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08/26/1997 - City Council Special 00280 MINUTES OF A SPECIAL MEETING OF THE EAGAN CITY COUNCIL Eagan, Minnesota August 26, 1997 A special meeting of the Eagan City Council was held on Tuesday, August 26,1997 at 5:00 p.m. in the Community Room of the Eagan Municipal Center building. Present were Mayor Egan and City Councilmembers Awada, Blomquist and Masin. City Council member Wachter was absent. Also present were Director of Finance VanOverbeke, Director of Public Works Colbert, Director of Parks & Recreation Vraa, Fire Chief Jensen, Police Chief Geagan, Assistant to the City Administrator Hohenstein, Administrative Intern Davis, Chief Building Official Reid, Senior Planner Freese and City Administrator Hedges. FIRE RELIEF ASSOCIATION PENSION City Administrator Hedges provided background information on meetings he has had with members of the Fire Relief Association to discuss a proposal to change from defined benefit to defined contribution and the City Council's direction on the appropriate benefit level. Mark Sportelli, President of the Fire Relief Association, was present and thanked the City Council for their willingness to consider a change from a defined benefit to a defined contribution pension plan. He further stated that he has also appreciated all the assistance the City Administrator, Director of Finance and City Council have given since the concept was presented in February. Mr. Sportelli also stated that originally a request was presented to the City Administrator that involved a buy-out at the $4,200 pension level, which would have required a cash contribution of $987,825 by the City. He stated that after advise from the City Administrator that this type of buy-out was not possible, the request was reduced to a defined contribution of $3,650 at an annual increase of 4% based on pool earnings at 6.2%. He thanked the City Council for their offer at $3,385 at an annual increase of 3% with pool earnings at 6.2% and stated that the difference is only $26,500 between the Fire Relief and City proposal and encouraged the Council to consider their request. City Councilmember Awada stated that as a matter of clarification, the City Council authorized the Fire Relief Association to pursue special legislation for a defined benefit amount up to $5,250; however, it should be made clear that this action did not assume approval of a lump sum defined benefit in the amount of $5,250. City Council member Awada further stated that the amount presented by the City Council is an excellent pension and offered that the pool earnings should be much higher than the 6.2% which would be more realistic. City Council member Blomquist stated that she was also concerned about the $5,250 lump sum equivalent request by the Fire Relief Association and feels the City Council's proposal is adequate and provides a good pension program for the volunteers. Pat Diloia, representing the Fire Relief Association Board, expressed concern about the 3% annual increase, stating that 3% of their pension allocation does not generate the kind of dollars that a 3% increase provides for a management position at $40,000-$50,000 with the same percentage increase. City Councilmember Blomquist stated that she feels the 3% is fair and that the City Council needs to look at 100 firefighters and the cumulative effect of the percentage increase for each of the volunteers. Fire Relief Association members Diloia and Sportelli also expressed concern about extending the agreement from three years to ten years, stating that seven years would be more reasonable for a review by the City Council and Relief Association. City Councilmembers discussed the request and suggested an eight year agreement. City Council member Blomquist stated that if the firefighters are worried about the risk that will be assumed under the defined contribution, the City Council has no objection if they stay with the defined benefit. Fire Relief Association member Diloia further stated that it is a proposal of the Relief Association that the City pay the entire $20,000 for administrative costs. Director of Finance VanOverbeke stated that the actual administrative cost will be less if the Fire Relief Association adopts the defined contribution, because an actuarial report will not be necessary, which generally costs $3,000-$4,000 when completed. He further stated that there will probably be more control on the expenditures if they have a direct impact on the firefighters and not 100% the obligation of the City. The estimates all show the administrative cost estimate of $20,000 funded from the total City contribution, thereby being the full responsibility of the Fire Relief Association. City Councilmembers suggested that the City and the Relief Association could possibly split the cost or the City would be responsible for the first $7,500. After further discussion, Mayor Egan suggested that the 00281. Page 2/Eagan Special City Council Meeting Minutes August 26, 1997 Relief Association work with the City Administrator in an effort to resolve these issues so an agreement can be reached on the new pension program between the Relief Association and the City Council. PRELIMINARY 1998 GENERAL FUND OPERATING BUDGET City Administrator Hedges introduced the Preliminary 1998 General Fund Operating Budget, stating that the presentation would consist of an overview of the General Fund Budget, an executive summary of the proposed budget and a methodology for preparing the levy certification for