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CC 2012 01 09 CHANHASSEN CITY COUNCIL REGULAR MEETING JANUARY 9, 2012 Mayor Furlong called the meeting to order at 7:05 p.m. The meeting was opened with the Pledge to the Flag. COUNCIL MEMBERS PRESENT: Mayor Furlong, Councilman McDonald, Councilwoman Tjornhom, Councilwoman Ernst, and Councilman Laufenburger STAFF PRESENT: Todd Gerhardt, Laurie Hokkanen, Paul Oehme, Kate Aanenson, Todd Hoffman, Greg Sticha, and Roger Knutson PUBLIC PRESENT: Tom Devine 7640 South Shore Drive PUBLIC ANNOUNCEMENTS: Mayor Furlong: Thank you and welcome to those here in the council chambers as well as those watching at home. We’re glad that you joined us this evening. We hope everybody had an enjoyable holiday season. It’s nice to be back here in the council chambers working on city matters again as we move into 2012. The council met with staff on Saturday to start discussing our strategic initiatives. We continued that discussion tonight on our work session and other items so we’re kicking off the new year right where we left off and that’s a very good pace. Let me start by asking members of the council if there are any changes or modifications to the agenda. If not, we’ll proceed with the agenda as published without objection. ORGANIZATIONAL ITEMS: Mayor Furlong: I’d like to start first item are a couple organizational items that we deal with at the beginning of each new year. One is to designate an official newspaper for the city. The other is the designation of the acting mayor and the third this year is to confirm appointment of the fire chief. Staff has provided a recommendation for the official newspaper, which would be the Chanhassen Villager. We’ll probably consider these in a single motion but any questions from members of the council on staff’s recommendation? Or any discussion on the official newspaper. Second is the acting mayor. The acting mayor is the person, a member of the council who will run meetings, stand in ceremonies and execute official documents in my absence. Councilwoman Tjornhom, thank you. You served in that role this last year. I appreciate that. I hope we didn’t call on you too frequently. Councilwoman Tjornhom: You only called on me when it was raining or snowing. Mayor Furlong: You know. Councilman Laufenburger: And we didn’t get cake as often as we did. Mayor Furlong: And we did not get cake. Well thank you for doing that. I don’t know if you’re interested in continuing in that role. If there are others but. Councilwoman Tjornhom: I would actually be interested in pursuing that role again this year. Chanhassen City Council – January 9, 2012 Mayor Furlong: Okay, thank you. I certainly accept that as a nomination. Are there any other nominations or a second for Councilwoman Tjornhom continuing in that role? Councilman McDonald: I’ll second Councilwoman Tjornhom. Mayor Furlong: Okay, thank you. Any other nominations or discussion? Okay, we’ll include her as the designate for the acting mayor in our motion when we get there. The third item is to confirm the appointment of the fire chief. John Wolff, who stepped in to complete the term of our previous fire chief this last year for a few months, was elected by members of the department to be the fire chief for a 2 year st term commencing with January 1 of 2012. Staff certainly recommends, as would I to the council that we confirm Mr. John Wolff’s appointment as fire chief. Any questions or comments on that item? No? If not then would somebody like to go ahead and make a motion. Councilman McDonald, would you like to make a motion then? Councilman McDonald: You caught me without looking. Mayor Furlong: I’ve got the printed copy. Councilman McDonald: Oh okay good. Mayor Furlong: I’ll just pass that down. Councilman McDonald: Because I was going to have to wing it. Okay, I make a motion that the Chanhassen City Council designate the Chanhassen Villager as it’s official newspaper and that we designate Ms. Tjornhom as the Acting Mayor and that we confirm John Wolff’s appointment as Fire Chief. Mayor Furlong: Thank you. Is there a second to that motion? Councilman Laufenburger: Second. Mayor Furlong: Motion’s been made and seconded. Any discussion? Councilman McDonald moved, Councilman Laufenburger seconded that the Chanhassen City Council designate the Chanhassen Villager as the official newspaper, designate Councilwoman Tjornhom as Acting Mayor, and confirm the appointment of John Wolff as Fire Chief. All voted in favor and the motion carried unanimously with a vote of 5 to 0. CONSENT AGENDA: Mayor Furlong: If there’s desire by members of the council or others present in the chamber for separate discussion on items 1(a) through (e), I would ask that you let me know at this time. Councilwoman Ernst: Mayor I do have one. Mayor Furlong: Councilwoman Ernst: Councilwoman Ernst: (b). Just for clarification. Mayor Furlong: Questions? Long discussion? 2 Chanhassen City Council – January 9, 2012 Councilwoman Ernst: Not long discussion. Just questions. Mayor Furlong: Just questions? Councilwoman Ernst: Yeah. Mayor Furlong: We can pick that up right after the consent agenda if that’s okay. Items (b) will be removed. Are there any other items? With that then is there a motion to adopt items 1(a) through (e) excluding (b). Councilwoman Tjornhom: So moved. Mayor Furlong: Thank you. Is there a second? Councilman McDonald: Second. Councilwoman Tjornhom moved, Councilman McDonald seconded to approve the following consent agenda items pursuant to the City Manager’s recommendations: a. Approval of Minutes: -City Council Work Session Minutes dated December 12, 2011 -City Council Verbatim and Summary Minutes dated December 12, 2011 Review Commission Minutes: -Park and Recreation Commission Verbatim and Summary Minutes dated December 13, 2011 Resolution #2012-03: c. Approve Acquisition of Wheel Loader. d. Approve Agreement to Temporarily Allow Issuance of a Building Permit Before Demolition of rd an Existing Home, 1641 West 63 Street, Ann Nye. e. Uphold Money Limits on Tort Liability as Established by Minnesota Statutes. All voted in favor and the motion carried unanimously with a vote of 5 to 0. 