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HomeMy WebLinkAbout2025/07/14 - ADMIN - Minutes - City Council - Study Session Official minutes City council study session St. Louis Park, Minnesota July 14, 2025 The meeting convened at 6:03 p.m. Council members present: Mayor Nadia Mohamed, Paul Baudhuin, Sue Budd, Yolanda Farris, Margaret Rog Council members absent: Tim Brausen, Lynette Dumalag Staff present: City manager (Ms. Keller), community development director, interim building and energy director (Ms. Barton), administrative services director (Ms. Brodeen), finance director (Ms. Cruver), legislative and grants analyst (Ms. Ferris), public works director (Mr. Hall), fire chief (Mr. Hanlin), engineering director (Ms. Heiser), police chief (Mr. Kruelle), deputy finance director (Mr. Olson), communications and technology director (Ms. Smith), HR director (Ms. Vorpahl), deputy city manager (Ms. Walsh), parks and recreation director (Mr. West), racial equity and inclusion director (Ms. Yang) Guests: Rebecca Petersen, managing director at Redpath; Natalia Madryga, Amy Koch, Alysen Nesse of Momentum Advocacy Discussion items 1. Review of 2024 Annual Comprehensive Financial Report Ms. Cruver introduced Mr. Olson for the presentation of the staff report, after which Ms. Petersen presented the annual financial report to the council. Mr. Olson stated that the report summarizes the results of the Annual Comprehensive Financial Report for the year ending Dec. 31, 2024, and that the city council will review the audit and discuss its results. It was noted that the council will be asked to formally adopt the audit by resolution on July 21, 2025. Mr. Olson stated that the city is required to have an annual independent and external audit and the audit firm issues an opinion on the city’s financial statements. The city submitted the report to the Government Finance Officers Association to be considered for the Certificate of Achievement for financial reporting. If awarded as anticipated, the city will have attained the financial report accolade for 41 consecutive years. Mr. Olson presented the council with a high-level staff report noting governmental fund structure and information. All reporting funds finished the year with a positive balance at year’s end. The city’s general fund has a policy stating that the fund must carry a minimum unassigned balance of 40% to 50% of the subsequent year’s budgeted expenditure, with the target of 45%. For 2025, the budgeted expenditure is $24,737,085. Docusign Envelope ID: 16E6A00F-F763-468E-AFFE-478D8AF7D24C Study session minutes - 2 - July 14, 2025 Ms. Cruver noted that in the council’s agenda packet, a table shows how the fund balance is broken into groups. Some of the fund balance cannot be spent, and some funds are restricted based on rules set by the state legislature. The city is looking at the assigned funds that can be moved, which total $24.7 million. Council Member Rog noted $150,000 earmarked for weather emergencies and asked if that is primarily for snow emergencies. Ms. Cruver stated that the fund could also be used flexibly for other types of weather emergencies. Mr. Olson described the OpenGov website as a transparency tool for revenues and expenses, providing a navigation summary. The primary expense for the general fund is related to personnel. The primary source of revenue to the general fund is classified as local revenues and sales, which includes property taxes. He noted that the city had fully expended all COVID-19 relief funds, securing the funds from the risk of claw-back by the federal government. Council Member Rog asked if the city is no longer transferring salaries out of the housing rehabilitation fund. Ms. Cruver stated that those funds now go directly into the general fund, which makes reporting more straightforward. Council Member Rog asked about $200,000 earmarked for public safety. Ms. Cruver stated that when the city receives specific donations for the police department, those donations are deposited in the general fund and then earmarked for public safety. Finance staff assure that these funds are assigned so they are used for the purpose requested. Mayor Mohamed asked if the same practice is used for parks and recreation donations. Ms. Cruver confirmed and added the process is slightly different when donations are for park improvements, such as park benches, as those dollars are deposited in the Park Improvement Fund. Council Member Rog asked if the public safety funds could be used for budget relief. Ms. Cruver stated that it is possible if there are activities that align with the purpose of the specific donation. Council Member Rog asked if any public safety funds have ever been used for budget relief. Ms. Cruver stated this is a new practice for this year as it aligns with the closure of the crime prevention fund. Going forward, monies that are donated to the city for public safety will be assigned to public safety purposes. Council