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CC 2016 12 12 CHANHASSEN CITY COUNCIL REGULAR MEETING DECEMBER 12, 2016 Mayor Laufenburger called the meeting to order at 7:05 p.m. The meeting was opened with the Pledge to the Flag. COUNCIL MEMBERS PRESENT: Mayor Laufenburger, Councilman McDonald, Councilwoman Tjornhom, Councilwoman Ryan, and Councilman Campion STAFF PRESENT: Todd Gerhardt, Chelsea Petersen, Paul Oehme, Kate Aanenson, Todd Hoffman, Greg Sticha and Roger Knutson PUBLIC PRESENT: Megan D’Agostino 751 Sierra Trail Gary Hein 1011 Lake Susan Hills Mayor Laufenburger: Thank you and for the record let it be noted that all the members of the council are with us this evening. Mr. Gerhardt, City Manager will be joining us in a moment and also our legal counsel Roger Knutson. I want to say welcome to the council meeting this evening. Those of you that are present in the chamber as well as those of you that are watching on Mediacom cable or live stream via our website. Nice to have you with us tonight. First action is the agenda. Council members, any modifications to the agenda? If not we will proceed with the agenda as printed. PUBLIC ANNOUNCEMENTS: None. CONSENT AGENDA: Councilman McDonald moved, Councilwoman Tjornhom seconded to approve the following consent agenda items pursuant to the City Manager’s recommendations: 1. Approve City Council Minutes dated November 28, 2016 2. Approve City Council Minutes dated December 5, 2016 3. Receive Park and Recreation Commission Minute dated November 22, 2016 4. City Code Amendment Stormwater Management; Authorize Distribution to Review Agencies. Resolution #2016-86: 5. City Project 16-01, Minnewashta Manor Reconstruction Project: Call Assessment Hearing. Chanhassen City Council – December 12, 2016 Resolution #2016-87: 6. Final Plat for 6900 Lake Harrison Circle. Resolution #2016-88: 7. Approve Resolution of Support for a FASTLANE Grant Application for Highway 212 between the cities of Cologne and Carver. Resolution #2016-89: 8. West Water Treatment Plant : Approve Special Inspection and Testing Service Contract. 9. Approval of 2017 Police Contract with Carver County Sheriff’s Office. All voted in favor and the motion carried unanimously with a vote of 5 to 0. VISITOR PRESENTATIONS. Mayor Laufenburger: At every City Council meeting anyone who wishes to address the council on a matter that is not on the agenda this evening you may step to the podium stating your name and address for the record and speak to the council. Any visitors present that would like to do that this evening? You’re certainly welcome to. Welcome. Just step up to the microphone. Tell us your name and your address please. Megan D’Agostino: Megan D’Agostino, 751 Sierra Trail. Mayor Laufenburger: Alright Megan, nice to have you with us this evening. What would you like to address the council about? Megan D’Agostino: It is about the downtown redevelopment. I realize that you had discussed it with. Mayor Laufenburger: We had it on the work session but you’re welcome to speak your views on that. Megan D’Agostino: Certainly. Mayor Laufenburger: Yeah can you bend it down a little bit? There you go. Megan D’Agostino: Thank you. I don’t come here to go against your decision. I do have concerns about it. I do believe that our city does need revitalization and that it’s good to have development. The concerns that I have is about the proposed project that you have in place. As far as the uniqueness and the ambiance of our downtown, that’s why my family moved here. That’s why we’re a top rated city in the country and so the design of it I have concerns about how tall it is. How modern it looks and the cohesiveness of the downtown and how it would look. I do also have concerns about the traffic. Extra traffic in that area and then wanted to 2 Chanhassen City Council – December 12, 2016 understand about the tax increment financing so those are my concerns and I just wanted to voice those. Mayor Laufenburger: Okay. Ms. D’Agostino I think the, at the work session the council did direct staff to prepare a redevelopment contract and also to prepare a redevelopment tax increment finance district. Those items, that was not a final decision on the part of the council. That was direction that we gave to staff to work with a potential redeveloper for that but this item will come before the City Council and the Planning Commission next year and there will be a public hearing. Megan D’Agostino: Okay. Mayor Laufenburger: So there will be ample opportunity to discuss that. Megan D’Agostino: Certainly. Mayor Laufenburger: You mentioned the word design. There is no design. There have been some renderings of what it would look like but that’s not what I would describe as a design. Megan D’Agostino: Final, okay. Mayor Laufenburger: So, but I appreciate your comments. I would just I think I would ask you and any other citizen in Chanhassen to stay tuned to observe how this process continues into the next year. Megan D’Agostino: Okay. Mayor Laufenburger: Alright? Megan D’Agostino: Alright. Mayor Laufenburger: Thank you Ms. D’Agostino. Megan D’Agostino: Thank you. Mayor Laufenburger: Is there anybody else who would like to speak at this time? Alright with that I will close visitor presentations. AWARD OF BID, $3,630,000 GENERAL OBLIGATION WATER REVENUE BONDS, SERIES 2016B. Mayor Laufenburger: Mr. Sticha is this your item? 3 Chanhassen City Council – December 12, 2016 Greg Sticha: Yes it is. Good evening Mayor and council. Earlier this year City Council awarded bid for construction of a $17 million dollar water treatment facility. Part of that process would be funding such facility. This evening we are here to award the first of the bond issuances that will be used to fund the west water treatment plant. We have had multiple discussions with council in various work session settings on the financing of the facility. We’ve incorporated into our utility rates for next year which are also on the agenda for this evening but first I want to get to some of the initial facts about this bond issuance. The total facility is going to be about $17 million dollars and for those at home tonight we’re issuing $3.6 million dollars in General Obligation utility revenue bonds. A portion of the entire cost of the facility. The plan is on th January 9 we will issue another $10 million in bonds or debt for the facility with the potential for a final issuance in 2018 for the remaining portion of the cost of the facility. Earlier last week city staff met with or had a phone call with the rating agency of Standard and Poor’s. During that process they asked the City and it’s financial advisors a number of financial questions as well as questions about the facility and the need for the facility. During that process they review the City’s financial records, management practices, and other financial data to help achieve or maintain or help set a rating on the bonds that the City is about to issue. The City previously had a AAA bond rating issued by Standard and Poor’s. We’re very pleased to confirm that Standard and Poor’s did reaffirm that bond rating of AAA as part of that rating process last week so that is fantastic news for the City. Mayor Laufenburger: Is there a higher rating? Greg Sticha: No. That is the highest