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CHM 03/03/2009 SPECIAL - 29982CITY OF FRIDLEY SPECIAL CHARTER COMMISSION MEETING March 3, 2009 CALL TO ORDER: Chairperson Borman called the Charter Commission meeting to order at 6:30 p.m. ROLL CALL: Members Present: Borman, Braam, Findell, Hoiby, Holm, Plummer, Reynolds, Scholzen, and Soule Members Absent: Jorgenson, Kirkwood, Kranz, Nelson, Ryan and Shaw Others Present: Deb Skogen, City Clerk/Staff Liaison Bill Burns, City Manager Rick Pribyl, Finance Director PRESENTATION BY CITY MANAGER AND FINANCE DIRECTOR ON 2009 AND 2010 BUDGETS City Manager Bill Burns thanked the Commissioners for allowing him to meet with them about the proposed budgets adjustments for 2009 and proposed budget for 2010. Hemet recently with the City's Department Heads and City Council to address the same issues. While the budget adjustments are temporary, the City is still looking at approximately a $1 million to $1.6 million deficit. His goal is to start planning ahead to avert a financial crisis from occuring in the City. If nothing changes, there could be drastic cuts to services or programs coming in the future. Mr. Burns reviewed his memo of February 26, 2009 (Attachment A) that was mailed to the Commissioners outlining some assumptions and the 2009 and 2010 revenue and expenditure adjustments he was recommending Commissioner Holm asked if the City was transferring money from general fund reserves to balance the city's budget on an annual basis; and, if that was true, would the City be out of reserves by the year 2012? Mr. Burns said yes. He said the shortfall required the City to transfer $815,000 from general fund reserve, $500,000 annually from the liquor operation, and $250,000 from the closed bond fund. He said sales at the liquor store have been down and going forward, they may only be able to transfer $300,000. He said by the year 2012 the city would have a $15 to $16 million dollar cash balance and would not recommend using any additional reserve funds as the city requires $5 million for cash flow and working capitol and $2.5m is needed for annual street maintenance. In addition, the city has no CIP funds dedicated to the Municipal Center facility and a portion of the parking ramp needs replacement. Commissioner Reynolds asked why the city didn't budget for projects that were needed. Mr. Burns said money for maintenance is added to the general fund for such projects but it isn't in the CIP fund. Commissioner Reynolds reviewed Minnesota BF 979 pertaining to the levy and was wondering, if it were passed, if that would allow the city to levy up to 100% of lost LGA. Finance Director Rick Pribyl said there is currently a statewide levy limit that is currently more restrictive then our Charter language. Commissioner Holm wondered what the city could do with no charter restrictions or no state levy limits. Adopted March 23, 2009 SPECIAL CHARTER COMMISSION MEETING OF MARCH 3, 2009 PAGE 2 Mr. Pribyl said if the language reverted back to the language in 1997, before the amendment was passed, the city council could hold a public hearing and adopt a resolution approving an additional levy. He said if the City Council were to adopt a resolution asking for an additional $1 million levy, it would cost approximately $50 -60 annually for an average residential property or about $5 a month in additional property taxes. Mr. Burns said the city could institute a franchise fee on utility bills. He said there were currently 30 cities that did have franchise fees on their electric and gas utilities. Xcel Energy said it would cost the residential property owners about $.75 /month and the commercial/industrial property owners about $1.25 /month. If instituted at that level, the city would receive an additional $381,250 in revenue. All properties in the city, including tax- exempt and city facilities, would have to pay the tax. Mr. Pribyl said this would be a locally generated fee rather an a controlled fee set by the state. Mr. Burns said Centerpoint Energy felt it was a regressive tax and felt a usage tax was better than a flat tax. He said that this would be a small fee that would be paid monthly by utility users rather than paying the fee in one lump sum. Commissioner Soule said the last time the franchise fee was adopted, it started the mistrust and the charter amendment was created as a result. Commissioner Braam wondered if there were any other ideas for increasing revenue for providing services Mr. Burns said the fees were already high pertaining to land use fees and other licenses have to be provided at the rate that it costs the city to provide the licensing. Commissioner Borman wondered if the city had any ideas to bring in substantial revenue to the city for instance raising taxes. Mr. Burns said they have thought about that. He said at some point the city may have to cut back services if they could not raise the revenue and felt they needed the help of the Charter Commission. He said currently the City Council could go to the voters for a special levy or a targeted levy, which would have to be spent for that purpose. He said the city would have to analyze the risk and availability of good people to campaign for this. Deb Skogen City Clerk provided the proposed charter amendment that would bring the charter back to the 1997 version and a timeline showing the process if the charter commission were to recommend an amendment by ordinance to the council. Commissioner Reynolds said the proposed ordinance takes all of the amendment language out. Ms. Skogen said it was a draft to return it to the original language prior to the 2000 amendment. She said the proposed ordinance was drafted for discussion by the Charter Commission. Commissioner Findell said he would prefer it be changed back to the original language as he did not think the electorate should be micro - managing the city's business. He felt more experienced people like the Finance Director, City Manager and City Council should be able to prepare and adopt a budget as they were appointed or elected for that purpose. Commissioner Soule said if people didn't like how the city was managed they had the option of recall or electing new individuals into office. Mr. Pribyl said the history of the city should provide a story of how the council has been fiscally responsible over the past thirty years, since he has been on staff. He said staff at various times in the past had recommended increasing taxes or fees, but the city council did not always agree. He said the city has been consistently lower then other communities with the utility rates or taxes. He said some changes were still needed at the state level. He was Adopted March 23, 2009 SPECIAL CHARTER COMMISSION MEETING OF MARCH 3, 2009 PAGE 3 working with Gary Carlson at the League of MN Cities to try to remove levy limits, but the Governor appears to want to restrict city spending even more than he has in the past. Commissioner Holm asked if the proposed ordinance would be on their neat agenda. Ms. Skogen said yes, that it would be placed on their agenda. Commissioner Reynolds said it appeared the city was still limited in the proposed amendment and Mr. Pribyl said that was correct, but the 5% or whichever is least was removed. Commissioner Soule said the Council could not increase the taxes just to increase them but had to have a good reason for increasing them. Commissioner Borman played the "devil's advocate" and wondered what would happen if the council tried to go for a levy increase first, and if it failed, then try to amend the charter — similar to what was done with the amendment for the utility rates — but, he could also see the benefit of just amending the charter to remove the restrictions. Mr. Pribyl said it took about three years to educate the public before the utility rate amendment was approved. He was not sure the city could wait three years for a tax levy increase. Commissioner Reynolds wondered if just the amendment to the tax levy should be done at this time because people would see all of the strikethroughs and wonder what was up. Commissioner Findell suggested changing Section 7.02.3 from voter approval to council approval; stating the council would still be required to hold a public hearing on any increase and adopt a resolution. It was agreed it might be a little easier if all of the language was not in the paper. Next Charter Commission meeting is scheduled for March 23, 2009 and this will be placed on the agenda. ADJOURNMENT: Commissioner Findell MOVED and Commissioner Soule seconded a motion to adjourn the meeting. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON BORMAN DECLARED THE MOTION CARRIED AND THE MEETING WAS ADJOURNED AT 8:08 P.M. Respectfully submitted, Debra A. Skogen, City Clerk/Staff Liaison Carol Hoiby, Secretary Adopted March 23, 2009