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12/07/2009 - 29272CITY COUNCIL MEETING CITY OF FRIDLEY DECEMBER 7, 2009 The City Council meeting for the City of Fridley was called to order by Mayor Lund at 7:30 p.m. ROLL CALL: MEMBERS PRESENT: Mayor Lund Councilmember-at-Large Barnette Councilmember Saefke Councilmember Varichak Councilmember Bolkcom OTHERS PRESENT: William Burns, City Manager Fritz Knaak, City Attorney James Kosluchar, Public Works Director Scott Hickok, Community Development Director Richard Pribyl, Finance Director Anthony Huber, 1376 Mississippi Street NE Don Holum, 6575 Monroe Street NE Joan Olson, 6320 Van Buren Street NE APPROVAL OF PROPOSED CONSENT AGENDA: APPROVAL OF MINUTES: City Council Meeting of November 9, 2009: Councilmember Bolkcom pointed out on Page 7, it says "Ms. Norton" and should say "Ms. Reynolds." On Page 8 where she states "it is something we should look" It should say, "It is something we should look at." On Page 5, paragraph 5, Captain Weierke replied, "yes, he does." She thinks it should be, "yes, he will." On Page 4, paragraph 7, it states, "Councilmember Bolkcom asked the animal control officer was." It should state "asked who is the animal control officer." City Council Meeting of November 16, 2009: Councilmember Bolkcom pointed out on the bottom of Page 7 where she asks what Fridley's share was, the response given on the ne�t line is, "70-80%." That is Columbia Heights' share. On Page 10, paragraph 5 from the bottom, Mayor Lund states "is for the engineering company" should be "is for the architect-designer company." FRIDLEY CITY COUNCIL MEETING OF DECEMBER 7, 2009 PAGE 2 APPROVED WITH CORRECTIONS. NEW BUSINESS: 1. Receive the Minutes from the Planning Commission Meeting of November 18, 2009. RECEIVED. 2. Special Use Permit Request, SP #09-15, by Kurt Manufacturing, Inc., to Allow Limited Outdoor Storage on their Property, Generally Located at 7585 Highway 65 N.E.; and Resolution Approving Special Use Permit, SP #09-15, for Kurt Manufacturing, Inc., 7585 Highway 65 N.E. (Ward 2). William Burns, City Manager, stated the petitioner wishes to store wire baskets and plastic pallets in two areas on his property. The first storage area is 560 square feet and will be used for storage of wire baskets. The second area contains 1,944 square feet and will be used for storage of both wire baskets and plastic pallets. The Planning Commission unanimously recommended approval at their November 18 meeting, subject to the seven stipulations. Staff recommends Council's approval. THIS ITEM WAS REMOVED FROM THE CONSENT AGENDA AND PLACED ON THE REGULAR AGENDA. 3. Approve Consultant Selection for Project No. 389 SPRING Project. William Burns, City Manager, stated the contract with the Hoisington Koegler Group was tabled at the November 16 Council meeting. Since the Public Works Director has been unable to complete contract details, staff is recommending that this item be tabled to the December 14 Council meeting. THIS ITEM WAS TABLED UNTIL DECEMBER 14, 2009. 4. Appointment to HRA Commission. After interviews with five candidates for the HRA Commission, Council has selected Steve Eggert as their appointee. Mr. Eggert will fill out the remainder of Steve Billings' term, which ends on June 9, 2010. Staff recommends Council's approval. APPROVED APPOINTMENT OF STEPHEN EGGERT TO THE HOUSING AND REDEVELOPMENT AUTHORITY. 5. Claims (144104 — 144301). FRIDLEY CITY COUNCIL MEETING OF DECEMBER 7, 2009 PAGE 3 APPROVED. 6. Licenses. APPROVED THE LICENSES AS SUBMITTED AND AS ON FILE. 7. Estimates: Ellingson Drainage, Co. P.O. Box 68 West Concord, MN 55985 2009 Watermain Rehabilitation FINAL ESTIMATE ................................... $ 58,650.66 Ron Kassa Construction 6005 East 250 Street Elko, MN 55020-9447 2009 Miscellaneous Concrete Repair Project No. 384 Estimate No. 5 ............................................. $ 8,736.20 Midwest Asphalt Corporation 5929 Baker Road, Suite 420 Minnetonka, MN 55345 2008 Street Reconstruction Project No. ST. 2008 - 1 Estimate No. 9 ............................................. $ 23,465.52 APPROVED. APPROVAL OF PROPOSED CONSENT AGENDA: Councilmember Varichak asked that Item No. 2 be removed from the consent agenda. MOTION by Councilmember Barnette to approve the consent agenda with the removal of Item No. 2. Seconded by Councilmember Bolkcom. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY. ADOPTION OF THE AGENDA: MOTION by Councilmember Varichak to approve the agenda with the addition of Item No. 2. Seconded by Councilmember Barnette. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE FRIDLEY CITY COUNCIL MEETING OF DECEMBER 7, 2009 PAGE 4 MOTION CARRIED UNANIMOUSLY. NEW BUSINESS: 8. Special Use Permit Request, SP #09-15, by Kurt Manufacturing, Inc., to allow Limited Outdoor Storage on their Property, Generally Located at 7585 Highway 65 N.E.; and Resolution Approving Special Use Permit, SP #09-15, for Kurt Manufacturing, Inc., 7585 Highway 65 N.E. (Ward 2). Councilmember Varichak stated she read in the Planning Commission minutes there have been no concerns reported by the neighbors. Is that correct? Scott Hickok, Community Development Director, replied, that is correct. Councilmember Varichak asked the petitioner whether he had any problems with the seven stipulations? Larry Frandson, Kurt Manufacturing, replied, no they do not. MOTION by Councilmember Varichak to approve Special Use Permit Request, SP #09-15, by Kurt Manufacturing, Inc., with the following seven stipulations: 1. Storage trailer and any other existing outdoor storage on this site shall be removed within 30 days of issuance of this special use permit. 