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10-13-1993 SpecialCITY OF RICHFIELD, MINNESOTA SPECIAL CITY COUNCIL MEETING October 13, 1993 MEMBERS PRESENT: Martin Kirsch, Mayor; Michael Sandahl; Susan Rosenberg; Russ Susag; and Don Priebe. STAFF PRESENT: James Prosser, City Manager; Steven Devich, Administrative Services Director; Thomas Ferber, City Clerk; Jack Erskine, Public Safety Director; William Fillmore, Liquor Operations Director; Sandy Rosenow, Community Services Administrative Assistant; Bridget Walstrom, Finance Manager. OTHER PRESENT: Jeff Radunz, Deloitte & Touche The meeting was called to order by Mayor Kirsch at 7:00 p.m. Item #1 CONTINUATION OF CONSIDERATION AND DISCUSSION OF 1993 REVISED/1994 PROPOSED BUDGET AND 1994 PROPERTY TAX LEVY, C.L. NO. 294 City Manager Prosser reviewed Council Letter No. 294 regarding the continuation of consideration and discussion of the 1993 Revised/1994 Proposed Budget and 1994 Property Tax Levy. A. COMPLETION OF BUDGET OVERVIEW City Manager Prosser reviewed and answered questions regarding the Recreation Enterprise Fund Budgets which include the ice arena, swimming pool, water slide, municipal golf courses, and miniature golf course. Discussion followed regarding the revenues from the waterslide and the impact of weather on these revenues. City Manager Prosser reviewed and answered questions regarding Capital Improvement Budget Summary which includes improvements to Washington Park, Donaldson Park, Penn Avenue/ I-494 to 76th Street, and 77th Street. He reviewed the status of funding for the 77th Street Project. He then reviewed the 1995- 1999 Capital Improvement Program recommended by the Planning Commission and Community Services Commission. Finance Director Walstrom reviewed and answered questions regarding Debt Service Funds. B. DISCUSSION OF LIQUOR ENTERPRISE City Manager Prosser outlined the liquor enterprise issues related to the following: 1) retained earnings, 2) proposal for a fourth liquor store, and 3) the method of reporting transfers of earnings. Special Meeting Minutes -2- October 13, 1993 He reviewed the projections for a fourth store versus the operations without a fourth store. City Auditor Jeff Radunz, Deloitte & Touche, reviewed and answered questions about-the projections regarding a fourth liquor store. He stated that the auditors are comfortable with the cost projections that went into the model. Mr. Radunz reviewed how general fund administrative cost allocations are charged as expenses to the 13quor operations paid for by transfers from the liquor operation profits. Discussion followed regarding cost accounting methods and the profits of the liquor operations. Council Member Priebe discussed th~'~negat~e impact on property tax revenue that another store would cause. City Manager Prosser reviewed the risks involved in the investment in an additional liquor store and the issue of the City being in the liquor business. He stated it was a philosophical question for the City Council to decide whether the City should be in this business for a profit.. He stated it is a business decisi©n r©r the Council as to whether to add a fourth store. Council Member Rosenberg asked the reasons for considering a fourth store. City Manager Prosser stated that the City is in the business for two reasons: 1) control of liquor sales, and 2) make profits to use for park improvements. He stated the policy issue for the Council is whether to invest in a fourth liquor store to provide an increased income stream for future park improvements or to spend the fund balance down for current improvements. Council Member Priebe stated concerns about the new store sales projections and the negative impact on existing store sales. Liquor Operations Director Fillmore indicated that of the projected $1.2 in sales for the new store, it is anticipated that $220,000 would come from Richfield's existing stores and the rest from the Bloomington market. Council Member Susag discussed the projections for a new store in south Richfield indicating they appeared to be conservative and that the I-494 strip area appears appropriate to support a store. He stated he opposed any additional cost accounting procedures which would cost more without any value added. Jeff Radunz stated that he had recommended a revenue sensitivity analysis which showed that if sales were 10~ less than projected, the net impact would be $20,000-$24,000 on the bottom line. Special Meeting Minutes -3- October 13, 1993 Council Member Rosenberg stated she would not support another liquor store at this time dust to increase the Special Revenue Fund. She stated that the parks redevelopment would be completed in two years and the current revenues would still be available for parks. Mayor Kirsch stated that there is a continuing need for park improvement funding for the ongoing park redevelopment process. Council Member Priebe discussed the issue of return on investment comparing the risk of an investment of $670,000 for a new store and investment of that amount in a long term bond. Mr. Radunz discussed the investment risk and liquor industry standards of return of investment. City Manager Prosser stated that it is a policy decision for the City Council as to whether this is a reasonable method to assist in providing funding for community park improvements in an era of declining resources. Mayor Kirsch stated that previous councils had made decisions about new liquor stores which has led to funding many City capital improvements and that it is reasonable to consider this option. City Manager Prosser stated he is looking for direction as to whether to include this item for Council consideration as part of the Capital Improvement Budget. Don Houlding, 7145 13th Avenue, reviewed the history of product mix, regulation, and pricing controls related to municipal liquor stores. He advocated that all liquor store profits be transferred to the General Fund to directly reduce taxes. Mayor Kirsch asked if there was consensus of the Council that this issue be scheduled for consideration at a future meeting. Council Member Priebe stated he wanted to kill it right now. Discussion followed about