Audit and Investment Commission

City of Woodbury 8301 Valley Creek Road Woodbury, MN 55125 651-714-3500 Minutes of The Parks and Trails Replacement Fund Joint Commission Meeting Tuesday, October 6, 2020 Audit and Investment Commission Members In-person or Virtual: Heidi Conrad, Ross Dahlin – Virtual, Blake Darsow, Ken Johnson, Jeanine Kuwik, John Lehman, Aileen Lyle – Virtual, Richard Osborn Parks and Natural Resources Commission Members In-person or Virtual: Greta Bjerkness (Chair), Timothy Brewington, II – Virtual, Karin Freymann, Arin Kurttila, Bruce Montgomery, Deborah Musser, Rachel Nelson, Jakob Neau Commission Members Absent: None City Council In-person: Mayor Anne Burt, Council Members Steve Morris and Amy Scoggins Staff In-person or Virtual: Angela Gorall, Assistant City Administrator Clinton Gridley, City Administrator Tim Johnson, Finance Director Michelle Okada, Parks and Recreation Director Belinda Reed, Recording Secretary Robert James, ICT Director (Virtual) Ben Stroback, IT Manager (Virtual) Item 1: Call to Order Parks and Natural Resources Commission Chair Greta Bjerkness, called the meeting to order at 7 p.m. Item 2: Special Order of Business – Presentation of Outstanding Volunteer Award to Timothy Brewington II Ms. Okada noted that each year, the City presents an Outstanding Volunteer Award to a community member with this year’s award being presented to Mr. Timothy Brewington, II. “Mr. Brewington currently serves on the Woodbury Parks and Natural Resources Commission and the City of Woodbury’s Public Safety Multicultural Advisory Committee. A few years ago when the City was implementing Body-Worn Cameras to the Police Division, Tim served as a citizen representative to review the body-worn camera policy for the Department of Parks and Trails Replacement Fund Meeting Minutes October 6, 2020 Page 2 Public Safety. Tim is also an alumnus of the Woodbury Citizen's Academy and recently represented our community on the Nexus Community Partners’ Board and Commission’s Leadership Institute at the state level. Tim and his family moved to Woodbury in 2013, and he also works in our community as pastor of Fellowship Church. During the crisis, surrounding the tragic death of Mr. Floyd, Tim appropriately leaned into Public Safety to encourage and facilitate a candid SWCTC interview with Director Lee Vague, about policing and race. Tim’s positive spirit and volunteering have made a real difference, and he is an important voice for the community in many regards. It is an honor to present the Outstanding Volunteer Award to Tim Brewington, II.” Item 3: Approval of the Minutes of the Parks and Trails Replacement Plan Fund Joint Commission meeting – September 1, 2020 Parks and Natural Resources Commission Chair Greta Bjerkness, asked for the approval of the September 1, 2020, Parks and Trails Replacement Plan Fund Joint Commission meeting minutes. MOTION: Moved by Commissioner Lehman and seconded by Commissioner Johnson, to approve the September 1, 2020, Parks and Trails Replacement Plan Fund Joint Commission meeting Minutes. VOTE: In favor All in-person and virtual Against None Absent None Item 4: Parks and Trails Replacement Fund Ms. Okada introduced Xcel Energy’s Manager, Community Relations and Economic Development, Mr. Jake Sedlacek, Mr. Sedlacek noted that Xcel Energy, which is headquartered in Minnesota, is engaged in the community in many ways, including membership in the Woodbury Chamber of Commerce. Xcel Energy’s customers in Woodbury consist of every resident, business and non-profit. Mr. Sedlacek added that Woodbury is very serious about saving energy and community members are sensitive to their utility bills. Xcel Energy’s new $10 million rapid electric substation, which was constructed in Woodbury recently, will help balance the electrical grid load in the area. The substation is situated east of Cottage Grove Drive and south of Bailey Road, near the Washington County Environment Center. Mr. Sedlacek noted he wished to thank the community for this deliberative process, and is happy to serve as a resource to the process. Mayor Burt thanked Mr. Sedlacek for his presence at the meeting. Agenda and Main Discussion Points Parks and Trails Replacement Fund Meeting Minutes October 6, 2020 Page 3 Ms. Okada noted that Assistant City Administrator, Angela Gorall, would be virtually presenting a majority of the meeting’s presentation. Ms. Okada provided a recap of the September 1, meeting, noting that staff collected the questions at last month’s meeting, and have included a number of the questions in the Q&A review; however, as staff continue to layer information, the Commissioners were encouraged to ask questions throughout the presentation. The ultimate goal of the process, potentially during the November 4, meeting, is to have the Commissioners provide a consensus to be presented for City Council’s consideration. Ms. Okada also noted that at the September 1, meeting, staff heard that the Commissioners felt leaving a fund deficit would not be an option. Q&A Review/Recap Ms. Gorall reviewed the impacts of franchise fees on the median value Woodbury home. The overall timeline of the process was reviewed, along with a Q&A recap from the last meeting. Staff verified that franchise fees are collected monthly by the utilities, which fees are then distributed quarterly to the City. Xcel Energy verified that they do not charge any administrative fee on the franchise fees to either their utility customers or the City. Xcel Energy also confirmed that they would deal with any delinquencies and that the City is paid 100 percent of the franchise fee amount. It was noted that any change in the fee amount