2. Outdoor storage area #2 shall need to be screened at which time the lot east of the subject property is developed, to ensure that it's not visible from the Central Avenue public right-of-way. 3. If a parking shortage occurs on the site, the petitioner shall install the designated proof of parking. 4. No outdoor storage other than the storage of items used by petitioner's business shall exist on the site. 5. No outdoor retail display shall take place on site. 6. The petitioner shall re-locate new accessible parking stall on turnaround to the east side of the turnaround, just south of the main walk entrance. 7. The petitioner shall revise curb and walk adjacent to the accessible parking spaces to surmountable curb type. Seconded by Councilmember Bolkcom. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY. FRIDLEY CITY COUNCIL MEETING OF DECEMBER 7, 2009 PAGE 5 MOTION by Councilmember Varichak to adopt Resolution No. 2009-67. Seconded by Councilmember Bolkcom. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY. OPEN FORUM: Joan Olson, 6320 Van Buren Street NE, stated there is a potentially dangerous situation on West Moore Lake Drive where people drop off students at the middle school. People stop on the street in the bike lane to drop off the students and if they are going westbound on West Moore Lake Road they promptly proceed to make a u-turn to go eastbound. She said she almost hit someone who pulled out in front of her. It is an S-curve and is e�traordinarily dangerous. Ms. Olson she made suggestions for safety. Paint the street so there is a crosswalk There is nothing there. The crosswalk is down by the high school. There is no place else for the students because nobody can park there. She also thinks there should be some No U-Turn signs there. She called the Police Department who told her it has to be the City Engineer who recommends those. She has left messages for Mr. Kosluchar, and she has spoken with Dr. Burns. Dr. Burns stated he did take Ms. Olson's call and he did forward it onto Mr. Kosluchar and Chief Don Abbott. He said he believed at least one of them had a conversation with the schools. James Kosluchar, Public Works Director, stated the school said they had some issues there earlier in the year and thought that some of them were being resolved. Also, in talking further with the Police Department, they discussed a plan of installing in one direction a"No U-Turn" sign. Ms. Olson stated it is happening in both directions. Anthony Huber, 1376 Mississippi Street, said he is a long-time Fridley resident and is also a consultant with the trash industry. He works with independent haulers and helps them do marketing. He referred to the notice in the City's newsletter talking about the City possibly going to an organized collection system--another way of saying monopoly. It happens in some towns, and there are good arguments on both sides. He just wanted to clear up some confusion. Mr. Huber stated there are four haulers: two national and two independent family-owned haulers. The independent haulers have probably started these routes many years ago. Columbia Heights has been in organized collection for a long time. They just recently switched from BFI Waste to Veolia. Veolia is worldwide out of France. They just got the Blaine contract. Blaine and Columbia Heights are the only two areas in this part of town that do single-sort recycling. Mr. Huber stated when you talk about putting this out for bid, you have to look at what it is going to do to the small independent companies. To bid an entire town, you have to bid it so low to possibly get it because it is a very competitive industry. Then, if you do get it, you have to provide two to three containers for each home which is an expense of about $210 per household. FRIDLEY CITY COUNCIL MEETING OF DECEMBER 7, 2009 PAGE 6 For an independent hauler to come up with that is a huge expense. They have already invested a lot of money to do business here for a long time. Currently Fridley has organized recycling. They are one of the only communities left in the northern metro where residents still have to separate recyclables. Some of that has to be looked at. Mr. Huber stated in greater Minnesota, where some of the towns are thinking of going into organized collection, there are a lot of haulers out there. These mom and pop haulers who have been doing it for so long, simply cannot afford to. However, because they have to stay and appear competitive, they have to bid it anyway but have to bid it so high because they cannot afford to get it. They actually do not have intentions on getting it anyway because if they did, they could not possibly come up with the money to provide the containers. Mr. Huber stated not only do you have to bid low to get it, you have to haul it at a significant loss. Then in two or three years you have to re-bid it or pick up the containers you just bought and did not make any money on to begin with and to kind of redo it all over again. With the City's economy, he just does not understand why they would not just want to keep an open free market. It has been going well for years. There are a lot of towns looking at going into organized collection around the Twin Cities. Mayor Lund asked Mr. Huber if he would send him a brief e-mail so he has a way of contacting him if and when they start looking at this issue. Mr. Huber stated his e-mail address is: thubermn ,aol.com. He represents a lot of family- owned independent trash haulers. Mayor Lund stated they have not really looked at this. It comes up fairly frequently. The biggest argument of course is the long-term cost and savings for this City and about having or not having one or more garbage trucks going down the same street four or five times a week. There is nothing wrong with looking at it, and there are a lot of people in favor of it. He understands Mr. Huber's point. Maybe they can cut the City into four segments and get four individual