rating, AAA. It’s the highest bond rating you can get. Mayor Laufenburger: Alright. Greg Sticha: For those at home that are wondering what bond rating impact has on the City. First of all a bond rating is similar to your credit score personally. It’s very similar. It’s your ability to repay debt over a period of time. With having the largest or excuse me, the highest bond rating it does give you the good fortune of in most terms achieving the lowest interest rate possible in the market. So for that purpose the bond rating was excellent news. Another part of the process that we then underwent was actually conducting a sale or award of the bonds to the lowest bidder and I have Nick Anhut from Ehlers here this evening and he’s going to go over exactly what happened today in the bond sale. Mayor Laufenburger: Good evening. Just state your name for the record Nick. Nick Anhut: Good evening Mayor and council members. Nick Anhut with Ehlers and Associates and we are financial advisors to the City of Chanhassen. It’s good to be before you this evening again with the results that Mr. Sticha did mention. We received 4 bids this morning with the winning bid coming from First Tennessee Bank out of Memphis, Tennessee. They did offer a low bid and a combined true interest cost of 3.59 percent or just under 3.6 percent on this installment of bonds. The high bid as depicted here on the bid tabulation came in at just over 4 4 Chanhassen City Council – December 12, 2016 percent from Northland Securities. The difference between these 2 is roughly about $320,000 in interest costs over the life of the bonds. I should back up and say that these bonds, general obligations of the City payable from net revenues of the water enterprise are to be repaid over a 25 year life and so that interest rate, while it may appear low to the people at home it’s a little bit higher than interest rates that cities have enjoyed in recent years. We have seen an uptick within the last month perhaps directly related to the election results. However I will say that this issue is deliberately structuring the last 5 years of the bond repayment so we have specifically targeted the back end of the bond issue. Typically when banks price a bond they’ll offer a low interest rate for bonds that are repaid in one year and then they’ll step up a little bit higher rate as the repayment term lengthens and so we are trying to set a backstop for the highest interest rate and we do anticipate that lower interest rates will come in with the future installments that do come in. That said we believe that this is an indicative result from the market. As I did mention we have seen rates rise over the last period of time. However it’s our anticipation that even with this rise in rates we’ll still be able to achieve the City’s directive and objective in financing the cost of this project below what was anticipated in the water utility study that the City did adopt when it did set it’s rates. With the results of the bids the par amount will be $3.6 million dollars. There is a reoffering premium that was included in the bid from FTN of roughly $195,000. This will be additional proceeds that can towards the construction project. And so you will be actually generating higher than face value on this bid. It’s not uncommon to see a premium bid in a market rate that we are in right now that we do believe that rates are rising in the future and these investment banks are trying to hedge against that to make their bonds more flexible in the coming markets when those rates do rise. Mayor Laufenburger: So Mr. Anhut what you’re saying is we essentially offered $3,600,000 or we were looking for $3,630,000. Is it First Tennessee, is that what it is? Nick Anhut: Correct. Mayor Laufenburger: First Tennessee essentially said we’ll do that but we’ll also offer another $195,000 at the same interest rate. Is that what they said? Nick Anhut: That’s correct. Mayor Laufenburger: Okay. Nick Anhut: So you will actually be enjoying more proceeds to go towards your project which will offset future bonding needs so we’ll be able to reduce the future installments that we had planned. Mayor Laufenburger: Is that a good thing Mr. Sticha for the City? Greg Sticha: Nick and I discussed that this morning and the option. 5 Chanhassen City Council – December 12, 2016 Mayor Laufenburger: We had an option to take that additional or not, is that correct? Greg Sticha: Yep we did and we felt, both Nick and I felt that that was the right thing to do for the long term cost of the facility. Mayor Laufenburger: Okay, alright. Nick Anhut: That said we do anticipate that there will be another installment of $10 million dollars in the beginning of January. That will be, I actually have a visual here. Structured to be repaid over a shorter timeframe so actually the bonds that are considered to be placed today are this blue on the back end. The very last 4 or 5 years of principle repayment. The next installment will be this gray area where we’ll fill in the blank and we anticipate again better results with the next sale because of the shorter term in the offering. That said the item is placed before the council for a motion to choose whether or not to award the bid to First Tennessee. In th anticipation of that these bonds will close this calendar year December 29 if the council does move forward to award and we’d be happy to address any of your questions regarding the rating, the offering documents or the actual results of the bids this evening. Mayor Laufenburger: Alright thank you Mr. Anhut. Any questions of council for either Mr. Anhut or Mr. Sticha? Councilman Campion. Councilman Campion: Yes I have one question. So can you Greg, can you explain why we’re going with this, the phased issuances and why you don’t do more at once or all at once? Greg Sticha: I can. The City has what’s called $10 million in bank qualified debt which is essentially tax exempt. Exempt from taxes which can garner a lower interest rate in the market as compared to a taxable issuance. The City, what we wanted to try to do is keep the interest in total as low as possible so we’ve already issued $6.7 million of our $10 million in BQ debt this year earlier this year. This remaining portion would take us right up to the maximum of the $10 million in bank qualified debt so garnering the potentially the cheapest interest rate possible for this debt. With that we did a rating call and with Standard and Poor’s to bifurcate this debt over th today’s date and January 9 so we’re issuing potentially another $10 million dollars in debt on th January 9 which would also be bank qualified. Tax exempt which would again garner us a lower interest rate. Now we certainly could have issued all $17 million today. That would have been a possibility. Trying to take advantage of our BQ is what we were attempting to do and which certainly would be a part of this and maybe Nick can kind of say how much additional interest rate we may have saw if we had issued the entire $17 million today but it’s also a little bit tricky to kind of play the interest rate risk game on these to a certain extent. The majority of the facility will be funded with these 2 bond issuances will be just under $14 million with anticipated costs of 16 and a half to 17 million so we