HomeMy WebLinkAbout2023/12/12 - ADMIN - Minutes - City Council - Study SessionOfficial minutes
City council study session
St. Louis Park, Minnesota
Dec. 12, 2023
The meeting convened at 6:30 p.m.
Council members present: Mayor Jake Spano, Tim Brausen, Sue Budd, Yolanda Farris, Lynette
Dumalag, Nadia Mohamed, and Margaret Rog
Council members absent: none.
Staff present: City manager (Ms. Keller), administrative services director (Ms. Brodeen), finance
director (Ms. Cruver), city clerk (Ms. Kennedy), deputy city clerk (Ms. Scott-Lerdal),
communications and technology director (Ms. Smith)
Guests: Rebecca Petersen, Redpath and Associates Auditors
Discussion items.
1. Annual Comprehensive Financial Report (ACFR) for the year ended Dec. 31, 2022.
Ms. Cruver and Ms. Petersen presented the report. Ms. Petersen indicated the result of the
2022 audit was an unmodified opinion. She also noted the City of St. Louis Park received the
GFOA Award for Excellence in financial reporting again for the 39th consecutive year; the award
demonstrates the city’s commitment to preparing financial statements that are comprehensive,
transparent and consistent with accounting standards.
Ms. Petersen said that in the audit, there was one finding for financial statement corrections
made in the course of the audit work. She added this was most likely due to the fact that there
was a significant turnover in personnel within the finance department last year.
Council Member Rog asked for more detail on the adjustment. Ms. Petersen responded there
was no fraud. During every audit there are corrections made as the auditors do their work, this
year there were more than typical, and that is what led to the finding. No items of
noncompliance were reported.
Ms. Petersen also explained communication to those charged with governance and noted no
disagreements occurred with management during the audit.
Mayor Spano asked for clarification on material weaknesses as identified in the audit. Ms.
Petersen replied this refers to the audit adjustments and the overall high dollar amount of
adjustments needed.
Council Member Dumalag asked about an adjustment in franchise fees noted on page 10. Ms.
Petersen noted that is the value of the receivable, and there was an amount due to the city at
the end of 2022 that was not received and that was not accounted for. This was a timing
difference, but there were no cash flow problems and the amount due was merely a reporting
issue.
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Council Member Rog asked if this affected any discussions the council had on the budget or
levy. Ms. Cruver responded the dollars were in the fund but needed to be accounted for in 2022
vs. 2023.
Council Member Budd asked for trends relating to the 2022 audit adjustments. Ms. Petersen
noted that adjustments have been needed each year and the quantity of adjustments in 2022 is
significantly increased.
Ms. Petersen described how the audit tests by sampling and looking at the financial statements
and at high-level controls. Ms. Keller added that there was also a process evaluation this year as
well as an audit.
Council Member Rog asked if there are risks in changing to new financial software for next year.
Ms. Cruver clarified that the change is in budgeting software - which is focused on resource
decision making and financial planning. She added the financial software where accounting and
internal spending controls take place will be the same as last year.
Council Member Budd noted the enterprise fund and asked about the net increase of $7
million, and why that increase was called out in the report. Ms. Cruver stated it was called out
to differentiate between government and enterprise funds.
2. Discuss ordinance requirements for on-sale liquor licenses.
Ms. Kennedy and Ms. Scott-Lerdal presented the staff report. Ms. Scott-Lerdal reviewed the
policy questions, noting staff is seeking direction on two possible code amendments related to
allowing restaurants to be located at taprooms and cocktail rooms, and the minimum ratio of
food to liquor sales that on-sale intoxicating license holders are required to maintain.
Council Member Rog clarified that cocktail rooms and taprooms were previously prohibited
from having restaurants under state law. Ms. Kennedy confirmed that was the case when the
state originally created the license categories and noted state law was changed to remove the
prohibition.
Mayor Spano asked about unintended consequences and definitions and if anything is a
concern for staff. Ms. Kennedy stated that taprooms and cocktail rooms will need to consider
zoning if they wish to have a restaurant in the same space. Both types of businesses
manufacture their products on-site, which means they will have to be mindful of zoning
regulations to ensure they can meet the requirements for both a restaurant and a
manufacturing business.
Council Member Budd asked if taprooms and cocktail rooms would be subject to the food-
liquor sales ratio if they choose to operate a restaurant. Ms. Kennedy stated no, because
taprooms and cocktail rooms operate under a different license category because they can only
sell what they make on-site. The food-liquor ratio only applies to establishments holding a full
on-sale intoxicating liquor license, which means they are able to serve all types of alcohol.
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Council Member Rog noted one unintended consequence could be loss of business for food
trucks that are often hosted at taprooms or cocktail room. Ms. Kennedy noted an
establishment can continue to choose to partner or offer food trucks if they choose to do so.
Removal of the prohibition provides the option for taprooms or cocktail rooms to operate a
restaurant, it would not be a requirement for licensure.
Council Member Rog asked for the definition of restaurant. Ms. Kennedy stated the statutory
definition is intentionally flexible. Generally, businesses need a menu, need to prepare food on
site and have tables for people to sit at. She noted the city has more defined requirements
within the code, however the level of food service is generally not defined.
Council Member Rog asked where THC and cannabis fit in here. Ms. Kennedy replied that
cannabinoids are regulated under a separate licensure program. Establishments with the
appropriate licensure are authorized to sell edibles or infused beverages, however edibles are
not considered “food” in terms of the definition of a restaurant.
