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HomeMy WebLinkAbout2020/10/12 - ADMIN - Minutes - City Council - Study Session Official minutes City council study session St. Louis Park, Minnesota Oct. 12, 2020 The meeting convened at 6:30 p.m. Councilmembers present: Mayor Jake Spano, Tim Brausen, Rachel Harris, Larry Kraft, Anne Mavity, Nadia Mohamed, and Margaret Rog. Councilmembers absent: none. Staff present: City Manager (Mr. Harmening), Director of Operations and Recreation (Ms. Walsh), Building and Energy Director (Ms. Hoffman), Engineering Director (Ms. Heiser), CFO (Ms. Lammers), Deputy City Manager/Human Resources Director (Ms. Deno), City Assessor (Mr. Bultema), Police Chief Harcey, Director of Community Development (Ms. Barton), Fire Chief Koering, Communications Manager (Ms. Smith), Senior Management Analyst (Ms. Solano), and Recording Secretary (Ms. Pappas). Guests: Stacy Kvilvang, Liz Diaz; Ehlers 1. 2021 budget, updated CIP, utility rates, and LRFMP Mr. Harmening stated the primary drivers of a levy increase would come from capital plans, roads, bridges and Connect the Park. He added a 4.5-5% levy increase would go a long way to meeting goals and achieving funding needs. Additionally, he noted there is a need to increase franchise fees to $1.25 for residential and $2 for commercial. Ms. Kvilvang agreed that capital plans and borrowing needs are the main drivers for tax levy increases, pointing out the tax levy for 2021 could go to 4.1-4.5% and meet city goals. She also pointed out a lower 2021 levy will result in a higher 2022 levy increase to make up for the differential and meet needs for 2022. Ms. Kvilvang added the council may want to consider a local option sales tax to help meet goals and added the fund balances for EDA that would be used for any projects that come up or are needed. Councilmember Harris asked if franchise fees will be raised this year . Ms. Kvilvang stated yes, this year for 2021 and then plan to review and increase again in 2023. Councilmember Harris noted last year the council contemplated a local option sales tax as they did anticipate an increase in capital projects and were seeking ways to finance this. She stated she remembered several information sessions with council. She stated she appreciated the refresh on that. Councilmember Brausen asked if the city share is the total dollars of taxes created and is that the portion going into the housing trust fund. Ms. Kvilvang stated 35% of this is eligible for the housing trust fund. Councilmember Kraft asked if the total amount of TIF in 2021 will be split between the city, county and school. Ms. Kvilvang stated yes. DocuSign Envelope ID: D095ADA2-87EF-42EF-A44B-A6030224EB2C Study session minutes -2- Oct. 12, 2020 Councilmember Kraft asked where the $339,000 city portion goes. Ms. Kvilvang stated into the capital equipment fund. Councilmember Kraft asked if these funds would go into the affordable housing fund . Ms. Kvilvang stated it would go into the general fund. Councilmember Kraft asked if these funds go into the general fund because funding is needed there. He also asked if not, would the levy need to be increased. Ms. Kvilvang stated both are correct. Councilmember Mohamed asked if the TIF districts noted in the staff report are all the TIF districts the city has. Ms. Kvilvang stated the city has more than noted in the report and they come off the list as the TIF districts are paid off. Councilmember Brausen asked if TIF districts are kept in existence after the note is paid in order to use those funds in affordable housing. Ms. Kvilvang stated the housing rehab fund and affordable housing trust fund pay for all affordable housing projects, adding these two funds could be combined into one fund with affordable housing being a portion of the overall housing fund. Councilmember Mavity noted if both funds are combined into one fund, there will need to be priorities created for the affordable housing trust fund so it will not get lost in the broader housing fund. Ms. Kvilvang stated the goal is to be sure both funds are unrestricted, and have programs set within to align them with the funding goals of the council for housing. Councilmember Mavity asked staff to be sure not to create an issue down the line should the legislature choose to fund this. Councilmember Rog stated she shares the same concerns as Councilmember Mavity and is proud of the priorities of the city’s affordable housing fund. She asked how it would be beneficial if both funds are set up as one. Ms. Kvilvang stated it would only mean the city is keeping all housing funds under one umbrella to make it easier to see all the funding for housing. Councilmember Kraft asked if funds in the housing rehab fund can be used for affordable housing items. Ms. Kvilvang stated the HRA portion of the tax levy can be used on any affordable housing programs. She added the fund could be looked at as a pie, with pieces going to various programs on affordable housing, some to staffing, some to rent assistance and some to housing