will have one potentially smaller issue that we, if we wanted to issue it bank qualified we would issue it early in 2018. If we see interest rates changing to an amount that it makes sense that we issue the other $3.6 million we may on thth January 9 we could, well not on January 9 we couldn’t I don’t think but a date soon after that 6 Chanhassen City Council – December 12, 2016 we could issue the remaining portion of the debt so that I guess was yet to be determined and I can let Nick kind of speak to the difference between BQ and non BQ debt in terms of interest rates. Nick Anhut: And I think the easiest way for me to do that is to just say that our anticipation is a non-BQ issue, meaning if you were to exceed $10 million dollars in a given year you would not be able to designate those bonds. Just as Greg described it’s a IRS, it’s part of the tax code as far as the issuance. Mayor Laufenburger: It would also be, wouldn’t the interest rate also be likely a higher interest rate? Nick Anhut: We would anticipate that you would pay roughly 50 basis points or a half a percentage point higher in rates with a non-BQ offering and the Northland bid came in roughly 50 basis points higher than the winning bid this evening and that differential was about $320,000 in interest costs. If you multiply that by another $10 million dollar offering outstanding we’re talking roughly $1.2, $1.3 million dollars of extra interest costs by doing that. In addition because we are phasing it, we’re not spending all this money at once. The project is going to be phased over the course of 18 months and so by issuing the debt now and holding onto the proceeds essentially you’re paying interest on that without the ability to use it for the project. They call that a negative arbitrage situation and so this way you’ll be able to be a little bit more efficient with the timing of when you’re starting to incur interest on your debt and the timing of the cash flows for the project or when you’re actually using the proceeds. Two fold. Greg Sticha: I think we’re going to be closely monitoring interest rates the next several weeks and our plan for the future issuances could change depending on what we see happening in the market so it’s a great question but that’s why we issued $3.6 this year. That’s what we had available left under our BQ status so that was the rationale behind that and why not the entire $16 and a half or $17 million. Councilman Campion: Okay, that’s helpful thanks. Mayor Laufenburger: And isn’t it also true Greg that in the rating conversation that you had did you share with them the plans to do $3.6 versus $10? So they. Greg Sticha: Yep they know of all of our plans for all of the bonds for this facility. Mayor Laufenburger: Right. Greg Sticha: So yep. Mayor Laufenburger: Alright any other questions? Do you have a motion you can put up there? It’s in the council packet. Is there anyone? 7 Chanhassen City Council – December 12, 2016 Todd Gerhardt: Nann can zoom in on it. Greg Sticha: And the low bidder is First Tennessee. Mayor Laufenburger: First Tennessee Financial Capital Markets in Memphis, Tennessee. Greg Sticha: Yep. Mayor Laufenburger: Do we have a motion? Councilman McDonald: I’ll make a motion Mr. Mayor. Mayor Laufenburger: Mr. McDonald. Councilman McDonald: I will propose that the staff, actually that should be council recommends that City Council award the bid for the General Obligation Bonds Series 2016B to the new low bidder which is First Tennessee Financial Capital Markets out of Memphis, Tennessee. Mayor Laufenburger: We have a valid motion. Is there a second? Councilman Campion: Second. Mayor Laufenburger: Thank you Mr. Campion. Any further discussion? Resolution #2016-90: Councilman McDonald moved, Councilman Campion seconded that the City Council award the bid for the General Obligation Bonds Series 2016B to the low bidder which is First Tennessee Financial Capital Markets out of Memphis, Tennessee. All voted in favor and the motion carried unanimously with a vote of 5 to 0. Mayor Laufenburger: Thank you Mr. Anhut, thank you Mr. Sticha. AMENDMENT TO CITY CODE CHAPTER 4 CONCERNING FEES. Mayor Laufenburger: We do this every year. Whose is this? Mr. Sticha. Greg Sticha: Good evening again Mayor and council. Part of our annual process each year is to review the City’s Chapter 4 ordinance of fees. Make any necessary or needed changes to the city ordinance for that purpose. Before you this evening you have an amended Chapter 4 of the city code for fees and I’m going to break down each of the changes by fee type here before we move forward. 8 Chanhassen City Council – December 12, 2016 Mayor Laufenburger: Mr. Sticha are you, you want us to reference the packet we have or do you have a power point? Greg Sticha: I do not have a power point. Mayor Laufenburger: Okay so we’ll reference the packet. Greg Sticha: We’ll be referencing the packet correct. Mayor Laufenburger: Very well. Greg Sticha: The first item in Chapter 4 that we’re looking at amend is fees to conduct background investigations on liquor license applications. Previously the City had not charged a fee for the renewal of the liquor license fee. However the City is being charged by Carver County for the background checks so we felt it was prudent to have that fee cost recovered as well as a new liquor license application fee so we’ve added that renewal section of that part of the ordinance to Chapter 4. Mayor Laufenburger: Okay I’m going to ask for questions after each one of these. Greg Sticha: Sure, let’s do that. Mayor Laufenburger: Okay. Council any questions regarding the fees on liquor license renewals? Councilwoman Tjornhom: I have one Mr. Mayor. Mayor Laufenburger: Councilwoman Tjornhom. Councilwoman Tjornhom: Approximately how many liquor licenses does the City have? Greg Sticha: Good question. Councilwoman Tjornhom: Didn’t mean to stump anybody. Greg Sticha: I want to say. Todd Gerhardt: We can get you that. Greg Sticha: We can get you that number. Councilwoman Tjornhom: No that’s okay. 9 Chanhassen City Council – December 12, 2016 Mayor Laufenburger: We know that off-sale we have I think is it 7 or 8 off-sale licenses? Greg Sticha: That is correct on off-sale. On-sale. Mayor Laufenburger: I think we have over 40. That would be you know the restaurants and… Councilwoman Tjornhom: So does this include when St. Hubert’s comes through for a special event or Rotary? Specific groups too or. Greg Sticha: If it’s a renewal with a new applicant yes, they would have to pay the $100. Councilwoman Tjornhom: Okay. Mayor Laufenburger: In this but I think if I’m not mistaken those are, we issue those as a permit. Greg Sticha: We do issue a permit for it. This is to recover the background check fee. So this is a fee that we pay to Carver County for having a background check done on that particular person. Previously if it was a renewal, in other words the same person we hadn’t been charging the $100 fee we were being charged. This adds that to the ordinance so that we are now recouping that fee that we are being charged in those instances. Todd Gerhardt: So the owner gets a background check at $250 may have general manager at $100 but we never, we’ve never charged for the additional fees so to come whole on that we are suggesting that we add the additional fees for the other operators. Councilman McDonald: If I could Mr. Mayor. I’m not sure you’ve answered Councilwoman Tjornhom’s question. She was asking about charities. St. Hubert’s. Rotary. There’s a few others that on a daily basis we allow the sale of liquor. How do they fare under this? Greg Sticha: I believe if it is a renewal of an existing applicant within their organization they would be charged the $100 fee. Mayor Laufenburger: Let’s, Councilwoman Tjornhom your question is valid and I think Mr. McDonald said it right that we haven’t answered it. I don’t know that we have the information in front of us today to answer that so I would direct staff to review that. When we have a St. Hubert or Rotary or somebody, if they have a special event where they want to sell wine for a weekend would you please just forward to council the answer to that question. Todd Gerhardt: It’s a temporary permit. Mayor Laufenburger: Yeah and I don’t think it requires a background. 