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CHM 06/10/2009 SPECIAL - 29986CITY OF FRIDLEY SPECIAL CHARTER COMMISSION MEETING JUNE 10, 2009 CALL TO ORDER: Chairperson Soule called the Charter Commission meeting to order at 7:02 p.m. ROLL CALL: Members Present: Commissioners Peter Borman, Gary Braam, Don Findell, Bill Holm, Nancy Jorgenson, Ted Kranz, Pam Reynolds, Noel Ryan, Lois Scholzen and Cindy Soule Members Absent: Commissioners Carol Hoiby, Rick Nelson, Leslie Plummer and Keith Shaw Others Present: Deb Skogen, City Clerk/Staff Liaison Cindy Ruschy, Staff Liaison Rick Pribyl, Finance Director APPROVAL OF AGENDA Chairperson Soule added an oral report of her meeting with staff on March 5, 2009 as 3.1 and a presentation by Finance Director Rick Pribyl as 3.2 on the agenda. Commissioner Ryan MOVED and Commissioner Reynolds seconded a motion approving the meeting agenda as amended by Chairperson Soule. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON SOULE DECLARED THE MOTION CARRIED REPORT OF COMMISSIONER SOULE MEETING WITH STAFF Chairperson Soule reported she had been called to attend a meeting with staff about the pending financial crisis in the City. She included Commissioner Holm in the meeting as he was her mentor and felt she needed some guidance. Based on the information, she and Bill agreed with staff and discussed an amendment to the Charter allowing for a special election. She said she did want it to appear things were done in secret and the Commissioners would be provided the same information she and Bill heard. As Chairperson, she called the special meeting because she felt it was important and urgent. REPORT BY FINANCE DIRECTOR RICK PRIBYL Rick Pribyl said the City Manager would provide his draft budget to the Council the following week. Due to the unallotment of local government aid and the market value homestead credit by the state, there appeared to be about a $1.2 million deficit for 2010. He said there had been a concern from the original petition committee and the Charter Commission that if the Council felt they need to increase taxes or fees they needed to ask the voters. Staff was reviewing the charter to see if they could have a special election for that purpose and found they could not. The City Attorney recommended an amendment to the Charter that would add the ability to have a special election and remove the 51% of those voting in the election to a majority of those voting on the question. Based on what had happened with the utility funds and the length of time it took to educate the public and actually change the charter, he felt it was important to begin those steps now before the city was out of its reserve funds or "rainy day" funds by 2012. He met with Cindy and Bill the previous week to discuss the feasibility. They agreed it was important as the city was coming upon a financial crisis. Adopted 9/28/09 CHARTER COMMISSION MEETING OF JUNE 10, 2009 PAGE 2 Rick reviewed the information provided in Attachment 1 with the Commissioners. This included part of the executive summary of the City's audit referring to Resolution 96 -1991 establishing the reserve goals for the various funds of the City. The Auditor noted on December 31, 2008, the General Fund balance was not sufficient to fulfill reserve goals established by this resolution. He said the city was in a downward spiral and had exhausted some of the reserves by transferring those reserves to the general fund for cash flow. He said staff would go back to the Council to redefine reserve funds. Rick Pribyl said there was an immediate need of $1.2m and the council survey suggested a voter approved tax increase. He said franchise fees might have some merit as these funds would be in a different pool than taxes cities, counties and school districts rely on from the state. He said with no new revenue and no approved levy or fee, the city would have to have drastic cuts in services. Deb Skogen stated staff had been considering a special election but found through our legal counsel that the city could only go to the voters during a regular election or that the charter would have to be amended allowing for a special election. Based on the information Rick had and the information received from the city attorney, staff decided to ask Cindy if she would meet with us to determine whether or not she should call a special meeting. Deb Skogen provided a proposed timeline and the possibility of going to the voters in December with a special election asking for an increase in revenue, if there was no referendum petition on the charter amendment. DISCUSSION OF PROPOSED AMENDMENT Commissioner Reynolds asked if the 2% change would help. Chairperson Soule said this amendment did not address any of the things the Commissioners had talked about nor did it refer to the "Holm" amendment. Commissioner Jorgenson wondered if the council could adopt an emergency ordinance allowed by, Section 3.06 of the Charter. After some discussion it was not sure whether or not this process could be used to increase the levy or fees. Commissioner Holm said the council could make dramatic cuts to the City's budget. Commissioner