1(B). APPROVE STIPULATION OF SETTLEMENT AND ORDER AS TO PARCEL 2, DEGLER. Mayor Furlong: Councilwoman Ernst, questions? Councilwoman Ernst: Yeah, I’m just wondering if you could clarify for me the, so the City had a property value, an appraisal value but it was different than the Degler value and I’m not sure what the money is that we’re paying, that we’re paying here so if you could just clarify that for me. Mayor Furlong: And some background. Councilwoman Ernst: And the difference, yeah. Paul Oehme: Sure. Little background Mayor, council members. This land acquisition was in conjunction with the Lyman Boulevard Phase I project. That’s the improvement project that was associated in conjunction with the high school, Chanhassen High School going in. That roadway needed 3 Chanhassen City Council – January 9, 2012 some, was widened significantly from a two lane rural section to a four lane urbanized section. There is a pedestrian underpass put in at the Degler property location so there were some permanent temporary drainage utility easement that was needed to be acquired for those improvements to take place. The City did, in conjunction with Chaska and Carver County did appraisals and we thought that was at a fair market value. There is I think 4 or 5 different comparable properties that were looked at. Based upon those comparables a cost estimate for per square foot was calculated. Mr. Degler did not fully agree with those numbers and it is his right to contest those numbers so he did hire an appraiser. Came up with his own cost estimate for what the value of those easements and right-of-way were. That goes through the condemnation process and so there’s a Judge has to sign and other court proceedings that took place as well so in conjunction with that you know we were off by, there was about a, there was a difference inbetween what the City’s appraisal was and the Degler appraisal based upon where those numbers were. It was the City Attorney’s office thought it was beneficial for us to settle at a certain dollar amount and the dollar amount based upon the attorney’s recommendations is in you background here so that’s a little bit of background in terms of how we got to this number but it’s basically, it’s kind of a negotiated settlement. We could have taken it to the next level and had commissioners hearings which would have incurred additional cost for the City in terms of legal fees and appraisal fee costs and court costs and those type of things. Councilwoman Ernst: Do we think that would have exceeded the difference that we’re paying here? Paul Oehme: I mean that was the attorney’s office recommendations that potentially liability or the exposure potentially would have been more than what our settlement would have been. Councilwoman Ernst: Okay. Thank you. Mayor Furlong: And just to clarify, this is I guess one of those all things considered because there is risk as well as cost to continue the process but in our packet is a letter from Tom Scott from Campbell- Knutson Law Firm recommending approval of this settlement so, in their view, at least our city attorney’s view, they believe this is fair and reasonable all things considered. Paul Oehme: That was their recommendation, correct. Mayor Furlong: Okay. Any other questions on this? Councilwoman Ernst: No. Thank you. Mayor Furlong: Would you like to make a motion then? Councilwoman Ernst: I make a motion we approve the Stipulation Settlement and Order as to Parcel 2, Degler property for the Lyman Boulevard Improvement Project #06-03, Phase I, Court File #10-CV-08- 426. Mayor Furlong: Thank you. Is there a second? Councilman McDonald: I’ll second. Mayor Furlong: Motion’s been made and seconded. Any discussion on the motion? Hearing none we’ll proceed with the vote. Councilwoman Ernst moved, Councilman McDonald seconded that the City Council approve the Stipulation Settlement and Order as to Parcel 2, Degler property for the Lyman Boulevard 4 Chanhassen City Council – January 9, 2012 Improvement Project #06-03, Phase I, Court File #10-CV-08-426. All voted in favor and the motion carried unanimously with a vote of 5 to 0. VISITOR PRESENTATIONS: None. REFLECTIONS AT LAKE RILEY: A. PUBLIC HEARING TO CONSIDER VACATION OF DRAINAGE & UTILITY EASEMENT IN THE FIRST ADDITION. B. FINAL PLAT APPROVAL FOR THE SECOND ADDITION C. APPROVAL OF PLANS & SPECIFICATIONS AND DEVELOPMENT CONTRACT FOR THE SECOND ADDITION. Kate Aanenson: Thank you Mayor, members of the City Council. As you indicated there’s actually three action items for you tonight. One is the final plat approval, and for that to occur you need to have a public hearing on the vacation of a utility easement and your final action will then be the approvement of the development contract and approval of the plans and specs. So I’d first like to start off with just kind of the subject site. We’re down in the eastern part of the city just north of Lake Riley. The first phase was approved. Typically these are put on consent. Again as we have the public hearing for the vacation you’re seeing that, so the subject site now is adjacent to 212. The applicant, Lennar Development, Mr. Jablowski was going to be here but he had a conflict with another city council tonight so in his absence he stated to us that he is in approval of all the conditions of the plat. Again one of the issues, this was going to try to be on in December but they were working out the wall. Retaining wall up against 212 which we’ll show a little bit in just a minute. So this is the subject