10 Chanhassen City Council – December 12, 2016 Todd Gerhardt: There’s no background check. Mayor Laufenburger: Yeah I think we issue those and I’m showing even my lack of complete information. I think we issue those for a dollar. Councilwoman Tjornhom: Okay. Mayor Laufenburger: Some very small amount. Greg Sticha: That could be correct. Mayor Laufenburger: But would you, Mr. Gerhardt would you get a definitive answer to that and send it out. Todd Gerhardt: Yeah it’s a temporary permit and just proof of insurance is all we ask. Mayor Laufenburger: Mr. Campion question about liquor license? Councilman Campion: One follow up. So is that, is the additional $100 fee for renewals, is that per establishment for application or is it per operating manager? Greg Sticha: I believe that’s per manager. Todd Gerhardt: It is per manager. They submit the owner and then they may have a general manager and an assistant general manager that they submit and our ordinance only called for the owner to do a background check but we do a background check on the general and the assistant and the County bills us for those too so Kim says what do you want to do? I said let’s take it back to council to see if they want to get reimbursed for those costs. It’s solely up to the council if you want to incur those additional costs. I didn’t think it was fair for the residents to pick up those additional $200 in doing those background checks. Councilman Campion: Okay. Mayor Laufenburger: Okay? Any other questions? Next Mr. Sticha. Greg Sticha: The second item in the packet is in regards to building minimum base valuations. Earlier this year staff had discussion with council on the valuation side of the permit fee that the City issues for building permits. During that discussion staff recommended that the City ordinance for fees in regards to this be amended to include, to now follow the Minnesota Department of Labor and Industry Building Valuation Data Code. Previously we had not updated or amended the City’s ordinance in terms of the building valuation fee associated with a building permit and we were using code that or data that goes back to I believe the 2009 building valuation data as provided by the Minnesota Department of Labor and Industry. So this section 11 Chanhassen City Council – December 12, 2016 of the code would be to amend it to follow the Minnesota Department of Labor and Industry Building Valuation Data each year going forward and not having to amend this ordinance every year that we wanted to change the valuation of the permitting process. Mayor Laufenburger: Questions? Mr. Sticha so we’ve always charged that 65 percent plan review fee but it’s been based on a different number, is that correct? Kate Aanenson: Yeah it’s been a 2009 number. It used to be clear. When someone submits for a residential home permit they put the value on there. We don’t double check and run that. Mostly this is going to apply to commercial businesses. A big commercial project. We’re given an architect drawing them and they’re generally closer to the true value so that’s really why it’s going to effect. We don’t double check when someone submits for a residential home for a finished basement or something like that so those generally tend to be lower. Mayor Laufenburger: Alright, any other questions? Next item. Surface water management. Greg Sticha: The last 3 items have to do with the City’s utility rates and I’m going to go over some information with council that they’ve already heard as part of our utility rate setting process but I want to share it with the entire audience so they can gain an understanding of the rationale behind the changes in the 3 utilities the City has. So the City has a water utility, a storm water utility and a sewer utility fee that is placed on all the homes that are using each of the utilities within the city. As part of our annual process staff reviews with City Council, each of these rates in terms of operating. In other words what the people who are paying to use the system are paying as well as connections. What people are paying to connect to the system. The one time fee to connect to the system. As part of that process we reviewed with council the changes that we were recommending for the 2017 utility rates as compared to what we had discussed in previous utility rate discussions and so I’m going to go through each of the utility funds and break down what we had discussed previously and what we are recommending this evening. On the storm water side we had previously recommended in previous years studies a change in the user charge from, of 2 percent in 2017 and a connection charge of 2 ½ percent. Based on some of the data that we had received in looking at other comparable cities as well as taking a look at where our connection charges are compared to communities in other neighborhoods very nearby we have started to feel some pressure on the connection charge portion of our utility fee schedule. So what staff tried to is to mitigate some of the increases within the connection side of our utility fees so one thing you’ll notice in all 3 of the utilities is a lowering of the connection charge as to what we had previously discussed in previous years studies. So on the storm water side previously we had discussed a 2 percent increase in the user charge and a 2 ½ percent increase in the connection for 2017. Based on the information we shared with council earlier this year and the health of the storm water fund we are now recommending a 4 percent increase in the user charge and a 1 percent increase in the connection charge for the storm water fees. The rationale behind the increase for storm water is really mainly driven by the need for following all of the new storm water requirements which are very expensive to the City and increase annually and have a great impact on the City’s storm water 12 Chanhassen City Council – December 12, 2016 rates. So the need to increase the 2 percent to the 4 percent is in part due to that as well as trying to keep the connection charge within the market that we’re seeing around other communities in the area. On the sewer side, the sanitary sewer side. Mayor Laufenburger: Just a moment, any questions on the storm water? Councilwoman Ryan: Can you just clarify who, just for public