contracts. Mr. Huber replied that is a terrific point. He said he also understands the argument about the streets, but simple physics will tell you that the one truck that drives up and down the street that is full is going to be a lot heavier than three or four trucks that are driving up and down the streets a fourth full because they are not going to be all full at the same time. To say that the recycling truck is bad for the environment is kind of a contradiction. In today's economy he just cannot understand why they would try and interfere with the ability for small independent companies just to stay competitive. If it were to go to single-organized collection, it would ruin the price point not just here. Also, the industry has gotten more expensive. Recycling is a commodity, and that industry is just falling apart. There are trash haulers who have spent so much money building these single-sort facilities, and the stuff was not worth a lot for a long time. Mr. Huber stated he just wanted to go on record and say it works. The small independent haulers started it and they do a good job. If you had it all on the same day that would be great, FRIDLEY CITY COUNCIL MEETING OF DECEMBER 7, 2009 PAGE 7 but then you have more trucks the same day. There are arguments back and forth, but currently the system works. Don Holum, 6575 Monroe Street, stated just to add onto Mr. Huber's comment, last year he had a salesperson come to his home trying to have him buy from their trash-hauling company. He sat down and gave him figures he could not believe — half of what he was currently paying. Mr. Holum called his current carrier and they said they would match it. It was not only for one year, it was for two years. That is why he would also endorse an open-type hauler. Mr. Huber stated Mr. Holum has a very good point. A lot of these companies monitor their pricing, and price-matching should not be a factor. He thinks that everybody should have an honest rate based on what their prices are. They can go in and bid it so low and what happens in the interim is it is going to hurt the independent hauler. If that happens long enough and widespread enough, eventually that independent hauler who has been in that area for all those years and built that, maybe generations ago, can no longer compete. 2010 BUDGET AND PROPERTY TAX PUBLIC MEETING: 8. Presentation of 2010 City of Fridley Budget. William Burns, City Manager, stated the budgetary process is essentially a year-long process. They start early in the year with the Council/Commission survey and go on with the goals and objective setting process, staff budget reviews, and ultimately, Council work sessions in both June and October. One of the things they look at every year is the budgeting conte�t and the issues that are raised during the budget discussions. A very important part of that process is the legislative conte�t. What happens in the State legislature has a lot to do with what happens to the City financially. The 2009 session was again one with strong partisan contentions. They were dealing with a$4.6 billion deficit. The legislature and the Governor agreed to part of it, and the Governor unallotted about $2.9 billion in expenditures, including $825,939 in Fridley's Local Government Aid. That came on the heels of unallotment for $418,214 at the end of 2008 and $357,955 for 2009. Altogether , there is well over $1.6 million in lost LGA. Dr. Burns stated the State maintained their 3.9 percent levy limit in the last legislative session. They did allow the City to add the 2009 and 2008 unallotments to their base, but they did not allow 2010 unallotments to be added to the 2010 base. There were a number of other legislative issues. There were efforts to move the jurisdiction for the building code from the Department of Labor to a separate committee, principally organized or dominated by builders. There was legislation regarding police administrative fines. There was legislation regarding absentee balloting and voter registration that would have cost the City more money. That was vetoed by the Governor. One legislator would have eliminated the interest paid on mortgages from the State income tax deductions. Another legislator would have created a half-percent county sales tax that would have added a half percent tax to the City's purchases. There was another bill that would have forced the City to use the State's cooperative purchasing system for all purchases., even though the City does have many purchases that are outside the system and are less expensive than using the State's system. They were successful in thwarting the things that were detrimental to the City's interest. FRIDLEY CITY COUNCIL MEETING OF DECEMBER 7, 2009 PAGE 8 Dr. Burns stated the prospects of the 2010 legislative session are not real good. The State's financial situation is really poor, and 2010 is an election year for the legislators and the Governor. It is very unlikely that the major fiscal imbalance that they facing will be dealt with effectively in that political conte�t. It is also very unlikely that there will be any LGA reform which is badly needed. There will probably be no removal of state levy limits, nor will there be any major state legislation affecting cities. It is also possible we will see further gubernatorial unallotments for 2010. The City just learned last week that the financial picture of the revenues for the State, are not as good as what they thought. The Governor is taking a hard look at cutting or unallotting another $479,000 that we might have received and were expecting to receive, in the latter part of 2009. So there are still threats of taking away additional LGA. Dr. Burns stated the City was interested in getting tax increment financing (TIF) legislation that would have allowed greater flexibility