Loading...
CCM 12/14/2015 CITY COUNCIL MEETING CITY OF FRIDLEY DECEMBER 14, 2015 The City Council meeting for the City of Fridley was called to order by Mayor Lund at 7:00 p.m. ROLL CALL: MEMBERS PRESENT: Mayor Lund Councilmember Barnette Councilmember Saefke Councilmember Varichak Councilmember Bolkcom OTHERS PRESENT: Wally Wysopal, City Manager Darcy Erickson, City Attorney Scott Hickok, Community Development Director Darin Nelson, Finance Director James Kosluchar, Public Works Director Kay Qualley, Environmental Planner PRESENTATION: University of Minnesota Students of Environmental Sciences Policy & Management Class. APPROVAL OF PROPOSED CONSENT AGENDA: APPROVAL OF MINUTES: City Council Meeting of November 23, 2015. APPROVED. NEW BUSINESS: 1.Resolution Scheduling a Public Hearing on January 25, 2016, on a Proposed Amendment to the Fridley Charter, Chapter 6, Entitled Administration of City Affairs, and Directing Publication of the Text of the Ordinance in Full. APPROVED RESOLUTION NO. 2015-58. 2.Resolution Relating to (1) The Decertification of Tax Increment Financing District No. 9, and (2) The Decertification of Tax Increment Financing District No. 16. APPROVED RESOLUTION NO. 2015-59. FRIDLEY CITY COUNCIL MEETING OF DECEMBER 14, 2015 PAGE 2 3.Resolution Adopting the Amendments to the Multi-Jurisdictional All Hazards Mitigation Plan for Anoka County. APPROVED RESOLUTION NO. 2015-60. 4.Resolution in Support of 2016 SWAP Fee Increase. THIS ITEM WAS REMOVED FROM THE CONSENT AGENDA AND PLACED ON THE REGULAR AGENDA. 5.Resolution Receiving Report and Calling Hearing on Improvement for Street Rehabilitation Project No. ST2016-01. APPROVED RESOLUTION NO. 2015-62. 6.Motion to Approve Scope of Services from Bolton and Menk, Inc., for Preliminary and Final Design of the Main Street Trail and I-694 Bridge Project No. ST2015-21. THIS ITEM WAS REMOVED FROM THE CONSENT AGENDA AND PLACED ON THE REGULAR AGENDA. 7.Claims (170635-170890). THIS ITEM WAS REMOVED FROM THE CONSENT AGENDA AND PLACED ON THE REGULAR AGENDA. 8.Licenses. APPROVED LICENSES AS SUBMITTED AND AS ON FILE. 9.Estimate: Kuechle Underground, Inc. PO Box 509 Kimball, MN 56302 2015 Street Rehabilitation Project No. ST2015-01 Estimate No. 4…………………………………………………………..150,112.16 APPROVED. APPROVAL OF CONSENT AGENDA: Councilmember Saefke noted a correction in the resolution on page 30, second paragraph, third been line. It should read “. . . and City Staff has working . . ..” FRIDLEY CITY COUNCIL MEETING OF DECEMBER 14, 2015 PAGE 3 Councilmember Bolkcom asked for Item 6 to be removed and had a question on Item 4. She asked how much money out of the General Fund was used to subsidize the SWAP fee. Darin Nelson, Finance Director, replied the General Fund is not subsidizing recycling. In 2015, staff time was reallocated and now time is allocated to different funds to break even. Pam Reynolds, 1241 Norton Ave., asked for Items 4 and 7 to be removed. MOTION by Councilmember Barnette to approve the proposed Consent Agenda with the removal of Item Nos. 4, 6 and 7 and the correction to the resolution. Seconded by Councilmember Varichak. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY. OPEN FORUM: Nate Serie, 5072 Hughes Street, said he has been a long-time Fridley resident. He lives on Main Street and it is very noisy and traffic is excessive. The traffic starts as early as 4:00 a.m. and does not quiet down until after 7:00 p.m. Garbage trucks come between 4:00 to 5:00 a.m. Between the warehouse and currier businesses the traffic is excessive. It is like living next to the freeway. There are hundreds of large trucks going by every day, and the priority currier company throws their shipping tags out of the window littering the road. Mayor Lund asked if the traffic was constant and if the garbage trucks came early all the time. Mr. Serie replied the garbage trucks come early several days a week between 4:00-5:00 a.m. Scott Hickok, Community Development Director, said he would follow up with his concerns. Mayor Lund added that staff will talk to the police about saturation patrol or a speed machine to see if that will bring down the speeds. Police may also have to talk to businesses along there. We appreciate businesses in our community but understand your desire for reasonable privacy. Councilmember Bolkcom asked what the allowed times were for garbage trucks to begin pick up. Mr. Hickok replied 7:00 a.m. ADOPTION OF THE AGENDA: MOTION by Councilmember Bolkcom to adopt the Agenda with the addition of Item Nos. 4, 6 