City Council - Workshop Meetings

City Council Workshop Meeting Ash North and South Conference Rooms November 15, 2023 | 6:30 p.m. This City Council Workshop meeting is taking place virtually and at Woodbury City Hall in the Ash North and South Conference Room. Members of the public may attend the meeting in person and may also join the meeting using a computer, tablet or smartphone and accessing the virtual meeting link at woodburymn.gov/VirtualMeetings Watch the Live Meeting Public comments will be accepted during the meeting both in person and virtually. Virtual questions should be submitted via the online Q&A feature within the virtual meeting link. Questions regarding the meeting will be also taken between the hours of 8:00 a.m. to 4:30 p.m. at 651-714-3524 or at council@woodburymn.gov. Questions received after 4:30 p.m. will be responded to in the next three to seven business days. Please note that all agenda times are estimates. 6:00 p.m. Dinner – Birch Conference Room Workshop Agenda 6:30 p.m. 1. Drinking Water Strategic Initiative: Water Treatment Implementation 23-255 8:00 p.m. 2. 2024 Preliminary Property Tax Levy and Budget Update 23-256 8:20 p.m. 3. Administrator Comments and Updates1 8;25 p.m. 5. Mayor and City Council Comments and Commission Liaison Updates1 8:30 p.m. 6. Adjourn to closed session to discuss annual performance review of the City Administrator Held in Birch Conference Room 1 Items under comments and updates are intended to be informational or of brief inquiry. More substantial discussion of matters under comments and updates should be scheduled for a future agenda. The City of Woodbury is subject to Title II of the Americans with Disabilities Act which prohibits discrimination on the basis of disability by public entities. The City is committed to full implementation of the Act to our services, programs, and activities. Information regarding the provision of the Americans with Disabilities Act is available from the City Administrator's office at (651) 714-3523. Auxiliary aids for disabled persons are available upon request at least 72 hours in advance of an event. Please call the ADA Coordinator, Clinton P. Gridley, at (651) 714-3523 (TDD (651) 714-3568)) to make arrangements.  1 City of Woodbury, Minnesota Office of City Administrator Council Workshop Letter 23-255 November 15, 2023 To: The Honorable Mayor and Members of the City Council From: Clinton P. Gridley, City Administrator Subject: Drinking Water Strategic Initiative: Water Treatment Implementation Summary Following Council approval of design contracts and associated Minnesota Pollution Control Agency (MPCA) grants in Spring 2023, City staff and consultants are making progress with the design of the City’s permanent water treatment plant (WTP), seventeen miles of pipe, associated infrastructure, and additional interim treatment capacity as the highest priority. Water treatment plant, well manifold pipe project, and system wide raw and distribution pipeline projects are progressing towards 60 percent design while construction of temporary water treatment at three well sites are in process. Council will be asked to provide direction on roadways assessments within the project area. The workshop agenda will cover project updates, including: • 2023 Accomplishments • Selected pipeline corridors • Project funding • Water treatment plant architecture design • Conceptual Drinking Water Supply Plan Annual Review (state report attached) • Project risks and vulnerabilities • Project timeline update • Next steps Staff is approaching project decisions with the following project mission statement motivating actions: Deliver resilient, system-wide treatment of drinking water for PFAS with continued urgency, while being mindful of community impacts. Recommendation Staff recommends not assessing property owners for road improvements associated with the water treatment pipeline infrastructure and funded through the settlement. Staff recommends only assess for resident petitioned traffic calming, if concurred with by the City. The rationale for not assessing is that many of the road improvements occur before the life of current infrastructure has been realized, reducing the possible benefit analysis for residents. Additionally, the organization’s number one priority is to provide treated water with urgency, the assessment process is a risk to the project’s timeline. Therefore, it is prudent to remove this barrier to urgency, early in the process. Council Workshop Letter 23-255 November 15, 2023 Page 2 Fiscal Implications There is not enough information through the ongoing design process, uncertain outcome of benefit appraisals, and evolving state share determination to be able to develop an accurate fiscal impact on the rate payers by foregoing assessments. At the last water Council workshop