City Council

ANDOVER CITY COUNCIL WORKSHOP MEETING – APRIL 23, 2024 MINUTES The Workshop Meeting of the Andover City Council was called to order by Mayor Bukkila, April 23, 2024, 6:00 p.m., at the Andover City Hall, 1685 Crosstown Boulevard NW, Andover, Minnesota. Councilmembers present: Jamie Barthel, Ted Butler, Rick Engelhardt, and Randy Nelson Councilmember absent: None Also present: City Administrator, Jim Dickinson Parks & Streets Operations Manager, Jason Baumunk Nature Resources Technician, Kameron Kytonen Director of Public Works/City Engineer, David Berkowitz Others UPDATE/DISCUSS BOULEVARD TREE MAINTENANCE Parks & Streets Operations Manager Baumunk reviewed the staff report with the Council and gave an update to the boulevard tree maintenance process. Councilmember Nelson shared the DNR does not recommend trimming or pruning oak trees between April and October. He shared the DNR recommends trimming these trees in late winter or early spring. Natural Resources Technician Kytonen said they will address this language in the letters they will be sending to the residents. Councilmember Nelson said he does not want any residents to trim their trees in a time where it could cause oak wilt disease to spread. He suggested making the deadline for this tree trimming to be later in December or early into spring. Mr. Baumunk said they want to be able to inspect the trees when there is still leaf cover and this makes it obvious which trees are diseased. He explained they are trying to find the perfect window of time when they can do these inspections and send notices while still making sure to get the work done at the best time. Councilmember Nelson shared he believes the trees on Veterans Memorial Boulevard were trimmed on March 1st. Mr. Kytonen said they have done work in March; however, once it gets into late March or early April through June they try not to do any tree trimming. Andover City Council Workshop Meeting Minutes – April 23, 2024 Page 2 Councilmember Nelson shared he contacted the University of Minnesota on this and who he spoke to explained to him that when the tree limb is cut it is essentially an open wound. He said that when they are trimmed in the early spring, this allows for the remainder of the spring and the summer for the trees to recover and bloom. Mr. Baumunk explained they will be providing the residents with a link to web pages that have best practices on how to trim these trees. Councilmember Nelson noted the City’s website has information on pruning practices; however, it did not have suggested and recommended dates for different kinds of trees. Mr. Kytonen said they can add this language to the website. Mayor Bukkila suggested rearranging the letter they will be sending to residents. She said as she is reading it, it is not giving her the impression that she has to do anything until the very end of the letter. She suggested putting something at the top of the letter that lets the residents know that action is required on their part. Mr. Baumunk added they will also be hanging door hangers on residents’ doors that outline the timeline and what needs to be done. He noted they worry residents would disregard the letters when they receive them thinking they do not apply to them. Mayor Bukkila stated other than the few adjustments to the letter she thinks this plan is well put together. Mr. Baumunk said they will need to bring something back to the Council on amending the City Code concerning abatements if this work is not done. Mayor Bukkila suggested putting something in the newsletter about this so residents know what is coming. Council consensus was reached to direct staff to make updates to the letter that will be sent out to the residents and put an article in the newsletter concerning the change in tree maintenance. MARCH 2024 COMMUNITY CENTER UPDATE City Administrator Dickinson presented the staff report in regard to the March 2024 Community Center updates concerning financials, staffing, facility usage, and activities. He shared they will be looking at utilizing some of the meeting space in the Community Center for possible revenue streams. He said he and Recreation Facilities Manager Erick Sutherland will be in attendance at the next Workshop meeting to discuss these ideas. Councilmember Butler said he does see people meeting in these meeting rooms from time to time. Mr. Dickinson said they are just looking at options of how to best utilize the space. Councilmember Butler said he would like to know what groups are using this meeting space. He noted some groups Andover City Council Workshop Meeting Minutes – April 23, 2024 Page 3 may meet virtually; however, a lot of groups that were meeting virtually in the past have gone back to meeting in person. Mr. Dickinson shared they also have the ability to utilize the teen room in the evenings. He said they are looking at programming out this room more in the coming year. He said the capital outlay expenditures for the Community Center are included in the report and reflected in the fund balance. Councilmember Nelson asked when the dehumidifier will be installed. Mr. Dickinson said it should be complete in the next few weeks. DISCUSS/REVIEW STRATEGIC PLAN IMPLEMENTATION/2025 BUDGET Mr. Dickinson