whether it should be considered separately prior to the December 1 budget hearing. City Manager Prosser stated it could be scheduled for a City Council meeting prior to the budget hearing for a decision as to whether to include it for consideration during the budget hearing. Mayor Kirsch stated that the majority appeared to agree to scheduling consideration of this issue for the November 22 City Council meeting. Special Meeting Minutes -4- October 13, 1993 Council Member Priebe expressed concerns that the liquor store operations sales and profits are not keeping up with inflation. C. DISCUSSION OF WATER/SEWER RATES Administrative Services Director Devich reviewed the water utility fund noting the depletion of the fund balance due to the water plant rehabilitation project capital outlay expenditures. He stated the current water rate per 1000 gallons is 51.30. He reviewed the proposed 1994 rate of $1.47 per 1000 gallons. Council Member Priebe asked questions about the water fund balance if rates remained at the 1993 level. Finance Director Walstrom responded that the fund would then have a projected deficit of 5195,000. Discussion followed regarding depreciation schedules and the impact on funding for future water plant equipment replacements. Administrative Services Director Devich reviewed several scenarios relat®d to p~©jeoti~cxs fog die~e~t sa~i`~a~y sewer rates. He reviewed the projected 1994 sewer maintenance expenditure budget which shows that 77$ of the budget is for Metropolitan Waste Control Commission (MWCC) charges. Administrative Services Director Devich reviewed the historical trend of MWCC charges and the 21.5$ MWCC increase for 1994. Council Member Susag, who recently was appointed to the MWCC, stated that the 1994 MWCC increase resulted mainly from the change in flow meters which revealed a higher flow. He reviewed issues related to debt service, loss of federal grants, energy costs, and environmental regulations which impacts MWCC rates. He advocated that the sanitary sewer rate be adequate to cover operating costs, a fund balance for contingency and capital needs. Administrative Services Director Devich reviewed water and sanitary utility rate comparisons with several cities using lime softening water processes, showing Richfield was the lowest in sanitary sewer rates. Council Member Priebe stated that the cash balance in the fund had increased ten fold since 1985, stating that the cash balance was excessive and could be reduced to $500,000. He suggested the cash balance could be used so rates would not have to be increased. Council Member Priebe stated he strongly opposed the proposed increase in sanitary sewer rates. Council Member Sandahl stated that is necessary to have a reasonable fund balance for operating and contingency needs with a rate that provides that level of funding. L, Special Meeting Minutes -5- October 13, 1993 City Manager Prosser stated that information will be provided on the alternative rates. He then discussed the issue of combining the water and sewer funds. D. DISCUSSION OF HUMAN SERVICES COORDINATOR POSITION City Manager Prosser reviewed the projected classification and salary costs of the proposed human services coordinator position. He stated that if the City Council desired to authorize such a position, funding from the General Fund could be utilized by charging communications activities to the Cable TV fund instead of the General Fund. 1 It was the consensus of the City Council that a fob description outline be prepared and provided to the Council. Council Member Rosenberg reviewed statistics which illustrate the need for a human services coordinator position for the City. It was the consensus of the City Council that consideration of authorizing the human services coordinator position for inclusion in the 1994 Budget be scheduled for a Council meeting _ _priortothe December 1 budget hearing. E. DISCUSSION OF USER FEE SCHEDULES City Manager Prosser stated that most Appendix D license, permit, and miscellaneous fees are proposed to remain the-same in 1994. He distributed and reviewed the recreation fee and charges schedule recommended by the Community Services Commission. Council Member Priebe stated that Rich Acres golf rates had increased significantly in the last three years. He stated the golf course should pay it's own way, but not make much money, especially since a portion of the profit must be paid to the MAC. F. DISCUSSION OF PAY PLANS City Manager Prosser reviewed pay plan issues related to collective bargaining units, proposed pay plans, and comparable worth. G. DEPARTMENT GOALS 1 City Manager Prosser stated that department goals have been revised and will be provided to the City Council for review and comment prior to inclusion in the budget document. Special Meeting Minutes -6- October 13, 1993 H. COUNCIL DISCUSSION Council Member Susag discussed the impact of the tax levy on property owners resulting from the inflationary increase and decreases in tax capacity in the City. He suggested staff continue to look at ways to reduce General Fund expenditures. He stressed the importance that when the City Council votes on the levy that it be clear that the City Council is taking the responsibility voting on behalf of the citizens for this levy for this level of services. City Manager Prosser stated that the staff could provide the Council with a list of alternative budget and service levels for the Council look at to reduce General Fund expenditures. Council Member Sandahl stated interest in seeing some of these suggestions. Council Member Susag stated interest in reasonable ideas to lower the tax levy. Council Member Priebe stated that because of the City's reliance on s-~a-~e ail Yunding -i.I~e C~.`%y is e~°i,:~emely vu~lrYe~alu~le to actions by the State Legislature. He stated that is why he feels it is very important to hold the line on taxes. He indicated the need for staff to take a serious look at significant changes to the budget. ADJOURNMENT The meeting was adjourned by unanimous consent at 10: 10/25/93 Date Approved __ _ _ ~~ ~-~ti. ~-Z.:_ Thomas P. Ferber City Clerk ~~~ Martin J. K'rsch li. Prosser Manager p.m. Mayor