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CHM 07/24/2003 - 00027145CITY OF FRIDLEY CHARTER COMMISSION SPECIAL MEETING July 24, 2003 CALL TO ORDER: Chairperson Findell called the Charter Commission meeting to order at 6:15 p.m. ROLL CALL: Members Present: Suzanne Alvite Warren, Don Findell, Anita Gerrity, Harry Heck, Nancy Jorgenson, Deborah Monden, Francis Van Dan, Suzanne Warren, and Dale Warren Members Absent: Char Fitzpatrick, Craig Gordon, Bill Holm, Janet Johnson, Cindy Soule Others Present: Deb Skogen, City Clerk/Staff Liaison William W. Burns, City Manager Jon Haukaas, Public Works Director Tim Werner, guest Malcolm Mitchell, guest APPROVAL OF AGENDA: Commissioner Jorgenson requested that a discussion of the levy referendum for Springbrook Nature Center be placed on the agenda for discussion. Commissioner Jorgenson MOVED and Commissioner D. Warren SECONDED a motion to approve the agenda as amended. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON FINDELL DECLARED THE MOTION CARRIED UNANIMOUSLY. DISCUSSION OF PRPOSED CHARTER AMENDEMENT TO CHAPTER 7 Mr. Burns, City Manager, reviewed the need from the city's perspective as to why a charter amendment was needed. He stated the current language specifically requires increases in utility rates be no more than 5% or indexed to the rate of inflation, whichever is less. He explained while limitations work some years, it does not work for others because many costs are outside of city control. Some of the problems are the increasing charges passed on by the MCES; water usage cannot be controlled; some summers are wetter than others providing lower water usage or less revenue to the fund; and most of the water and sewer system is underground and we cannot always easily predict when there may be a break or additional maintenance or replacement is needed. Mr. Burns said that the budget shows a steady estimated deficit in the Water and Sewer Fund over the next five years. Because of the current language in the charter, the city cannot raise the rates enough to recapture their costs. He noted Fridley's rates are lower than surrounding communities and taxes in the city have historically been low because the City Council has been good stewards with the city's money. Mr. Tim Werner, a guest, asked why the needed repairs did not come from the reserve. Mr. Burns explained the dollar amount shown in the reserve does not just account for cash, it also accounts for fixed assets. He said there was approximately $2.5m in cash on an annual basis which did not accrue because the money is used to fund maintenance, replacement and repairs. Adopted 11 -24 -2003 SPECIAL CHARTER COMMISSION MEETING OF JULY 24, 2003 PAGE 2 Commissioner Van Dan commented storm water was subject to the weather but sewer was not. She said there had been no major expansion other than Medtronic and questioned why there would be a change in water. Mr. Burns said the water system was separated into three areas and storage tanks were needed to store water to provide the service to the residents. Jon Haukaas, Public Works Director, explained the Capital Improvements Projects planning process. He said that the Marian Hills stand -pipe had been inspected in 1997 and had been budgeted for $180,000 in repairs this year. He said the stand -pipe has a 50 -year assumed life and it was at 50 years. He explained the repairs completed in the last 15 years and explained the inspection completed this year found they could replace the liner and fix the stand- pipe for $650,000 to give it another 10 -15 years, or build a new one of steel to last 75 years for a cost of $550,000. If it was replaced it could be taken down during the low usage months in October/November and be replaced by the following spring. Mr. Werner again asked why the replacement funds were not set aside to replace the stand -pipe. Mr. Burns explained there was money set aside for the depreciation of fixed assets, but those funds may be needed for unexpected expenditures. Commissioner Alvit6 Warren said depreciation was different than a reserve. Mr. Burns said that is money set aside, but that the cash balance does not reflect the value of the fixed assets. He had come to the Charter Commission for a procedural amendment change to the charter and was not in a position to tell the Charter Commission whether the rates should be increased or not, or what the increase should be, as that was the decision of the City Council. Commissioner Heck asked if Mr. Burns was recommending a certain set of fees be placed in a different subsection, what would prevent him from coming back and asking for more. Mr. Burns said he did not know if there were would be any other types of fees in the future or not, but was asking them to consider the merits of this request. Commissioner Jorgenson said if the amendment was passed, the City Council could change the rates to anything they wanted. Mr. Burns said, again, historically the City Council has shown to have been responsible stewards and residents could change the make -up of the City Council at the ballot box. Mr. Werner said the ballot box did speak because the Charter Amendment passed due to a problem of trust. Mr. Werner said it was never the intention of the committee to have utility rates included. Chairperson Findell said he was surprised the amendment was needed because he thought when they amended the petition language items considered pests were taken out. He said there was another section in the Charter related to utility funds stating that the city could not make a profit and could only charge fees based on the cost of the service. He supported the amendment to help make the business of the city easier. Commissioner Heck said the lower cost to the residents was a benefit to live in the city and what would stop the City Council from raising them more. Mr. Burns said the city needed to charge more to cover the cost of mandates and maintenance. Mr. Heck felt that there would be little information sent to the residents and there