Member Rog asked what the city’s current costs are related to Southwest Light Rail Transit (SWLRT). Ms. Cruver stated the housing project refers to the Beltline development commercial and housing project, which is tracked separately and relates to housing and utilities work at that location. Council Member Rog observed that there appeared to be increases in cash and investments throughout the report. Though this would be good for a business, it may not also be good for a city. She asked if it is desirable to have the goal of excess funds throughout the city budget. Docusign Envelope ID: 16E6A00F-F763-468E-AFFE-478D8AF7D24C Study session minutes - 3 - July 14, 2025 Ms. Cruver noted that it is possible to have too much or too little in each city fund. She stated that the financial department looks at each fund and its cash balance to make sure variances in expenditures can be managed and future needs are being planned for, along with preserving a positive future bond rating. Ms. Cruver stated the fund balance was increased by $5 million across the board. She pointed out that that this is a small percentage related to the overall budget and shows that growth is now spread across multiple funds. She added that in the general fund, 45% is targeted to ensure the city can weather any sharp increase in expenditures or volatility in revenue. Ms. Cruver stated that the city has a relatively stable revenue source in the property tax levy. Therefore, what needs to be reviewed is the city’s cash flow. Though the city council votes on the next year’s levy every December, those funds do not actually come to the city until June of the following year. There needs to be enough cash on hand to cover expenses until May or June each year, and risk needs to be managed appropriately. Council Member Rog stated that a fund balance increase of $5 million is a significant amount of money to her. Ms. Cruver agreed that $5 million is not an inconsequential amount and reiterated that for an enterprise that is bringing in and spending over $100 million per year, a change of $5 million in fund balance is in fact a small percentage, adding this is not uncommon. Council Member Budd asked what revenues are at risk with uncertainties at the federal level. Ms. Cruver stated that city staff had studied this potential and reiterated that the largest concern was the COVID-19 fund, which has been spent down or otherwise obligated. She added the present risk is the effect of trade policies on expenses. Ms. Keller added that the city is also aware of grants applied for, already awarded or obligated and is watching this closely to be sure funds are received. Council Member Rog asked about the city’s ability to levy 105% for debt service and asked if this is the city’s current practice. Mr. Olson stated this is correct and added that at certain times, this amount can also be decreased. Ms. Petersen of Redpath and Associates presented the financial details of the audit. It was noted that the audit is public information and has been added to the city website on the finance department’s financial reports page. Ms. Petersen stated the 2024 audit shows the financials are fairly presented, and added the auditors presented a clean and unmodified opinion, which is the highest level of assurance provided. Ms. Petersen noted that this year, the auditors made two findings of internal control. She noted a finding for audit adjustments, which is a change in numbers that was a classification issue. She stated this is the same finding as in 2023, but the pervasiveness was much lower this year. Ms. Petersen added that the second finding this year was management override of internal controls. She noted some instances where various levels of management were not adhering to the internal controls that the city’s financial policies had established. She stated the auditors felt it was important to point this out, noting that an expectation of adherence to policies at Docusign Envelope ID: 16E6A00F-F763-468E-AFFE-478D8AF7D24C Study session minutes - 4 - July 14, 2025 every level can help minimize risk. She noted there was an instance where a staff member was allowed to order tennis shoes and ship them directly to their home and then expense them under the city’s protective footwear policy. The policy is intended for the purchase of steel-toe boots as required in the line of work. Ms. Petersen noted the other instance was a transaction where an individual had an outside relationship with the city. There was an expense that appeared to benefit that outside relationship and was also expensed to a budget category for which that person had responsibility in the city. She noted that anytime there are potential conflicts, auditors prefer to see documentation that shows someone else is aware of the expenditure and has approved of the transactions and been involved in them. When there is no documentation, the auditors do not know if the transaction has been approved or not. She