site. Again the applicant is requesting approval of 49 lots and 2 outlots so it’s pretty much the rest of that development. The other large portion in there is dedicated for parks and open space and that will be the property, Riley Ridge Park and then there’s a large wet, which is excuse me adjacent to Lyman Boulevard, then there’s the wetland complex immediately to the north of that. So this is the final plat. Again the 49 lots. Some of the lots adjacent to the wetland are a little bit larger because they are in the shoreland district so that’s where you see the little difference there in the lot size. So with that you can see there was a retaining wall and that was some of the issues that we worked through. The wall does not go continuously along that property because the actual grade of the berm along 212 is actually higher than would have been the retaining wall so there already is noise attenuation provided so this wall will go where you can see the light kind of green yellow on the site plan into that one cul-de-sac so that’s the wall and I think we wanted to make sure the durability and the architectural significance looked well for that so that met our approval so that was why the delay from your December meeting til now so staff is appreciative of the extra effort that was put into that. So with that a vacation is required. A notice was sent out. That is in your packet but I’ll let the city engineer go through the vacation request. Paul Oehme: Thanks Ms. Aanenson. There, Mayor and City Council members. There is a 12 inch trunk watermain that’s encumbered on the site. The current location of this watermain conflicts with the proposed alignment, layout of the new development so the watermain will need to be relocated. There is currently a permanent easement, drainage utility easement over the watermain. Staff is recommending that this watermain, or easement be vacated at this time and a temporary easement be approved over the existing watermain until the time that a new watermain relocated within the roadway right-of-way of the development is functioning so with that staff is recommending the vacation of the drainage utility easement and a public hearing be held at this time for the vacation. Mayor Furlong: Thank you. Questions? Let’s start with questions for staff on this drainage and utility easement. We’ll hold the public hearing and then we’ll get back to the other items if there’s no objection to that process. Any questions for staff regarding item A here which is the drainage and utility easement 5 Chanhassen City Council – January 9, 2012 vacation and replacement? Everybody’s comfortable with staff’s report? Okay. Let me go ahead then and I will open up the public hearing and invite any interested party to come forward and address the council on the request for the vacation of the drainage and utility easement in the First Addition. Seeing nobody then, without objection we’ll close the public hearing and bring it back to council. Let’s continue on then with staff reports for items B and C and then we’ll consider all three in a single motion. Kate Aanenson: Yeah, so that’s really what the staff had for their staff report. The development contract is in place. It’s a standard development contract again. The applicant was in concurrence with the conditions in that also and so with that we are recommending the three motions for your approval and be happy to answer any other questions that you may have. Mayor Furlong: Thank you. Any questions on this? The development of the site is going well I assume. Kate Aanenson: Very well. Yes. They’re very satisfied. Mayor Furlong: That’s good to hear. Okay. Councilman Laufenburger: Mr. Mayor? Mayor Furlong: Yes, Councilman Laufenburger. Councilman Laufenburger: Kate, how many plats were in the original Reflections at Lake Riley? Was it like 40. Kate Aanenson: 66. Councilman Laufenburger: 66, okay. Kate Aanenson: Yeah, yeah. Councilman Laufenburger: And what do we get a sense on how many of those are either in process or ready to be built on right now, do you have that, has the developer reported that to you at all? Kate Aanenson: They’re selling very well. They’re very satisfied. Exceeding their expectations so that’s why they’re platting the rest of the whole thing. Typically they’re taken down in smaller chunks but they have so much confidence they’re platting the rest of it all at once so. Todd Gerhardt: Mayor, council members. Just to do the second addition with some of the grading, utility work, streets, it’s probably you know work that’s going to, it will be work that’s going to occur probably April-May timeframe and that’s going to take probably a good 3-4 months so, that gives you up until the end of July really to sell out the other 20 some lots that they had with the first addition and then prepare them to start off and market the second addition. Councilman Laufenburger: Okay. And just one other question. What about the nomenclature assigned to the specifically the Courts like Highland Court and Lakeview Circle, is that permanent? Is that determined by the developer? Kate Aanenson: They have to be reviewed by the, the building official looks at those and they’re also submitted to the County so there’s not conflict in similar names so. Councilman Laufenburger: There’s one at Chaska. 