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09-13-2021 Work SessionSeptember 13, 2021 A work session meeting of the Scandia City Council was held on the above date with modifications. The meeting was conducted in-person at the Scandia Community Center and over an electronic platform. All participants who joined the meeting remotely could hear each other and contribute to discussions. Mayor Christine Maefsky called the meeting to order at 6:10 p.m. The following were present: Council members Heather Benson, Steve Kronmiller, Patti Ray, Jerry Cusick and Mayor Christine Maefsky. Staff participating: City Administrator Ken Cammilleri, Public Works Director Charles Fischer, Fire Chief Mike Hinz and City Treasurer Colleen Firkus. Perry Rynders, Capital Improvement Committee member, and Terry Gorham, Parks & Rec Board Chair were present. APPROVAL OF THE AGENDA Ray, seconded by Benson, moved to approve the agenda as amended. Motion carried 4-0. Cusick not present. CONSIDERATION OF QUOTES FOR SECOND DUST CONTROL APPLICATION ON 185TH STREET/OAKGREEN AVENUE/OLD MARINE TRAIL/PARADE AVENUE Due to the dry nature of the season, the gravel roads of 185th Street, Oakgreen Ave., Old Marine Trail and Parade Ave. are in need of a second application of calcium chloride. Complaints have been reported and on-site inspections have proven the requirement. Public Works Director presented three quotes ranging from $9,972 to $12,600. Ray, seconded by Kronmiller, moved to accept the quote from Northern Salt, Inc. for $9,972.00. Motion carried 5 — 0. DISCUSSION OF THE CITY'S 2022 DRAFT BUDGET AND CAPITAL IMPROVEMENT PLAN Administrator Cammilleri presented the 2022 draft budget with revised options. The changes to the General Fund were reviewed first. The proposed net change of 12.72% in the 2022 general fund levy is $201,500 to maintain the City's General Fund Policy of retaining 50% to 65% of next year's expenditures. Expenditures are proposed to decrease 7%. The budget proposes a 69.9% fund balance in the general fund to have a contingent reserve of funds for unexpected costly events or emergencies, and give the City a good bond rating. Council discussed increased line items of additional personnel costs, animal control, legal services and parks/community center grounds deferred maintenance. Revised funding strategy options were considered. Option II — No Tax Rate Impact Reallocate projects to keep revenue needs stable, or eliminate projects, to keep a stable Tax Rate. This option shrinks and spreads spending over time. To fund all general Capital Projects, equipment purchases were pushed out, road projects scaled back and spaced out with 3 -4 -year breaks to finance with levies, and Park projects without cost estimates were left out of the budget to have no change in tax rate. September 13, 2021 Scandia City Council/Capital Improvement Committee Page 2 of 3 Option IIIA — Bond Debt Strategy, Increased Tax Rate This spending approach assumes debt via bond issues to keep a level tax levy and rate. This option recommends a tax rate increase of 4.08% and levy increase of 6.5%. Long-range financial planning is required to ensure the city has available revenue to pay for long-term debt. An alternative Option IIIB was proposed to attempt no tax rate increase. Pages 28-32 summarized all the options for all the funds' budgets and their affect on levy and tax rate. Councilmember Kronmiller pointed out the options assume expenses over the next 3 to 4 years, but the Capital Improvement Committee has not met yet to review projects and make recommendations. He suggested the Council set the levy for 2022 then start looking at capital spending for the next 10 years and funding options. Administrator Cammilleri agreed, but also pointed out the need for the Council to decide what kind of impact on the tax rate they wanted and how to fund capital projects (levy, fund balance, debt) to provide goals for the Capital Improvement Committee. Rynders also suggested the engineer estimates need to be updated from previous years and the Council needs to know what the needs are before setting spending goals. The Bliss Stormwater plan of $260,000 was clarified that 85% of the cost is covered by a grant and the balance split between the City and the Watershed District. Administrator Cammilleri recommended Option IIIA with an increase in levy and tax rate for 2022. All Capital expenditure goals cannot be met with out some increase at some time, but timing of when that occurs is what needs to be decided. The Levy/Tax Impact Rate goal will dictate capital project goals. Option II draws down the fund balance. Option III requires debt with or without a tax rate increase. An increase allows equipment to be purchased on schedule and helps build fund balance for future projects. Council discussed the American Rescue Plan (ARP) funds of which the city has received half and expects the other half at the end of this year or beginning of next year. Funds must be spent by the end of 2024. Cammilleri stressed that this are one-time funds that should be used for one- time expenditures, and not to be used to offset levies as then the city would have to make up for it in the future. That is the reason the budget does not include the ARP funds and they are applied to the Sewer Utility projects (Nitrate fix & Bliss Lift Station upgrade) of $1,450,000, along with State Bonding dollars and User Rate increases. State Bonding is not guaranteed, and the 112 Users on the system will not be able to fund this project through just increased User Rates. Cammilleri encouraged the Council to consider the ARP funds a gift to rectify the City's past failure to set aside funds to maintain its sewer system on Big Marine Lake. Federal or State grants are unlikely prospect to rely on. The City should know by February or March of 2022 whether or not it will be included in the State's 2023 bonding bill. If no bonding is received, then the City will need to fund the Sewer projects fully. Since the 2022 projected Levy and the Capital Projects are almost the same between Options II and IIIB, Councilmember Kronmiller suggested, and the Council agreed, to decide on the levy of September 13, 2021 Scandia City Council/Capital Improvement Committee Page 3 of 3 Option II for $2,578,051 to present at the Truth & Taxation Hearing on September 21, with capital projects and their funding to be discussed at a later date. ADJOURNMENT Ray, second by Benson, moved to adjourn the meeting. Motion carried 5-0. The meeting adjourned at 8:10 p.m. Respectfully submitted, Colleen Firkus Treasurer