rehab. Mr. Harmening added the housing rehab fund currently funds affordable housing activities and has been doing so for many years. He added having both funds can be confusing, so staff thought it would be better to merge both and then be diligent about how the funds are used within the fund. DocuSign Envelope ID: D095ADA2-87EF-42EF-A44B-A6030224EB2C Study session minutes -3- Oct. 12, 2020 Councilmember Kraft asked if the fund had $6 million within it and $1 million was used for affordable housing, could the funds be restricted within the fund . Ms. Kvilvang stated yes. Councilmember Kraft asked if the city has $20 million in the fund balance, and wanted to do a $5 million project, over what time period would it take to replenish the development fund. Ms. Kvilvang stated land can be sold to get the proceeds back over a 5-year time period. Mr. Harmening added $20 million is just a recommendation for a minimum amount place holder in the fund balance. Councilmember Kraft asked if there should be a policy around this minimum fund balance that states it is acceptable to go below the minimum level. He asked if the fund could be replenished in 1 year, especially right now during financially challenging times. Ms. Kvilvang stated the fund can be replenished, over time, but not in 1 year. She stated that it would be council policy to decide to go below any minimum if they determine to do so, and then plan to get back to the levels desired in the fund. Management is important to maintain the Standard & Poor’s AAA rating also. Mayor Spano stated a 5% tax levy would require $83,000 out of the general fund balance . He asked what the fund balance would be if this was the case. Ms. Kvilvang stated the total funds do not have to come out of the fund balance, and capital projects can be cut back on if needed, and the council could choose to not do some larger projects. Councilmember Harris asked what the projected timeframe is to reach a $1 million fund balance in capital replacement. Ms. Kvilvang stated the estimate, with the current plan would be by 2024. Councilmember Harris asked if the city has had a policy on fund balances in the past. Mr. Harmening stated this policy only exists on the general fund, and staff feels its best practice to have a target for each fund as a minimum fund balance. Councilmember Harris stated with tight funding and a 4.5 – 5% tax levy, is there also merit in a goal fund balance within 3 years. Mr. Harmening stated that would depend on the council to raise revenue to do that, either through property taxes or issuing debt or a combination of these two. He stated staff felt feathering this in over time was the prudent thing to do versus doing it all at once. Councilmember Rog asked why the Louisiana Bridge must be done in 2021. Ms. Heiser stated this is the bridge over Minnehaha Creek which has been scheduled for replacement since 2018 . The bridge has structural instability and is being checked every 6 months, and has been downgraded, so it must be replaced due to its poor condition. Councilmember Rog asked if the city has secured external funding for the bridge project . Ms. Heiser stated the city has $800,000 for the project, but the legislature did not pass any additional bridge funding, and the city cannot put this off any longer. Councilmember Rog asked what the additional $122,000 is for related to the Dakota Bridge . Ms. Heiser stated this is another bridge being monitored and must be replaced for safety reasons . DocuSign Envelope ID: D095ADA2-87EF-42EF-A44B-A6030224EB2C Study session minutes -4- Oct. 12, 2020 Ms. Walsh added part of the funding for this bridge will come from stormwater and part from the park fund. Mr. Harmening discussed park dedication fees and stated in the fall staff brings to council a fee schedule to adopt for an assortment of fees, adding this would be the time to change fees for park dedication. Councilmember Rog asked if the fees are mandated by the state . Mr. Harmening stated no; however, developers have pushed back about the size of the fees. It is important when setting fees that the reasoning is to cover business expenses or a planned program. Councilmember Rog asked why it is too late this fall to review the park dedication fee. Ms. Lammers stated the first reading is October 19, so there is not enough time to review in the cycle this year. Mr. Harmening also noted, however, the fees can always come back to the council at a future date to adopt a new or revised fee. Councilmember Rog stated she is still concerned about the housing rehab fund and the affordable housing fund, adding it feels risky to funnel money from one fund to the other. She added she shares Councilmember Mavity’s concerns about potential legislature matching funds that are set aside as well. Ms. Barton assured Councilmember Mavity the affordable housing trust fund is under the umbrella of the affordable housing fund and will still be its own fund, adding the funds will not be co-mingled. She stressed the funds are dedicated and under policies and noted