would be little public input on this issue. He wondered what the city was prepared to do if they did not recommend the amendment and felt they should not be voting on the issue due to the other five members being absent. Mr. Burns said he understood the intent of the group was not to place restrictions on the utilities. He felt the city had good rationale due to the uncontrollable costs beyond the city's control. Commissioner Van Dan said the Charter Commission was there to protect the city's constitution and reviewed previous events that had happened. Commissioner Van Dan had worked with the City Manager when the Council set the mill rate on a yearly basis, but when legislation changed to tax capacity she had worked with the Finance Director. After the franchise fees were defeated she helped lead the charge on the petition to change the charter in 2000. Adopted 11 -24 -2003 SPECIAL CHARTER COMMISSION MEETING OF JULY 24, 2003 PAGE 3 Commissioner Alvit6 Warren wondered why the city didn't challenge the petition in court when it was approved by the people. She felt the Charter Commission had a larger responsibility to the city and voters rather than the City Council. She said she understood the economic impacts, but felt it would be a problem to vote to amend the Charter because it can cause more distrust. Mr. Haukaas asked if amending the charter now might be a step to creating that trust with the City Council. Chairperson Findell said he heard a general consensus from the members they would prefer to see the issue decided by the voters. Mr. Burns said he would go back to the City Council to let them decide the action that would be taken. He said the current language micromanages the city and has the opposite effect of what it was meant because the City Council has to levy to the maximum now because of the limit that has been placed on them, which was similar to what the state was doing with levy limits. If the city does not levy the maximum, the base becomes smaller and we will be more limited with what can be levied and may not be able to balance the budget. Prior to the amendment in 2000, the city had only increased the levy twice in fourteen years. Commissioner Van Dan defined a fee as something you have to pay for a minimal service to cover administrative costs and a charge was the cost for the amount of service used. Commissioner Heck wondered why the tank crept up on them and why it was worse than thought. Mr. Haukaas said there is a five -year cycle used to inspect infrastructure and they had anticipated five more years use from the stand -pipe, however, the inspection showed it was worse than anticipated. Mr. Burns said it was unfair to portray the stewardship of the infrastructure in a poor light because he felt it was anything but that. Mr. Haukaas explained the additional $370,000 needed to replace the stand -pipe had not been budgeted, as well as an $800,000 repair project to revamp Commons Plant for the removal of radium due to the Federal mandate. He said with the anticipated deficits in the water and sewer funds, they would not be able to bond for the additional $1,170,000 that would be needed to do the two projects. In order to bond, you have to show that you have a reliable revenue stream, and our projections show that we cannot raise the funds; therefore, we could not bond. Mr. Haukaas said due to the inflation rate and low interest earnings, the city was in more difficulty. Historically water and sewer rates have been low and a change to the charter would keep the infrastructure working properly and allow lower rates to continue in the future. Commissioner Jorgenson wondered if the project could be assessed. Mr. Burns felt it would unfair to assess just one part of the city for the needed replacement and was not sure he could assess the whole city because you do have to show a benefit. Commissioner D. Warren asked what steps would be taken if amendment not passed. Mr. Burns said the City Council would have to decide if they would initiate a charter amendment or fee increase to send to the voters. Mr. Werner again asked about the $29m in reserve and why those funds could not be used. Mr. Burns_explained that $17 -18m was in the Capital Improvement Fund for future repairs and maintenance on streets, parks, working capital, replacement of fixed assets and for the police department. About $14m was in the water and sewer funds, which was dwindling. He said the city has had a good record because of interest investments, a good bond rating and the fact that the city pays for its capital with cash thereby eliminating an additional levy on property taxes. Commissioner Heck MOVED and Commissioner Van Dan seconded a motion to adopt the proposed language presented by staff to amend Chapter 7 of the Fridley City Charter. Commissioner D. Warren requested a roll call vote. Those voting nay: Commissioners Alvit6 Warren, Gerrity, Heck, Jorgenson, Van Dan and D. Warren. Those voting aye: Commissioners Monden and Findell. The motion failed 6 -2. DISCUSSION OF LEVY REFERENDUM FOR SPRINGBROOK NATURE CENTER Adopted 11 -24 -2003 SPECIAL CHARTER COMMISSION MEETING OF JULY 24, 2003 PAGE 4 Commissioner Jorgenson said that the Springbrook Foundation was asked to submit an advisory levy referendum at a meeting with the City Council. After doing research, it was determined this could not be done by the Foundation as the City Council is the only body that can levy taxes. She said it was suggested that fees be created for residents and non - residents for use of the park, but would have to go to the voters as it would be a new fee. The Foundation has reserved the right to propose an ordinance amendment to change the city charter in reference to use of city parkland. ADJOURNMENT: Chairperson Findell declared the meeting adjourned due to the lack of quorum after two commissioners left the meeting for the evening at 8:09 p.m. Respectfully submitted, "dAeomr? - Debra A. Skogen, City Clerk/Staff Liaison Deborah Monden, Secretary Adopted 11 -24 -2003