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HomeMy WebLinkAbout2025/06/16 - ADMIN - Minutes - City Council - Study SessionOfficial minutes City council special study session St. Louis Park, Minnesota June 16, 2025 The mayor called the meeting to order at 7:08 p.m. Council members present: Paul Baudhuin, Tim Brausen, Sue Budd, Yolanda Farris, Lynette Dumalag, Margaret Rog, Mayor Nadia Mohamed Council members absent: none. Staff present: City manager (Ms. Keller), deputy city manager (Ms. Walsh), city clerk (Ms. Kennedy), community development director (Ms. Barton), administrative services director (Ms. Brodeen), finance director (Ms. Cruver), financial analyst (Ms. Stephens), public works director (Mr. Hall), fire chief Hanlin, engineering director (Ms. Heiser), building and energy director (Mr. Hoffman), police chief Kruelle, chief building official (Mr. Skallet), communications and technology director (Ms. Smith), HR director (Ms. Vorpahl), parks and recreation director (Mr. West), sustainability manager (Ms. Ziring) Discussion items 1. Base budget and background Ms. Cruver presented the staff report for the 2026 budget. She noted two policy considerations: • Does the city council support increasing the employee benefits fund levy from $200,000 to $400,000 to cover ongoing costs and reduce the need for ongoing fund balance transfers? • Does the city council support moving to an allocation model to fund internal services, rather than transfers or direct levies? Ms. Cruver stated that the results of the 2024 financial audit will be reviewed at the city council meeting on July 14, 2025. At that time, the general fund will also be reviewed. In 2024, expenses were over budget by 1.3% and revenue was over budget by 3.8%. Ms. Cruver noted that credit card payment processing fees have increased as more people are using credit cards to make payments to the city. A percentage of each transaction goes to third- party credit card processing instead of toward the payment for a city service or utility, which has a large cumulative effect on the cost of providing the service. Since 2018, the cost of these fees has more than doubled for the city. Council Member Rog asked whether the city could change the process at some point during 2026, hypothetically saving approximately $150,000. Ms. Cruver stated that this change would need to be planned for and rolled out over time. Finance staff are researching software or hardware changes that may be needed to implement this change and will bring a recommendation to the Aug. 11, 2025, city council meeting. After receiving direction from the council, finance staff can begin work on an implementation plan. Docusign Envelope ID: A3091E19-C2BD-45B6-AF08-EA33F682B17F Study session minutes -2- June 16, 2025 In 2024, Ms. Cruver reported that the city received a few unexpected grants, including a grant for tree canopy management. Another success in 2024 was that the finance department submitted a Popular Annual Financial Report (PAFR) to the Government Finance Officers Association. Ms. Cruver stated the PAFR received an award level of Outstanding and finance staff will continue to submit this report annually. Ms. Cruver also noted that, over the past year, staff has made changes to spending and revenues to slow down use of the development fund and preserve remaining funds. She noted staff corrected some personnel budget items so the budget can be better understood and reduce unneeded transfers. They have removed some variable costs to the capital fund to address items such as replacing streetlights, heavy snow removal, or sidewalk work that may be volatile from year to year. In this way, money can be saved for use when needed. Council Member Rog asked if sidewalk expenditures are for repairing cracked and problematic sidewalks in a discretionary way. Ms. Cruver stated that the funds are for non-capital sidewalk and roadway maintenance as needed throughout the year. Funds were moved from the Public Works general fund to a separate fund specific to this need, which reduces pressure on the general fund levy. Council Member Budd asked for clarification on the movement of funds from the general fund to an internal service fund. Ms. Cruver stated yes, it is now in the Municipal Building and Infrastructure Fund and noted this includes repairs that are variable; emerging infrastructure needs such as electrical boxes and streetlights. Ms. Keller reminded the group that these improvements have been positive for both the public works department and for transparency of fund use. She also suggested the group consider these funds as being used for repairs that emerge throughout the year when staff is out surveying the area and cannot be planned for, such as additional sidewalk repairs. Ms. Cruver reviewed the timeline for the 2026 budget process, including bringing the operating budget change items and associated levy impacts to the city council on Aug.11, 2025. On Sept. 2, 2025, finance staff will bring the capital plan for fiscal years 2026 through 2030 and final maximum levy decision-making process to the council. In October 2025, staff and council will discuss the Tax Increment Financing (TIF) management plan. In mid-November 2025, the Truth in Taxation notices will be sent to all property owners in St. Louis Park. On Nov. 10, 2025, finance staff will bring any emerging issues or changes that need to be made to the Fiscal Year 2026 budget to the council for final review, as well as the final five years of