6 Chanhassen City Council – January 9, 2012 Kate Aanenson: Yeah, they will, if there is a conflict it will get sent down. Normally we send down a draft just to make sure but if there is a conflict it’ll be sent back and changed. Councilman Laufenburger: Okay, thank you Mr. Mayor. Mayor Furlong: Thank you. Any other questions for staff on any of these three items? Always nice to see a development come through on a plat and hear a development going well so if there are no questions would somebody like to make a, let’s go to discussion. Any discussion or other comments? If not, if somebody would like to make a motion. We can deal with all three items, a, b and c in a single motion I believe unless there’s objection. Councilman Laufenburger: Mr. Mayor. Mayor Furlong: Councilman Laufenburger, thank you. Councilman Laufenburger: Yeah, Mr. Mayor I would move that the Chanhassen City Council grants approval of the final plat for Reflections at Lake Riley, Second Addition as shown on the plans dated th Received November 14 and subject to the conditions of approval in the staff report. And that the Council approves the easement vacation subject to filing the Reflections at Lake Riley Second Addition plat and filing of the attached temporary drainage and utility easement. And the City Council approve the development contract and construction plans and specifications for Reflections at Lake Riley Second Addition. Mayor Furlong: Thank you. You read well. Is there a second? Councilman Laufenburger: Staff prepares well. Mayor Furlong: Staff is well prepared. Todd Gerhardt: That is one big motion. Councilwoman Ernst: I’ll second it. Mayor Furlong: Was there a second? Todd Gerhardt: Nann’s got to type it up. Mayor Furlong: Motion’s been made and seconded. Any discussion on the motion? Resolution #2012-02: Councilman Laufenburger moved, Councilwoman Ernst seconded that the nd City Council approves the easement vacations subject to filing the Reflections at Lake Riley 2 Addition plat and filing of the attached temporary drainage and utility easement. All voted in favor and the motion carried unanimously with a vote of 5 to 0. Councilman Laufenburger moved, Councilwoman Ernst seconded that the City Council grants nd final plat approval of Planning Case #10-12 for Reflections at Lake Riley 2 Addition to subdivide 18.9 acres into 49 lots and two outlots as shown in plans dated Received November 14, 2011, subject to the following conditions: 7 Chanhassen City Council – January 9, 2012 1. All trees proposed to be preserved shall be protected by tree preservation fencing. Fencing shall be installed prior to grading. 2. The public drainage and utility easement on the north side of the development must be vacated. 3. The existing building and driveway on the north side of the site must be removed. 4. The lowest opening of a building must be a minimum 18 inches above an adjacent emergency overflow. 5. The development is adjacent to Lyman Boulevard and is therefore subject to the arterial collector fee at the time of final plat, which is calculated as follows: 14.36 developable acres x $2,400.00/acre = $34,464.00 6. The developer will not be reimbursed for the relocation cost of the 12-inch watermain since the work is development driven. 7. The applicant, with the assistance of the city, must show that adequate capacity exists within the North Bay storm sewer system to accommodate the proposed drainage area to be directed to North Bay. 8. The NPDES General Stormwater Permit for Construction Activity must be applied for and obtained prior to any earth-disturbing activities. Proof of this must be provided to the city. 9. The applicant shall install a five-foot sump at structure CBMH-123 and a four-foot sump at CBMH-303. Both of these shall be fitted with a SAFL Baffle as well. 10. Hydraulic calculations shall be provided to the city for review and approval before the final plat can be issued. 11. Mulch, MnDOT Type 3, certified weed free shall be used in all of Block 2, Outlot A and Outlot C whenever mulch is called for. 12. SWMP fees in the amount of $76,510.34 are due at the time of final plat. 13. Phosphorus removal will need to meet the minimum 60% removal rate and should be maximized to the greatest extent practicable. 14. The applicant shall be responsible to assure that all other agency permissions are applied for and resulting conditions are met. 15. A Landowner Statement and Contractor Responsibility form will need to be filled out and submitted to the LGU (City of Chanhassen) and the DNR. The form can be found at: http://www.bwsr.state.mn.us/wetlands/forms/Contractor_Responsibility.doc 16. Appendix A, C.1 and C.2 must be addressed including: a. Exposed soil areas must be stabilized as soon as possible but never later than seven (7) days. b. A discussion of the feasibility of infiltration and the appropriate response to these findings. 17. Building Official Conditions: 8 Chanhassen City Council – January 9, 2012 a. Demolition permits must be obtained before demolishing any structures on the site. Application for such permits must include hazardous substances investigative and proposed mitigation reports. b. A final grading plan and soils report must be submitted to the Inspections Division before permits can be issued. c. Retaining walls over four feet high must be designed by a professional engineer and require permits, inspections and final approval. d. Each lot must be provided with separate sewer and water services. e. The developer and/or their agent shall meet with the Inspections Division as early as possible to discuss plan review and permit procedures. 18. Fire Marshal conditions: a. Submit alternative street name for Lakeview Circle (proposed street name conflicts with existing street). b. No burning permits will be issued. Tress, scrubs, etc., must be removed from the site or chipped. c. Mains and fire hydrants shall be installed and made serviceable prior to combustible construction. d. A three-foot clear space must be maintained around fire hydrants. e. Temporary street signs shall be installed as soon as construction begins. Signs shall be of an approved size as required by the Chanhassen Fire Marshal. They shall be weather-resistant and maintained until replaced by permanent signs. f. Fire apparatus access roads and water supply for fire protection is required to be installed. Such protection shall be installed and made serviceable prior to and during time of construction except when approved alternate methods of protection are provided. 