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CHM 05/01/2017 CITY OF FRIDLEY CHARTER COMMISSION MEETING MAY 1, 2017 CALL TO ORDER: Chairperson Ostwald called the Charter Commission meeting to order at 7:00 p.m. ROLL CALL: Members Present: Commissioners Gary Braam, Zach Crandall, Don Findell, Manuel Granroos, Richard Johnston, Ted Kranz, Rick Nelson, David Ostwald, Barb Reiland, Pam Reynolds, Valerie Rolstad, Avonna Starck, and Richard Walch Members Absent: Commissioners Bruce Nelson and Cindy Soule Others Present: Deb Skogen, City Clerk/Staff Liaison Wally Wysopal, City Manager Scott Lund, Mayor Bob Barnette, Councilmember at Large APPROVAL OF AGENDA Commissioner Braam MOVED and Commissioner Rick Nelson seconded a motion approving the meeting agenda. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON OSTWALD DECLARED THE MOTION CARRIED. APPROVAL OF MINUTES Commissioner Braam MOVED and Commissioner Reynolds seconded a motion approving the Charter Commission meeting minutes of April 3, 2017. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON OSTWALD DECLARED THE MOTION CARRIED. ADMINISTRATIVE MATTERS Ms. Skogen said a letter was sent to the Chief Judge for the reappointments of Commissioners Don Findell, Valerie Rolstad and Cindy Soule as their terms expired on May 1, 2017. ADOPTED MAY 15, 2017 CHARTER COMMISSION MEETING OF MAY 1, 2017 PAGE 2 OLD BUSINESS: Discussion of Chapter 7 Chairperson Ostwald reviewed what the Commission has been doing over the past six months and how the restrictions have affected the City. City Manager Wysopal said there is no money to add new services or needs. City is still short 2 police officers from 2008, one of whom could provide resources to multi-family units due to the perception of crime in those areas. City has no funding to purchase body cameras and staffing as other cities are doing. Commissioner Reynolds said there was funding available to purchase body cameras and provide tech support. Mr. Wysopal said while there might be funds available to help with the purchase of the body cameras and some tech support, there was no city funding available for the other technology such as servers and staffing that would be responsible for editing and record keeping of the data that would be acquired through the use of body cameras. Chairperson Ostwald said the analysis shows a needed estimated increase for general operating funds and capital funds of about $978,430 equating to a levy increase of 9.29% for 2018 which would provide essential services to the City. Neither the CPI nor 5% increase would even cover those needs over the next three years. City has already shown it is in decline, there is no surplus, no extras or emergency funds left. Commissioner Findell asked if the estimated needs were over and above the normal operating expenses. Mr. Wysopal said yes, they tried to respond to the question raised, to do what you need to do going forward what that would relate to. So we prepared the information but noted the City was not proposing or requesting the increases. It was representative of a fully funded operations budget. He reviewed the budget process and said the City Council makes adjustments and approves a final budget. These estimates contain requests from departments that we have had to say no to. Commissioner Reynolds wondered what was meant that a percent levy increase did not equate to same increase for the taxpayer. Mr. Wysopal said an estimated levy increase is spread across all tax paying parcels in the City depending on the type of parcel, valuation, and rate assigned by statute will affect the increase. He cited how the Mayor’s taxes increased a lot while Councilmember at Large Barnette’s taxes only went up slightly. He said when a TIF district has been completed, that added value goes across all taxpaying parcels to help out. The amount of property taxes everyone pays goes down, but because it is a levy, it doesn’t mean rates go up, it just means the amount of money the City can request stays the same. This is the difference between a levy which equates to dollars and the ADOPTED MAY 15, 2017 CHARTER COMMISSION MEETING OF MAY 1, 2017 PAGE 3 tax rate which equates to a percentage. If current levy restriction were written in a different way, City could raise more money when a TIF project is completed and is now distributed across all tax paying parcels, that value is not recognized. Even though the levy is going up, there are many different reasons why your property taxes may not be the same as your neighbors. If the value goes up, the percentage captures a bigger tax. An example is the growing City of Maple Grove where when the City adds 5,000 new homes and 2 million square feet of commercial property, its value goes up but the tax rate doesn’t have to change to capture the same amount of taxes. When you have a stagnant property tax base, there is no growth that comes from higher values. Commissioner Reynolds asked what TIF Districts would be expiring soon. Mr. Wysopal said there was one coming up but couldn’t recall which one it was. He said there was the housing district across the City and Medtronic which would be coming up soon, unless they choose to build another building. He also discussed fiscal disparities which Columbia Heights receives that Fridley does not. He said those extra dollars help to decrease Columbia Height’s property taxes. The City is the only Anoka County contributor into fiscal disparities and does not receive that benefit. Commissioner Reynolds said in the 2017 budget process, there was $900,000 that got redistributed, based on Auditor’s