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CHM 07/18/2005 SPECIAL - 00027097CITY OF FRIDLEY CHARTER COMMISSION MEETING JULY 18, 2005 CALL TO ORDER: Chairperson Jorgenson called the Charter Commission meeting to order at 7:04 .m. ROLL CALL: Members Present: Peter Borman, Gary Braam, Don Findell, Anita Gerrity, Bill Holm, Nancy Jorgenson, Kathleen Linder, Pam Reynolds, Cindy Soule and Francis Van Dan Members Absent: Char Fitzpatrick, Craig Gordon, Carol Hoiby and Janet Johnson Others Present: Deb Skogen, City Clerk/Staff Liaison Richard Pribyl, Finance Director Scott Lund, Mayor Peter Eisenzimmer, 6535 Oakley Drive, Fridley, MN 55432 APPROVAL OF AGENDA: Commissioner Borman MOVED and Commissioner Braam seconded a motion to approve the agenda. Commissioner Findell noted that the Commission would be approving the May 23, 2005 meeting minutes not the April 25"' minutes and it was agreed the meeting date would be changed. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON JORGENSON DECLARED THE MOTION CARRIED UNANIMOUSLY. APPROVAL OF MAY 23, 2005, CHARTER COMMISSION MINUTES: Commissioner Borman MOVED and Commissioner Gerrity seconded a motion to approve the May 23, 2005, Charter Commission Minutes. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON JORGENSON DECLARED THE MOTION CARRIED UNANIMOUSLY. 1. ADMINISTRATIVE MATTERS Ms. Skogen noted that there is one vacancy at the current time. 2. DISCUSSION AND RECOMMENDATION TO CITY COUNCIL ON CITY COUNCIL PROPOSED CHARTER AMENDMENT Chairperson Jorgenson had invited Mayor Scott Lund to the meeting to provide the City Council's perspective on the proposed ordinance. She said that the Charter Commission meeting would end its discussions at 8:30 p.m. and that if the Commission could not make a recommendation, the neat meeting would be held on August I't at 7:00 p.m. Adopted September September 26, 2005 CHARTER COMMISSION MEETING OF JULY 18, 2005 PAGE 2 Mayor Lund said State law requires the Charter Commission to make a recommendation to the City council regarding their proposed amendment to Chapter 7 of the City Charter to help move the issue forward. He said that Chapter 7 was amended as a result of a petition. He said that the water, storm water and sewer enterprise funds were losing money, and not as a result of any inefficiency of the staff or city council. Mayor Lund described the enterprise funds stating the 2006 proposed deficit and the total deficits over the past three or four years: Fund 2006 Deficit Overall Deficit Water ($200,000) ($724,000) Storm Water ($10,000) ($154,000) Sewer ($168,000) ($280,000) Mayor Lund noted the reserves had been set aside in the enterprise funds over the past 50 years to help pay for the replacement of the infrastructure, replace of equipment or capital improvements. If the city continued the same practice it has for the past three or four years, the city would most likely run out of the reserves and would have to borrow to complete any capital improvements. Rick Pribyl, estimated the city's enterprise reserves could possibly be depleted in 12 to 13 years; and the general fund in 4 to 5 years, if the city continued to use the same practices. He said we may even see increases to the charges due to increased federal or state mandates along with increased costs to the Metropolitan Council on Environmental Services (MCES). He said currently 73% of the charge to customers of the sewer portion of their utility bill goes directly to MCES and that the city receives about 27% to maintain the system. He said while the Charter restricts the rate increase by 5% or the rate of inflation, whichever is lower, increases from the state and others have been in the double digits. Mr. Pribyl said they could not take money from the general fund to pay for the utilities. Mayor Lund said the city was very prudent to have saved money for replacement of its infrastructure. He said by exhausting the reserves the city would have to borrow money by bonding to pay for any improvements, which would increase everyone's taxes. Chairperson Jorgenson wondered about the closed bond fund Mr. Pribyl said the closed bond fund had already been used by transferring about $2 million over the past four or five years to the general fund and was transferring an additional $250,000 to the 2006 general fund. He said those funds are usually set aside and put in separate funds to pay for capital improvements for possible catastrophic needs. He said the city receives property taxes from the state twice a year, or every six months and the city would need to have six months worth of savings to pay their bills. Commissioner Van Dan asked how the Marion Hills standpipe would be paid for when it was replaced, as City Engineer Jon Haukaas had said in 2004 that it needed to be repaired or replaced. Mayor Lund said the standpipe had been replaced and had been paid for out of the water fund reserves, as it was intended to do. He said other entities like corporations or tax exempt properties are receiving those benefits at the expense of the taxpayers helping to offset the fees as well. Mayor Lund reminded each Commissioner they were here to decide about the city council proposed Charter amendment. He said some might say voters spoke very clearly to restrict taxation, but they may not have meant to restrict the enterprise funds, which has resulted due to the amendment to the Charter as a result of the 2000 petition. Commissioner Soule wondered why people were paying a fee on their water bill rather than a rate, as expressed in Chapter 11 which states the