Council Member Rog noted there (3) instances of non-compliance in the last x years with the
current rule that 50% of gross receipts need to be attributable to the sale of food. She asked if
staff saw this as a challenge. Ms. Kennedy stated staff believes if this were causing widespread
issues with business owners not being able to comply, staff would be aware. Business owners
track food sale percentages as a part of their accounting practices and tend to be forthcoming if
they are experiencing issues complying with licensing requirements.
Council Member Budd noted she has heard from one establishment that it is a burden and that
a 60-40 ratio would be easier to manage.
Council Member Brausen asked how much time staff spends auditing application results. Ms.
Kennedy replied that businesses are required to provide a certified CPA statement annually
during their license renewal process. Staff review the statements in conjunction with renewal
applications.
Council Member Brausen stated he is in favor of the policy considerations. He noted in other
cities, this model works, and it seems unnecessary to continue prohibiting restaurants at
taprooms or cocktail rooms. He noted he also is in favor of dropping the food-liquor ratio
requirements, adding he does not see the benefit to the city to continue tracking.
Council Member Rog stated she also supports taprooms and cocktail rooms having the option
to serve food. She continued that given the loose definition of a restaurant and the lack of
clarity around the level of food service expected, she is not ready to eliminate the sales ratio for
on-sale intoxicating license holders. She stated she would support moving to a 60-40% ratio of
liquor sales to food sales, especially considering Council Member Budd’s statement. She
concluded it is too much too soon to drop the requirement completely.
Council Member Dumalag stated she is in favor of allowing a restaurant at taprooms and
cocktail rooms. In terms of the sales ratio, she is undecided on the best path forward.
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Council Member Rog asked if staff looks through establishment receipts to confirm they are
within the 50% regulation. Ms. Kennedy stated staff do not review receipts, they review the
certified CPA statements that report the gross receipt totals for each category. The code does
provide staff with the authority to request additional documentation, including sales receipts,
to perform additional auditing if inconsistencies in reporting are found.
Mayor Spano added he is supportive of both policy considerations. He added he did reach out
to the mayors of Edina, Bloomington, and Golden Valley, none of which have the food-liquor
ratio requirement. He stated they have reported the caliber of operations has not diminished.
He is not overly concerned about moving away from the requirement, but with the idea that
the council can reinstate the food to liquor sales ratio if needed later.
Council Member Budd stated she supports allowing restaurants at taprooms and cocktail rooms
and is in favor of moving to a 60-40 ratio for liquor and food sales.
Mayor Spano brought forward he has also heard that some establishments are elevating their
food prices to compensate for liquor sales and asked staff if they are hearing that. Ms. Kennedy
stated some likely adjust their sales strategies to ensure they can comply with requirements.
Council Member Rog asked if the police department has weighed in on the requirement. Ms.
Kennedy responded they have not because it is difficult to attribute a public safety issue to one
cause. However, they do a great job of collaborating with staff and business owners to work
through any public safety issues or patterns that may be occurring at licensed establishments.
Council Member Mohamed stated she supports allowing restaurants in taprooms and cocktail
rooms. She noted on the sales ratio she could support either eliminating it making an
incremental change to 60-40. She stated if there is an issue in the future, the council can review
it again at that time.
Council Member Farris stated she supports allowing restaurants in taprooms and cocktail
rooms and will support the consensus of her colleagues regarding the food-liquor sales ratio.
Council Member Rog stated she would like to adjust the sales ratio incrementally and not
eliminate it to see if any issues arise at licensed establishments.
Council Members Dumalag and Mohamed expressed support for adjusting the sales ratio to 60-
40.
It was the consensus of the city council to support removing the prohibition on restaurants
being located at taprooms and cocktail rooms and to change the minimum required ratio of
liquor and food sales for establishments holding an on-sale intoxicating liquor license from 50-
50 to 60-40.
Ms. Scott-Lerdal reviewed the next steps and stated the amendments will be brought forward
to take effect for the next licensing period beginning March 1, 2024.
Written Reports.
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3. Systems year in review and 2024 preview.
4. Boards and Commissioner program update.
Council Member Budd asked about the interim plan in the Boards and Commissions program
update written report. She asked how a directive comes to the city manager. Ms. Keller stated
directives from the council will be addressed, or a project from staff where they need input, or
something could be carried over into a new structure.
Council Member Budd asked if the council ever meets with boards and commissions to review
work plans. Mayor Spano stated it has happened in various ways over the years.
Council Member Budd asked how she could generate a discussion if she had an interest in
hearing about 2024 plans of boards and commissions. Ms. Keller stated there could be a study
session or an alternative way to get information to the council.
Council Member Rog asked if there is a timeframe for the council hearing from boards and
commissions on their feedback and concerns. Ms. Keller stated she will discuss this with staff
and get back to council on this.
Council Member Budd stated she also likes the Q & A portion in the Three Rivers update.
5. Three Rivers Park District CP Rail regional trail - update.
Communications/meeting check-in (verbal)
Ms. Keller stated Monday, Dec. 18, 2023, is the last council meeting of the year, when the 2024
budget will be approved. She noted also that Mayor Spano will be recognized and there will be
a farewell event after the meeting at City Hall. She stated more information is on social media.
The meeting was adjourned at 8:00 p.m.
______________________________________ ______________________________________
Melissa Kennedy, city clerk Nadia Mohamed, mayor
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