based on unspent bond proceeds. He stated the Sewer Utility Fund
is driven by capital acquisitions and is generating positive cash flow. He stated the Refuse Fund is
showing improving margins from 2006 to 2007 and includes one year's worth of operating expenses,
with a good reserve level.
Mr. DeJong stated it will be important to regularly review and revise rates for each of the City's
enterprise funds to ensure adequate funds and to determine when the City needs to issue bonds.
Mr. McDonald stated the Storm Water Utility Fund shows an increase in the fund, with
outstanding bonds of approximately $3.4 million. He stressed the importance of keeping up with
rate studies and rate projections.
Mr. McDonald stated the Wireless Fund will be closed out in 2008 and the cash deficit eliminated
at the end of the year.
Ratio Analysis
Mr. McDonald then presented a ratio analysis of the City's financial statements that provides
additional information for trend and peer group analysis; the peer group average consists of an
average of Abdo Eick & Meyers' client base plus other select cities of similar size and geographic
location. He stated the City's percentage in debt to assets was 19% at the end of the year compared
to 27% for the peer groups. He stated the City's debt per capita has decreased to $708 per person
and the City's taxes per capita are a bit higher than the peer groups; this number may be impacted
by TIF.
Mr. McDonald reviewed the capital assets which are intended to show how new or old the City's
infrastructure is and stated business-type capital assets show 53% left to depreciate; the peer group
shows 61%. He stated when a city nears the 50% level, it will begin to see more repair and
maintenance.
GASB
Mr. McDonald explained GASB No. 45, a new accounting standard related to a city's post-
employment obligations. He stated this standard requires a city to book a liability on the financial
statements intended to measure the cost of carrying retirees on its health insurance program.
Council and staff had discussion relating to GASB No. 45 and its impact on the City's financial
statements.
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Councilmember Sanger asked Mr. McDonald if there is anything in the financial statements other
than the control processes previously mentioned that cause significant concern.
Mr. McDonald replied they are satisfied that was has been reported this evening are the only items
they would consider significant. He added if you look at these items alone for what they are, they do
not raise significant concerns; rather, the process is intended to assist a city in reviewing its internal
controls to ensure accuracy and completion.
Mr. DeJong expressed his thanks to the Finance Department staff for their efforts in completing the
audit.
3. Liquor Licensees - 4 a.m. Closing during Republican National Convention
Ms. Stroth asked the Council if they wish to allow the temporary 4:00 a.m. closing time to
interested on-sale intoxicating liquor licensed establishments during the Republican National
Convention from September 1-5, 2008. She stated state law provides all cities with the discretion to
allow on-sale establishments to stay open until 4:00 a.m. and noted only a few establishments in the
City expressed an interest.
Councilmember Finkelstein stated he was not in favor of the 4:00 a.m. closing time, particularly in
light of the long process recently undertaken to increase the penalties for liquor violations.
Councilmember Sanger stated overall, she did not think the 4:00 a.m. closing time would be a
problem, but agreed with Councilmember Finkelstein with respect to the new liquor violation
penalty schedule.
Chief Luse stated they expect most of the convention attendees will not be driving and instead will
be transported by bus or shuttles between St. Paul and their hotels.
Councilmember Carver stated he did not see any downside to extending the closing time.
Councilmember Omodt stated the extended closing time is only for five days and stated he did not
have a problem with it as long as Chief Luse was okay with it.
Councilmember Basill stated he was neutral with respect to the extended closing time.
Mayor Jacobs stated it appeared the majority of Council is in agreement with the extended closing
time.
Mr. Harmening stated this item will be on the City Council agenda for June 16.
4. Highway 100 Reconstruction (Full Build) Project Update
Mr. Rardin presented an update on the current project status, project schedule, and next steps. He
reported that recent communications with Mn/DOT staff suggest the proposed Highway 100
project is undergoing an internal agency review with the intent of minimizing the project and its
cost; Mn/DOT staff have indicated they do not have adequate funding available to meet all needs
and are minimizing projects to the fullest extent possible. He stated it appears the project will be
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changed from an improvement project to an infrastructure replacement project, resulting in project
costs being reduced by approximately 50%. He added Mn/DOT has made a commitment to noise
walls because the highway violates noise standards.
Mr. Rardin reviewed the preliminary changes to the project provided by Mn/DOT and noted if
these changes are implemented, it appears the City will have very little, if any, opportunity to
improve local transportation connections. He stated Mn/DOT staff appears committed to
reconstruction occurring in 2015 and 2016.
Councilmember Finkelstein asked about the impact of these changes to those homeowners who were
waiting for Mn/DOT to make a decision.
Mr. Rardin replied it has always been presumed that those homes will be removed as part of any
highway project.
Mr. Rardin stated Mn/DOT has given staff the impression that they will provide the City with its
final decision on the project by July 1.
It was the consensus of Council to wait until Mn/DOT provides its final decision on the project and
then react accordingly.
5. City/School District Budgets
Mr. Harmening stated that staff desires to continue the conversation with the City Council
regarding how the City might assist the School District with its budget challenges, since not all
Councilmembers were able to attend the May 27" meeting. He stated when the Council discussed
this on May 27`x, Council expressed a desire to work with the School District and to provide some
fairly immediate assistance in the form of the City picking up the cost of the police liaison officers
which are currently split 50/50, or approximately $85,000 per year per entity. He reported he met
with Superintendent Bowers and her staff last week and reviewed the wish list to better understand
what the School District is asking for. He stated he asked the School District representatives where
they would use any assistance provided and their response was the monies would be used to help
stabilize their budget and ultimately to try to sustain programs and services that they want to keep.