19. The applicant shall work with staff to evaluate the use of a privacy fence and vegetation along the north edge of the property to lessen the noise impact from Highway 212. A solution will be presented with the final plat. 20. Approval is contingent on the approval and filing of the easement vacation. 21. The $34,464.00 arterial collector fee shall be collected with the development contract. 22. All outlots containing drainage basins shall be deeded to the City.” All voted in favor and the motion carried unanimously with a vote of 5 to 0. Councilman Laufenburger moved, Councilwoman Ernst seconded that the City Council approves the Development Contract and Construction Plans and Specifications for Reflections at Lake Riley nd 2 Addition. All voted in favor and the motion carried unanimously with a vote of 5 to 0. 9 Chanhassen City Council – January 9, 2012 CONSIDER APPROVAL OF MEDIACOM AGREEMENT. Greg Sticha: Good evening Mayor and council members. Mayor Furlong: Mr. Sticha, good evening. Greg Sticha: In 2010 city staff became aware of the potential for some accounting errors in regards to receipt of funds for the City’s cable franchise fee agreement with Mediacom, the City’s cable service provider. At which time we looked into our options into trying to figure out the extent of the errors that were involved. In 2011 the City employed the firm of Scott Lewis and Associates to perform an audit of the City’s franchise agreement with Mediacom and the accounting records related to that agreement. That audit did reveal some accounting errors which at that point in time we approached Mediacom to discuss settlement of those funds related to the franchise agreement. Over the last several months we’ve been in discussions with Mediacom to come to an agreement on a dollar amount owed for those inadvertent accounting errors. I guess at this point in time I don’t have anything additional to add that is not already provided in the staff report so what I am going to do is turn it over to Brian Grogan, the City’s attorney in matters related to the franchise agreement and Brian’s going to explain what a PEG fee is and answer any of your questions that you might have about either the fees or the agreement that is in front of you this evening. Mayor Furlong: Good evening. Brian Grogan: Good evening Mayor, members of the council. For the record my name’s Brian Grogan. I’m an attorney with the Minneapolis law firm of Moss and Barnett here tonight representing the City working with your finance director and your city manager. That’s a little bit like describing, the question he gave is like describing the national debt. You know these are hard questions but I’m going to keep this short. You run a pretty efficient meeting here. I don’t want to throw you off tonight. We have a franchise that dates back to 1998 and so this has been here now for a good 12-13 years that it’s been in operation. It has two components as it relates to payments to the City. Franchise fees and PEG fees and they’re calculated in two different ways. Franchise fee is based on a percentage of gross revenues. In this case it’s a 5% fee that the cable operator, Mediacom pays to the City basically as a rental fee for the use of your rights-of-way and so they pay that on what’s known as gross revenues, and that’s a defined term in the contract that includes revenue sources from the company’s delivery of cable services. It’s important to distinguish this doesn’t include telephone services or internet, broadband services. Just cable TV video services but you’d be surprised how much is included in that. There’s pay per view. There’s basic. There’s converter rentals. There’s sales. Advertising sales that come off of video services so there’s a number of components in that definition and it’s not uncommon for cities and cable operators to disagree about an interpretation of that type of definition. The City wisely hired a national expert to do this audit and his interpretation, not surprisingly differed from Mediacom’s financial controller’s interpretation of that and that resulted in some differences in terms of how Mediacom calculated the franchise fee payments. The fact that this franchise dates back to 1998, sometimes when you have an error like that it compounds then and it just keeps going year to year. You have interest played on top of that and the sums can get rather large. It’s important to emphasize that during this process Mediacom was very cooperative with the City. They acted in good faith. They provided information when we asked it. As a matter of fact they put their controller in direct contact with our financial consultant Scott Lewis so it was a good exchange of information. They don’t agree on everything but that was the purpose of the negotiations that Greg alluded to. But the second component of this relates to PEG fees. PEG fees are calculated a little differently under your franchise. City’s have the right to negotiate those any way they choose. In the metropolitan area it’s very common for cities to have a component that helps support the cameras and the lights and the edit decks that are used to broadcast this meeting and school meetings and other things like that. In your case the fee was allocated at 84 cents per subscriber per month and what 10 Chanhassen City Council – January 9, 2012 typically happens is that gets coded in and it never gets looked at again. There’s a calculation done based on the number of subscribers, the fee and voila, you have a fee that gets added and it usually gets paid on a quarterly basis along with franchise fee payments so again it’s very typical for a city to get one check each quarter. It includes both revenue sources and you