reviewed the staff report in regard to the implementation of the Strategic Plan. He noted the two focuses are public safety and the roads. Councilmember Nelson asked if the analysis on market rates for public safety and fire services is regional. Mr. Dickinson said it is local to the metro area and other cities that are comparable to Andover. Mr. Dickinson noted all of the items in the Strategic Plan are in progress and being worked on. He shared market wages are increasing very quickly. a. Discuss City Transportation System Funding Mr. Dickinson reviewed the different funding sources that could be utilized for the roads, including franchise fees and assessments. Mayor Bukkila asked how franchise fees started. She noted these fees are not like property taxes where there is a process of determining property values then taxing based off of that value while also allowing residents to argue their values. She said with franchise fees they are just required to be paid. Mr. Dickinson explained it relates to the delivery of the utilities. He said the utilities are all in right-of-way (ROW), and the City controls these ROWs. He noted since the City is maintaining these ROWs, the utilities are cutting into the ROW all the time as well as taking heavy equipment over the streets. He explained that charging a franchise fee is to maintain the roads that the utility companies so often utilize. Mr. Dickinson said he has brought the idea of franchise fees forward to the Council since 2000. He shared that consultants and cities now know how to implement these franchise fees in the correct way and he sees it as a tool to help support the streets. He added a number of the cities that Andover compares to in terms of tax rates also have franchise fees. He said if the City did a $1 franchise fee per user, per month for two utilities, it will bring in around $280,000 per year. Councilmember Nelson asked how they calculate the total amount it would bring in. Mr. Dickinson said it is calculated based on accounts. He said they get the account numbers from the utility Andover City Council Workshop Meeting Minutes – April 23, 2024 Page 4 companies. Councilmember Barthel asked if these numbers are based on all utility consumers, including nonprofits and churches that do not have to pay property taxes. Mr. Dickinson said yes. Councilmember Nelson said this would also include the schools. Mr. Dickinson said if they were to raise this number to $4 a month per user, per month for both utilities it would result in $1,100,000 a year. He reviewed the different examples of how this revenue could be used as a pledge to a 10-year bond issuance, with and without 25% assessments. Councilmember Barthel asked if they would charge a $4 franchise fee to each resident per utility if they would then be able to borrow around $11,000,000. Mr. Dickinson said yes. Mr. Dickinson said he is not sure if they would be able to implement franchise fees as early as 2025; however, they would be able to have the bonded dollars available in 2026. He reviewed the road and bridge bond levy of around $1,000,000 a year. He noted this funding will become available in 2029 so they would be planning for these dollars in 2028. He explained this $1,000,000 will allow them to reissue another bond to get them $10,000,000. Councilmember Barthel asked if they were to move forward with the road and bridge levy, the franchise fees, and the assessments, if they would only need to fund an additional $9,000,000. Mr. Dickinson said yes. Mr. Dickinson explained he is trying to find a way to get $50,000,000 in funding for roads over the next 10 years. He said that this would be a lot easier if they increased assessments. Councilmember Butler asked about the present-day impact on a typical household. He noted the franchise fees would be $96 per year per household. Mr. Dickinson said he does not have these numbers right now; however, he can work on that. Mayor Bukkila noted the City is trying to hold its bonding at 25% of the total levy. She asked if they would still be staying under this threshold and by how much. Mr. Dickinson said yes and explained they will use franchise fees to support one of the bonds and franchise fees are not a tax, which is not a percentage of the levy. Councilmember Butler asked if they would be issuing a new bond in 2029 with the $1,000,000 from the levy. Mr. Dickinson said yes. Mayor Bukkila asked if they would want to take the $7,000,000 that they already borrowed and reissue it again. Mr. Dickinson said yes, that would be using the $1,000,000 road and bridge bond levy. Mr. Dickinson explained they are trying to place dollars at the roads sooner rather than later so Andover City Council Workshop Meeting Minutes – April 23, 2024 Page 5 that they can save mill and overlay and reclamation projects from becoming full reconstructions. He noted if his suggestions are too fast then they will have to figure out a different plan on how to deal with the streets. Councilmember Nelson asked about the amount that was needed to just maintain the existing roads rather than this plan which is proactive. Mr. Dickinson said the total is between $30,000,000 and $40,000,000. Councilmember Barthel asked if they would spend less money maintaining the