information, who sets those storm water requirements? Greg Sticha: Maybe Ms. Aanenson better answer that question. Kate Aanenson: …standards and then we adopt our own ordinance. They have to be aligned with the watershed district so. Councilwoman Ryan: And so that’s why the fees increased? Kate Aanenson: (Yes). Councilwoman Ryan: Okay. Mayor Laufenburger: Sewer and water fees. Greg Sticha: On the sanitary sewer side, in previous studies we had recommended an increase of 3 ½ percent on the user side and 2 percent for the connection charge. After reviewing this year’s data and with a 7 percent increase in the Met Council fee to dispose of the sanitary sewer staff is now recommending a 4 ¼ percent increase on the user side and a zero percent increase on the hook up charge. The reason for the zero percent hook up charge is in part driven by what we are trying to attempt to maintain competiveness in the market but also our reserves on the hook up side for this particular fund are healthier than our operating side for this fund so there wasn’t as big of a need to have an increase for the sanitary sewer side. Plus the fee that is being charged by Met Council is essentially for usage. Paying to have your sewage treated so the bulk of the cost is being brunted on the user side of the formula. Mayor Laufenburger: So the sewer connection fees are flat, correct? Greg Sticha: One time charges. Mayor Laufenburger: One time charges. The initial hook up. And then the water connection or hook up fees are what percent? Greg Sticha: The sanitary sewer? We’re talking about sanitary sewer here? 13 Chanhassen City Council – December 12, 2016 Mayor Laufenburger: In my packet I’m looking at one chart that shows both water fees, water hook up, water connection and sewer hook up, sewer connection. The sewer related fees are flat. But the water related fees are going up what percent? Greg Sticha: The water connection fees are going up 4 percent. I was focusing still on sanitary sewer. I hadn’t. Mayor Laufenburger: Okay sorry. I’m sorry. Greg Sticha: I hadn’t gotten to the water part of the equation. Mayor Laufenburger: Okay. Greg Sticha: On the water side connection fees were previously documented as part of our rate study to be increasing at 5 ½ percent. This was in large part due to the advancement of the west water treatment plant which we talked about earlier this evening. Moving that facility up into 2017 as to previously been discussed in later years, 2020 and beyond, certainly had a great impact on that. Another impact on the water fund is our increasing cost. As part of this year’s study we also did shift one salary to each of the utility funds of which the water fund will be paying the largest portion but our MIS department portion of their wages are now being funded out of our water and sewer fund as a percentage is based on the amount of work that they’re actually doing for those funds which had previously been paid for by the general fund and so staff felt it was fair to charge at least that percentage back to the utility funds for which that they are doing the work on. Those factors helped drive the increased needs of the 5 ½ percent on the user charge and the 4 percent on the connection charge for the water funds and as compared to the previous years the user charge is the same. However the hook up fee again is slightly lower than what we had projected in last year’s rate study. Trying to keep again competitive with market and still maintain our cash balance reserves that are needed within each of those funds. Mayor Laufenburger: Any questions on sewer or water? Councilwoman Ryan. Councilwoman Ryan: Mr. Sticha didn’t you do an analysis of, I know you said we were remaining competitive but didn’t you specifically look at neighboring cities to make sure because I know you had received, or you and Mr. Gerhardt received comments from developers and builders about our fees and so when you were recommending some of these changes that we still fall in line with some of the neighboring cities that we compete with? Greg Sticha: We surveyed our comparable cities as well as the neighboring cities and in particular with some of our neighboring cities to our east and south our fees were you know towards the higher end of the range. Or excuse me, to our west and south our fees were, our connection fees were a little bit higher than some of the market and so we felt to remain competitive we tried our best to adjust this year’s rate study and rates that did not have as significant increases as we had projected in previous years. 14 Chanhassen City Council – December 12, 2016 Councilwoman Ryan: Okay. Todd Gerhardt: Mayor, council, we stayed competitive with Chaska on the hook up fees almost equal but from a user fee we still are below them so you know some of the kick back we were getting were some more of the multi-family homes. You have more units and it’s a larger dollar amount when they write that check per unit so keeping the unit fees consistent this, from 16 to 17 made sense. Councilwoman Ryan: Thank you. Mayor Laufenburger: Next. Thank you Mr. Sticha. Greg Sticha: That is it for the City’s utility fees. The last fee that I’d like to discuss is a recreation fee that is changing for 2017 or is recommended being a change and that is for a group picnic reservation fee. The large group fee which we previously did not have. We had one fee, would cover expenses such as garbage and extra cleaning for portable restrooms and additional staff cleaning when large groups use the City’s various park picnic shelters. Staff is recommending groups of 100 or more pay an additional $50 for residents and $100 for non- residents and that is a change in, as compared to our previous years picnic reservation fees. Mayor Laufenburger: So for a group under 100 their fees remain the same. Greg Sticha: Yep. Mayor Laufenburger: Okay. Any questions on pavilion rental? Is that it? Greg Sticha: That is it. Those are all the changes to Chapter 4 of the City Ordinance on Fees. Mayor Laufenburger: Okay, let’s do this. May I have, first may I have a motion to approve the ordinances as presented by Mr. Sticha. Councilman McDonald: So moved. Mayor Laufenburger: Thank you Mr. McDonald. Is there a second? Councilwoman Ryan: Second. Mayor Laufenburger: Thank you Councilwoman Ryan. Now is there any discussion that the council would like to have relative to modifying any of the proposed fees? There being no discussion, all those in favor of the motion signify by saying aye. 15 Chanhassen City Council – December 12, 2016 Councilman McDonald moved, Councilwoman Ryan seconded that the City Council adopts the attached ordinance amending Chapter 4 of the Chanhassen City Code revising the fees for 2017. All voted in favor and the motion carried unanimously with a vote of 5 to 0. APPROVE RESOLUTION ADOPTING FINAL LEVY, 2017 BUDGET, AND 2017-2021 CAPITAL IMPROVEMENT PROGRAM (CIP). Mayor Laufenburger: Mr. Sticha you ready? Greg Sticha: Yep. Mayor Laufenburger: Okay. This is the approve the resolution adopting the final levy, the 2017 budget and the CIP for 2017 through 21. Greg Sticha: The last part of our business this evening takes place again every year. We ask council for approval and are required to approve a final levy with the Carver County Auditor for taxes