recommendation that it was in excess of six months’ worth of funds and had to be redistributed. She wondered if that had not been redistributed would the number be as high. Mr. Wysopal said the number would be lower. Commissioner Walch wondered if there was a levy increase if it would be assumed the levy would continue to be increased for the following year, or compounded. Mr. Wysopal said you could parallel the water fund, which had the same restriction. Rates went up to help make up for some of the losses. As the rates go up, the expenses increase as well. The other thing missing in the proposed increases for the next three years is the political discussion or council decisions that go into deciding an increase. The City Council would most likely say no to a 9% increase. Commissioner Reynolds wondered if the analysis distributed provided for the needs of the City. Mr. Wysopal said yes, that was what the Commission had asked staff to prepare. Chairperson Ostwald said Fridley is the only City with a restriction and staff has shown there is a financial decline due to the restriction. Our job is to frame and amend the Charter for the needs of the citizens of Fridley. He believed that if we want to have the City continue the quality of life we have with the services we have, we do have to make a decision on how to move forward. There was some discussion about removing the CPI. He thought they should move towards a simplified version using general state law as a guide. He said they have a responsible city council and a professional city manager. No one has shown they would take advantage of not having a restriction. He said if the council increased the levy by 9%, every one of the councilmembers would be replaced as well as the city manager. He said they had gone to one extreme and now it was time to revisit and change the policy to give them more leniency but with a caveat of ADOPTED MAY 15, 2017 CHARTER COMMISSION MEETING OF MAY 1, 2017 PAGE 4 reviewing the change after a few budget years. If it is not working, the Charter Commission can then make a change. Commissioner Reiland agreed that a review after 5 years would be a good recommendation. Commissioner Reynolds disagreed as the Charter provides the only way for how government will run the City. She did not believe that by switching the language per state statute, the City might as well be a statutory city. She said the restriction was put into place because the citizens did not want the City Council to just tax and spend. She felt if it was changed to state statute, they could increase as much as they want and used the water bill as an example. Commissioner Rolstad asked Commissioner Reynolds if there wasn’t anything in her life that went up that had to be paid. She said her medical bills go up, insurance goes up and she cannot control that. She said they as citizens have a responsibility to make sure the City can function and not go in debt and take out loans that we should not be taking on every 2 to 3 years. Commissioner Reynolds said when the City takes out loans it puts the tax burden on the citizens. Commissioner Rolstad said most of us have loans such as car payments and a mortgage. If we want to be fiscally better for our citizens, if elected officials are being fiscal, they will not raise the levy 10 to 20% as that would be political suicide. Mayor Lund said the Charter allows for reverse referendum, which statutory cities do not have. He did not think they would need a sunset clause as they had the opportunity to review and change the charter if needed at any time. He said historically the City was very fiscally prudent prior to the restriction. About 20 years ago this City was the envy of other metro cities because of its very strong financial reserves. He said when they partnered with the Fridley School District to build the community center. The City used $1.6 million from the reserves rather than bonding for the construction which would have also required interest. Now we have to borrow money we are paying back with interest, to pay for equipment. Commissioner Crandall felt removing the index and leaving the 5% would help make the budget process more manageable. Even with restriction put in place, have we hit the 5%? The individuals who petitioned felt 5% was good, but it has that small restriction as well. He thought 5% was a good middle ground and prevented very large increases. He would like to see the Charter Commission review it in 3 to 5 years. If it is close but not quite good enough you could increase at that time. Commissioner Findell said while he recognizes the increases the City is feeling are not necessarily budget increases such as a cost of living or cost of running the City. He thought the increases were due to technological innovations or new opportunities to serve the citizens better to improve the delivery of services which is new spending not operating expenses as well as federal or state mandates. He wondered if there was any way they can allow for new innovation coming forth. ADOPTED MAY 15, 2017 CHARTER COMMISSION MEETING OF MAY 1, 2017 PAGE 5 Commissioner Reiland felt some might be innovation but most was mandatory spending from other agencies. It is nothing you can prepare for, we have no choice. Commissioner Nelson agreed to disagree and could blame others for mandatory requirements and spending, but not all is innovation. He said body cameras could help the city keep insurance claims down. He said the Public Works Director would like to fix the roads but has to do it over a 50 year period because he can only budget so much annually. He