collectible 1998 taxes. City Administrator Hedges started by reviewing the purpose of the Special City Council meeting, stating that the City is required to certify to the County Treasurer-Auditor on or before September 15, 1997 the proposed property tax payable; a proposed 1998 budget; and public hearing and continuation hearing dates for truth-in-taxation. Director of Finance VanOverbeke provided information on the proposed calendar that includes the date for ratification of the proposed levy certification, the preliminary budget adoption and dates for the public hearing and continuation hearings for truth-in-taxation. Mayor Egan proposed that the first City Council meeting in December be changed from Tuesday, December 2 to Wednesday, December 3, which is the only date the City could hold the initial public hearing, further stating that initial public hearing dates have already been scheduled by other taxing authorities for Monday, Tuesday and Thursday, December 1, 2 and 4. City Councilmembers agreed that the Wednesday, December 3 date is preferable over any other dates if the City Council meeting has to be rescheduled to satisfy the truth-in-taxation requirements. City Administrator Hedges reviewed the budget formulation process, thanking all the Department Heads for their work during the past four months and further, reviewed the recommended budget which totals $16,560,000, an increase over the 1997 budget of $607,900 or 3.8%. He stated that the contingency in the City Administrator's budget is estimated at $363,800, which represents 2.2% of the proposed budget. The City Administrator further reviewed revenue estimates, stating that certain revenues are higher while others are proposed to decrease; however, he stated that any revenues that are reliant on development fees were budgeted conservatively, which has been the City Council's tradition during the past decade. City Councilmembers stated that they prefer budgeting development related revenues in a conservative matter, so there isn't a dependency on those type of fees as development continues to decrease intensity throughout the City. City Administrator Hedges further reviewed expenditure appropriations, stating that the increase in personal services represents approximately 78% of the total budget increase. He stated that a half-time receptionist position was eliminated in Finance and the Community Development Director position in Community Development. He stated that the increases are for salary increases to regular and temporary personnel, volunteer firefighter compensation, three new Police sworn officer positions and an MIS Intern. Director of Finance VanOverbeke provided an explanation of how the ad valorem tax levy certification was prepared for 1998. He stated that the total tax levy, without the MVTA, is $13,756,716. He stated that 90.4% of this amount is for the general fund, while 6.3% will be allocated to the street fund and 3.3% to the equipment revolving fund. He stated that this proposal includes a maximum property tax levy, under restrictions set forth by the Legislature, with the imposition of levy limits. He further indicated that the proposal eliminates the need to sell equipment certificates for both 1997 and 1998, which is a high priority by the City Council. City Administrator Hedges stated that the ad valorem tax also includes a flat $100,000 addition to the 5% amount of gross levy that is historically levied for the major street fund. He stated that this has also been discussed as a priority by the City Council. Director of Finance VanOverbeke stated that the tax capacity rate increase is 3.8%. Director of Finance VanOverbeke further explained the City tax capacity rate, stating that 1997 actual payable was .21743, while the 1998 estimate is .22564. He stated that the reason the tax capacity rate has increased is due to the change in property tax classifications, which decreased the overall gross tax capacity for the City. He stated that in 1997, the gross tax capacity was $67,548,519; the estimate for 1998 is $66,599,526. If there had been no legislative changes, the gross tax capacity would have been $74,040,693. Director of Finance VanOverbeke further stated that even though the tax classification rates have impacted the overall gross tax capacity and as a result the tax capacity rate, most of the homes in the City of Eagan will experience a decrease in the property tax in 1998 if their market value does not change. He stated that with the tax classification rate changes, there was relief for high value homes, which represent most of the homes within the City and the spending column of the property tax statement will show a decrease. After various questions by the City Council, the City Administrator was asked to review the executive summary . 