the Capital Improvement Plan (CIP). Ms. Cruver stated the budget will be finalized and adopted on Dec. 15, 2025. Ms. Cruver then noted several items that may impact the 2026 budget, including an uncertain economic forecast and particular uncertainty about tariffs and trade policy. Related to this, interest rates are not coming down and are affected by slowed consumer spending and inflation. This has made it difficult to forecast financial policy for the future of the city. Ms. Cruver noted the changing nature of trade policies and stated this may affect costs of projects that were already planned as capital improvements projects. Docusign Envelope ID: A3091E19-C2BD-45B6-AF08-EA33F682B17F Study session minutes -3- June 16, 2025 Ms. Cruver discussed other items affecting the fiscal year 2026 budget. In 2024, the city received a grant of a little over $100,000 from the Department of Energy and submitted it for reimbursement. In recent communication, the Department of Energy has noted that it is in a holding pattern and it is possible that the reimbursement may not be funded. The monies have already been spent for park improvement and will need to be covered by the city’s funds if the reimbursement is not approved. Council Member Rog asked for clarification to whether the grant was $68,000 or $100,000. Ms. Cruver explained that the grant was a little over $100,000 and that the $68,000 was actually for tax credits. She clarified that the programs are similar in that they both have a climate focus, but that the difference is that the city was counting on the reimbursement from the grant whereas the tax credits would have been an added bonus. The city would not have expended the $100,000 if the grant had not been approved. Ms. Cruver also stated that federal funding for AmeriCorps programs was drastically reduced by the federal government in the spring of 2025; the program is unlikely to continue. AmeriCorps volunteers are paid a modest monthly stipend to offset the cost of living. Multiple departments within the city will be affected, such as the volunteers who were doing the tree inventory. Without AmeriCorps volunteers, staff will most likely have to continue with the tree inventory project in addition to their current work at a slower pace, or the city will need to hire more staff to continue the tree inventory. Council Member Budd asked how many AmeriCorps volunteers the city has hosted in the past. Ms. Cruver stated that this year, at the time that funding was cut, one volunteer was working with the solid waste team and three volunteers were working with natural resources under parks and recreation. Ms. Cruver transitioned the discussion to the 2026 forecast. The city’s revenue sources are numerous. At 70%, the largest revenue source is property taxes. The second and third largest sources are licenses and permits, then charges for services. From 2025 to 2026, license and permit revenues are forecast to be virtually flat, increasing by only 3% from 2025. There is a natural increase in rental units, which leads to an increase in revenues. That increase is offset by a policy decision to discontinue the relative homestead rental license program, which decreases revenues by about $15,000. This revenue decrease is part of the 2026 projection. Permits are calculated by the overall value of a project; permit revenues are tied to the economic forecast as homeowners contemplate small home improvement projects or developers plan large-scale projects. If interest rates were to drop, or economic uncertainty were replaced with confidence, license and permit revenues would likely increase. Finance staff are suggesting a flat budget for fiscal year 2026. Council Member Rog asked if there is uncertainty regarding state revenues. Ms. Cruver stated that some of the state revenues declined from 2025 levels; aid for public safety will be steady. St. Louis Park has never counted on Local Government Aid and the award for next year will be $0 due to cuts from the state legislature. The city received about $32,000 last year and approximately $72,000 this year, but the amount will be $0 in 2026. Docusign Envelope ID: A3091E19-C2BD-45B6-AF08-EA33F682B17F Study session minutes -4- June 16, 2025 Ms. Cruver noted an increase in charges for service in program revenue for leases and rentals. They are expected to increase by about 2.5%, in line with inflation. Ms. Cruver transitioned the conversation from revenues to expenditures. The largest expenditure from the general fund is personnel salaries and benefits. She pointed out that these grow each year. Rather than budget the same amount of money from year to year, staff budgets for the same number of employees each year. Council Member Brausen noted that several years ago, the council made a conscious decision to raise the target range for staff salaries to 85% for comparable positions. He noted this had been a stair-stepped process and asked if it is now complete. Ms. Cruver stated she can report back to the council with information from the human resources department. Staff works with a compensation consultant on salary benchmarking. While the city does account for salary adjustments most years, they are usually not as large as is recommended to keep up with the 85% target or inflation. Ms. Keller explained that this does not mean that all staff are paid at the 85% target because not everyone is paid at the top of their range. It means the salary ranges for positions are supposed to reflect the city’s