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HomeMy WebLinkAbout2022/05/16 - ADMIN - Minutes - City Council - Study Session Official minutes City council study session St. Louis Park, Minnesota May 16, 2022 The meeting convened at 7:20 p.m. Councilmembers present: Mayor Jake Spano, Tim Brausen, Sue Budd, Larry Kraft, Nadia Mohamed, and Margaret Rog Councilmembers absent: Lynette Dumalag Staff present: City Manager (Ms. Keller), Deputy City Manager (Ms. Walsh), Engineering Director (Ms. Heiser), Community Development Director (Ms. Barton), Building and Energy Director (Mr. Hoffman), Finance Director (Ms. Schmitt), Interim Communications and Technology Director (Ms. Smith) 1. 2023 Budget: long range financial plan, debt, fund balances, ARPA Ms. Schmitt presented the report. The councilmembers discussed the 2023 budget, tax levy modeling, long range financial planning, debt, fund balances and ARPA. Councilmember Brausen asked for a breakdown of data related to the general levy and how much tax comes from commercial versus residential. Ms. Schmitt stated she can get that data from 2022 and get back to the council on it. Councilmember Brausen stated if the levy is raised, projects will be completed over time, and for the future, but then funds would not need to be borrowed fo r projects. Mayor Spano stated keeping debt lower makes sense for the future. Ms. Schmitt stated there are many ways to fund, but these are all policy decisions for the council . She added staff can look at various scenarios and utilize the financial revenue the city has. Councilmember Rog asked how common it is to take a debt-free approach. Ms. Schmitt stated taking on debt is not necessarily a bad thing, and there may be a happy medium in specifying what debt can and cannot be used for. Councilmember Budd asked if there is a healthy level of debt . Ms. Schmitt stated the city is well below the statutory debt limit. Councilmember Brausen added St. Louis Park also has less debt compared to other nearby cities. Councilmember Brausen stated the city has been stretching the tax levy over time, as opposed to raising the levy. He noted a local regional sales tax could assist with funding projects. Councilmember Mohamed stated she is interested in seeing numbers from staff and what a healthy medium would be for working towards less debt. Mayor Spano stated he sees this like borrowing money to buy a car versus paying cash up front. DocuSign Envelope ID: 2AB6CCDA-AF82-4E54-A3F6-C7D63BC8FC91 Study session minutes -2- May 16, 2022 Councilmember Kraft stated it feels like the next few years is not the time to do this, because there are projects the city is already committed to. He noted the Louisiana Avenue project that the council decided not to push off. He stated either projects will need to get pushed out further, or the levy will need to be increased, so it seems like the time to decide this is when there is no debt. He likes the idea theoretically but does not think this is the most important thing to look at in the next few years. Councilmember Rog noted there are so many variables and a lot of information. She stated the levy is her primary concern and the current approach does not seem to be sustainable or desirable in terms of relying on debt for so many of the city’s projects, while debt has nearly doubled over the last 8 years. Councilmember Rog stated she would not want to levy at higher amounts to accumulate for debt service. She asked if there are other ways to get to more reasonable levy increases, like approaches to TIF and if federal funds might be obtained to lower levies. Councilmember Rog asked if federal funds are secured for a project like Louisiana Avenue, how would that work. Ms. Schmitt stated this would be a long-range plan and funding can be used to mitigate and not necessarily raise the levy more. She added there are so many variables that can be looked at. Councilmember Rog stated she also wants to be more discerning about what funds are borrowed going forward. She added with inflationary issues a concern for so many now, she has concerns about a 7% increase in 2023. Councilmember Budd asked about the 7% increase and if there are federal monies projected to be received. Ms. Schmitt stated the 7% takes into consideration the Louisiana Avenue project, but the goal is not to have a 7% increase. Mayor Spano stated he would like to see the various scenarios for now and over the next 5 years. Ms. Schmitt stated a couple of options could be looked at with and without taking on debt for the Louisiana Avenue project, and what the options would look like if federal funding was received. Councilmember Rog stated this feels like it could impact staffing needs as well. Ms. Schmitt stated staff incurs debt and then reimburses back for consultants at approximately 85%. Ms. Heiser noted federal funds cannot be used to pay consultants. Councilmember Rog stated she wants to know how things would change in St. Louis Park if projects were funded differently. Mayor Spano stated the idea is to figure out a way to reduce the amount of debt the city issues and the amount residents pay for that debt, while still doing projects. He suggested a 10 – 20- year planning process can be looked at as to how the city pays for projects. Councilmember Kraft stated to get to that place, there will be a timeframe where the city does less and charges residents more in order to build up enough money to fund projects. He stated he would like to look at how large of a fund would need to be built up to do a project without incurring debt. He added this is an interesting exercise, but he wants to know how much it will cost on an annual basis. DocuSign Envelope ID: 2AB6CCDA-AF82-4E54-A3F6-C7D63BC8FC91 Study session minutes -3- May 16, 2022 Ms. Keller stated staff will work on the variables involved with the Louisiana Avenue and Cedar Lake Road project, provide information on how much debt costs the city every year and a recommendation of how much of a fund should be built up, and how doing so would affect life in St. Louis Park. Ms. Schmitt presented information on the American Recovery Plan Act (ARPA). Councilmember Kraft asked why the city should not use excess general fund balance to assist with levy reduction. Ms. Schmitt stated it could be used but should be spread over multiple years. Councilmember Kraft asked how much money is being spent on TIF and affordable housing, and how much is being invested into this. He stated he wants to understand the full dollars being spent. Ms. Schmitt stated if TIF is not used, then the development may not happen. Ms. Barton stated she will have to find the total figure. She stated in some of the projects, the TIF is going back to the developer. In other projects monies go into the affordable housing trust fund . She added it is a mixture of funding and for affordable housing, multiple funding sources are needed including the housing