said the City did not plan for reconstruction of infrastructure. Some of the spending is to bring the City up to the standards it should be in, not mandates from the state or other agencies. He said he had no problem raising the levy limit, eliminating previous year levy and CPI and going to a straight 7%. If they need more, Section 7.02.2 would handle that. He said he wasn’t opposed to raising the restriction to 10%. He did not agree with removing restriction entirely, as it might open a can of worms and would rather not go down that road. Prefer to make it a flat percentage regardless of CPI or previous year. If it doesn’t work in a year or two, we will revisit the issue. He said if you are using the previous year levy and an increase, you would be compounding the levy. Commissioner Walch said he liked removing the CPI but wanted the fixed rate to be low enough so the City could not fund a performing arts center. He felt that due to the rhetoric about bonding for the new city hall, that if they removed the hard limit it opened opportunities for crazy spending. Mr. Wysopal asked what percentage would not become defacto increase, just as the CPI, which has been averaging at 1.4% for the last eight years. In January when beginning the 2018 budget we knew that inflation would be 1.4%. That doesn’t cover the increase in operating cost. What percentage would you utilize to allow the City Council their elected responsibility to debate over things that are necessary? Commissioner Crandall asked what percentage would be needed to cover the City’s costs. Mr. Wysopal said he did not know yet because we are in the process of putting together the 2018 budget. Right now with a 1.4% increase we know that we have a shortfall of $2 million for the things we need. Commissioner Findell said we are always looking backwards at the CPI, he wondered what would happen if there was a financial crisis nationally and inflation increased like the 1980’s, what the City would do with its finances. He said it could devastate everything. Commissioner Reynolds said if there was a financial crisis no one would be able to pay their taxes, it won’t just be the City that would be hurting. Everyone keeps talking about the different percentages. She was on a fixed income and still manages to pay her bills with the increases. Everybody keeps looking at her income and saying but Pam we need a little more because the dogs need an $11,000 play toy, which was spent on the K-9’s. Mr. Wysopal said the $11,000 was a donation specifically for that purpose and the payment was in the payables to be approved by the Council. The City doesn’t have the substitution effect like ADOPTED MAY 15, 2017 CHARTER COMMISSION MEETING OF MAY 1, 2017 PAGE 6 individuals do. The City can’t say they can’t afford the police so they will provide private security for $10/hour. He cited a recent example of the purchase a diesel truck. The price increase $12,000 to $15,000 from the budgeted item because it had to meet all of the new EPA standards that had been placed in the past year. He said he was concerned some individuals wanted to micro manage the budget and tell the City Council how to do their job. He said that was just not right. Commissioner Rick Nelson said they were all volunteers appointed by the Chief Judge to help manage the charter to the best of their ability. When he bought his boyhood home in 2007, property values were higher than they are now. That is not the fault of the City, but the City has suffered with the additional levy restriction. That is as much of the problem of the economy improving and property values increasing. We are paying more in taxes with the same levy limit that was there. You are generating more money with the current system you have because the property values are going up. Mr. Wysopal said that was not correct. The value of a property can go up or down as much as it wants, but the levy is the dollar amount the council can ask for to run the City. It can only go up 1.4% in 2018. If the house value goes up or stays the same, the City is still collecting the same amount of money over the entire City. Commissioner Findell said the theory is that the City’s cost of living was the same as the citizens with the additional mandates. Commissioner Kranz said we have been discussing this issue for the past six months. We are getting off track and spending a lot of time talking about the problems rather than finding a solution. He suggested there was an urgency to get something done to recommend to the Council. Commissioner Reiland agreed. Chairperson Ostwald said they could request a 5 year forecast and have the City Council present information at a town hall to see what the citizens think. He felt the Commission needed to find a solution and he will call for a special meeting if they can make a recommendation. He understands how passionate everyone is, but we really need to make a decision. Chairperson Ostwald asked everyone to report what direction they would like to move toward, 1) removing the limit completely and trust the elected officials to do their jobs, 2) remove the CPI and retaining a restrictive percentage; and 3) determine if there should be a sunset clause to bring it back for review. Commissioner Rick Nelson preferred a straight percentage cap, nothing tied to previous tax levy and no CPI with the percentage to 7%. Commissioner Johnston preferred to remove the restriction completely and allow the City to govern under the state statute, as that what we elect them to do. If a sunset clause was in place at 3 to 5 years. ADOPTED MAY 15, 2017 CHARTER