target of offering competitive compensation in the 85th percentile for comparable positions. Council Member Rog asked what general increase in staff salaries is proposed for 2026. Ms. Cruver stated 3% is proposed for 2026. Health insurance costs are projected at the maximum increase of 11% and these costs are included in the 2026 budget. Ms. Cruver discussed the new family medical leave program that was approved by the state in 2023, which will begin in January 2026 and is included in the 2026 budget as a placeholder. As allowed in the state’s policy, the city will be splitting the cost of this program in the 2026 budget with employees; approximately $150,000 paid by the city and $150,000 paid by employees through payroll deductions. Staff is also looking into private bids from benefits vendors for the family medical leave program. Council Member Budd asked if to-date, the city has been providing family medical leave to staff. Ms. Cruver stated yes and noted that there would need to be some changes to current practice to comply with the new law. Staff will continue to research options. Ms. Vorpahl clarified that the city would need to supplement the family medical leave program provided by the state. The state uses a sliding scale meant to reimburse the lowest-paid workers. A big piece of the state legislation that the city is working on is once an employee severs employment with the city, they are still eligible for this leave for 26 weeks. This is not currently included in the city’s benefit plan, and staff is working closely with other cities and the League of Minnesota Cities on adherence to these guidelines. Staff continues to look for a vendor that could provide that supplement at a lower cost than the state, and currently, there are many competitive bids. Council Member Budd asked if the city charges employees for unemployment insurance. Ms. Vorpahl stated that the city does not. Council Member Budd clarified that the city covers the Docusign Envelope ID: A3091E19-C2BD-45B6-AF08-EA33F682B17F Study session minutes -5- June 16, 2025 entire cost of unemployment and Ms. Vorpahl confirmed this is correct. Ms. Vorpahl described how Family Medical leave, short term disability, and other types of leave will need to expand under future state legislation. Council Member Rog asked if the topic of benefits and leave would be on a future legislative session agenda. Ms. Keller confirmed that clarification was requested, and this is likely to be a future topic of discussion. Ms. Cruver stated the recommendation for today’s conversation with relation to the Employees Benefit Fund is to right-size the levy to cover past expenses and be proactive about budgeting. The fund currently pays for two categories of expenses. One is for current employees for cost of insurance and pension. The other category is for other employee expenses or expenses related to non-current employees, typically staff out on disability or on disability retirements. This second category cannot be handled with one-to-one budgeting, as is used on current employees, which is why approximately $200,000 in levy went into this fund. Other costs covered by the levy include tuition reimbursement and consulting fees. In the past two years, expenses have averaged around $400,000 but the city has only been levying $200,000. Instead of budgeting correctly, the city has had to move large amounts of fund balance into the Employee Benefit Fund and spend it down every two years. Finance staff recommends these costs be right-sized. Council Member Rog asked if the city budgets $400,000 per year for tuition reimbursements. Ms. Cruver stated the amount is actually $40,000 per year. Ms. Keller noted that tuition reimbursement is a tool for recruitment, retention and education required as part of employees’ roles; the funds are available to city employees only. Council Member Budd asked if the health and dental insurance for separated employees refers to COBRA funds. Ms. Cruver stated there are some costs to the city for COBRA, but added that the city is obligated to pay for city employees who are retired on disability. Council Member Rog asked if these considerations require approval by the city council. Ms. Cruver stated these considerations are all part of the overall levy, which does require the council’s vote to approve, as does as the 2026 budget. Ms. Cruver stated a 7% levy increase in the general fund for 2026 is projected at this time with no new spending proposals. Expenses are growing as projected revenues are flat, putting pressure on non-tax levies. Council Member Budd asked for more detail on the non-tax levies. Ms. Cruver specified that they include permits, licenses and charges for service. Council Member Baudhuin asked if the flat revenues could be attributed to economic chaos and uncertainty at the federal level. Ms. Cruver stated that this could be a contributing factor, adding that market uncertainty, flat revenues from permits, and no change in interest rates are also factors. Docusign Envelope ID: A3091E19-C2BD-45B6-AF08-EA33F682B17F Study session minutes -6- June 16, 2025 Council Member Dumalag asked if the projected 7% levy increase takes valuation changes of property into account, noting a residential gain of 2% and an office space decrease of 8%. Ms. Cruver stated that it does not. The changes to the market values of different sectors of the city’s properties would not impact the overall levy increase but would impact how the increase is distributed among