Reynolds felt that $1.2m shortfall was not drastic but there might be an immediate need to make cuts to the budget. Commissioner Borman said there should be some provision to allow the city council to go to the voters to ask for a levy at a special election. Commissioner Findell felt this amendment was a brilliant idea and supported its passage. Commissioner Jorgenson felt the Governor had not made the unallotments yet and felt staff was acting too quickly. Rick Pribyl said the city was looking at the worse case scenario and felt strongly about what the unallotments would be. Commissioner Holm said regardless of what the Governor did, the City was now in a crisis. Commissioner Reynolds did not like the concept of a special election. She felt whoever had control of the process or the date of the election, controlled the outcome as the turnout was much smaller then a general election and felt all voters should have input to the process. Commissioner Jorgenson said the issue had been getting people to the polls. Commissioner Borman felt if people chose not to vote, it was not the City's fault. Adopted 9/28/09 CHARTER COMMISSION MEETING OF JUNE 10, 2009 PAGE 3 Commissioner Reynolds wondered about the timeline of a proposed December election but did agree there was a process that would need to be started to educate or get the information to the voters in 2010. Commissioner Jorgenson said the taxes assessed in 2010 are payable and due the following year. Rick Pribyl said the City did not know if they could sustain all of the cuts due to bargaining unit issues. He said currently there appeared to be a ($702,000) deficit with all of the transfers. He said the liquor fund transfer was lowered in order to allow the liquor store to maintain the reserves needed for its cash flow. Commissioner Jorgenson said she was frustrated with the process, especially in light of the possibility of the police department adding two dogs because of a grant. She felt people were not going to understand. She said there was $38m in reserves when she left and wondered where it all went. Rick Pribyl said the reserves have all been exhausted. Commissioner Jorgenson wondered why the spending continued to go on. Commissioner Reynolds asked about recreation and why it was important. Rick Pribyl said it would be a major change in the city if the city did not provide this service. Commissioner Braam said it was all about the quality of life the citizens wanted to have — did the citizens want the City to be bare boned or to have some amenities. Commissioner Reynolds suggested backing off some of the services while the economy was bad. Commissioner Kranz said he would like to see the city go to the voters to let them decide and wondered what the cost of an election was. Deb Skogen said the election would cost approximately $15,000, mostly due to election judge salaries as all precincts would have to be open. Commissioner Reynolds said there was no money in the budget for an election and Rick Pribyl said that was correct. Commissioner Findell said people would ask what the City was doing with the reserves and why the city would need to raise taxes when there was a reserve. Commissioner Jorgenson was upset the reserves were spent down. Rick Pribyl said there were about 15 different funds, subsidiaries as well as the municipal corporation, which all had to maintain a certain reserve for cash flow. He said in order to determine what a surplus you might have you would have to look at each fund. He said the city was already at its bare bones level if the city was going to continue with the same level of service. Commissioner Holm said if the proposed amendment was adopted, it would allow the Council to go to the voters by December 15"' to ask the voters if they would approve an increased tax levy or approve franchise fees; but there would be no guarantee of the citizens passing anything. Commissioner Reynolds wondered if the franchise fees could be transferred to the general fund. Deb Skogen said yes, that state laws does allow the transfer. Adopted 9/28/09 CHARTER COMMISSION MEETING OF JUNE 10, 2009 PAGE 4 Rick Pribyl said for the average homeowner in Fridley, the franchise fees would total approximately $39 a year vs. an increase in the tax levy which would total approximately $82. Commissioner Reynolds asked about a targeted levy or whether the city was going to list what services would be cut. Rick Pribyl said at this time there were a lot of questions but a targeted levy was just that, the funds could only be used for that specific purpose rather than raising revenue for the general fund. Commissioner Holm said some voters may have certain issues they feel are important while others may feel other things are more important. Commissioner Borman said during contract negotiations with the Union at Qwest, the company always discussed the needs of the business when negotiating. Commissioner Reynolds said she understood the need but could not understand the need for a special election. Commissioner Borman said the City could try to cut funding to its employees but would still have to negotiate with the unions and