payable in this case in 2017. This evening I’m going to go through the general fund and the various levies that the City is asking to levy for. In addition council is also approving a CIP, a 5 year capital improvement program that is a long term financial planning document. We will be coming back to council for all of the items within that document that are over $20,000 in cost for further approval. The document is a guiding or plan management tool for staff as well as for the council to maintain it’s capital equipment and infrastructure items. And then we will also be discussing the special revenue funds which are a part of the City’s budget. They are a very small part of the City’s budget but the City has 3 special revenue funds and those are included in the resolution as part of the approval when we get to the end this evening. So let’s, for those at home that have not been a part of the budget this year we’re just going to take a quick walk through the process that the City Council and staff went through. The preliminary budgets were submitted by the department directors in early July. The City Manager and myself reviewed those. In August the City Council had a detailed budget meeting with staff to review each of the department’s budgets. In September the City Council approved a preliminary levy that was used for the Truth in Taxation statements that went out about a month ago that the residents had an th opportunity to come to the Truth in Taxation hearing which was held on December 5 and then this evening we’ll be adopting a final budget and levy for taxes payable in 2017. The expenditures in front of you are the City’s general fund expenditures and this is taking a look at the 2016 budgeted expenditures as compared to the final recommended 2017 budget expenditures by category. There are no real significant changes across any one category. There is one full time position that is being now budgeted for within the park and recreation department that had previously been a three-quarter time position but there are no significant increases in either staffing or service levels in any of the 5 areas you see before you in terms of expenditures. On the revenue side you’ll notice a similar corresponding increase in revenues as compared to what you saw on the previous side. 4.8 percent increase in revenues the bulk of which is being paid for with property taxes. If you take a look at the 2016 budgeted property tax as compared to the 2017 final recommended budgeted property tax, the most significant portion of the increase 16 Chanhassen City Council – December 12, 2016 is being funded by property taxes. All other governmental revenues, service revenues, licenses and permits are projected to remain flat as compared to the previous year. So what factors change the budget for 2017? For the most part most expenditure line items remain flat for 2017. General fund expenditures did increase 4.8 percent or roughly $500,000. Wage increases of 4 percent were included in the 2017 budget. A significant portion of the City’s general fund costs are health care costs for it’s employees. That increase came in at 13 percent and it’s also important to note that for taxes payable in 2017 the City saw new growth of 1.56 percent which did include the decertification of TIF District number 5 and TIF District number 9. This slide shows all of the City’s various levies as compared to the previous year. The City’s debt levies, I’m going to go over those first and those are on the bottom portion of the slide. The City’s debt levies did change as compared to 2016 to 2017. The general obligation debt for the 212 bonds did come off the books starting with 2017. Total debt levies of $1,048,000 are what are required to be repaid for 2017 with tax dollars. The other operational levies are listed above. There were no changes to either the capital replacement equipment levy or no recommended changes to the capital replacement equipment levy nor the sealcoating levy to preserve our streets. The revolving street construction fund levy, there was a small change as compared to the previous year and this was in part to offset some of the last minute costs that we saw that were from changes in our workers compensation premiums and so we did have to make one adjustment as compared to the preliminary levy to that number to pay for those costs going into 2017. This graph takes a look at the City’s total levy as compared to new growth and a history, a 10 year history of what the final levy has been set by the City Council by previous City Councils. If you take a look for 2017 we are recommending a final levy set at new growth which is what the preliminary levy was also set at. In previous years councils have chosen to set the final levy, which is in green, at an amount slightly lower than new growth for the past several years. So what’s the impact on a homeowner in Chanhassen? Below there are some examples of an actual impact on a Chanhassen property city portion of their property tax. I picked 3 parcels, varying dollar amounts in value to kind of illustrate the purpose of what the preliminary levy, what type of impact that would, that has on an average home in Chanhassen. It’s important to note that these are actual Truth in Taxation statements that were sent out a month ago so these are actual homes and what their change in their property tax dollars are going to be. The average home according to the Carver County Assessors Office changed in value, taxable market value by about a half a percent for 2017 and what this illustration I guess is kind of showing is that based on the preliminary levy that the City Council set, which is also the staff recommended final levy, the majority of property tax owners are going to see property tax decreases in their city portion of their property tax bill as compared to the previous year. Even a home, Parcel number 1 that saw a 2.2 percent increase in it’s value is only seeing a one dollar increase in it’s city portion of it’s property taxes. I think that speaks to a couple things. Keeping the preliminary levy at new growth as well as the decertification of TIF number 5 and TIF number 9 had a larger impact on the overall property tax base and the final taxes that will be collected from all the parcels within the city. It had a positive impact as compared to what we had previously thought when we had met in September. So where do people’s property taxes go? This graph shows a break out of a home in School District 112 of where the property taxes go. 44 percent of the total property tax bill goes to the school district. Approximately 31 percent to the county. 