would require approximately 90 days to complete: 60 days for the City to notify the Minnesota Public Utilities Commission of a fee increase and subsequently, 30 days for Xcel Energy to implement a franchise fee increase to their utility customers. A discussion took place with regard to at what point would the $2.9 million yearly funding be required to be increased and how many years will the $2.9 million be enough of a yearly funding amount. Ms. Okada noted that the $2.9 million represents the base asset value average before inflation and before enhancement factors. Staff put together a 10-year CIP, taking the theoretical document of the plan, along with the reality of what will be placed year-to-year for 10 years, with the $2.9 million being the average that will get us to that point. Mr. Gridley noted that the plan is a living document and each year there are going to be assets added with the total continuing to grow. Staff noted that in discussions with utility providers about non-users/off-the grid customers, using either a solar source or some other means of energy, those users are still going to have a premise. A full disconnection was described as very rare circumstance, so with any premise, there will still be some franchise fee applied. With regard to large commercial industrial user data, Ms. Gorall noted that impacts to those users are more challenging and information is not readily available. Staff reached out to Washington County and determined there are 124 parcels, with improvements, Parks and Trails Replacement Fund Meeting Minutes October 6, 2020 Page 4 located in Woodbury that are tax exempt. Not included in this number is land without any improvements, as well as City-owned parcels. Staff further broke down the parcels by type. Mr. Gridley noted that in terms of creating the fund base amount and growing it, the use of franchise fees is good with regard to creating the base amount. Growing the franchise fee, however, would take actions much like the property tax. In determining how you want to create the base funding, and how do you grow the funding, the base funding could be created using one method and growing the fund with the other method, or some combination thereof. It would be necessary to determine what will be needed to keep up with the future growth as the value of the parks and trails assets grow, knowing that every development adds more to the parks and trails system that will have to be depreciated. Commissioners continued to discuss the importance of balancing the fund with a mixed approach, centered on the funding options of property taxes and franchise fees. It was noted that the City Council continues to balance other expenditure needs across the City and that the General fund, primary funded by the property tax, has many pulls in different directions with pressure to allocate that are great. A discussion took place with regard to the pros and cons of property taxes versus franchise fees. Ms. Gorall noted that once the Commissioners determine their comfort level and appropriate level of impact, with the pros and cons in mind, as to what that balance should be and anything the Commissioners would not support would help staff going forward. Mr. Gridley, in summarizing that when comparing the two methods: a property tax, to a multi-year stair step franchise fee, the franchise fee can be accomplished in a single action of the City Council, executed over multiple years, versus a property tax, which is a new question each year to be decided by the City Council. Staff confirmed with the City Attorney, that the franchise fee could be set going forward, or it could be determined that a certain fee be set for this year, and future fee increases could be written into one ordinance. However, any change in the franchise fee each year will require administrative work on staff’s end to implement, in order to meet that 90-day window to change the franchise fee. A discussion took place with regard to using the unassigned property tax fund balance on an annual basis or a percentage of the unassigned property tax fund balance to fund the $686,000, or figure out what the franchise fee is and the difference could come from the unassigned fund balance. A discussion took place with regard to whenever there is an expenditure need, would it be possible to identify who are the beneficiaries of that use. In the case of parks and trails, identifying who are the actual users and who is paying for the rehabilitation of the parks and trails going forward and whether or not a franchise fee would capture 100 percent of the users. It was noted that some of the Commissioners would like the property taxpayers to have some skin in the game. It was also noted that homeowners have stake in the investment, when you look at property tax exempt, schools, hospitals, there are trail systems around those facilities on public property, and so with a total property tax approach you would not be capturing those exempt premises. However, with a franchise fee, the 124 identified parcels would participate in supporting the park system. Parks and Trails Replacement Fund Meeting Minutes October 6, 2020 Page 5 A discussion took place with charging entrance fees to non-Woodbury residents for the use of facilities. It was noted that bringing people into the City has a common good in advertising the City, supporting local businesses, and bolstering the City’s image. It was also noted that Woodbury is already a community of choice and well known for our parks, so people have the choice of moving here and having that added benefit of using the parks. Ms. Okada added that Woodbury does have people come and use our