and 7. Seconded by Councilmember Saefke. FRIDLEY CITY COUNCIL MEETING OF DECEMBER 14, 2015 PAGE 4 UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY. 2016 BUDGET AND PROPERTY TAX PUBLIC MEETING: 10. Presentation of the 2016 City of Fridley Budget. Darin Nelson, Finance Director, said pursuant to the City’s Home Rule Charter, submitted tonight are the revised 2015 and 2016 budgets. This document contains information to provide the citizens of Fridley, elected officials and other interested parties with a description of the proposed municipal services and the investments for the upcoming year, as well as the means for paying for them. Mr. Nelson stated that as Fridley becomes a fully-developed community with a stable population, the ability to maintain, improve, or expand the types of services provided to our residents and businesses continues to evolve and presents new challenges. This budget reflects the changes necessitated by the City’s maturity, current and future fiscal restraints, and its attempts to respond to market pressure and citizen-driven requests though certain innovative but fiscally sound public service policies. Mr. Nelson noted one such example in the 2016 Budget takes place in the Police Department. Taking advantage of several retirements in top level positions, the Police Department eliminated one Captain position and added one Lieutenant position. The restructuring takes advantage of natural attrition and allows the department to better respond to the public safety needs of the community. Mr. Nelson said the City continues to monitor operational expenditures to achieve cost savings without negatively impacting service levels. If there was an overarching theme for the 2016 budget, it would be focused on maintaining service levels while providing reasonable compensation to employees. Mr. Nelson reported the 2016 General Fund budget is neither proposing any major new initiatives or services, nor any additional full-time equivalents. This is not to say that additional positions are not warranted. In the Police and Community Development departments, for example, the FTEs were reduced several years ago as a part of an austerity measure. These positions are needed, but the levy limitations prohibit including them in the budget. As with all budgets, there are restraints on resources that cause decisions to be considered. The trade-off in this case is ensuring existing employees are adequately compensated before adding additional employees. Mr. Nelson said in accordance with the City Charter and State Statutes, a preliminary budget, along with the proposed 2015 tax levy collectible in 2016 was adopted by the City Council on September 28, 2015. With some changes from the preliminary estimates, this budget includes property tax-supported funds (General, Debt Service, and Capital Projects) as well as all other operating or capital funds presented as special revenue and enterprise funds. FRIDLEY CITY COUNCIL MEETING OF DECEMBER 14, 2015 PAGE 5 Mr. Nelson stated the City’s overall financial condition mirrors that of the State’s. Fortunately for the City, the State has experienced improvements in the both its fiscal and economic climate. The State’s support and distribution of LGA continues to be on the City’s radar. Currently the City receives about $1.3 million, which is almost double the amount received in 2012, However, they are still about $700,000 less than amounts received back in the 1990s and early 2000s. Fridley’s practice is to dedicate all LGA to capital projects or other one-time related costs and to not rely on LGA for operational or recurring costs. Unfortunately, that practice will be modified moving forward. This budget reallocates $250,000 of LGA to the General Fund for operational purposes in 2016. Mr. Nelson said the City’s General Fund has Charter-imposed constraints that other funds do not. The levy increase is limited to the CPI of the prior year or 5%, whichever is less. The CPI for 2014 was 1.4% or an increase of about $146,000. The City’s operational costs are increasing at a rate higher than 1.4%. For instance, prior negotiated multi-year contracts stipulate 2% COLA adjustments for 2016. The City must do its best to remain competitive with other similar cities. Generally, Fridley pays below the average of comparable cities. A study conducted in 2015 indicated this condition was worsening, so the City felt compelled to increase salaries slightly above the rate of inflation, but at average with the increases taking place