COMMISSION MEETING OF MAY 1, 2017 PAGE 7 Commissioner Starck really liked the idea of having City Council making the decisions but worried how short sighted people can be without the giving things the time they need to mature and do the work they are supposed to do. She worried that in a year or two citizens will only talk about how the City Council raised their taxes without having the knowledge or understanding of why it was done. Her preference was to remove the restriction completely with a review at 3 years. Commissioners Reynolds preferred to leave as is but would agree to remove the CPI but keep the 5% restriction. Commissioners Granroos, Walch, Kranz, and Crandall preferred to remove the CPI index, keep the 5% restriction and sunset between 3 to 5 years. Commissioner Braam said the citizens elect the City Council to do a good job and preferred to remove the restriction completely with no sunset. He said 20 years ago the City had a little nest egg because they did such a good job at managing money. But since the restriction was put on, it has squeezed the life out of those funds. Commissioner Findell said he liked having an index but not the CPI. He preferred a 5% limit but if need to provide the ability increase the limit with unanimous vote of council if sunset, after 5 years. He would like to see something provided by an economist about the economy and what is happening. Commissioner Rolstad preferred the restrictions be removed, but was concerned about what percentage should be used. She said the City would be paying catch up but didn’t know how long it would take. So at this time she would remove the CPI and place percentage between 5 and 7. If there was to be a sunset, a longer period of time would be needed. Commissioner Reiland said she preferred to remove CIP and provide a cap of 7%. If a sunset, it should be longer than 5 years. Chairperson Ostwald said he could not predict the future but felt the City Council was elected to responsibly manage the budget and not be frivolous about it. He said based his decision on his own experience and his responsibility to manage the money of his Employer. He sees it as the same for the City Manager and Department Heads. He felt that if they put a hard limit on the Council, they will be back in the future reviewing the same issue. His preference was to remove the restriction completely with no sunset. The consensus of the Commission was to remove the CPI and to keep a percentage between 5 and 7%. After discussing whether to have a sunset or not, knowing no other chapters of the Charter had a sunset, they chose not to require one. There is an opportunity at any time to ask for information so they could review the finances at any time. Commissioner Findell would like to see a requirement to establish a specific level of funds for depreciation that should be reinvested, similar to reserve in 2000, but not as high. ADOPTED MAY 15, 2017 CHARTER COMMISSION MEETING OF MAY 1, 2017 PAGE 8 Mayor Lund said the reserves will never be able to return to what they were prior to the restriction. Mr. Wysopal said he appreciated how much work the Commission has given to this topic. He does take his job very seriously and wants to make sure the City has the resources it needs to provide services while being reasonable about the financial picture of the City. He said the City Council would take any improvement over the current situation. He agreed with Commissioner Findell that he would love to see an index, but found they just could not find one to use. Could there be any consideration to increase the levy up to 7% if a unanimous vote was required. He asked because by the time the City Council certifies the 2018 tax levy it is September and you have to live with the figure you provide to the County afterwards. It would just give the City an opportunity to deal with issues, similar to the Workers Compensation increase of $80,000 for 2017 that have to be paid this year but weren’t budgeted for. Commissioner Rick Nelson said he was fine between 5 and 7. If more was needed they could go to the voters to request more. Ms. Skogen said the council would have to approve a ballot question that would go to the voters and the increase would most likely not happen for about 18 months, so it would be too late for the next budget year. Commissioner Rolstad said after further contemplation she preferred removing the restriction completely and allowing the City Council to levy according to statute, because the City is so far behind and didn’t think with a restriction the City could start saving reserve funds. She still felt that citizens could vote the City Council out if they increased the levy too high or were frivolous about it. She felt they were tying the hands of the City Council from doing their due diligence with our tax dollars so they are not having to take out more high interest loans every two to three years costing us more rather than saving and having the ability to draw out the funds when needed. It is time to stop saying taxes are hugely bad. If we all put money into the pot, it is spread out throughout the City. Commissioner Rick Nelson MOVED and Commission Walch seconded a motion amending Section 7.02.1 that we lift the levy cap, lift CPI, 5% is the new cap, it may go to 8% with a 4/5 majority vote and visit the issue after three years to have a better understanding that the City is in a better place. In trying to review the motion, Commissioner Crandall felt the tax levy greater than the prior year tax levy should not be removed – You would have to leave that in otherwise you would not have