Mr. Harmening suggested if the Council wants to do something right away, the City could waive
the School District's portion of the 2008 payment for the police liaison officers, which would be
approximately $45,000; he recommended holding off on making any decision with respect to the
police liaison officers for 2009 until the City goes through its full budgeting process. He stated
longer term, there are several policy questions for the Council to consider, including how recently
enacted levy limits impact this issue, whether any assistance provided would be permanent/long term
or short term and subject to being revisited, and whether the City should look at capital
improvements identified by the School District differently than operational items. He stated an
additional question to consider is whether the City Council wants to know exactly what the School
District is going to do with any assistance provided, i.e., does the Council want to dictate what those
cost savings might be used for.
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Councilmember Carver stated a paramount question for the City is whether one public entity can
funnel money to another public entity.
Mr. Harmening stated that the City Attorney reviewed the wish list and has indicated there are
clearly some things the City can and cannot do; an example of something the City is not able to
provide assistance for relates to social workers at the schools. He noted that the premise for the
artificial turf and buildings is that it has a much greater potential for use by others in the
community.
Councilmember Carver stated if there are some efficiencies that can be realized by one entity taking
over another's activities, e.g., lawn care, that that is something which should be considered.
Councilmember Sanger stated she would agree to waive the 2008 cost for the police liaison officers,
and preferred to hold off on the rest of the items, particularly in light of the recently enacted levy
limits.
Councilmember Paprocki stated he would also agree to waive the cost for the police liaison officers
as short term assistance. He concurred with Councilmember Carver's comments regarding
efficiencies that can be realized.
Councilmember Finkelstein stated his agreement with waiving the cost for the police liaison officers;
in terms of sidewalk installation, he felt that was the City's responsibility anyway.
Councilmember Basill reviewed the items on the wish list and stated at the May 27th meeting, the
City Attorney indicated item #1 (snow plowing and lawn care) was something for which the City
may be able to provide assistance and he would be agreeable to this item. He stated he has no
problem with waiving the cost for the police liaison officers (item #2). He stated the Council
discussed item #3 (Lenox costs for utilities/custodian) at great length on May 27th and the City
Attorney has indicated this item may be acceptable and noted the City already provides some
assistance with respect to Lenox. He reiterated that the City Attorney has indicated that the City is
not able to provide funding assistance with respect to item #4 (social worker). He stated the City
Attorney has indicated item #5 (election costs) would be okay and he does not have a problem with
that item. He stated the City Attorney has said the City might be able to provide some assistance
with respect to item #6 (field artificial turf and buildings). He indicated with respect to item #7
(custodian at Eliot), the City Attorney has stated the City would not be able to provide funding. He
stated that item #8 (City-run junior high athletics) was also discussed at length on May 27th and the
City agreed to take over soccer and added he did not think the City should or could say no to this
item. He expressed his agreement with Councilmember Paprocki regarding item #9 (sidewalk
installation) as a one time cost. He stated the field turf presents an interesting concept for Council
consideration and felt this is something that will benefit well beyond the School District. He added
the Council should consider its Vision and felt the Council should be looking at this in terms of an
overall community center.
Councilmember Sanger expressed reservations about the wish list and added the field turf is not a
project aimed at getting money freed up for the academics needed in the schools. She stated there
are a significant number of parents who are upset with the School District because it is cutting
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academics and culture programs and added she felt strongly that the City should not put money into
athletics when the School District is making significant cuts in academics.
Councilmember Omodt stated he did not have a problem with one entity helping out another and
felt the City should view the community center issue as an opportunity.
Councilmember Carver stated it will be important to make certain the City is looking at
demonstrable efficiencies as it relates to the current atmosphere as well as the levy limits.
Councilmember Finkelstein stated the community center might make good sense and felt it was
worth exploring further.
Mayor Jacobs stated the artificial turf presents an opportunity for partnering with the School District
to build something that the community has already expressed an interest in.
Mr. Harmening stated that later this year as part of the Council's Vision process, there will be a
specific presentation to the Council on a multi use center, including what functions it will serve.
Mr. Harmening stated he will plan to have the police liaison officers 2008 funding request on the
regular agenda for Council action on June 16th.
6. Communications (Verbal)
Mr. Harmening updated Council on a recent meeting with representatives from STEP and stated
they discussed several available options related to STEP's relocation. He stated the Council may
wish to consider some financial assistance with STEP's transitional costs; he added that STEP
understands why the City needs to move forward with the project and staff has agreed to continue to
meet with STEP to help them with their relocation efforts.
Mr. Harmening stated the recent hail storm caused significant damage to the recent plantings along
Excelsior Boulevard. He indicated that staff will be filing an insurance claim as an uninsured loss.
Mayor Jacobs handed out bookmarks for distribution at the parade on Saturday and stated the
Council is#8 in the line-up.
The meeting adjourned at 8:27 p.m.
Written Reports provided and documented for recording purposes only:
7. City Sales Tax Audit Report
8. Critical Incident Preparedness Training
9. Highway 7 / Wooddale Avenue Interchange oje t U•date
Nancy Stroth, ity Clerk Je` aco , ayor