in the market. Mr. Nelson stated the result is City salaries are not losing further ground in the market. He said 2016 is a Presidential election year, which has an estimated cost of $55,000 that is fully supported within the General Fund. The $250,000 of LGA being reallocated to the General Fund is coming directly from the Building Capital Projects Fund. This reallocation is anticipated to be an annual reallocation over the next five years. There are currently $1.25 million of building projects that have either already been approved and are on hold, or are anticipated in the future. Depending upon future facility decisions, these projects may be eliminated. Mr. Nelson noted even with the additional $250,000 of LGA funds directed towards the General Fund, excess fund balance will be utilized to balance the 2016 budget. As of December 31, 2014, the City had a fund balance of about 55% of the 2015 budgeted expenditures. The General Fund’s budget policy indicates a balance in the range of 35 to 50%. The current balance of 55% equates to about $750,000 of surplus fund balance. So, there are funds available to support operations, but excess fund balance does not solve ongoing funding issues, and the percentage will actually fall if a balanced budget is achieved. Since expenditures tend to increase year over year, maintaining a certain fund balance percentage requires an annual surplus. That being said, the City does have a very healthy fund balance within its General Fund and should not be overly alarmed that this budget utilizes some of the surplus. Mr. Nelson said the overall property values in the City increased for the second year in a row. commercial/industrial and apartment values increased at about an 8% rate, while residential values remained basically flat. Distressed sales continue to decline, which is another positive indicator of an improved housing sector. Commercial redevelopment continues to be an economic driver with a couple high profile projects currently in the construction phase. FRIDLEY CITY COUNCIL MEETING OF DECEMBER 14, 2015 PAGE 6 Mr. Nelson noted that late last year, Moody’s Investors Services reaffirmed the City’s Aa1 credit rating and removed the negative outlook. Aa1 rating is the second highest rating issued by Moody’s and is realistically the highest credit rating the City can attain. Aaa ratings are reserved for cities with a much larger geographical footprint and a substantially larger tax base. The City’s Charter restricts the 2016 levy to an operational increase of 1.4%, which amounts to $146,200. Offsetting the increase is a debt service payment expiring this upcoming year. That debt service payment would reduce the levy by $172,000, which would result in a net reduction to the total levy. Mr. Nelson said that the City has an opportunity to prepay the debt service payments on two outstanding street improvement bonds. Prepaying these bonds will save almost $40,000 in interest expense over the next two years. Prepaying also allows the City the opportunity to better position itself for a potential facility bond in the future. This prepayment would increase the total levy by $466,228 or 3.97%. The financial impact to residents is expected to be less than $15 for a home with an estimated market value of $176,000 Mr. Nelson said that Staff prepared the Budget based upon a $12,200,835 tax levy which will sufficiently fund general operations, debt obligations, and capital projects. Again, the levy represents a $466,228 or 3.97% increase from the 2015 tax levy. As noted earlier, 1.4% is dedicated to operational and capital outlay and the remaining 2.57% or $315,204 is dedicated to prepaying existing debt service. This should be the final 2015 budget. Revenues are coming in higher because of increases in building permit revenues. Expenditures are expected to come in slightly above the original budget because of additional contracted services for inspections. They are anticipating a surplus of $394,000 over the original budget. Mr. Nelson stated the City has complied with the appropriate sections of the City Charter that require certain formats and information be contained within the budget document. The budget needs to be approved by Council and submitted to the County by the end of December. No action is required tonight. The budget is available on the City’s website under the Finance Department and is also contained in tonight’s agenda packet. Tonight’s meeting is a public meeting, and the public is welcome to comment on the