00282 Page 3/Eagan Special City Council Meeting Minutes August 26, 1997 City Administrator Hedges reviewed eleven points in the executive summary, stating that most of these points are the main issues in the City Administrator's budget for 1998. Mayor Egan thanked the City Administrator for an excellent budget document and suggested that the City Council review each of the items in executive summary along with any other questions regarding the operating budget. City Council member Blomquist stated that she would like to share her general budget philosophies, which include not spending windfalls based on tax capacity increases; she suggested that more dollars be allocated to street maintenance; she would like further discussion on why the storm water utility was removed from the general fund and taxed as a separate user fee on the water and sewer bills; and that consideration be given to generating fees for more revenue in the Park Department for programming. City Councilmember Awada stated that 72% of the operating budget is personnel and continued to question why technology is not reducing the need and reliance for clerical personnel. She further questioned the need for more Police personnel. Chief of Police Geagan explained that the community has grown to expect programs, such as DARE., community policing and other related services which are labor intensive, in addition to police responding to the traditional police calls and patrol duties. He stated that the budget could be reduced; however, the Police Department service would be relegated to responding to calls with no other programs associated with community policing. Mayor Egan asked if there are any additional reductions in Community Development, specifically asking about Steve Dorgan's position. City Administrator Hedges stated that he is proposing to not fill the position, however, to leave the position as a vacancy in the budget until the City Council has set its policy regarding code enforcement for residential properties and other related regulations. He stated it is possible the position could be eliminated after further evaluation. City Councilmember Masin asked Chief of Police Geagan about the DARE program and specifically how effective the program is. Chief Geagan stated that there are a number of studies that address DARE.; however, it is hard to measure what the impact is on fifth graders with or without the DARE. program. Mayor Egan asked the City Administrator to review the special report on the Parks & Recreation budget. City Administrator Hedges stated that, as directed by the City Council, a more in-depth analysis of the Parks & Recreation budget was prepared for City Council review. He stated that as a part of the study, staff included results of the activity based costing that were prepared in 1993 and 1994. He stated that this allows the Council to evaluate how the Park Department expenditures are broken down, such as overall maintenance of parks and trails, recreational services, park planning and development and public facilities/services-non-park. After further review, City Councilmember Blomquist stated that she would prefer to see programs reduced where there is a limited or no cost benefit to the City and to increase the user fees for certain programs which allocate more of the cost to the user. She further questioned the amount of mowing and whether there could be some savings by cutting back on some of the boulevard mowing operation. Director of Parks & Recreation Vraa stated that this mowing is performed by seasonal employees at a total cost of $6,500 to $8,500 for the season. City Councilmember Blomquist further suggested that two Planning positions be eliminated. City Councilmember Masin stated that she does not agree with reducing programs in Parks or other departments, especially in a growing community. City Councilmember Awada stated that her suggestion is not to necessarily reduce or eliminate programs as it is to bring the total recreational cost and direct services closer together so there is direct correlation between the programs and user fees. City Council member Awada also suggested that the levy certification be reduced by $50,200, which is the approximate cost of a Planner position and is the actual difference between the contingency budget in 1997 and the amount proposed for 1998. Director of Finance VanOverbeke reminded the City Council that any reduction in the total levy certification for 1998 will reduce the base and could limit the City Council's ability to raise revenue from property taxes in 1999 and subsequent years. City Council member Blomquist stated that she is in support of City Councilmember Awada's proposed levy reduction, which would lower the overall City budget to a 3.6% increase. City Councilmember Blomquist further stated that in addition to the reduction in the contingency by $50,200, she would propose a further 00283 Page 4/Eagan Special City Council Meeting Minutes August 26, 1997 review of the Park programming by reducing certain programs where there are few users and high costs, increase other user fees to bring the recreation cost and direct services closer together, consider a downsizing in the Planning positions, reduce the number of Police officers from three to two and allow the Police Chief to determine whether it should be one patrol officer and one detective or two patrol officers, and further to fully evaluate the seasonal boulevard mowing program to determine if there are any cost savings to that service delivery. City Councilmembers concurred with City Council member Blomquist's suggested changes and the City Administrator was directed to reduce the levy certification by $50,200 and all other reductions would be reappropriated to the street construction fund to provide a greater allocation of revenues for the street infrastructure system. Mayor Egan again thanked the City Administrator for an excellent document. It was agreed by the City Council that no additional budget work sessions would be necessary prior to the adoption of the preliminary budget and levy certification scheduled for the September 2 regular City Council meeting. OTHER BUSINESS There being no further business, the meeting was adjourned at 9:00 p.m. August 26, 1997 Date TlH