move forward. In this case way back at the start there was an inadvertent error where it didn’t get coded properly. At least that’s what the parties are guessing. We’re not positive because some of these records are so old that it’s really tough to track down but it compounded. Once the error was made it simply happened year after year and you had interest calculations on top of that. Again the company was very cooperative in trying to gather the records that were available so that our consultant could review that information. A final report was issued. I was brought in to try to help negotiate the settlement agreement and some of the other differences between the parties and what we have before you tonight is a settlement agreement. We call it a settlement and release agreement. What it really does is it allows the company to make a payment to cover these inadvertent accounting errors and in return the City agrees that we’re done with this. This chapter will now be closed and we’ll start fresh from this point forward now that we all know that these errors were there and the company’s agreed to correct those. There were a couple of things that came up through the process that justified consideration of an amendment and that’s part of this settlement agreement. There was a few revenue categories that the company took the position that those really shouldn’t be included in the City’s calculation of gross revenues for that first fee, the franchise fee. And after reflecting on it and listening to their position the City agreed that they were right. Those really should not be included in the calculation so part of our recommendation tonight as a part of this settlement is for on a slight amendment to the definition of gross revenues. I want to emphasize though that this definition, this amendment will only really stay in effect for a little over 12 months. This contract in it’s entirety will expire in May of 2013 and that you know sounds funny because to me that seems like forever. 2013. You know May of 2013 isn’t that far away from us right now and so we’re really talking about an amendment that will affect us just for that period of time and in all likelihood this matter will be back before the council sometime prior to May of 2013 for a new contract. It may look similar to this one. It may have some changes to it. The parties haven’t really negotiated that yet but I expect the city manager will be bringing that towards you or forward to you in the next year or so. So my recommendation this evening is to approve this settlement agreement. To accomplish that Mr. Mayor I put forward a resolution that would authorize execution of this settlement agreement and the resolution would then also approve this minor amendment to gross revenues that’s also embodied in the settlement agreement. And with that I certainly stand for any questions that the mayor or council may have. Mayor Furlong: Thank you. Any questions for Mr. Grogan? Councilman Laufenburger. Councilman Laufenburger: Mr. Morgan, is that correct? Brian Grogan: Grogan. Councilman Laufenburger: Grogan, excuse me. The amount of the settlement on the surface seems big to me and I’m wondering how does this settlement, which I am assuming is essentially a payment for errors made let’s say for the 13 years that the contract has been in place so far. I’m wondering how does, do you have any information about how the amount of this settlement compares to the revenue that we’ve been seeing from Mediacom during that same timeframe? Brian Grogan: It’s actually a tiny fraction of the total revenue that the City receives, because you receive a 5% franchise fee each year. The amount of franchise fees underpaid you know on an annual basis, this represents actually a fairly small fraction of the total revenue but as it relates to the PEG fees it represents a rather sizeable portion of that because the initial error in not coding that properly really translated through so that, you know a large portion of this amount relates to that PEG fee piece of it along with interest calculation on it. 11 Chanhassen City Council – January 9, 2012 Councilman Laufenburger: Alright. And Mr. Grogan, do you know how many subscribers Mediacom has in Chanhassen that this revenue is based on and the PEG fees are based on? Brian Grogan: You know I might have to refer back to your finance director, if you have a ballpark number. Laurie Hokkanen: The last number if had from 2004 was 4,118 subscribers. Councilman Laufenburger: Okay so quick calculation, 84 cents a month. Mayor Furlong: About? Councilman Laufenburger: For 12 months times 13 years times 4,000 subscribers, assuming that they’ve had some growth, that’s $524,000. Is that about right? Brian Grogan: I’m going to trust your math on that. I do have a I think an answer to explain the discrepancy between the two though. Councilman Laufenburger: Please, would you answer that discrepancy. Brian Grogan: Sure. You know we’re talking about a franchise here that extends back 13 years and there is a statute of limitations on all contract matters in Minnesota which was an issue that was raised by Mediacom. The City had an option to pursue full enforcement of that and to challenge that issue. We really seriously researched and weighed that issue heavily and the settlement number that you have is a result of a compromise over what we felt the City had strong legal authority to collect versus the risk that we would have that some sizeable portion of this may not be collectable because of a statute of limitations issue. Councilman Laufenburger: And plus we were also avoiding the cost of litigating that. Brian Grogan: Precisely. And that was an issue your staff raised and asked for specific estimates on the cost, the process, how much time it would take, etc and that was weighed into this calculation as well. Councilman