budget. Councilmember Saefke noted on page 108 the final paragraph, second sentence, should read been “Fridley has always been…” Councilmember Barnette said years ago, the commercial industries paid the majority of the property taxes which had a favorable impact on the taxpayer. Mr. Nelson replied in the past, it was 60% industry and 40% resident and now it has flipped—to 60% resident and 40% industry. Fiscal disparities for commercial properties pay into this program and get money back from the program; this program is at a breakeven point. Councilmember Barnette noted a correction on page 122 on the graphs at the bottom it reads personalpersonnel and should be . FRIDLEY CITY COUNCIL MEETING OF DECEMBER 14, 2015 PAGE 7 OLD BUSINESS: 11.Second Reading of an Ordinance Amending Fridley City Code Pertaining to the Approval and Issuance of Business, Rental and Contractor Licensing; and Adopt Official Title and Summary Ordinance. Deb Skogen, City Clerk, said a review of the different licensing sections of the Code showed some licenses required Council approval, some approval by a specified individual and some were silent on approval. City Council and staff met in August to discuss the licensing process. Based on that review an ordinance was drafted providing for administrative issuance of some licenses. The first reading was presented to the City Council on October 26 and November 23. Ms. Skogen said some questions were raised at the first reading in Sections 4 and 5, about why there were so many days allowed prior to issuance of the licenses (45 days) and whether there was an appeal process available to an applicant if their license was not approved and issued administratively. After reviewing the Code, it was determined there would no longer be a need to wait 45 days to issue a license. Some of the licensing code allows for an appeal process, while others do not. Ms. Skogen noted that staff reviewed Sections 4 and 5 of the ordinance and have recommended changes to those sections. After the last meeting, a matrix was prepared and provided to the City Council showing which licenses had an appeal process. Due to changes in Section 4 of the ordinance, staff reviewed Chapter 11 and made an additional amendment to address some of the same issues as Section 4 to remain consistent. The changes to the ordinance are as follows: Section 1: Chapter 11. General Provisions and Fees Section 11.03 is amended to provide language for the sale of a business or the death of a licensee. This section would require a new licensee to apply for a license within 30 days while allowing the business to continue to operate. 2nd Reading – Amending Licensing Process Section 4 – Chapter 18. Motor Vehicle Body Repair Added the fire marshal to the reviewal/recommendation process Added in language about zoning process Repealed all language regarding a deficient application or transfer of a license Added language about the sale of the business and changing 60 days to 30 days for obtaining a new license Added language allowing license to expire if new application was not received within 30 days. Chapter 22. Music Festivals Amended Section 22.09 by changing the time period of issuance and approval from 45 days to 15 days. FRIDLEY CITY COUNCIL MEETING OF DECEMBER 14, 2015 PAGE 8 Ms. Skogen said staff recommends a motion holding the second reading of this ordinance. Councilmember Bolkcom noted on page 169 under 11.03; in the first sentence, remove the “. . . on forms furnished by the City.” language Mayor Lund noted on page 171 there is no separation under 18.1, in the second line, a coma should be added between “public safety director” and ‘fire marshall”. MOTION by Councilmember Saefke to waive the reading of the ordinance and adopt Ordinance No. 1324 on second reading, and adopt the Official Title and Summary Ordinance and order publication. Seconded by Councilmember Barnette. UPON A VOICE VOTE, COUNCILMEMBERS BARNETTE, VARICHAK, SAEFKE AND MAYOR LUND VOTING AYE, COUNCILMEMBER BOLKCOM VOTING NAY, MAYOR LUND DECLARED THE MOTION CARRIED ON A 4-1 VOTE. PUBLIC HEARING: 12.Consider an Interim Ordinance for the Prohibition of Approving and Siting New Telecommunications Towers and Wireless Telecommunications Facilities to Allow for the Study, Adoption or Amendment of Official Controls Related to the City’s Zoning Code MOTION by Councilmember Saefke to open the public hearing. Seconded by Councilmember Bolkcom. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY AND THE PUBLIC HEARING OPENED AT 9:01 Scott Hickok, Community Development Director, said in 1996, the Federal Telecommunications Act assured telecommunication providers that they would have a place in cities across the Country to locate towers.. A City could to some extent regulate location, height, material colors, landscape screening, etc. A City could not simply say, “No, not in our City.” Mr. Hickok stated in response to the Federal Act of 1996, the City Adopted an Interim Ordinance to allow staff time to study the impacts of towers, locations where they should be placed, size and type of structures permitted as towers, and proper screening for base equipment. At that time, the industry represented that the next wave of technology would eventually be coming and could replace the prominence of towers. After a 12-month moratorium, the study was complete Mr. Hickok said the City has a plan for towers and facilities that was designed, checked and double checked, by consulting Radio Frequency (RF) Engineers hired by the City. That plan has served the City well. The next generation is now rounding the corner. This will be a smaller FRIDLEY CITY COUNCIL MEETING OF DECEMBER 14, 2015 PAGE 9 series of facilities and devices that will be spread throughout a city and will help fill the voids, or “Black Holes” that currently exist for cell service providers. Mr. Hickok noted that like 1997, the City must now take time to get ahead of this generation of facilities and equipment by first understanding the technology, and second by evaluating acceptable locations for this latest evolution of telecommunication devices. The ordinance before Council will allow the statutory 12-month period to ready the City for its proper response to cellular and other wireless technology that would enjoy the benefits of this new technology and will likely be making permit applications after our interim Ordinance has run its term. Mr. Hickok stated that an extension is possible allowing a few additional months to study, if necessary. Staff hopes to have the study completed within the first 12-month timeframe. Staff recommends that the City Council hold its public hearing and receive comment. Further staff recommends approval of the first reading of the interim ordinance and its companion resolution to allow staff to commence study prior to the second reading. Councilmember Bolkcom asked how much it is to hire the consultants and if this was a budgeted item. Mr. Hickok replied that this was a $100,000 budgeted item in the first go around. This time will be a small fraction of that. It is not budgeted. Staff does not know how much it will cost, but speculates it will be between $10,000-15,000. There is professional service money to use for this research project. Councilmember Bolkcom asked what the timeline was to have it completed. Mr. Hickok replied that they do not plan to take the entire 12 months if they do not have to. Staff will bring this back to the Planning Commission and Council within the 12-month window. Councilmember Bolkcom asked how many towers were on public vs. private property. Jim Kosluchar , Public Works Director, replied 2/3 are on private property and the rest were on public property. Mr. Hickok added that staff wants to utilize properties to get coverage in the City. Currently there is full coverage for the city in locations that make sense. Staff does not focus on private vs public property. If there is proof that a location does not work, staff can come up with a request to move the tower to another location and they are abundantly fair. Staff does not want to see new poles up and tries to put towers up in areas where they already exist. Pam Reynolds, 1241 Norton Ave., asked if this would have an effect on Century Link’s request for a franchise. Mr. Kosluchar replied that the Century Link proposal is for underground fiber optic. FRIDLEY CITY COUNCIL MEETING OF DECEMBER 14, 2015 PAGE 10 MOTION by Councilmember Bolkcom to close the public hearing. Seconded by Councilmember Saefke. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY AND THE PUBLIC HEARING CLOSED AT 9:12 P.M. NEW BUSINESS: 13.First Reading of an Interim Ordinance for the Prohibition of Approving and Siting New Telecommunications Towers and Wireless Telecommunications Facilities to Allow for the Study, Adoption or Amendment of Official Controls Related to the City’s Zoning Code MOTION by Councilmember Bolkcom to waive the reading of the ordinance and adopt the ordinance on first reading. Seconded by Councilmember Saefke. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY. Resolution Authorizing and Directing the Study of Interrelated Planning Factors to 14. Facilitate Planning and Regulation of Telecommunication Towers and Wireless Telecommunications Facilities and Authorizing City Staff to Engage the Services of Consultants for the Same, for the Protection of the Health, Safety, and Welfare of the Citizens of Fridley. MOTION by Councilmember Saefke to adopt Resolution No. 2015-63. Seconded by Councilmember Bolkcom. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIOUSLY. 4. Resolution in Support of 2016 SWAP Fee Increase. Pam Reynolds, 1241 Norton Ave., asked what the amount of increase was, as that information was not in the agenda packet like it has been in the past. Mayor Lund replied the utility bill would increase to $7.86 per household, per quarter, or 11 cents over last year’s rates, if the rate was raised 1.4%. Ms. Reynolds asked what the new recycling cost would be. Mayor Lund replied that the new SWAP fees could be found on page 31. MOTION by Councilmember Bolkcom to adopt Resolution 2015-61. Seconded by Councilmember Saefke. FRIDLEY CITY COUNCIL MEETING OF DECEMBER 14, 2015 PAGE 11 UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY. 6. Motion to Approve Scope of Services from Bolton and Menk, Inc., for Preliminary and Final Design of the Main Street Trail and I-694 Bridge Project No. ST2015-21. Councilmember Bolkcom asked on page 56 what the extra hourly basis was. Jim Kosluchar, Public Works Director, replied that is handled by staff; some are assumption, exclusions or inclusions. Councilmember Bolkcom asked if they were doing the traffic control management plan. Mr. Kosluchar replied yes, that is a big piece of design work and will shut down I-694 for about 8 hours. Councilmember Bolkcom asked if this was prepared by a contractor. Mr. Kosluchar replied that the designer will develop the set of traffic control plans that fulfill the requirement of MnDOT and other reviewing agencies. The contractor can modify the plans for their operation and submit a final traffic control plan. Councilmember Bolkcom asked on page 58 task, 1c, if the last sentence “. . . end of June, 2016, for a late summer 2015 bidding process . . ..” should be corrected to read “. . . for a late summer 2016 bidding process . . ..” Mr. Kosluchar replied correct. Councilmember Bolkcom asked on page 61 if more designs would be brought back. Mr. Kosluchar replied that there are more details that we had to discuss at today’s workshop. The workshop was a general sense of what the options are. Councilmember Bolkcom asked on page 63 the last sentence in the first paragraph; she thought they were closing some of it down. Mr. Kosluchar replied that does seem to contradict that but since it will be closed, no traffic analysis is needed so traffic will be zero during the shutdown period. Councilmember Bolkcom asked on page 64 who pays those fees. She said she was trying to add up numbers as there seems to be a lot of extra fees. Mr. Kosluchar replied that the right-of-way permit is in the hundreds of dollars and is not a large dollar amount. Some are city permits and no fee will be associated with those permits. FRIDLEY CITY COUNCIL MEETING OF DECEMBER 14, 2015 PAGE 12 Councilmember Bolkcom asked what a DCP submittal is. Mr. Kosluchar replied Delegated Contract Process; this is the process where the City can provide federal oversite for the project. Councilmember Bolkcom asked on page 66 if this comes in way above what we can afford if it will come back to Council and have alternatives. Mr. Kosluchar replied yes; there would be updates brought to Council before it went out for bids to see where we are at. Councilmember Bolkcom noted that on page 55 the cost is $214,323. She asked with all the additional costs how much more the project would cost. Mr. Kosluchar replied that the project may come in underneath that amount as some tasks are not to exceed hourly tasks. MOTION by Councilmember Bolkcom to approve the Scope of Services from Bolton and Menk, Inc., for Preliminary and Final Design of the Main Street Trail and I-694 Bridge Project No. ST2015-21. Seconded by Councilmember Saefke. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY. 7. Claims 170635-170890. Pam Reynolds, 1241 Norton Ave., noticed that there were funds used to purchase parts for vehicles and asked if the City had licensed mechanics in Public Works to work on the vehicles. Mayor Lund replied yes, three of them. Ms. Reynolds asked about the asbestos survey report for Park Services and where was asbestos in our city parks. Mayor Lund asked Ms. Reynolds to give him her questions and he would respond to them. MOTION by Councilmember Bolkcom to approve the claims as submitted. Seconded by Councilmember Saefke. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY. FRIDLEY CITY COUNCIL MEETING OF DECEMBER 14, 2015 PAGE 13 15.Resolution Providing for Water, Sewer & Storm Water Utility Rate Changes. Darin Nelson, Finance Director, stated that staff worked with the 5-year pro forma statements in order to determine the breakeven point for all three of the Utility Enterprise Funds for 2016. In addition, staff also updated the 20-year long-range forecasts to aide in estimating both long-term operating and capital needs. The 20-year forecasts also aid in projecting future rate increases. These long-range forecasts were presented to Council at the September budget work session. The goals of the long-range forecasts are to enable the utility funds to be self-sustaining without relying on debt to fund ordinary capital outlay and to maintain low to moderate rate increases in the future. Mr. Nelson reported that 2014 was the third consecutive year of 8% increases, 2015 was reduced to a 5% increase. We increased rates in 2012-2014 in order to “catch up” with growing costs, specifically capital costs. These rate increases have helped stem the tide given the fact we have not issued debt since 2010 in the water fund. Due to the recent wet springs and summers, and potentially other factors such as an aging and more diverse population, the City is experiencing a decline in water sales. This decline in water sales has significantly mitigated our previously projected revenues. Water sales have decline almost 15% since 2012. Mr. Nelson stated that prior assumptions were based off of those higher consumption amounts which has a detrimental effect on our cash reserves even with our increased rates. Met Council is recommending residential consumption at a conservative rate of 75 gallons per person per day, which many cities are well above. Fridley’s residential consumption for 2014 is calculated at about 65 gallons per day. In addition to decreasing sales, water production costs are anticipated to increase 10% or about $80,000 per year due to stopping the flow of water from New Brighton. Mr. Nelson said the City’s utility infrastructure has substantial fixed costs in just providing access to service for our residents and businesses. Having a rate structure that it so heavily dependent upon variable consumption levels is problematic. A utility rate analysis and potential rate restructuring is planned for 2016 with a goal of trying to find a balance between fixed and variable fees. Staff is recommending a 15% increase in water rates for this upcoming year. Mr. Nelson noted that ideally it would be nice to moderate the rate increase in lieu of the rate study, but unfortunately our cash reserves cannot afford a year delay and would likely cause future rate increases to be compounded even further. An increase of 15% equates to about $27.17 annually for an average residential water user. As expected with a decrease in water sales, our gallons billed for sewer also decreased in 2014. MCES measured our flow for the year at 1.68 billion gallons, which is a decrease of 4.8% MCES system wide flow decreased 6.4% MCES costs are allocated based on each city’s contributions to the system Mr. Nelson stated that since our flow did not decrease at the same rate as the entire system, we will be absorbing a larger portion of the bill for this upcoming year. The MCES base charge is increasing 5.4%, so with our added share of the pie, the City’s 2016 MCES charges are FRIDLEY CITY COUNCIL MEETING OF DECEMBER 14, 2015 PAGE 14 increasing by 7.2%. MCES has provided us with notice that 5+ percent increases can be expected for the next few years as their infrastructure continues to age and is in need of repair and replacement. The MCES charge accounts for almost 80% of the operational budget for the Sanitary Sewer System. Mr. Nelson said this utility has major operating and infrastructure costs just to maintain the service no matter how much or how little flow passes through our system. A rate study with the potential for a rate restructuring is a real need. To offset the increasing MCES charges along with future higher increases, staff is recommending a rate increase of 9% which equates to an annual increase of $35.36 for an average household. This