rates that may be charged for utility services. Mayor Lund said that the restriction of 2000 had caused the utilities to be included as a fee but wondered whether or not the intent was to include utility fees in the original petition that was approved. Commissioner Soule said a rate was different than a fee. Adopted September 24, 2005 CHARTER COMMISSION MEETING OF JULY 18, 2005 PAGE 3 Commissioner Borman said Chapter 7 does not say rate, it says utility charges. He said you could go back to Chapter 11 and say the City can increase its rates, but that Chapter 7 restricts the increase in the rate. Mayor Lund said there was a lot of discussion in the ad hoc group and that the council was looking for clarification now. Commissioner Holm said Chapter 11 allows the city to set rates, but Chapter 7 says you can only increase the rates by the rate of inflation or 5 %, whichever is less. He did not think it was in conflict and that it was very explicit in that it included utility charges. Commissioner Van Dan felt it was important, like Representative Krinkie, to have a glossary and define what certain types of words meant. She said if the Commissioners could not understand the meaning, how could an ordinary citizen understand. Water is a commodity which the city sells, it is not a fee, charge or rate. Commissioner Van Dan said that no one can ask the City to lose money or make a profit in providing the service, only that they recoup their expenses. Commissioner Van Dan felt the Council should enact laws that could be enforceable and claimed election fraud occurred when the charter was changed by the ad hoc committee. Chairperson Jorgenson said there was an ad hoc task force that met, of which she and Commissioner Van Dan were on, who made a recommendation to the Charter Commission, who in turn recommended an amendment by ordinance to the City Council. Commissioner Holm agreed the ad hoc committee recommended an amendment by ordinance to the Charter commission which went to the City Council for its adoption. Commissioner Braam said the City Council sent language to the Charter Commission and asked for the Commission's recommendation. He agreed there was a problem and that it needed to be fixed because the city was losing money and it was now up to the Charter commissioner to make a recommendation to the council on their proposed amendment by ordinance. Commissioner Braam MOVED and Commissioner Holm seconded a motion to recommend supporting the ordinance as written to the city council. Commissioner Gerrity wondered if there was a way to change the wording so people knew it would be used strictly for water services only. Chairperson Jorgenson wondered how in 2001 the city council could not adopt a resolution requiring a special election allowing the citizens to vote on an increase in the rates and that now they could have a special election to amend the Charter. Ms. Skogen said the increase in the water rates was governed by the City Charter which expressly states next general election whereas the charter amendment is governed by state law, thereby allowing a special election. Commissioner Reynolds said she had found an Attorney General opinion about a case in Breckenridge, stating they could charge what they thought was reasonable and put any extra back into the general fund. She thought Fridley should have a Public Utilities Commission (PUC) to regulate the rates. Commissioner Reynolds also said there was a cable committee at one time, that there no longer is a committee and that one of the councilmembers was appointed to help mediate the cable franchise. She wondered what happened to the cable committee and why there was no PUC. She wondered if an amendment would be necessary if there was a PUC. Mayor Lund felt the discussion of the cable committee was non germane for this discussion and that it could be discussed at another time. Adopted September 24, 2005 CHARTER COMMISSION MEETING OF TULY 18, 2005 PAGE 4 Commissioner Findell felt Section 11. 07.2 limited the Council's ability to make revenue to transfer funds to other accounts and read that section. Commissioner Van Dan said she could not support the amendment as submitted to the Charter Commission. She felt the Charter was a work in progress and the Charter Commission should review the whole charter and define the verbiage so that it was consistent throughout the Charter. Commissioner Borman wondered how going through the whole charter helped fix the problem the City had now. Mayor Lund said they were trying to keep it simple so they are not accused of doing something underhanded or so confusing to allow the Charter language to change. Chairperson Jorgenson said the petition committee initiated the change due to the franchise fees adopted on gas and electric. She felt the biggest problem this year was there wasn't a public hearing held for the public to address the issue and the first reading was passed very late in the evening. She wondered how the City was going to get the information out to the public. Mayor Lund said the city would do everything it could within the campaign laws to educate the voters by using cable, the city newsletter, and hopefully the Fridley Sun - Focus. He said the city could not use taxpayer money to influence the voters, but it could be used to educate people about the issue. Commissioner Van Dan said the city council might consider leaving Chapter 7 alone and adopting a separate ordinance stating water is a commodity and not subject to Chapter 7. Commissioner Holm disagreed and said it was still a utility. Mayor