in the use of TIF to deal with foreclosed properties in Fridley. That did not happen, but he understands there is a good chance that will happen in 2010. Some of our traditional concerns included administrative fines, legislation that would put wine in grocery stores and compete with our municipal liquor business, and legislation regarding eminent domain. It is unlikely there will be effective legislation in 2010 on these major issues. Dr. Burns said the June and October budget work sessions with Council focused heavily on budget cuts and revenue adjustments. Expenditure adjustments for 2009 and 2010 totaled around $1,469,000. The City knows that the 2010 cuts include a salary freeze. Actually that does not show up in the decrease in general fund budget. The City is estimating that had it let salaries go forward as they have been in prior years, the City would have had 3 percent cost of living salary increases amounting to about $251,527. The City's cuts also included four vacancies, and the net savings from holding those vacancies vacant is $224,400. He would add that one of the vacancies is a terminated employee who is legally challenging his termination. Dr. Burns stated another adjustment the City has made for 2010 is the suspension of the IT depreciation charge. We have an information systems internal service fund that charges our various departmental budgets for their purchase and depreciation on IT equipment. We are suspending that charge for 2010 and saving $154,169. It is not a real cut, it is simply a suspension of a cost that we would otherwise entail. Not all travel and conference expense is cut. If an employee has to travel and attend a conference to maintain his certification or licensure, then he is going. However, other travel and conference expenses have been eliminated at a savings of almost $68,000. The City is looking at a savings of almost $64,000 related to health insurance. Also, employees had been able to sell back up to five days a year of their vacation leave. That has been suspended for 2010, a savings of another $64,000. Dr. Burns stated there are also some revenue adjustments for 2010. The City has not had as many fund balances as it had. It has had low interest rates and to some e�tent that is a benefit if you are borrowing money. If you are trying to invest City funds, however, not having high interest rates represents a loss of revenue and the City is looking at $90,000 in interest lost for 2010. The City is also looking at losing about $150,000 in our transfer from the liquor fund and $141,000 in license and permit revenue. On the positive side, the City is transferring $107,300 which would normally go to the Parks capital levy to the general fund. The City had some pleasant one-time surprises. The balance at the end of 2009 is projected to be just a little bit over FRIDLEY CITY COUNCIL MEETING OF DECEMBER 7, 2009 PAGE 9 $541,000, so the City will be able to shift that into the general fund as we go into the year 2010. The City also dissolved three TIF districts, 1 through 3, and retired the bonds in those districts. That one-time action gained us $438,000 in TIF turn-back revenue. The City has also added additional overhead charges for the utilities which amount to about $54,000. Dr. Burns stated regarding employee health coverage, it was not a huge budget discussion, but every year at the October budget work session they review it. Unfortunately, some of the City's employees' experience was not good in 2009 and we saw a premium increase of 19.8 percent. However, through a variety of benefit adjustments, position freezes, and plan changes, the City was able to convert that increase into a$64,000 savings. While the City did not restore all dues and subscriptions that had been taken out earlier in the year for 2010, it did partially restore dues and subscriptions based on the need of department managers and supervisors to maintain their professional training and status. Dr. Burns stated the City also restored step increases, costing about $53,000 to the final budget. They felt continuing to exclude step increases was contrary to what other cities were doing, and would be more expensive than the savings to defend the step increase move in labor negotiations and other contests. Dr. Burns stated another discussion they had in their budget work sessions was the suspension of locally-funded capital improvements costs. They did put a hold on $275,000 of those costs. They did not actually shift the money over to the general fund, but the money is available in the various capital improvement funds at some point should it be needed to provide cash flow. Dr. Burns stated utility rate adjustments were also a big part of the budget discussion. The water rate increase is budgeted at 5 percent and the sewer rate increase at 9.5 percent. There is no increase for storm water. They also discussed a variety of revenue options. They talked about the potential for a street lighting levy, bonding for equipment and charging the interest outside the levy limits that would base from the City Charter, and possibly asking the voters to approve a levy or franchise fee. Council agreed to wait as far as determining whether or not they wanted to implement any of them. Dr. Burns stated our budget for all funds is reduced by 9.5 percent or by close to $1.7 million. One of the big funds is the general fund, and the expenditures have been reduced by $792,855 or by 5.3 percent below what was budgeted in 2009. General fund budget reductions include $293,990 in personal service costs. Of that amount, the largest part is for salaries--$251,527. There is also a$64,000 decrease for health insurance. There is a$25,000 increase for cash benefit payments in lieu of health insurance. The City does make that available for employees and