roads because they are fixing them. Mr. Dickinson said no and explained they have maintenance money within the operations of the street department. Mayor Bukkila asked about how these changes will impact taxpayers. Mr. Dickinson said they would likely be looking at a tax increase around 11% to 12%. Councilmember Nelson asked about the tax increase last year. Mr. Dickinson said it was 6%. Mr. Dickinson reiterated they could make this situation easier if they increased assessment rates. Councilmember Barthel asked what the impact would be if they increased the assessment rates from 25% to 30%. Mr. Dickinson said this could decrease the tax amount; however, it would go directly to the road project based on the assessment. He explained the biggest impact this would have is on tax statements on an annual basis. Councilmember Barthel said if they are doing franchise fees and increasing taxes then he would like the assessment rate to stay where it is because if they are going to increase assessments this would hit residents with three separate increases. Councilmember Butler noted they can increase assessment rates; however, all this is doing is shifting costs from the general taxpayers to the individual homeowners who are benefitting from the project more directly. He added all of the roads in the City will be reconstructed at some point. He noted he supports the current assessment rate of 25% as it helps balance the subsidies that inevitably happen between different areas. He stated increasing assessments too much could make them too punitive. He said he has never been a big supporter of bonding for roads as they are always going to be working on roads, so it is not just a one-time need. He stated he was okay with the bond that they did a few years ago to create a surge in funding with the low rates that were available. He asked how they can plan this out so that a future Council does not have to continue to bond for the roads. Mayor Bukkila said she had this same question. Councilmember Butler asked if it is critical that the current debt service levy goes back into bonding or if this could just be redirected into the roads. Mr. Dickinson said that could be an option. Councilmember Barthel said this would depend on what the rate environment is looking like at the Andover City Council Workshop Meeting Minutes – April 23, 2024 Page 6 time that they need the funding. Mr. Dickinson explained due to the number of streets that they have that fall in the mill and overlay and reclamation categories, if these roads are not addressed for their current needs over the next 5 to 10 years, then they will need to be fully constructed which will cost twice as much. Director of Public Works/City Engineer Berkowitz explained the next five years are extremely critical for these roads and unless they address these roads now, it will have a snowball effect in the future. Councilmember Barthel said he would like to keep the idea of franchise fees on the table; however, he would like to learn more about them. He said he would also like to know what the tax rate increase would look like with the franchise fees and without the franchise fees if this money would have to be made up in more of a tax increase. Mayor Bukkila shared she calculated the tax increase and franchise fees would result in a cost of around $200 extra dollars per year for her household. She explained when she considers the magnitude of the problem the extra $200 per year is something she is willing to spend to fix this problem and ensure it does not get worse. Councilmember Barthel said the one thing he likes about franchise fees is that these fees will be charged to all users, even the users that do not pay property taxes. Mayor Bukkila asked how much the City would have to pay in franchise fees for all of the properties that they use. Mr. Dickinson said it would be around $20,000 to $40,000 depending on the amount charged. Councilmember Butler agreed with Councilmember Barthel; however, the singular household is paying the same amount in franchise fees as a huge church would be. Mr. Dickinson explained he does not recommend franchise fees based on a percentage because when they start applying this by class it becomes more complicated. Councilmember Engelhardt noted it is possible that these fees may only be able to help for a short amount of time. Mr. Dickinson moved on to discuss assessments in both the rural and the urban areas. He gave examples of the difference in costs for properties in the rural and urban areas. He added the urban area utilizes more public safety services. He noted there is a give-and-take between the urban and rural. He said all of this could warrant an increase in assessment rates for rural properties. Mayor Bukkila asked how they would be able to legally do this to property taxes. Mr. Dickinson said this is just a change to the assessment rate. He noted this would likely make the assessment hearings more difficult. He said they may have to look into what other cities do, which is having Andover City Council Workshop Meeting Minutes – April 23, 2024 Page 7 a pre-assessment before the project begins. He explained assessments are because the work they are doing is providing a benefit back to the property and