if anything does come available from the state, that can also still be added to the affordable housing fund. Councilmember Rog stated when looking at street rehab costs over 10 years, the range is $6-12 million per year. She asked if this is an appropriate range. Ms. Kvilvang stated yes, while Mr. Harmening added given the scope of all street improvement needs, especially MSA streets, this is not a surprising cost. Ms. Heiser added the entire cost is $7 million and includes not only street replacement, but water main, sanitary sewer, and new sidewalks. Councilmember Rog stated she sees this as a major cost driver, adding she can count on one hand how many times a resident has asked her to fix their street in her 3 years on the council . She stated this feels like it is department driven and not community driven adding she hopes the council can be open-minded about having an outcome-based budget that reflects the city’s commitment to biking, walking, and mass transit and eases up on pavement management. She stated she wants to know what the city spends each year on streets themselves and look at how to pull back on that. Councilmember Brausen stated in Ward 4 he hears about fixing Cedar Lake Road all the time . He noted this project has been deferred the last 4 years, and Louisiana Avenue to Highway 394 has also been deferred. He stated roadways do matter and major roadways have to be maintained especially since much of the city’s infrastructure is 50-75 years old. DocuSign Envelope ID: D095ADA2-87EF-42EF-A44B-A6030224EB2C Study session minutes -5- Oct. 12, 2020 Councilmember Brausen also asked for clarification and confirmation on the start of the housing rehab fund, asking if it was started by excess fees from certain housing projects . Mr. Harmening clarified it was started by fees from activity revenue bonds, adding these fees can be used for any lawful government expenditure. Councilmember Brausen stated the EDA fund is around $20 million and asked if prior expenditures were for development around the light rail station. Mr. Harmening stated that was certainly the goal. He stated in 1997 the fund had over $30 million in it and in the years that followed, the city used it for projects it was not able to recoup but were worthwhile. He stated the fund started to erode, so a fund balance policy will be important. Councilmember Brausen stated it is worthwhile to have these funds on hand and to make strategic decisions while controlling development projects. Councilmember Brausen asked if within the 4.5-5% proposed tax levy, there is a presumed 2% average wage increase for staff. Ms. Kvilvang stated the 4.5-5% will give flexibility for labor negotiations. Mr. Harmening added one labor contract was settled pre-COVID, but 4 more are open for 2021 and staff will need to negotiate in good faith with those bargaining units. He stated this percentage amount will allow some room to settle union contracts. Councilmember Brausen stated the city’s policy has been to treat staff increases the same as union contract. Mr. Harmening agreed adding the size of the increase and benefit package are usually similar with minor differences and variations depending on the bargaining unit. Councilmember Mavity stated she appreciated Councilmember Rog’s comments but wanted to clarify while all these funds are together as one big pie on housing related activities, she asked if the affordable housing trust fund as adopted by council, meets state rules . Ms. Barton stated yes. Councilmember Mavity added one of the advantages of the trust fund is that is has been predictable and the development world relies on that. Councilmember Mavity also addressed Councilmember Rog’s comments on outcome-based budgeting stating what the city does on roads is outcome based and is one of the reasons council does not get complaints because the city has been so methodical in doing roads so very effectively and well. She stated roads are part of the city’s core services as is water and sewer, and there are no pothole jokes in St. Louis Park for a reason. Councilmember Mavity continued, the blending of MSA funds and pavement management funds will not create future problems; however, by blending these funds she wants to be sure future problems will not be created. Ms. Heiser stated MSA funds can only be used for MSA roads, such as Louisiana Avenue. She stated the design of MSA roads meet standards and the city cannot risk this for the future, adding it will be important to make sure the pavement management fund is more flexible. Councilmember Mavity noted the bonding and rating concern, and asked i f the AAA rating were lost, is there a huge financial cost to the city in terms of interest paid on bonds. Ms. Kvilvang stated that depends on the year it happens. She stated currently it would not be significant, but in 10 years it could be, adding it depends on the economy. She added the city would never want the lowering of the rating to be a headline in the community, noting the city attained the AAA bond rating 12 years ago