hopefully is saving money by offering a cash benefit in lieu of having them use our health insurance plan. They estimate if all the employees who had the cash benefits were to take a health insurance plan for a single person, the City would be spending about $70,000 more. Dr. Burns stated another part of the general fund is supplies. The cost of supplies is down by $85,178. A large part of that decrease is the $100,821 reduction for fuel. Last year when they were budgeting, they did it in May and June and were looking at $4 per gallon charges. That did not happen, and we budgeted much less for fuel. At the same time, our equipment is getting FRIDLEY CITY COUNCIL MEETING OF DECEMBER 7, 2009 PAGE 10 older and the demand for repair parts is going up, so we included another $17,577 for repair parts. Dr. Burns stated "other services and charges," the third major category of general fund expenditures, is down by $345,196 or 12.9 percent. A big chunk of that is the IS charges which were deferred for one year. There is also a reduction of $17,000 for professional services; $57,506 for conferences and schools; $14,290 for non-professional services; and a decrease in dues and subscriptions budget by $11,210. Dr. Burns stated capital outlay costs, which means costs for equipment and vehicles, is also down by $68,491. Altogether we are purchasing about $241,000 worth of equipment. It includes a turf sweeper for parks maintenance, a dump truck to be used for pothole patching for street maintenance, and three police squads. The City has a number of "special revenue funds" that are separated out from the general funds because of accounting requirements. Those funds are also down by $92,540 or 7.4 percent. The funds include the Cable TV Fund, the Grant Management Fund, the Solid Waste Abatement Fund, the Police Activity Fund, and the Springbrook Nature Center Fund. Dr. Burns stated the biggest change in these funds is the $60,281 reduction for solid waste abatement. This reflects the end of revenue sharing with our hauler and the elimination of drop- off and paper shredding events. We do have a little bit of money leftover from this year's revenue sharing program, and will have a very limited number of drop-off and paper shredding events in 2010. Once that money is gone, however, we most likely will be done with those kind of events. Dr. Burns stated there is also a reduction of $29,590 for the Police Activity Fund. This fund supports one police officer who is assigned to this fund to replace another higher paid police officer. Reductions are partially offset by a$3,829 increase in Springbrook Nature Center expenditures. He thinks most of these are for step increases as well as for expanding the hours of the part-time maintenance person there from 17 to 20 hours per week. Dr. Burns stated regarding capital improvements, we have general capital improvements, streets and parks capital improvements. The budgeted part of the capital improvements are down by $794,000. Capital improvement fund expenditures are down by 53 percent. The 2010 street fund projects are funded entirely by federal stimulus dollars, state aid to highways or property owner assessments. With one exception, there is no money budgeted for streets. It is all local other than the assessments, but it is not money that would ordinarily come out of our budget. Dr. Burns stated the 2010 projects include the 2010 mill and overlay project which is costing us $649,500. That is a project that includes streets in the Rivers Edge Way neighborhood. It also includes some streets in Councilmember Varichak's neighborhood that are bounded by Old Central on the west, Stinson on the east, Mississippi on the north, and Gardena on the south. We are also continuing with the 61st Avenue/Moore Lake Drive mill and overlay project that is worth $463,000. A lot of that is paid for by stimulus money we are getting from the Federal government as well as by property owner assessments. Other street-related projects include our contribution to the signalization at the 85th Avenue and Springbrook Drive intersection. We are FRIDLEY CITY COUNCIL MEETING OF DECEMBER 7, 2009 PAGE 11 spending $75,000 there and making state-mandated signage upgrades which are costing us $30,000. All of those projects though are paid for by state MSAS funding. Dr. Burns stated while the budget shows $130,000 for a 2010 seal coating project, that money will be held. He does not anticipate we will spend that money on seal coating. The remaining $470,000 for streets capital improvements consists of MSAS reimbursements that will be funded through the capital improvements budget for the 2010 mill and overlay project. Other 2010 projects which are not street projects include an HVAC replacement project for this building. We are going to replace one of the HVAC units on the top of the building at a cost of about $21,000. We are also looking at designing some alternative energy improvements which he hopes might include some solar improvements. We are looking at court resurfacing in our parks worth about $50,000 and parks furnishing and fencing at a cost of $17,000. Dr. Burns stated regarding the enterprise funds which consists mainly of utilities and liquor operations, they are looking at a decrease of $364,313 or 2.7 percent. All of that decrease belongs to the liquor operations. The water fund is up by $10,525 or 4/lOths of 1 percent. Some of the contributors to that include a reduction of $42,820 in depreciation costs for water. An increase of $19,069 in operating costs, mostly utilities, and a$20,941 increase for debt service. Dr. Burns stated the sewer fund is up by $331,967 or 7.9 percent. He said around $307,000 is for additional treatment costs that are being handed down to us by the Metropolitan Council Environmental Services. However, there