they need to be able to justify this benefit in court. He said very few challenge the 25% assessment rate in court. He shared in the 24 years he has been with the City only two assessments have been taken to court and one went to mediation and was settled. Mayor Bukkila suggested having this even out by having a baseline amount then anything above that amount would be assessed at a higher rate. Mr. Baumunk gave an example that the first 30 feet of front footage could be free and any footage beyond this would be what is assessed. Councilmember Butler asked how far they are willing to go with this and if it will be worth it. He asked if they kept the assessment rate of 25% for urban properties and increased the rate for rural properties to 35% if this extra 10% for rural properties would be enough to justify the headache it would cause. He added if they make the first 300 feet of front footage free then they would have to majorly increase the levy to make up for this. Mayor Bukkila said the preference seems to be to stay at a 25% assessment rate, but they are open to hearing alternatives. Mr. Dickinson said they can bring back more options on how this could be broken out. He explained he could look at these averages and the annual levy amount and come up with an acceptable amount of years based on a total tax bill. Councilmember Butler said the 25% assessment rate is simple and easy for residents to understand. He noted if they increase this rate then communicating this to the public and trying to get them to understand could be a nightmare. Mayor Bukkila noted they will need to study this and have an example ready to use to explain to residents who may not understand. Councilmember Butler said they will also need to do some education to the community about what is happening with the state of the roads and why they are having to implement these increases. Councilmember Barthel said he is still open to the rural properties having a higher assessment. Councilmember Nelson agreed. Mr. Berkowitz shared there has been something in legislation for years called street utility. He said this would be a little more complex than stormwater utility. He noted if this street utility legislation goes through then this could mitigate the issue between the urban and rural properties. He said this would be extremely difficult to set up in Andover because they are dealing with many different development sizes. He added that roads have become a major issue in the State and there are many cities around Andover whose roads are in the same shape, or worse. He said they would not want to let the roads get into any worse shape than they are now. Rhonda Ganske, 2159 153rd Lane NW said she does not understand the viewpoint of urban versus rural. She noted properties in the rural area are paying more in taxes due to their property values. Andover City Council Workshop Meeting Minutes – April 23, 2024 Page 8 She shared at the Board of Review meeting that was held a few weeks ago they increased the property taxes 10% to 15% and it was significantly more for rural over urban properties. She noted it may be a hard sell to tell residents that they will be treating rural and urban property owners differently. Councilmember Butler noted that for rural projects, the City is covering a lot more of the expense on a per home basis over what they would be covering per home for an urban project. Ms. Ganske reiterated it would be a challenge to pitch this to the rural property owners. She added there are many rural homes in the City and these property owners are only going to be looking at how this assessment and project will affect them and why they are being treated differently than everyone in the urban area. She noted a majority of the roads that have been added to the City over the past 25 years are urban roads so all of the additional streets that are now having to be maintained are all in the urban area. Councilmember Barthel stated the urban lots are paying more for the City functions than the rural lots are. He agreed that communicating this to residents in the rural area will be extremely difficult. Councilmember Engelhardt added there is a mix of advantages and disadvantages. He shared he gets questions from residents about why they are getting charged for storm sewer utilities when they do not have any storm sewers. Tracy Strombeck, 16401 Uplander St. NW stated she recently had a mill and overlay project done in her rural neighborhood, she was told by staff it was due. She is more worried about water service and fire protection is also important. The funds seem to get shifted to other priorities and the infrastructure suffers. Regarding roads for her it is about what is fair for the community. Council consensus was reached to direct staff to bring back more information on franchise fees and increased assessment rates. DISCUSS/REVIEW 2025 BUDGET DEVELOPMENT GUIDELINES Mr. Dickinson recommended moving this item to a May Council meeting. OTHER TOPICS None. ADJOURNMENT Motion by Butler, Seconded by Nelson, to adjourn. Motion carried unanimously. The workshop meeting adjourned at 7:42 p.m. Respectfully submitted, Andover City Council Workshop Meeting Minutes – April 23, 2024 Page 9 Ava Major, Recording Secretary