Laufenburger: Okay. Just one last question. What prompted us to look at this last year? Were we suspicious of this? Mr. Sticha maybe the question goes to you. Greg Sticha: In 2010 we started receiving the PEG fee money. Got a back payment for 2010 late in 2010. At that point in time we became suspicious that something wasn’t right and that’s when we employed Scott Lewis to undertake the audit. We initially did a 3 year review and then after we found errors in those 3 years we then employed him to do another 2 years which gave us the 6 years of the statute of limitations that Mr. Grogan was referring to. At that point in time we did some estimates back to 1999 as well and then that’s when we met with Brian and Mediacom to discuss a settlement. Todd Gerhardt: Mayor, council. I also had discussions with General Manager Bill Jensen and we were talking about the service levels in the community and I had talked to him about you know being contacted by a variety of different audit firms to review franchise agreements and through our discussion we came to the conclusion that it’s probably a good practice to do this on occasion. I think if anything it was a joint effort between Mediacom and the City of Chanhassen to take a look at the whole audit process. Councilman Laufenburger: Does our current, you’re familiar with our current contract, is that correct? 12 Chanhassen City Council – January 9, 2012 Brian Grogan: Yes I am. Councilman Laufenburger: Does our current contract stipulate that we can ask for an audit or we can ask for a report you know looking at details? That we can do that on an annual or every 3 year basis or something like that. Brian Grogan: Absolutely. As a matter of fact I was here, drafted these, both the ordinance and the franchise for the City back in 1998 and it does include an audit provision. Typically these things come up in my experience because I do represent cities around the country on primarily these communications issues and they come up when a contract is up to renewal or renegotiation so it was actually quite timely and somewhat serendipitous that this came up a year and a half prior to when you’re going to be renegotiating but it is not at all uncommon for a city to wait until that time period to do the audit. Some, I would say more, some that have a larger subscriber base, and I’ll use Minneapolis as an example. When you have that large of a subscriber base you can justify the expenditure of $10,000 or more for an audit because you’re spreading it over a large base. The smaller the community then you have to weigh the cost benefit of doing those every 2 or 3 years. There is a cost benefit to it. Councilman Laufenburger: Okay, thank you Mr. Mayor. Mayor Furlong: Thank you. Did you have a question Councilwoman Ernst? Councilwoman Ernst: Yeah. So Todd, kind of going back to your comment then, is an audit the only way to catch something like this or is there like a best practice that the City can actually implement that would catch this outside of an audit? Because I’m thinking of the cost of an audit. You know maybe it’s something we do annually. I don’t know. Todd Gerhardt: Well I don’t think you need to do it annually. The best practice would be to do one at least once every 5 years. Statutes of limitations allow you to go back 5 years so you know we don’t want to get caught into the position where, that we couldn’t enforce the franchise agreement past that 5 year window so I think once every 5 years still gives you that flexibility. Councilwoman Ernst: But wouldn’t it make more sense to do it probably more often than 5 years if the statute of limitations is 5 years? Brian Grogan: If I might. Mayor Furlong: Yeah, Mr. Grogan. Councilwoman Ernst: Thank you. Brian Grogan: Madam councilmember, if I might ask with the mayor’s permission, the franchise does include something called a franchise fee payment worksheet which may sound rather sixth grade’ish in terms of what they do but it actually does serve a purpose. They fill out on a quarterly basis the revenue that they collect from various sources. Often times they’ll categorized this as proprietary information and they’re allowed to do that under State Data Practices Act but by filling out that information it’s more than just getting a check without any verification of how it’s calculated. The trick in this situation was there was no deviation from the trend that had occurred. The payments that we got back in ’98 moving all the way forward had a nice steady increase each year of X percent and there was no reason to suspect that there was any miscalculation on the part of the company. Again it was the initial coding error for one issue that resulted in this occurring long term but as we looked forward to the rest of this contract and 13 Chanhassen City Council – January 9, 2012 then to 2013 going forward that worksheet, if properly filled out by the company, can be a great tool for your finance director to verify that there isn’t a deviation in the revenue sources. I like to think of it as you get in the right ballpark and if you’re not in that ballpark then you know a flag’s been raised and it’s probably time to bring in that specialist and have them take a closer look and so that tool’s here and after this exercise that we’ve gone through with Scott Lewis I think we have a very good baseline now to work from. Hopefully that will serve us well going forward. Councilwoman Ernst: Okay great, thank you. Todd Gerhardt: And Mayor, council. Brian hits on the point. We still have new growth coming into the community so the dollar amount changes from year to year, as Brian mentioned. This last year we’ve added 186 new single family homes in the community. Probably most of those are going to add cable service so you’re going to see an increase in those franchise fees and PEG fee numbers so, but we