are some other sewer changes there. We have $44,317 for sewer administrative costs which include the general fund administrative charge. Overall sewer operating costs are up by $287,650. Practically all of the increase is the MCES additional treatment cost. The storm water fund is up by 8.6 percent. The numbers are fairly minimal, $12,300 for additional administrative charges; $11,000 for additional depreciation; and $13,005 for additional services contracted. Dr. Burns stated the liquor fund is down by $739,505 or 12.1 percent. A lot of that is tied to diminished revenues, and a lot of those are tied to the loss of Gander Mountain. When Gander Mountain moved out, the City began to lose money. There is also some reconstruction plan for the Cub Foods property on 57th Avenue and, at this point, we do not know how that will impact our revenues for 2010. As a result of projections, they decided to cut the transfer of revenue from the liquor fund to the general fund by $150,000. Dr. Burns stated regarding the tax impact of this year's 2010 budget, the City's property tax levy for 2010 is $10,120,162 or plus 6.8 percent. The components of that levy are $9,101,421 for the general fund; $698,104 for bonded indebtedness; $314,400 for Springbrook Nature Center's special levy; and $62,000 for the Six Cities Watershed District. The impact of these tax increases on the home valued at $196,200 is a tax increase of $47 a year. The local portion of taxes will move from $554 to $601. The overall tax impact of the City's levy increases will vary from school district to school district. Changes range from $48 in the Spring Lake Park District to $261 in the Fridley School District. Anoka-Hennepin residents will see an $83 increase, and Columbia Heights residents will see a$78 increase. FRIDLEY CITY COUNCIL MEETING OF DECEMBER 7, 2009 PAGE 12 Dr. Burns said with respect to the financial health of the City, we are looking at some decrease in fund balances and expect by the end of 2010 we will wind up with $16,356,442. That includes the $3.5 million in unreserved general fund amounts. Regarding expenditures vs. revenues for the general fund since 2005 that amount has varied from year to year. It varies from about $1.6 million to somewhere between $647,000 and $811,000. What we wind up with for 2010 is an $811,281 deficit that has to be accommodated by transfers. Dr. Burns stated regarding the sources of general fund revenue, the dependence on property taxes is growing. At one time we had about 30 percent of our tax reliance on property taxes. However, local government aid became smaller and smaller. At one time LGA was up to 35%. Now, it is down to 9.9% of the total. Dr. Burns stated there has been very little change over 14 years in the budget in terms of constant dollars. When you adjust for inflation, our budget today is a little higher than what it was in 1995. If you end at 2008, the last year for which actuals are available, the increase amounts to about .6 percent per year. Dr. Burns stated with respect to the economic environment for Fridley, they look at several things annually to measure the strength of Fridley's economy. They look at the value of new construction, and know that for the first ten months of this year, it was $42 million plus compared to $37 million plus for the same period in 2008. However, much of the total was for public sector projects. The Minneapolis Waterworks spent almost $19 million on their clarifier. They also built a police command center on their site for $2.4 million. The Northstar station absorbed another $3 million in public money. There were other semi-public projects; Unity Hospital spent a fair amount of money for improvements. Totino-Grace (which is not a public entity but not necessarily a private enterprise entity either) spent a fair amount of money on their project in 2009. The City did not have as many private sector projects this year. There were, however, eight large projects valued at more than $500,000 compared to three large projects valued at $SOO,OOO last year and six large projects in 2007. Dr. Burns stated regarding employment, unemployment was a little better in Fridley than it was nationally. It grew from 6.5 percent as of October 1, 2008, to 7.7 percent as of October 1, 2009. The increase in unemployment is accompanied by a 2.3 percent decrease in the number of Fridley jobs from 23,005 in 2008 to 22,486 in 2009. Dr. Burns stated property values are going down. The market value of all Fridley property decreased by 5 percent between 2008 and 2009, from $2.6 billion to $2.5 billion. The assessed value for single-family homesteaded property decreased by 8.5 percent. The value of non- homesteaded rental buildings having three or fewer units rose by .8 percent. That has to do with the continued transfer of homesteaded single-family property to non-homesteaded rental property. The value of non-homesteaded property having four or more units, however, decreased by 2.7 percent. The value of commercial and industrial property decreased by 1.7 percent and 1.8 percent respectively. There were decreases in property values accompanied by a 4.3 percent decrease in tax capacity which is the amount available for property taxation. FRIDLEY CITY COUNCIL MEETING OF DECEMBER 7, 2009 PAGE 13 Dr. Burns said they also look at public assistance. The number of households receiving cash assistance or food stamps increased from 1,023 to 1,329 or by 29.9 percent between 2008 and 2009. District 14 reports a 16 percent increase in the number of students receiving free or reduced meals. The only bright spot in this year's economic conte�t presentation is that crime is down. The number of Part I and Part II crimes committed in Fridley through September 2009 decreased by 14 percent. Dr. Burns stated in conclusion, the City