trust fund, grants, TIF and other funding measures . Councilmember Kraft stated he had wanted to use the ARPA funding for transformative projects from a climate or racial equity standpoint. He stated he would like to see the full picture before deciding. Mayor Spano asked if the city could use half of the ARPA funds to lower the levy. Councilmember Rog asked what other projects the ARPA funds might be used for . Ms. Schmitt stated it can be used for shortfalls or for tax court petitions that might come through . Councilmember Brausen added the fund might also be used for capital projects needed at the end of the year. Councilmember Rog stated she would like to use the $2.8 million for the items Ms. Schmitt mentioned and use the balance for transformative projects, such as Councilmember Kraft noted. Councilmember Brausen stated he is interested in using the ARPA funds to buy down the levy to get the city to its target areas. He added he would like to feather the funds in and bring levy figures down below 6%. Councilmember Rog stated she wants to be careful about investing ARPA funds this way, when it is not reflective of the total amount residents actually pay in taxes, because of valuation changes, and when looking at all the other levies. Councilmember Brausen stated typically this council has made transformative investments and continue to do so. The city regularly spends on the items that reflect our values and strategic priorities, such as affordable housing. He noted the optics have mattered in the past to the council, and if this is done in a reasoned way, there can be transformational change. DocuSign Envelope ID: 2AB6CCDA-AF82-4E54-A3F6-C7D63BC8FC91 Study session minutes -4- May 16, 2022 Councilmember Kraft asked that this be looked at from the citizens ’ perspective, the three levies combined versus separate. Ms. Schmitt stated if the HRA and EDA levy are kept the same as 2022, the numbers remain the same, and the levy will not increase. Councilmember Kraft asked what the maximum is of the $2.8 million that could be used and still be judicious in the other places. He added it seems there are other funds with healthy balances that could be used. Ms. Schmitt stated that could be discussed in the capital plans, but right now it is difficult to find contractors to do the jobs that are planned. Ms. Keller noted if staff looks at the ARPA funding and the general fund, it would be helpful for council to tell staff how much they are comfortable with using and how much should be used for transformational change projects. Councilmember Rog stated she is having a hard time with this as it relates to what the transformative projects would be, or what requests would be in front of council. She stated she is supportive of the $1.8 million feathered in to reduce the levy over time and she is open to discussion and hearing more on how the additional funds could be used. Councilmember Mohamed agreed and stated she is in favor of using the $1.8 million and some of the ARPA funds to find a good balance for the levy. Ms. Keller recapped that council is interested in having staff look at considering allocated funds together and at using $2.5 million for levy relief. Ms. Schmitt presented on the HRA and EDA levies. She asked if staff should continue to plan for the general, HRA, and EDA levies for the 2023 budget. Councilmember Brausen stated he would be in favor of increasing the EDA levy, for climate investment. He added he is in favor of all three levies continuing in 2023. Councilmember Rog asked when the council will learn about the Affordable Housing Trust Fund. Ms. Barton stated this report will be forthcoming by the end of the year in 2022. She noted it has all been allocated for upcoming projects and it is getting close to maxing out on what was pooled. She added the HRA levy is separate for specific programs. She noted the report to the legislature will reflect what was done with the pooled TIF . Councilmember Rog asked if there was no HRA levy, would projects get funded by the g eneral fund. Ms. Barton stated yes. Councilmember Kraft stated he is not in favor of the three separate levies and because he thinks it makes things confusing for citizens. He stated it is a little less progressive to do it this way, so if it is not needed, and it would make it easier to understand without them, then why have separate levies. DocuSign Envelope ID: 2AB6CCDA-AF82-4E54-A3F6-C7D63BC8FC91 Study session minutes -5- May 16, 2022 Councilmember Brausen stated by losing the three separate levies, there would be a loss of dedicating funds to specific programs like affordable housing and climate change. Councilmember Kraft disagreed and stated dedicated funds can be done within the general levy as well and would be more transparent. Ms. Keller asked what the administrative impact would be if the three levies were folded into just one general levy. Ms. Schmitt stated the HRA housing funds are special revenue funds and need to have a special revenue source, so it would no longer fit into the classification and financial statements would need to be reconfigured, noting it is a lot of work to completely retool funds. Councilmember Mohamed stated she is in favor of keeping the three levy funds as they are now. Councilmember Kraft asked if funds can be transferred from one fund to another and if there are any limits. Ms. Schmitt stated if the EDA levy becomes more substantial it may need to be looked at again within 10 years, because it is used for salaries. Councilmember Kraft stated it feels cleaner if the EDA funding comes from the general fund . Mayor Spano stated the three levies are transparent. He asked if the council would be fine communicating the total number, made up of the three levies, to help mitigate concerns. Councilmember Kraft agreed that would be a good step. He still, however, feels the EDA levy should be folded into the general levy. Councilmember Rog agreed with Councilmember Kraft. She stated the climate action fund could be a line item within the general fund, and the EDA could then be folded into the general fund. Councilmember Budd stated she would agree about moving the EDA into the general fund for transparency. Mayor Spano stated this conversation will need to be revisited to come to agreement. Councilmember Kraft stated it would be helpful to look at how much money comes into pooled TIF which might allow for flexibility in the HRA, because of investments that are being made elsewhere. Mayor Spano stated on April 22 there was a report from staff about PLACE. He asked about the progress of the project as he did not see a report in early May. Ms. Barton stated the report will be coming out this coming week. The meeting adjourned at 9:15 p.m. ______________________________________ ______________________________________ Melissa Kennedy, city clerk Jake Spano, mayor DocuSign Envelope ID: 2AB6CCDA-AF82-4E54-A3F6-C7D63BC8FC91