property taxpayers. Council Member Dumalag pointed out that how residents experience levy increases can be very different; some may see a higher percentage due to valuation. Ms. Keller clarified that the 7% levy increase being discussed refers to operational funds and is one part of the total levy. Ms. Cruver added that given the property assessment of 2026, city staff has determined that the residential impact will likely be very close to what the levy is. The city is seeing a decline in industrial and commercial value, though by comparison, but not nearly as much as other cities. As a result, the increased pressure on the residential levy is smaller. Ms. Cruver pointed out that if a residential property has substantial updates or improvements, this can increase a property’s valuation and taxes. Council Member Rog asked if any TIF districts are decertifying this year. Ms. Cruver stated there are several decertifying at the end of 2026, but noted this will not impact the 2026 assessment. Ms. Cruver summarized her presentation by noting that the general fund is higher than expected, capital replacement funds and park improvement funds will be discussed on Sept. 2, 2025, and that the city has already discussed the need and recommendation of increasing the Employee Benefit Fund by $200,000. The debt service levy in December 2025 is projected to go up by $600,000 based on 2025 projects; debt service lags a year. The city is finalizing bonding numbers and staff are focused on efforts to lower costs. Ms. Cruver noted that with the 2024 Financial Audit completed, the city can look at actual balances and places where available balances can be used instead of bonding, such as utility funds. For the Housing and Redevelopment Authority levy, Ms. Cruver noted that no increase is anticipated. The Economic Development Authority (EDA) levy is planned to increase by $187,000, forecasted to cover maintenance of city properties owned by the EDA as well as zoning consultation fees. Council Member Brausen asked what is driving the park improvement fund to increase by $200,000. Ms. Cruver clarified that because the levy was intentionally lowered in 2025 to use fund balance, there is room to provide some levy relief. Ms. Cruver stated the internal services expenses of each department related to vehicles, equipment and Information Technology (T) items are also being reviewed and itemized, as they have been funded in different ways over the years. After consulting with the city’s auditors, the best way to expense charges by departments is a chargeback structure. This spending will be reflected in the general fund spending for each department and then moved to internal service funds. Docusign Envelope ID: A3091E19-C2BD-45B6-AF08-EA33F682B17F Study session minutes -7- June 16, 2025 Council Member Rog asked if this limits staff’s flexibility. Ms. Cruver stated she did not think so, and noted that staff’s expenditure policies will not change. Itemization will provide more clarity on where expenditures can be lined up. Council Member Budd asked if a department utilizes a great deal of technology, would their budget be more likely to grow than a department that is more operational. Ms. Cruver stated that is correct, and added that their general fund budget will grow, but the levy that was previously going to the IT fund to support that will now go to the general fund levy. Aside from new proposals, which will be discussed on Aug. 11, 2025, the new fund organization will be levy-neutral. Council Member Baudhuin stated he appreciated all the work done on the finance report discussion by Ms. Cruver and city staff. Council Member Dumalag agreed that the decision- making for the city council will be clearer because of staff’s work. It was the consensus of the city council to approve both policy considerations. 2. Proposed study session topic – planning for a community center Council Members Budd, Farris and Rog presented the proposed study session topic. Council Member Rog stated that she and Council Members Budd and Farris have continued to talk about their study session request form and their proposal is different than how staff interpreted it. They believe that a standard community center may not be the solution for St. Louis Park and proposed a needs analysis that would look at the following items: should a community center be focused on youth or be multigenerational, how equity and access should be included at the heart of a plan, should a community center serve western or high rental populations of the city, what is currently offered, and where are the gaps. She noted St. Louis Park has The Recreation Outdoor Center (ROC), and the Aquatic Center, but no community gym. She asked if a community center could be a central gathering place for the community and whether the city council should ask residents for their input. Council Member Farris stated the council will need to think creatively and not think about new construction. She stated this concept could be a replacement for the Roller Garden, a field house reusing Kohl’s at Knollwood, or leasing gyms from schools for open basketball, sewing clubs, classes, community kitchens, or partnering with the YMCA or other organizations. She also asked if utilizing church spaces could be an option, and if outdoor or indoor space could bring the community together. She added she would not want to focus only on youth, but include everyone in the community. Council Member Budd added that Bickham Court has a clubhouse