lost about $1.6 million in local government aid. We do not see any fixes coming our way by way of the state legislature for 2010. Fridley's economic environment has been impacted by lower property values, increased unemployment, and greater dependence on public assistance. The budget drafted in these conte�ts is 9.5 percent lower than the budget prepared for 2009. Enterprise funds are down by 2.7 percent. Most of that has to do with declining profits in the liquor fund. The general fund budget reflects numerous revenue and expenditure adjustments, including a salary freeze, four vacancies not filled, health insurance reductions, suspension of IS fund charges, reduction in travel, and cutbacks in vehicle and equipment purchases. These adjustments leave the City with a general fund budget of $14,127,235; and a general fund deficit of a little over $811,000. Property taxes for general fund, retirement of street improvement bonds, and Springbrook Nature Center and Six Cities Watershed District will add $47 to the taxes paid on the average valued Fridley home. Like most other local governments and the State of Minnesota, the City of Fridley faces major financial challenges. While the $811,281 general fund deficit is only half of what it was last year, many of the adjustments that have gotten us to this point are either one-time benefits or very short-term in nature. Dr. Burns said the revenues include the temporary use of the Parks money; $438,000 in the one- time TIF retirement bond money; and $541,000 in general fund savings for 2009 which is not guaranteed to repeat for 2010. The total one-time revenues amount to over a million dollars and, when you add that to the expenditures adjustments which should be considered temporary, there is $823,000 or a total of about $1,909,000 in either one-time or temporary adjustments. Dr. Burns stated in addition to the short-term nature of revenue and expenditures adjustments, we must also be concerned about the potential loss of LGA. As the State tries to face the $5.4 billion deficit, there has to be some uneasiness about the safety of that LGA money. Demands for City services remain high. Although we had a 14 percent decrease in crime rates in 2009, our crime rates remain among the highest in the metro. It is something we have to deal with, and so the demand is there for our police officers. The calls for medical assistance and response to fires have also risen sharply. There has been a high increase in code enforcement activity. Housing maintenance has been added to our code enforcement responsibilities. There has also been a marked increase in rental inspections as we see single-family properties converted to rental property. We have 110 miles of streets, between 300 to 400 acres of parks, and another 110 miles of utilities that need to be maintained. The demand for maintenance, including preventative maintenance, is there and continues to be there regardless of the City's financial situation. Although recreation programs are not growing, they do remain important, particularly for seniors and youth in our community. FRIDLEY CITY COUNCIL MEETING OF DECEMBER 7, 2009 PAGE 14 Dr. Burns said there is also concern about the City's cash flow requirements. According to Mr. Pribyl we need almost $6 million in cash balances to avoid borrowing for operations. We anticipate that we will not be able to meet these requirements beyond 2011. We also project that by 2013, there is a good chance we will have exhausted all three of our sources of general fund transfer. Those include the closed bond fund, the general fund reserve, and the liquor operations balances that we have been transferring over. The City needs to look for alternative sources of revenue in the coming months. If we are going to keep the broad-based services that Fridley has, including recreational services, we have to look for another source of income. While the current economic climate does not favor support for higher cost of government, it also does not favor cutbacks in local government services. These circumstances will make it even harder ne�t year to define a budget for 2011. Dr. Burns stated with an overall sense of concern, as well as a strong sense of pride in the quality of Fridley's local government services, he presented the City's 2010 budget for Council's consideration. Mr. Holum, 6575 Monroe Street NE, stated he had some questions about property taxes. He said in 2005 his home was valued at $180,500; and his taxes were $1,868. For the ne�t year, his home value went down $8,800, down to $187,008 and his taxes went up $235. He asked for an explanation. Richard D. Pribyl, Finance Director, stated he can account for right off the top the 6.8 percent related to the City levy itsel£ Since the year 2000, we have had to manage the local Charter limitation that was imposed, so the City measures that on an annual basis and that is the Minneapolis/St. Paul CPI. That ordinarily sets the ceiling for the local levy. In 2008, for the legislation session for 2009, the State imposed the State levy limits. All of a sudden, the City has another limitation to manage and try and watch both of those and make sure the City does not exceed the lesser of the two. In 2009, with the formulas they have provided the City as far as how it determines our levy, we have to look at both the LGA and the levy in relation with what they call a revenue base. In 2009, we actually got more LGA which meant we levied less. When you took a look at it in 2009, we actually went backwards in our levy. We lost $54,000 in levy as compared to 2008. In 2010 now we actually get less in LGA which meant that our levy moved up. In both these years, we were levying under the Charter limitations so it is the State levy limit that is less. What happens, because of the interaction