20 percent to the city 17 Chanhassen City Council – December 12, 2016 and 5 percent to other small taxing jurisdictions such as the watershed district and the mosquito control district. Each year City Council reviews our budgeted expenditures as compared to some of our competitors across the metro and this graph is included to illustrate that our percentage of increase in budgeted expenditures as compared to our comparable cities is below average for the most recent data that we do have. Obviously we don’t have budgeted expenditures for 2017 for all the other cities as they’ll be passing all of their budgets this evening just as we are but our most current data shows our most recent year a 3.2 percent increase in our budgeted expenditures with the average being 4.4 percent and a number of communities in our comparables higher than our 3.2 percent increase. Taking a look at the same data as provided in Carver County only, again our increase of budgeted expenditures of 3.2 percent compared to the county average of 5 percent is certainly among the lower percentage budgeted increases throughout Carver County. This graph takes a look at the per capita spending. In other words the dollars spent per resident within each of our comparable cities. Mayor Laufenburger: General fund spending right? Greg Sticha: General fund spending correct. And as you can see based on this data we are the lowest of all of our comparable cities. Our key financial strategy cities with the average being about $549 per person and Chanhassen being at $424. The same data comparing per capita spending to our other cities within Carver County. Again Chanhassen being the lowest with the average being just under $500 per capita. And the last 2 slides I’m going to take a look at tax rates throughout Carver County as well as Hennepin County. This graph shows the 2016 final tax rate of each of the taxing jurisdictions within Carver County in the first column and in the second column the 2017 preliminary tax rates as established by the preliminary levies by all of these jurisdictions within Carver County. Chanhassen had the lowest tax rate in 2016 and based on the preliminary levies will again have the lowest tax rate in 2017 in Carver County. The average being just over 60. Taking a look at how we compare to other jurisdictions in Hennepin County, again the City of Chanhassen compares very favorably with the 24.252 tax rate. There’s only one or two other communities that we are aware of within Hennepin County that have tax rates lower than the City of Chanhassen and so it’s a very positive number for the City’s constituency. So lastly what staff’s looking for this evening is a recommendation adopting a 2017 final levy at $10,795,121 and approve a total general fund expenditure of $10,991,400. We’re also looking for approval of the CIP for 2017 through 2021 in the total amount of $153,293,650. One item of note on the CIP for 2017 to 2021, of that $153 million I believe over 70 percent is funded by other taxing jurisdictions and not by the City of Chanhassen. The majority of those projects are either street construction. Street projects or other funding projects that are funded by either the County or the State or some other jurisdiction. Mayor Laufenburger: You can leave that up there Mr. Sticha. Greg Sticha: Yep. 18 Chanhassen City Council – December 12, 2016 Mayor Laufenburger: Thank you very much Mr. Sticha. Also thanks to your finance department for putting this together and for helping work through the council over the last several months. Are there any questions for Mr. Sticha from council? Oh you can’t get off so easy. So if I understand you correctly, I’m a citizen. I’m hearing what you say Greg. Most importantly you said that the preliminary levy that we established, which is the basis for the preliminary tax statements that went out to all of our residents, it sounds like the final tax statement that they get from the County will reflect exactly what the preliminary tax statement said for city taxes only. Greg Sticha: That is correct. There’ll be some minor adjustments based on some tax appeals that are currently going on in all jurisdictions but it should be really close to what, if the City Council passes a final levy identical to the preliminary levy. Mayor Laufenburger: Which is what you’re recommending. Greg Sticha: What is what we’re recommending, their property tax bill for next year should be very close to what they go in their Truth in Taxation statements. Mayor Laufenburger: Okay do we know anything about what the County has done or is anticipating to do? Do you know? Mr. Gerhardt do you know? Todd Gerhardt: I do not. Mayor Laufenburger: Okay. Alright so but the only thing we have jurisdiction over is the City portion of that property tax statement. Okay. You mentioned that we’ve decertified 2 districts, 5 and 9. Once we’ve decertified those at this point do we have any other TIF districts in place? Active TIF districts in place. Greg Sticha: We have one remaining TIF district. TIF District 10 which was for the Southwest Transit Station. It’s a very, very small TIF district. It does not generate a lot of increment and I think as part of a potential redevelopment process this district might be eventually eliminated as well. Mayor Laufenburger: Okay, alright. Also the CIP, what’s the amount of the CIP levy? Is it $800,000? Greg Sticha: For the equipment yes. $800,000. Mayor Laufenburger: $800,000 and that levy goes into a capital equipment or capital improvement program fund, is that correct? And in fact that fund varies depending upon how much we actually act on during a particular year is that correct Mr. Sticha? Greg Sticha: That’s correct. That levy, the projected spending for that fund in 2017 is projected around $950,000. 19 Chanhassen City Council – December 12, 2016 Mayor Laufenburger: Okay so that’s a little bit more than the levy for 2017 but we have money in that fund right now to fund that, those additional expenses. Greg Sticha: Right, we have reserves within the fund and also typically the numbers that are included in the CIP or this planning document end up being a little higher than our actual bided out cost once we go out to bid on a number of those items. Mayor Laufenburger: And just as a reminder the CIP that we’re approving is not a check. It’s approval for those to come back to the council for recommendation if they’re greater than what amount? Greg Sticha: $20,000. Mayor Laufenburger: $20,000 so that means we’ll see, if we’re going to buy a plow or a vehicle or a lawnmower those things would come back to the council for review. Greg Sticha: All of those will yes. Mayor Laufenburger: Okay, alright. Any further discussion or motion regarding this levy? Councilwoman Tjornhom: I’ll make a motion. Mayor Laufenburger: Councilwoman Tjornhom, thank you. Councilwoman Tjornhom: I’d like to make a motion that the City Council adopts the 2017 final levy $10,795,212 and approves a total general fund expenditures of $10,991,400. It also approves the CIP for 2017 through 2021 in the total dollar amount of $153,293,650. Mayor Laufenburger: We got it. We have a valid motion. Is there a second? Councilman McDonald: I’ll second. Mayor Laufenburger: Thank you Councilman McDonald. Is there any discussion? I would just like to make a comment if I can before we take this vote. Mr. Sticha you’ve highlighted some very important metrics comparing Chanhassen to our kfs cities and our surrounding communities and I believe I speak on behalf of the council that what you’ve presented to us is a, essentially a budget that matches the growth from property taxes of 1.56 percent and I know that I say this to all of the staff, your recommendation comes as a result of hard work. Making sure that all the tax dollars that we levy to the citizens of Chanhassen are used efficiently and appropriately so my thanks to you and also Mr. Gerhardt and all of the city staff and department heads in putting this together. 