and it is a big deal as many cities in MN have not achieved that. DocuSign Envelope ID: D095ADA2-87EF-42EF-A44B-A6030224EB2C Study session minutes -6- Oct. 12, 2020 Councilmember Mavity stated while she won’t be on the council for the final vote, she prefers the tax rate increase of 4.5-5% which is no more than $10 per year for the average homeowner. She encouraged the council to go with this rate stating the collective gain will put the city in a better position for next year’s hit, while being able to do the projects and priorities residents have been asking for. Councilmember Brausen agreed adding he continues to support the 4.5-5% levy. He added delays have more long-term consequences, and he doesn’t want to see staff tasked with the job of performing at high levels during a pandemic and be shouldered with more burdens next year. He stated the council has to ask residents to help address the economic issues that might happen next year, adding this levy will provide resources to make adjustments as needed, while addressing increases. He stated he would support up to a 6% levy increase even though he has concerns on the impacts to lower value home residents who have enjoyed the most appreciation. He stated they will unfortunately have a higher tax burden, and some will sell and will then realize values and other will carry the burden. Councilmember Brausen added there will be tax impacts on renters and rental property owners will have higher increases vs. single family homeowners, noting this is reflective of their properties not having increased in value as much . He stated, however, there will not be a direct correlation between a tax increase and rent increases necessarily. Councilmember Harris stated she is fine with the franchise fees which are a sound approach for paying a fair share for the use of roads. She added she is in favor of the fund balance policy but would delay it for 3 years. She stated the levy will impact expenditures for next year, adding it is up to the council to figure out how to maintain city infrastructure and it is a difficult choice . Councilmember Harris added she is cognizant of residents that live in Ward 3, which includes everything from kids on free lunches all the way to million -dollar homes on Minnehaha Creek. She agreed the city has a collective power and everyone can help one another. She stated she is more concerned about what is coming next year adding the higher levy will help mitigate financial problems next year. She stated she is leaning toward the 5% levy. Councilmember Kraft asked if the city is on track to be at 45% for the general fund at the end of the year. Ms. Lammers stated the city is within the budget set last year. Mr. Harmening stated the budget looks strong and in terms of expenditures and revenues , it could be above 45%, so monies could be reapportioned to other funds. He also added , however, the big unknown is the 2nd tax settlement in December. Councilmember Kraft asked if there was a reduction on pavement quality from 70 to 60 rating, what that would mean in terms of cost savings. Ms. Heiser stated she would have to calculate that and get back to him. Councilmember Kraft stated related to the $250,000 in the budget for climate action , will this amount come out every year from the development fund. Ms. Kvilvang stated this is for 2021. Councilmember Kraft asked why it is only $250,000 for climate action. Mr. Harmening stated this amount was viewed as substantive and that it could be built on and would not have a DocuSign Envelope ID: D095ADA2-87EF-42EF-A44B-A6030224EB2C Study session minutes -7- Oct. 12, 2020 detrimental effect to the budget. The funds would be set aside in 2021 in the development fund and support programs to be developed. Councilmember Kraft stated he prefers formalizing a fund balance target in a policy and then there are expectations for what happens if it goes below or above. He added because of the way the property tax is set up, the tax levy will fall disproportionately at lower and higher value properties and rentals at the C level. He stated this trend is the same over the last 5 years and added social security projected increase next year is in the 1% range . He stated he favors the 3% levy increase, and to address the economic downturn. Councilmember Kraft added he is not satisfied with the $250,000 climate action budget, adding this is a top priority, a crisis, and is as important as COVID and racial equity. He stated the city needs to treat climate change as a crisis, and added he wants to see a plan to actually do it and address this crisis as a crisis. He noted he appreciates the work being done but stated the city cannot pat itself on the back and has to address what is true and necessary. Councilmember Rog stated in her mind this is money coming out of folks’ bank accounts and while $1 may not be a lot, the $85 per year in franchise and utility fees will have bigger impacts. She added discussions on road expenditures and how we will pay for it is worth more discussion. She