fund is now bearing its share of the weight by having staff allocated to the operational costs this past year. This fund also experienced a large rate increase this past year helping to stabilize the fund’s cash balance. Mr. Nelson said that in addition, as part of the cleanup process of implementing a new utility billing system, all parcels within the City were reviewed to ensure the correct acreage and rate were being applied. Several discrepancies were noted and corrections now in place. These corrections will increase annual revenues by $125,000. Staff is recommending no rate increase for storm water this upcoming year. Recommended rate increases are as follows: Water – 15% or $27.17 per year for the average household* Sewer – 9% or $35.36 per year for the average household* Storm Water – 0% per year per residential property Estimated annual additional cost for all three utilities = $62.53 or $15.63 per quarter - Average household is based on 20,000 gallons per quarter Staff recommends approval of the Resolution Providing for Water, Sewer & Storm Water Utility Rate Changes. Mayor Lund noted that Fridley is already below the recommended average of 75 gallons because residents conserve water; he asked why the sewer use is not decreasing. Mr. Nelson replied that 75 gallons is on residential use and sanitary includes commercial accounts so this scenario does not compare apples to apples. Pam Reynolds, 1241 Norton Avenue said she does not like the rate increase. People are encouraged to conserve water and then when they do they are hit with a rate increase. The same thing happens with gas for home heat. The consumer is being penalized for doing what they are asked to do. Rate increases also make the fund balances look good when we go forward with building a new city hall. It would only take 440 signatures to put this on the ballot and ask to put utilities back to Charter to take control of the CIP. This was removed in 2007 and there has been an increase every year. FRIDLEY CITY COUNCIL MEETING OF DECEMBER 14, 2015 PAGE 15 Mayor Lund replied that everyone is penalized and because of conservation the fees will have to be increased. Fridley has an aging infrastructure that requires maintenance. The City took an $80,000 hit with the shut off from New Brighton water alone. He said he agrees with Ms. Reynolds’ comments about the unfairness. All accounts are separated and do not become part of the General Fund. Water, sewer and storm are used for only things related to that and has nothing to do with adding a city hall. Ms. Reynolds asked what happens if the fund balance looks bad when the City goes to bond. Mayor Lund replied that the City may get a better rate if there are fund balances but they look at the General Fund. Ms. Reynolds asked why 15% was added to the water fixed charge and 9% to the fixed charge on sewer. She asked if it really went up 15% or if it should be a 2% cola raise. Mr. Nelson replied that there are fixed costs and variable costs. In the past, rate increases were the same for fixed and variable costs. Mayor Lund replied that the rate study was appropriate this year as we missed the mark. Too many other variables came into play. Projections proved to be not valid, so there is a 15% increase on water. Other cities have more fixed costs associated with bills. A variable cost is based on water usage but the money all goes into the same pot. In the past, there were reserves and water rates were not raised for a time but now if rates are not raised, the City will go in the red. Councilmember Bolkcom added that if people conserve water with the variable rates they will pay less per gallon. Infrastructure is very expensive; like to reline a sewer. The increase is $62 a year or $5 a month. MOTION by Councilmember Barnette to adopt Resolution 2015-64. Seconded by Councilmember Saefke. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY. 16.Informational Status Reports Wally Wysopal , City Manager, stated that City Hall and Public Works will be closed on December 24 and 25. On December 28 there will be an open house from 5-7 to answer questions about the current conditions and future of Fridley City Hall and Public Works. ADJOURN: MOTION by Councilmember Barnette to adjourn. Seconded by Councilmember Varichak. FRIDLEY CITY COUNCIL MEETING OF DECEMBER 14, 2015 PAGE 16 UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY AND THE MEETING ADJOURNED AT 10:02 P.M. Respectfully Submitted, Krista Peterson Scott J. Lund Recording Secretary Mayor