added that documentation protects the city and the staff as a whole. Ms. Petersen also explained that the report on Minnesota legal compliance is reviewed from an accounting perspective. She noted the auditors looked at sample transactions and stated that this year, there were no findings in this area. Ms. Petersen noted that the final report is related to governance and is recorded in a formal letter to the council. She shared key points in the letter, including standardizing how liabilities are accounted for and also accounting for changes or errors in financial statements. Ms. Petersen stated that financial auditors acknowledge estimated costs for projects in process, as well as estimated costs of environmental remediation and liabilities that must be acquired. Ms. Petersen stated there were no significant disagreements with management. She pointed out that the city has authorized users of charge accounts. The auditors were not able to find a policy that states criteria for the selection of which stores the city has charge accounts with, and stated this is an important piece to internal controls. She noted that staff is already addressing this issue. Ms. Petersen added that the auditors found that there was a city-owned home that a city employee was leasing. Anytime there is a transaction with the city, there are compliance rules to be addressed. She stated the lease has been terminated and noted the importance of consistently following legal requirements. Ms. Peterson stated that city staff were given a reminder that finance needs access to all agreements, and that the auditors found that this is not always the case. Council Member Rog asked if there is now more paperwork, stricter rules and more documentation required for staff making purchases. Ms. Cruver stated there is no new regulation. However, city staff have completed new training on purchasing policies and have stopped using store credit card accounts, which are no longer active. Ms. Cruver stated that there has been a great deal of training around public purpose and policies, as the auditor's findings have come to staff. Ms. Keller confirmed this statement. Docusign Envelope ID: 16E6A00F-F763-468E-AFFE-478D8AF7D24C Study session minutes - 5 - July 14, 2025 Council Member Rog asked whether any of these issues noted by the auditor were occurring before 2022 or if these issues were an anomaly. Ms. Keller stated some of these issues may have occurred but were not reported or identified by the auditors in the past, as there has been a change in practice over time. Council Member Rog referenced the issue of footwear and asked how shoes are defined. Mr. Olson stated that the city has an official HR policy related to the use of shoes as equipment. Ms. Vorpahl stated the city's footwear policy follows the OSHA policy for steel-toe shoes, as well as language in union contracts. Ms. Keller added that this was an issue of education as to the appropriate type of shoes that can be expensed to the city for city work. Ms. Cruver stated that a specific policy was not followed. Ms. Petersen noted that the auditors examine samples in their audit process, so this issue may have been missed in the past. Council Member Rog stated she is not concerned about how this happened, but about staff having greater flexibility around expenditures. Council Member Baudhuin noted the auditors had very few findings, and they are minor in nature. He stated he wants to applaud staff in light of the volume of laws, policies and best practices in place. The audit outcome speaks highly of city staff. Mayor Mohamed stated that there have been changes over the last year with the tightening of city policies; refining and tightening interpretation of laws related to public purpose and ethical expenses. She noted this presentation shows what financial transparency is, and she congratulated staff on the favorable audit. 2. 2025 Legislative session wrap-up Natalia Madryga, Amy Koch and Alysen Nesse of Momentum Advocacy presented the report. It was indicated that they will continue the work of Senator Melissa Hortman on her behalf, adding that she will be sorely missed. Ms. Nesse stated that the last month has been difficult for all of Minnesota, especially those who knew and worked alongside Senator Hortman over many years. She shared the good news that Senator Hoffman has moved into a rehabilitation facility where he is recovering and walking; he will be returning to the legislature next year. Ms. Madryga commented on developments in the Minnesota House and Senate since the election in November 2024, noting it was a close election with a tie in the legislature. Bi- partisan activities and power sharing are becoming prominent, along with three special elections held within five months. She stated it was difficult to get things done - and done on time. Ms. Nesse noted that during the 2025 session, the state budget was $66 billion, decreased from $72 billion. The bonding bill did pass; however, it