know what that rote number is and we can kind of equate that back but we’ll definitely be monitoring those like we have in the past to make sure that we see those increases. Councilwoman Ernst: Okay. Thank you. Mayor Furlong: Any other questions? Just a couple quick questions. The agreement here talks about an effective date and that basically we’re re-setting the clock at that point. The effective date is tonight I assume. Brian Grogan: Tonight. To the extent that council approves it, this would be the effective date. Mayor Furlong: Okay. And then my question to that is, then are we comfortable that the PEG fees and the franchise fees have been accurately calculated over the last year or whatever time period between when the audit became and subsequent to that up to tonight? Brian Grogan: Yeah the settlement was reached, I’m at a ballpark but roughly mid-December was when we finalized this and your schedule was very busy at the end so we pushed it to this meeting. But part of this settlement number was, you know when you’re dealing with a number this large, there’s a little bit of give and take on that number and part of the give and take was to assume the amount outstanding for all of 2011 and up and through this date and that’s built into the settlement figure. Mayor Furlong: Okay, good. And then that answers my question. Then the other question I have, this is not the first agreement we’ve had with a cable provider. This agreement which is effective tonight or 13 years. We’ve had prior agreements I assume. Brian Grogan: Correct Mr. Mayor. This was a, the contract tonight was a renewal of a contract that was with a prior operator. Some of you may remember Triax Cablevision was the operator previously. That was renewed and so it’s been, you know you’ve had cable here for in excess of 30 years actually. Mayor Furlong: Okay. And have, during that period of time Mr. Gerhardt or Mr. Grogan, have we conducted an audit like this before or is this the first time that we’ve, to your knowledge. Todd Gerhardt: I’m not aware of any other audits. Brian Grogan: My recollection is that when we did the renewal, as we were coming into this contract, and I can’t say whether it was an outside accountant or the internal finance director at the time but there’s always scrutiny over that issue because the city mayor at the time, we always know the questions going to ask have we gotten paid for what we were owed under the existing contract before we renew the new one. 14 Chanhassen City Council – January 9, 2012 As I recall Mr. Ashworth was the manager at that time and he was prepared for that question so I just don’t recall if it was an internal review or an external review. Mayor Furlong: What level of review had been done. Brian Grogan: Correct. Todd Gerhardt: Mayor, council, every time we prepare our annual budget we need to put a dollar amount for our franchise and PEG fee amount so typically that amount goes up annually so, so if you were to go back I history you will see an increase in that franchise fee amount and then comparing the previous year from our estimate for like this coming year so it’s looked at on an annual basis. Mayor Furlong: Okay. That’s fine. Any other questions on this? Thank you very much for the information. Let’s bring it to council for any discussion. If there is no discussion, it’s been recommended that we’ll make a, or that we accept, approve and accept the resolution. Would somebody like to make a motion? Councilwoman Ernst: I can make it. Councilman McDonald: Okay. Mayor Furlong: Councilwoman Ernst, please. Councilwoman Ernst: I make a motion that we adopt a resolution authorizing execution of an agreement with Mediacom for unpaid franchise and PEG fees due to inadvertent accounting errors. Mayor Furlong: Thank you. Is there a second? Councilman McDonald: I’ll second it. Mayor Furlong: Motion’s been made and seconded. Any discussion of the motion? Hearing none we’ll proceed with the vote. Resolution #2012-01: Councilwoman Ernst moved, Councilman McDonald seconded that the City Council adopts a resolution authorizing execution of an agreement with Mediacom for unpaid franchise fees and PEG fees due to inadvertent accounting errors. All voted in favor and the motion carried unanimously with a vote of 5 to 0. COUNCIL PRESENTATIONS: None. ADMINISTRATIVE PRESENTATIONS: Todd Gerhardt: Just wanted to make sure the council is updated here. We did receive two commercial development plans that will be going to the Planning Commission and ultimately the City Council. Primrose Daycare is going to locate down next to Kwik Trip off of Lyman and 101 so they’re going through our site plan approval process. And we did receive application last week also for the redevelopment of the Chanhassen Office Complex. The facility just to the west of Lotus Garden Center so that would be a retail facility in that location so you should see those in the next oh probably February timeframe. Other than that, we stayed busy here in December. Finished up employee reviews and working on 2012 goals and again I appreciate the council giving up their Saturday to sit down and establish council key financial strategies for 2012. 15 Chanhassen City Council – January 9, 2012 Mayor Furlong: Thank you. Any questions for Mr. Gerhardt or his staff? Mr. Oehme, thank you for keeping the city plowing budget, expenditures under budget for the last few weeks at lease. I think between the last year at this time and this year we got two average winters so far so, but any other questions for staff? CORRESPONDENCE DISCUSSION. None. Councilwoman Tjornhom moved, Councilman McDonald seconded to adjourn the meeting. All voted in favor and the motion carried unanimously with a vote of 5 to 0. The City Council meeting was adjourned at 7:45 p.m. Submitted by Todd Gerhardt City Manager Prepared by Nann Opheim 16