that is in use and is a miniature-sized idea. She noted the equity model is for those who need less structured opportunities for recreation. She also noted current and past programs such as Ainsworth Basketball with Cops, The Nest, Hopkins and Minnetonka with The Depot coffee shop, and parks and recreation outreach efforts. Docusign Envelope ID: A3091E19-C2BD-45B6-AF08-EA33F682B17F Study session minutes -8- June 16, 2025 The council members stated these ideas could be discussed at a future study session, and instead of focusing on how to finance a community center, consider dedicating funds for a needs analysis, looking at equity, and what the city already has along with what it needs. Council Member Brausen stated that this proposal is different than what he understood from what was submitted, and added he is not interested in doing an analysis of one large community center facility. He would also like more information from the Vision 4.0 process first, and to hear from constituents and see if this topic comes up in the visioning process. He added he is in favor of discussing an analysis of all city facilities. Mayor Mohamed added that when she saw this topic, she was not sure how to differentiate between The Roc, Westwood Nature Center or other community facilities. She asked whether the “western side of the city” refers to the area opposite The ROC. She would not be interested in building a community center as it requires significant capital, but added she would be curious how to fill gaps the city is currently experiencing, especially in the area that is west of Louisiana Avenue. Council Member Dumalag added community facilities should be looked at again, but she had concerns about doing a study. She observed this is as a real estate analysis, and suggested gaps can be looked at through the visioning process. She could support this if the city rents space for community events. She would like to discuss a needs analysis and then a facilities analysis. Council Member Rog added there are barriers to access and participation in many communities through transportation, not to disparage programs of parks and recreation. Council Member Dumalag added that perhaps vacant properties within the community could also be looked at for community facility use. Mayor Mohamed asked for staff’s perspective and if they have had time to review the revised proposal. Ms. Keller noted that she had not seen this revised proposal and suggested evaluating the trends that arise from the Vision 4.0 conversations. She intends to bring council a 2026 budget proposal to do strategic planning once the Vision 4.0 process is concluded. Funds could be included to also look at a needs assessment for projects like this that come out of the visioning process. Council Member Farris noted that some children in her neighborhood had nowhere to play last winter and ended up in some storefronts across from the post office that were empty. She said the children did not harm anything but just needed a warm place to play. She stated because there were no adults present, this could have turned into a bad situation. This example shows how much community facilities are needed. Council Member Farris stated The Rec Center has hockey, but there are no basketball courts available in the winter - only during the summer. She would like this discussion to be part of a study session, and added that this is personal to her. Docusign Envelope ID: A3091E19-C2BD-45B6-AF08-EA33F682B17F Study session minutes -9- June 16, 2025 Council Member Dumalag stated it would be helpful if this study session topic were resubmitted with this conversation included, so it does not get lost, and so all can agree to it. Ms. Keller offered that the supplemental material provided to council could be attached to the study session topic in lieu of resubmitting. Mayor Mohamed agreed this study session topic could be addressed after the visioning process is finalized. Ms. Cruver stated that different cities provide these services in different ways, and St. Louis Park collaborates with schools to use their facilities. She added staff could explore this for more information on the contractual relationship between the city and schools, while Vision 4.0 progresses. Ms. Walsh added that, in the meantime, she can get all of the information related to indoor and outdoor school spaces that the city uses. Council Member Farris stated that this would be helpful. Ms. Walsh added also that the Vision 4.0 process will be important to see what comes up related to community facilities. Council Member Rog stated this discussion can wait until the visioning process is completed, but she does not want to wait too long to discuss this. Checking for consensus, Ms. Keller summarized that this topic will be folded into strategic planning, as it relates to relevant topics, instead of a separate study session. Mayor Mohamed asked what would happen if the community facilities topic does not come up in the Vision 4.0 process. Ms. Keller stated the council would need to have a conversation to decide whether they still wanted to pursue it. Council Member Baudhuin added he would want to discuss this further, whether or not it comes up in the Vision 4.0 process. Written Report 3. Environmental Stewardship System Wrap-Up The meeting adjourned at 8:40 p.m. ______________________________________ ______________________________________ Melissa Kennedy, city clerk Nadia Mohamed, mayor Docusign Envelope ID: A3091E19-C2BD-45B6-AF08-EA33F682B17F