Lund did not think it was the right thing to do. He said there was a problem as part of the outcome of the restrictions and understood the people did not want to give any power to the city council. He said the city had one of the lowest rates around and the city was not trying to get additional money. Commissioner Reynolds was not sure you could create an ordinance that would be in conflict with the Charter. Commissioner Findell said that utility fee was added after the fact and was not part of the original petition language of 2000. He agreed it should be voted on this year and liked the language in Section 3 of the ordinance. Commissioner Soule asked if it was too much power to give to the city council in Chapter 11 to allow them to adjust the rates so they are just and reasonable. Mayor Lund said there was a difference of opinion on what was reasonable and the city would have to research the issue and possibly have a rate study done. Commissioner Reynolds asked what the first increase might be if the ordinance was adopted and whether or not the city took into consideration how much money went to the Met Council, why their fees were so high and what they did with the money. Mayor Lund said those were all good questions. He said the city has lost revenue in the double digits but had not determined what the increase would be and that it would be good for citizens to question and research what and why the MCES needs that much money to operate the services they provide. Mr. Pribyl said a study of 33 cities showed Fridley was the 3 d lowest in utility rates. He said if an increase was made it would be phased in over time and would not be a double digit increase in the first year. Mayor Lund said historically Fridley always had low fees and he could not ask other citizens do pay any more than he would be willing to pay because he was a citizen here as well. Adopted September 24, 2005 CHARTER COMMISSION MEETING OF JULY 18, 2005 PAGE 5 Commissioner Gerrity asked if the motion was approved and sent back to the City Council, whether or not the City Council intended to go forward to increase the rates. Mayor Lund said if the voters approved the amendment, increases would be in incremental stages to get the funds to the position where they break even and not to make money. Commissioner Gerrity asked if the rates for the services were for the services that are actually used. Mayor Lund said it was the cost of the service, plus a small portion of which would go into the enterprise find so the city would not have to bond for their capital improvements. Commissioner Braam also asked if they knew what the increase would be and Mr. Pribyl said that the increase would be enough to allow the city to break even and not to make money. Commissioner Findell felt the city council should have the authority to determine how to run a business financially and keep it financially stable. He said he does not intend to micromanage the city council but would rather elect a representative that would take that responsibility. Commissioner Braam said the city council might be able to sell the amendment by agreeing not to increase the rates by double digits. Mayor Lund said that he would take that message to the city council. Chairperson Jorgenson asked Mr. Pribyl if the increase they were going to send to the voters in 2001 was 9 %. Mr. Pribyl stated that the needed increase was more like 12% but it was determined not to have a double digit increase. She then asked Mayor Lund if the Chamber of Commerce was aware of the proposed amendment and possible increase in fees and Mayor Lund said yes they knew and were in agreement that it was necessary. Commissioner Borman asked if the enterprise funds could transfer money into the general fund. Mr. Pribyl said that money could be moved if the city council adopted a resolution. He stated that with most funds with the exception of bond debt money could be moved this way. Mr. Pribyl said in the 24 years he has been with the city, he had not seen any operating transfers from the utility funds to the general fund, only from the liquor fund. Mayor Lund said that Moody's has noted the city carries the highest rating it can, but has placed the city on a watch list due to the decreasing reserves. If we lose this rating rating, it will cause our interest rate to rise and then everyone more money. Chairperson Jorgenson noted the 2006 general fund revenue showed $7,943,821 being received from property taxes, yet the budget was $13,000,000. Mayor Lund said 61% of the general fund revenues comes from property taxes and that the remainder of the funds come from different sources like the liquor fund, intergovernmental transfers, and permit fees. Commissioner Soule called the question on Commissioner Braam's motion and Commissioner Findell seconded the call. Commissioner Van Dan requested a roll call vote. Commissioners Borman, Braam, Findell, Gerrity, Holm, Jorgenson, Linder and Soule voted aye; Commissioners Reynolds and Van Dan voted nay. THE MOTION PASSED ON AN 8 -2 VOTE. Mayor Lund said he would like to work with those Commissioners who said no to the motion. ADJOURNMENT: Commissioner Braam MOVED and Commissioner Findell seconded a motion to adjourn the meeting. Adopted September 24, 2005 CHARTER COMMISSION MEETING OF JULY 18, 2005 PAGE 6 UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON JORGENSON DECLARED THE MOTION CARRIED AND THE MEETING WAS ADJOURNED AT 8:30 P.M. Respectfully submitted, Debra A. Skogen, City Clerk/Staff Liaison Kathleen Linder, Secretary Adopted September 24, 2005