added at this time she cannot answer if she supports a 3, 4 or 5% tax levy, adding she wants to look at franchise fees and pavement management more. Councilmember Mohamed asked if council wants residents to pay less now and more later. She stated council knows what is happening this year, and that it might get worse or better in the future. She added there is some belt tightening happening and she appreciates that, noting the maximum she would agree to is a 4.5-5% tax levy. She stated this is doable and she is comfortable here. Mayor Spano stated he is interested in a 5% levy right now. He stated as a practice the city has done its best to make increases and decreases gradual and less abrupt, adding this only delays a more aggressive and severe response down the road. He stated he appreciates staff’s work on franchise fees to take burdens from residents, adding this system was designed so a percentage increase was small and residents could adapt to it, noting this is the whole nature of the entire idea of pooling tax revenue to invest in the community. Mayor Spano added he does hear one of the things the city does really well, from residents, is core services. He added the fact the city does those well allows us to do other things better than other cities, such as road conditions and he stated the city cannot get behind and start downgrading. Mayor Spano stated the council was in agreement on roads last year and added if the city wants to see climate change and race equity initiatives go away, the community will not support them if core services are allowed to decline. Mayor Spano stated he does not want to do a bigger ask of the community next year by shaving one-half of a percent this year, so he prefers a 5% tax levy or higher. Mr. Harmening stated the council has a tentative date to meet in later November for more discussion on financials, adding they can meet again also if needed before the public hearing. DocuSign Envelope ID: D095ADA2-87EF-42EF-A44B-A6030224EB2C Study session minutes -8- Oct. 12, 2020 Councilmember Mavity left the meeting. 2. Review interview process for filing ward 2 seat Ms. Solano stated 8 eligible people applied for the Ward 2 seat, and noted Monday, Oct. 26, will be the interviews staring at 5:30 p.m. She added, the 30-minute interviews will go until 9:45 p.m. and then discussion and a final decision will be made. Ms. Solano stated staff recommends providing the questions in advance to the candidates to have a thoughtful interview session. The council discussed the questions to be asked, and Ms. Solano noted the whole process including interviews and discussion will all be a public meeting. The council decided to use ranked choice voting and come up with the top 3 candidates for council discussion. Ms. Solano stated the decision will need to be made by October 28 if the council wishes to appoint on Nov. 2. Mr. Harmening noted, however, the appointment may happen later in Nov. if the council needs more time to discuss the top 3 candidates. Ms. Solano added the process is totally up to the council’s decision. The council agreed this is a hard decision, to choose a Ward 2 councilmember to serve for 1 year, and had concerns about supplanting temporarily the electorate, but ultimately agreed they need to make this decision. Mayor Spano stated he would like clarity on the process in advance. Councilmember Kraft added he would prefer no discussion and only ranking in order to get to the top 3 candidates. The council agreed they would not like to do a second round of voting or discussion. Instead, the council will send their top 3 choices to Ms. Solano by Wednesday, October 28. The ward 2 seat will then be selected using a ranked choice vote of the council. 3. Future study session agenda planning and prioritization The Oct. 26, 2020 study session will be the Ward 2 council interviews. Councilmember Rog asked if the plus signs on the calendar indicate these topics will have time on the calendar. Ms. Solano stated yes, noting these items are being worked on by departments and will get scheduled soon. Councilmember Kraft asked if topics are being scheduled while taking into consideration that COVID is the new normal. Ms. Solano stated yes and noted she will get back to council on these topic prioritizations. Councilmember Kraft stated he is interested in having a joint meeting with the school board . DocuSign Envelope ID: D095ADA2-87EF-42EF-A44B-A6030224EB2C Study session minutes -9- Oct. 12, 2020 Mayor Spano stated this meeting occurs twice a year in the fall and spring but pointed out the school board has a lot of work right now. Mr. Harmening stated he would reach out to the superintendent and board chair about a meeting in the spring. The meeting adjourned at 10:00 p.m. Written Reports provided and documented for recording purposes only: 4. Acquisition of 6211 Cedar Lake Road ______________________________________ ______________________________________ Melissa Kennedy, city clerk Jake Spano, mayor DocuSign Envelope ID: D095ADA2-87EF-42EF-A44B-A6030224EB2C