did not include any local projects. She stated that tonight, the impacts of this on St. Louis Park will be discussed. Docusign Envelope ID: 16E6A00F-F763-468E-AFFE-478D8AF7D24C Study session minutes - 6 - July 14, 2025 Ms. Nesse stated that both of the city’s bonding requests (the Oxford/Louisiana and the Wayzata/Zarthan Avenue projects) were resubmitted. Bonding forecasts released in November 2025 will be reviewed to determine if any funding will be available. Ms. Nesse added that while there was a deficit, savings were found and are currently uncommitted. Council Member Rog asked about legislative updates regarding remote participation in meetings. Ms. Keller stated that staff are working with the city attorney and updating the city’s policy related to remote meetings to incorporate and reflect recent changes to the extent possible. Council Member Budd asked if the remote policy will go into effect in 2026. Ms. Nesse stated that it goes into effect on Aug. 1, 2025, but each local jurisdiction will decide how they will offer remote participation. Ms. Keller clarified that remote participation is not mandatory, but it is now allowed, within specific parameters. Ms. Nesse stated that Minnesota still processes Medicaid applications by paper. As this is an outdated system, this will be problematic. She added that there will be lots of discussion around technology for Health and Human Services. Ms. Nesse stated that the Supplemental Nutrition Assistance Program (SNAP) will be funded more through state funds versus federal funds. This change will most likely raise state taxes, as well as increase food insecurity issues for those on the margins. Ms. Nesse noted there may be drastic cuts to the U.S. Department of Housing and Urban Development (HUD) as well. These cuts would require 60 votes to pass the Senate, not just a simple majority. She stated that cuts of 36% would be challenging for any Democrat to vote for. Mayor Mohamed asked for more information about a pilot program around traffic cameras. Ms. Madryga stated that the pilot program for red lights and speeding only applies to the cities of Minneapolis and Mendota Heights. She added that the program is highly contentious because in 2007, the Supreme Court struck down the program in Minneapolis, stating the city did not have the authority to implement the program. Therefore, the state law was changed in order to allow for the pilot project. Council Member Rog noted the twin homes project on Minnetonka Boulevard, and that the $3 million was awarded but not obligated. She stated that if those federal funds were not received, the project would not move forward. She asked if this is correct and if the city will look for alternative funding. Ms. Barton stated the city is still moving forward and assuming the funding will be available for the twin homes project. She added that HUD continues to tell the city to move forward, and a consent item related to the grant will be on the council agenda for July 21, 2025. She continued that if the funding does not come through, that would have a significant impact. The city would need to find other funding sources, and the project would not move forward until funding was found. Docusign Envelope ID: 16E6A00F-F763-468E-AFFE-478D8AF7D24C Study session minutes - 7 - July 14, 2025 Council Member Rog asked if environmental reviews were included. Ms. Barton confirmed this was correct and phases one and two have been completed. Council Member Baudhuin referenced the cannabis laws and stated that any and all expenses must be tracked so the city can lobby for funds in the future. Ms. Nesse stated that this is correct, and tracking and rationale to lawmakers regarding aid related to enforcement will be needed. Council Member Rog noted the end of federal funding for sustainability assessments and asked if the city would encourage residents to use city programs before the end of the year. Ms. Keller stated she will follow up on this with Ms. Ziring, sustainability manager, who is very proactive in her strategy. Council Member Rog pointed out that if this information could be given to the council, they could also share it with constituents. Council Member Rog observed that the issue about trees received bipartisan support and has a positive direction. Ms. Nesse stated that the tree project was a priority of Senator Hortman’s and the project will continue. Ms. Madryga stated that Momentum Advocacy will continue to work on the priorities of St. Louis Park and keep staff and council informed. Written Report Council Member Baudhuin asked whether the Arrive + Thrive update could be found in one link versus several links. Ms. Keller stated she will review this with staff. 3. Arrive + Thrive update – Wards 1, 2, and 3 The meeting adjourned at 7:50 p.m. ______________________________________ ______________________________________ Melissa Kennedy, city clerk Nadia Mohamed, mayor Docusign Envelope ID: 16E6A00F-F763-468E-AFFE-478D8AF7D24C