20 Chanhassen City Council – December 12, 2016 Resolution #2016-91: Councilwoman Tjornhom moved, Councilman McDonald seconded that the City Council adopts the 2017 final levy at $10,795,212 and approves total general fund expenditures of $10,991,400. It also approves the CIP for 2017 through 2021 in the total dollar amount of $153,293,650.All voted in favor and the motion carried unanimously with a vote of 5 to 0. Mayor Laufenburger: Thank you Mr. Sticha. Councilman McDonald: Mr. Mayor? Mayor Laufenburger: Mr. McDonald. Councilman McDonald: If I could, I don’t want to, what I would like to say is that, this goes over pretty smoothly I think every year. There’s not a lot of debate or question about it but what’s important to realize is that as you pointed out in your presentation the budgeting actually starts in July. Council gets it in August and from August, September, October, November we are constantly discussing the budget. You know looking at ways to cut it back so I think what happens and what the citizens see tonight is just kind of the icing on the cake. I mean we have gone through this numerous times. We have looked at everything possible and I think what this is is this is just a culmination of all of our past meetings and a determination of where we wanted to go so it’s really a collaborative effort between council and the staff and I think that’s why you see these going so easily and there’s not a lot of fighting or yelling or screaming so I just wanted to get that point across that you know council has been very involved in coming up with these numbers. Mayor Laufenburger: Thank you Mr. McDonald. ADMINISTRATIVE PRESENTATIONS. Todd Gerhardt: I have a couple of things. I also want to thank the Mayor and City Council for the time and effort that you put into the budget process. I know there were a lot of special meetings outside of our regular budget meetings and to understand an almost $11 million dollar budget isn’t something you’re going to cover in 3 to 4 meetings and you know I think I’ve said this before, when you’re running a city you’re running a business that operates like 6 different types of businesses within one. Law enforcement acts as a separate entity. Your engineering, street department, utility department. Your building department. Your planning department. Your park and rec department. All operate differently and as a community grows some of those departments are affected differently and a parks department they may have more parkland to mow. They may have more trails to plow but we still figure out a way of continuing to provide that service to our residents and to do that in an efficient and effective manner so I want to thank the Mayor and council for understanding that and for giving us the opportunity to teach you how those different departments operate. And big credit goes back to our department heads to be creative. To think outside of the box in providing means to continue to provide that service and 21 Chanhassen City Council – December 12, 2016 it’s some of the key elements are using automated sprinkler systems in our parks. Buying special equipment that makes us more efficient and effective. The computer systems that make us more efficient and effective and really allow us to keep our staff levels down. I’ve done comparisons and our staff per capita is one of the lowest in the metro area and it’s because of those efficiencies and taking advantage of those technologies is what helps us provide good service back to the residents at a fair and reasonable price. Mayor Laufenburger: Very good. Todd Gerhardt: And just a reminder council’s invited and department heads, we meet at Applebee’s after the regular council meeting to conclude the year and reminisce about all the great times we’ve had together. With no arguments. Councilwoman Tjornhom: Who brings the gavel? Todd Gerhardt: The Mayor’s the only one that gets to touch the gavel. Mayor Laufenburger: Yeah I’m not taking a gavel to that gathering for sure. Anything else Mr. Gerhardt? Todd Gerhardt: That’s it. COUNCIL PRESENTATIONS. Mayor Laufenburger: Any council presentations this evening? I have a couple that I’d like to make. First of all Chanhassen lost a resident this weekend and this is one that I think is important for not only as a city but also as a country. Miles Lord died in Eden Prairie on Saturday. He was 97 years old. Miles Lord served as Minnesota’s Attorney General and US Attorney for Minnesota before being nominated as a Federal Judge by President Lyndon Johnson in 1966. Hubert Humphrey, the late Vice President and a very close friend of Lord once called him the people’s judge. Lord wrote of himself, I am not anti-corporation but I am anti-hoodlum, anti-thug, anti-bank robber, and anti-wrong doers and some of these wolves wear corporate clothing. He instilled in his whole family a moral obligation to look out for others said his daughter Virginia. He was hired as Assistant US Attorney in 1951 and he made his name as a hard nosed prosecutor of gangsters and racketeers in the Twin Cities. In 1954 he was elected State Attorney General. He was re-elected twice and remained in that post until 1960. From 1961 to 1966 he was US Attorney for Minnesota before ascending to the bench in 1966. One of his proudest decisions was a 1972 permanent injunction in favor of equal rights for women. He ordered the Minnesota State High School League to permit 2 high school girls who had no girls teams at their schools to play on boys sport teams. Two months later the United States Congress passed Title IX legislation prohibiting gender based discrimination in federal funded education programs. And in a landmark ruling in 1980 Lord sided with environmentalists ordering a continued band of motor boats in the Boundary Waters Canoe Area. Lord is survived by his 22 Chanhassen City Council – December 12, 2016 th daughters Priscilla and Virginia and a public memorial will be held at 4:00 p.m. January 12 at Mount Calvary Lutheran Church in Excelsior. Miles Lord was a landowner, property owner here in Chanhassen. Had his offices here in Chanhassen and I had the pleasure of meeting him 2 years ago. He was a resident at Summerwood here in Chanhassen. His mind was sharp though his body was tired and it was a pleasure to meet him, this icon. He was once profiled by Mike Wallace on 60 Minutes. Something to which I’m sure we all aspire. Anyway Miles Lord, a great contributor to our city, our state and our country and he’ll be remembered appropriately. And lastly I just wanted to say that this is the last meeting of our City Council this year. It’s been a memorable year. We’ve had some ups and downs. We’ve had a few surprises and we’ve also had some very predictable things going on in the city. I think I look back to the festivals that we’ve had. I look back to the engagement that all of the council members have had with citizens and I’m real proud to work with the City Council so on behalf of our citizens I thank all of you for your service to the city. That being said is there a motion to adjourn? Councilwoman Tjornhom moved, Councilwoman Ryan 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 8:15 p.m. Submitted by Todd Gerhardt City Manager Prepared by Nann Opheim 23