possibly enter into arbitration. Chairperson Soule said there were deep cuts proposed in the budget but the City was not yet cutting services to its residents. Commissioner Ryan said as a government supervisor when you make too many cuts to employees, you lose your best and brightest employees because they are the first ones to be hired by other companies. It's always the government workers that get the short end of the stick. Commissioner Kranz said we are all trying to recover from the economy and the first thing people say is let's cut wages. That will only add to the problem. Let's try raising taxes to continue to employ good people and keep them. He said he had to negotiate with the union and the new owners of the Star Tribune when it was sold. He had to go all the way to New York to bargain and the Company wanted to cut employees wages and if they don't, they threatened to shut the doors. Commissioner Jorgenson felt until the public sees its services cut at a city level, she did not think the voters would approve an increase. Rick Pribyl felt, based on what happened with the utility rates, that it was a matter of educating the voters and it was more like an exercise to get them to understand the importance. Chairperson Soule said if the voters said no, the city would have to cut services. She said it was the first thing she thought of when staff brought the issue to her. Commissioner Borman wondered how and where to start cutting services. Commissioner Reynolds felt the City could quit putting in irrigation systems in the parks; or cut the fees or dues of $16,000 to the League of Minnesota Cities. Commissioner Jorgenson said the City belonged to the LMC and as part of their membership the LMC, through the LMCIT, provided insurance to the City as well. Commissioner Holm MOVED and Commissioner Ryan seconded a motion that the Commission adopt the language as provided with the agenda amending Section 7.02.2.C. & D. allowing for a special election and removing the 51% requirement. Adopted 9/28/09 CHARTER COMMISSION MEETING OF JUNE 10, 2009 PAGE 5 Commissioners Jorgenson and Reynolds both declared they were adamantly opposed and would circulate a referendum petition against the proposed amendment. Commissioner Jorgenson felt the City Council could come back every three months and ask for a special election. Commissioner Holm said there would be political risks to the council if they tried to come back every three months to ask voters for an increase and didn't think the Council would do that. Commissioner Jorgenson felt the Charter Commission was being dismissed from amending the charter. Rick Pribyl said the City was going to be in a crisis by 2012 and out of the "rainy day" funds. He said staff had tried to anticipate the governor's cuts and felt they knew what the best and worst case scenarios were. He said the City used to receive $2 million in funding from the state, but the state has since commandeered those funds. Commissioner Holm said during this twelve years on the Charter Commission, this was not the first time staff had come to the Commission requesting a change and most of the time the Charter Commission has recommended those changes to the Council. Commissioner Findell said the amendment satisfied the need to go to the voters, which was what most people cared about when bringing the original petition. He said the City would see a core group of people who really care about City services come and vote in the election. Commissioner Reynolds felt the change in language would allow the Council to declare multiple elections. Commissioner Braam said the City was at a crossroads, as was every city in Minnesota. Which way are you going to go? Are you going to lose full -time employees? Are you going to cut services? He said it was all about the quality of life and you get what you pay for. He felt it should be up to the voters to make the decision about the quality of life they would like. He also did not believe the City Council would call a special election every three months at $15,000 per election. CHAIRPERSON SOULE CALLED THE QUESTION AND A ROLL CALL VOTE WAS TAKEN. COMMISSIONERS BORMAN, BRAAM, FINDELL, HOLM, KRANZ, RYAN, SCHOLZEN AND SOULE VOTED AYE; COMMISSIONERS JORGENSON AND REYNOLDS VOTED NAY. THE MOTION PASSED ON AN 8 TO 2 VOTE. Commissioner Holm MOVED and Commissioner Borman seconded a motion sending the approved charter amendment to the City Council. UPON A VOICE VOTE, CHAIRPERSON SOULE DECOARED THE MOTION PASSED WITH JORGENSON AND REYNOLDS VOTING AGAINST THE MOTION. Chairperson Soule asked if the Commissioners wanted to continue with the July and August special meetings. After a brief discussion, they all agreed September 28"' would be their neat meeting. ADJOURNMENT: Commissioner Ryan MOVED and Commissioner Jorgenson seconded a motion to adjourn the meeting. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON SOULE DECLARED THE MOTION CARRIED AND THE MEETING WAS ADJOURNED AT 8:18 P.M. Respectfully submitted, Debra A. Skogen, Adopted 9/28/09 CHARTER COMMISSION MEETING OF JUNE 10, 2009 City Clerk/Staff Liaison , Acting Secretary Adopted 9/28/09 PAGE 6