between levy and the LGA, in 2010, we went up 6.8 percent because due to the State levy limits in 2009, we actually lost ground. With that calculation for 2010, we did get less LGA which meant we were allowed to increase the levy a little bit more. Mr. Holum stated so you cannot come up with actually a rate or percentage because it fluctuates from year to year based upon LGA. Mr. Pribyl replied, based on the formula that includes LGA and the levy. As one moves up, the other moves down, and vice versa. If you take a look at the Minneapolis/St. Paul CPI for 2009/2010, in 2009 it was 2.6 and in 2010 it was 3.8. The total of those two is actually 6.4 so we are still underneath those two years' worth of CPI. We could take a look at those two years FRIDLEY CITY COUNCIL MEETING OF DECEMBER 7, 2009 PAGE 15 independently and what we have now increased from 2009 in levy. That is the secret to all of this. He wished it was simpler than this. It is not. Every time they simplify it, it gets worse. Mr. Holum stated so it would vary one year to the ne�t based upon that formula? Mr. Pribyl stated as long as we have a State levy limit it will. All bets are off as far as when they take that off that there is some other formula that comes into play in regards to levy calculation. Mr. Holum asked how does that come in based upon our Charter. What does our Charter say regarding property taxes? Mr. Pribyl replied we have to manage both of these indexes and we do that. In 2009, we were under the local levy limits by $450,000 and for 2010 we are under by $179,000. So the State levy limits were more restrictive than the local levy limits. Mr. Holum stated he was given the definition regarding the Charter limitation on levies and asked if it wasn't around 5 percent. Mr. Pribyl replied, it is the lesser of 5 percent or the Minneapolis/St. Paul CPI. Mr. Holum asked what the number was. Mr. Pribyl replied, which is 3.8. Keep in mind we are below that ceiling with the State levy limit. We were in 2009 and we still are in 2010 by $179,000. Mr. Holum stated and it is 5 percent or the cost of living which is 3.8%. Mr. Pribyl stated the ceiling though is built year by year and in place year by year. So they actually manage year by year. We increase the prior year by that local increase. So from the year 2000 we have increased it by, for example, 2.8 percent. That has now been the ceiling and year after year , we actually manage that ceiling. Mr. Holum asked how they came up with 6.8%. Mr. Pribyl replied, the 6.8 percent is actually the increase in levy from 2009. Mr. Holum asked but how did he arrive at that 6.8? Mr. Pribyl replied, actually the levy in 2009 was $9,472,487, so the levy in 2010 is $10,120,162. Mr. Holum stated so a typical layperson could not understand this unless they had figures like that. You could not go by a rate, like, okay, this year it is going to be 5 percent, 6, 7 percent based on this fluctuation. FRIDLEY CITY COUNCIL MEETING OF DECEMBER 7, 2009 PAGE 16 Mr. Pribyl replied, right. Mr. Holum stated he certainly does not mind paying his fair share. He thinks it is happening in other communities as well. He said he did see a need for additional revenue and we have to do it through a referendum, but people are going to say you are not going to tax me like this and are going to say put it back on the State. He knows the Mayor spends a lot of time down at the legislature and look where it got him as part of the LGA. Mayor Lund replied, actually, it was very fruitful. We did gain back In 2006 we were at zero dollars. It was not just him. It was City staff. It was our legislators. There were a number of players. We were able to get some of that back and, because of our rather unique situation in Fridley with our Charter restrictions, they did consider legislation for us to be able to levy back at least some of those LGA losses. To the e�tent they have been able to, we have levied those back under the law. Dr. Burns has been working through the League of Minnesota Cities, too, in lobbying efforts with the State about what we have determined is the unfairness of local government aid. Not only has the pot diminished greatly with the State of Minnesota trying to balance their budget, it is how it is distributed and the fact that out-state gets so much more of it, and that is not where the money is coming from. Mr. Holum stated his home value was $196,006 in 2009. Now it is going down to $187,800. He shared this with a prominent real estate person in the community who said that is not even close, it should be closer to $160,000. The assessor's office has to come up with a more realistic figure when it comes to market values, because that his home is not worth $187,800. Dr. Burns stated the State law directs the way we identify values. For a typical year, for payable 2010, our values were determined in 2008. We are about two years behind. Councilmember Bolkcom suggested to Mr. Holum that he contact some of his State representatives. Councilmember Barnette stated he has always taken pride in that Fridley taxes are the lowest in Anoka County. Mr. Pribyl stated on December 14, 2009, there will be resolutions to approve the budget and levy, if there are no changes. Mayor Lund stated people should probably know there is the potential for unallotments by the Governor in the very near future, and the budget may change. Councilmember Bolkcom stated she read that there could be an unallotment this month and also two more ne�t year. 9. Informal Status Report None. FRIDLEY CITY COUNCIL MEETING OF DECEMBER 7, 2009 PAGE 17 ADJOURN. MOTION by Councilmember Barnette, seconded by Varichak, to adjourn. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MEETING ADJOURNED AT 9:17 P.M. Respectfully submitted, Denise M. Johnson Scott J. Lund Recording Secretary Mayor