facilities and they frequent our businesses. In turn, those businesses would be paying franchise fees. Although not every one of the neighborhood parks would lend themselves for charging user fees, there are community parks that do draw regionally and may lend themselves for a fee structure. A question was raised as to how the utilities notify their franchise fee customers, as to how the money is being used. Mr. Sedlacek offered that as part of Xcel Energy’s process, when a franchise fee is passed, they are required to do two bill notification, on the bills prior to the fee going in, and then on the regular billing cycle it shows up as a line item as a “city fee.” Mr. Sedlacek noted it could be quite confusing to many ratepayers; however, City newsletters and website information will be helpful to inform the public. Ms. Okada noted that if the City Council does adopt a franchise fee, there would be a public process to gather feedback from residents and business owners. Key Questions for Commissioners Much of the discussion centered on a mix approach to the funding. Ms. Gorall asked for Option 1A feedback. The Commissioners were asked to drill into the handout with more feedback for that option specifically. Mr. Gridley explained why using the unassigned reserve fund balance is not a sustainable source as the property tax portion of the fund. Mayor Burt took the opportunity to thank the joint commissions on how hard they have been working on the subject and how thoughtful the process has been and really appreciated the work they have been doing. Council Member Morris noted that the conversation has been fantastic and as it relates to equity, he would be cognizant as to how a flat fee might have an equity impact as a percentage of income on a lower income household. Commissioners discussed the options and overwhelmingly preferred Option 1A. A few provisions were discussed:  Diversification of having it come from two sources: property tax levy and franchise fees.  Clearly dedicate the proceeds of the franchise fee to the replacement program so future council would not have the option to dip into those funds for other purposes.  Balance the fund with using a percentage of property tax and majority drawn from franchise fees.  Maintaining some level of property tax contribution so residents have a stake in supporting the system. Parks and Trails Replacement Fund Meeting Minutes October 6, 2020 Page 6  Educational component about franchise fees will be an important part of the public process. Commissioners also discussed the options for increases in the fund. Commissioners agreed that since we do not know what the future holds, either as to the growth of the park system or the growth of the city building, an automatic stair step may not be a good idea. Commissioners commented that the City Council can always increase the franchise fee, but if there is a need, they can also increase whatever the percentage property tax is. However, that is up to a future Council to assess and determine what those factors are. It was noted that the Audit and Investment Commission worked on a compensation schedule previously and it was suggested that perhaps there is a way to algorithmically lay something out to say this is what would be recommended, to try to influence the future with the philosophy we have today about the parks and trails system funding. It was noted that $2.9 million is the base and does not have inflation or contingency in it and that what Option 1A does, is sets up a model for funding parks and trails replacement as the City goes forward each year. Once you apply the impacts of inflation and contingency, the amount is going to be greater so something has to include some kind of growth. Mr. Gridley was asked to explain how the City’s water rate increases were set. Council Member Morris inquired where the Commissioners stood with regard to a flat fee versus a usage fee. Some Commissioners agreed they would not support a franchise fee percentage because of its impact on commercial and industrial users and anticipated a pushback from the business community to the Council if that were the proposal. The flat fee was thought to be fair when balanced with a property tax. When talking about high and low income, property tax inclusion does somewhat compensate for that because the higher value home pays more than a lower value property. Mr. Sedlacek noted one of the reasons Xcel Energy is opposed to a percentage fee is that is a very regressive approach so you have two homes next to each other and one home is able to afford the very nice refrigerator; they can benefit from that while the other cannot. We do not want to have any kind of disincentive for saving so for people that want to take advantage of energy efficiency there are many programs out there. Therefore, percentage fee has a regressive impact on folks and we have other incentives to help people save energy. The Commissioners had a consensus on the use of a flat fee. Staff was asked if they would bring back to the Commissions a more refinement of the use of discretionary fund balance versus funding the balance through property tax. The Commissions and staff further discussed how enhancements and contingency could be addressed. There was consensus that the percentage would be the percent of the fund that would come from property taxes. Staff clarified that the next PTRF meeting will be held at 7 p.m. on Wednesday, November 4, 2020. Parks and Trails Replacement Fund Meeting Minutes October 6, 2020 Page 7 The Parks and Natural Resources Commission will hold their November 4, meeting at 5:45 p.m. Item 5. Adjournment The meeting was adjourned at 9:05 p.m.