anything to tie it to. After further discussion, Commission Rick Nelson AMENDED HIS MOTION to read, “…shall not to exceed in dollars, a tax levy that is greater than the prior year tax levy not to exceed 5%. However it may increase up to an additional 3% with at least four votes of the City Council.” ADOPTED MAY 15, 2017 CHARTER COMMISSION MEETING OF MAY 1, 2017 PAGE 9 Commissioner Reiland said if they are giving an additional 3%, or 8% in total, why weren’t they comfortable just stating 8%. Why should the City Council have to jump through hoops when we say we trust them? Commissioner Kranz said the public would probably not buy into the 8% but would buy into 5%. Commissioner Findell said he did want to micromanage the City Council but felt there should be someone overseeing this process. Commissioner Starck had been having a conversation with others in the community about what we want and why people want to live in this City. She said they had just sold a house in Fridley and bought another house in the City. We could have gone anywhere, but decided to stay. So talking percentages seems arbitrary, because we do not have a budget. What kind of services do we want the City to provide and what are we willing to trade for those services. None of us are wealthy and we can’t just write a check to the City. But, at the end of the day I want to be able to call the police or fire, want my streets plowed as well as having other services I chose to live in this community for. A recent article from the Star Tribune cited the City of Fridley as one of the top 7 suburbs people want to move to. This is a changing community with young people who want to raise their families here. What kind of a community are they expecting and what do we want to leave for them and future generations. She discussed her trip to Copenhagen and asked about taxes, which were high. She was told they don’t mind paying for those services as their community is safe. She wants to feel the same way. Commissioner Reiland wondered how the budget process worked, if he provided a budget which included the 5% and then the City Council would decide at what percentage it would increase the levy. Mr. Wysopal would go to the department heads and tell them what the City Council is looking for in serving the public. What do you need to provide these services? He would review the budget with the department heads, ask questions about their department’s budget including cutbacks in their departments, and then provide a budget to the City Council at the lowest numbers they can. The City Council has the opportunity to change the budget and make a policy decision to increase the levy. He said once the City Council votes on the maximum levy for 2018 in September that would be the final number. It could not be increased but could be decreased. He said he would not complain about the possible amendment on the table. He said in his 30 years of service, he has never asked for a levy increase of more than 7 or 8 percent. Commissioner Walch liked the idea of a super majority, but felt it was hard to ask politically for more than 7 or 8 percent. I like the idea that it requires at least 4 votes so if there was a minority, they could put a check on the City Council and keep the percentage at 5%. Mr. Wysopal said he sees that as a Council dynamic and it is his job to be aware of it. It would just take one councilmember to say they are not going over 5%. ADOPTED MAY 15, 2017 CHARTER COMMISSION MEETING OF MAY 1, 2017 PAGE 10 After further discussion it was determined that there did not need to be a sunset, as there are no sunsets in other chapters. Commissioner Rick Nelson felt the City Council could come to them if it wasn’t working and/or the Charter Commission could ask for a review to see how it is working. Mayor Lund asked about the percentage, the expectation set at 5%, thinking forward the City Council should be able to justify it. Some of the thinking may be if they increased it to the maximum each year, some might say see they raised and they still need more. While if they kept it low, you never needed the additional percentage. Commissioner Crandall suggested avoiding the political views by saying the City Council just needs to ask for what they need. Commissioner Rick Nelson called a vote on the question. UPON A VOICE VOTE 10 COMMISSIONERS VOTED AYE AND 3 COMMISSIONERS VOTED NAY (COMMISSIONERS BRAAM, JOHNSTON, AND REYNOLDS). CHAIRPERSON OSTWALD DECLARED THE MOTION CARRIED. Commissioner Crandall MOVED to remove Section 7.02.2 in its entirety. There was no second so the motion failed. Mr. Wysopal said there were other sections in the charter that conflicted with the state or county deadlines and wondered if the Charter could discuss those at the same time. Commissioner Rick Nelson MOVED and Commissioner Gary Braam seconded a motion to have staff provide other changes that would be required where the state language presents a conflict with the Charter. UPON A VOICE VOTE ALL VOTING AYE CHAIRPERSON OSTWALD DECARED THE MOTION CARRIED. th Chairperson Ostwald called a special meeting be held on Monday, May 15 at 7 pm in Conference Room A of the Municipal Center. ADOPTED MAY 15, 2017 CHARTER COMMISSION MEETING OF MAY 1, 2017 PAGE 11 ADJOURNMENT: Commissioner Braam MOVED and Commissioner Rolstad seconded a motion to adjourn the meeting. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON OSTWALD DECLARED THE MOTION CARRIED AND THE MEETING WAS ADJOURNED AT 8:43 P.M. Respectfully submitted, Debra A. Skogen, MMC City Clerk/Staff Liaison Commissioner Manuel Granroos Secretary ADOPTED MAY 15, 2017