meeting, an early estimated City cost range of $22-$40 million was shared. The $22-$40 million cost range includes City responsible components of pipeline construction and implementation of flexibility in the operations building and the expanded garage, delaying Public Works building expansion. The pipeline estimate of probable costs at the completion of 30 percent design have been updated and summarized as $130 million for state funded infrastructure, $3.4 million in congressionally directed spending and $11.9 million for city funded trunk water infrastructure. Governance Mode • Fiduciary - Stewardship of tangible assets, oversees operations and ensures efficient and appropriate use of resources, legal compliance, and fiscal accountability. • Generative - identifying key questions, anticipating future challenges, framing of issues, and development of options. Policy Aligns with the 2019-2021 Strategic Initiative 19-01, Ensure Long-term Drinking Water Sustainability and 2022-2024 Strategic Initiative 22-01 Drinking Water Treatment Implementation. Background Assessments: Historically, the City of Woodbury has assessed residents for roadway improvements consistent with the policy direction given in the Roadway Construction and Rehabilitation Financing Policy. Due to the relative age of the roadways being impacted, urgency of delivering water treatment, the onerous nature of the assessment policy staff recommends foregoing the assessments for roadway projects associated with water treatment infrastructure. A key reason not to assess is the cause of the project (similar to development causing road improvements) is not the road rehab need but the need to install water infrastructure. This approach is consistent to the Roadway Construction and Rehabilitation Financing Policy intent for roadways funded by Development, for mitigation of the development impacts, through negotiations indicating assessments would not apply, at the discretion of the City. Furthermore, removing the assessment process for this project protects the water treatment plan project timeline. Eight projects are anticipated, which it is estimated would take over 200 hours of staff time to complete the 429 processes, not including administrative support staff hours. A six- month lead time is necessary for benefit appraisals and public engagement related to the assessment process. The timeline to accommodate these processes is likely to cause project delivery delays. Pipeline Corridors were selected by analyzing and balancing the criteria: capital cost, constructability, cost impact to operations and maintenance, operational resiliency, and Council Workshop Letter 23-255 November 15, 2023 Page 3 accommodations needed for other infrastructure in the roadway. The analysis included review of significant corridor details to ensure construction could be accommodated with minimal impacts to the project schedule. The most major challenge being existing underground infrastructure barriers since all routes go down existing roadway corridors that include gas, electric, communications and other facilities. The alignments have remained consistent from the completion of the Preliminary Engineering Report through the preliminary design. At this time, any proposed changes to the engineered plan would cause significant project delays and likely have increased cost impacts. Staff have thoroughly vetted the plan and will be informing Council of the plan and potential impacts during construction and have received approval of the proposed routes from the 3M and State of Minnesota settlement co-trustees. Architecture design: Staff has worked closely with architects from Jacobs to establish building designs and exterior aesthetic treatments that deliver buildings that operate efficiently while managing the building heights and mass as they relate to the adjacent residential properties in the Copper Ridge and Bridlewood Farms developments. Attached are concept plans for Council to review. Conceptual Drinking Water Supply Plan Annual Review: The Minnesota Department of Natural Resources (DNR) and Minnesota Pollution Control Agency (MPCA) 3M Settlement Co- Trustees (Co-Trustees) provided an annual update on the status of the settlement and projected spending. Their report and PowerPoint presentation are attached. Current estimates of planned capital projects exceed the funding set aside for capital and contingency by approximately $116 million. Every community is projected to exceed the estimated capital spending for the Conceptual Drinking Water Supply Plan (CDWSP). The State will provide an update on the drinking water protection funding in the coming months and once the initial project is complete will consult with the working groups and consider re-allocating the funding to capital. Additional options will also be discussed throughout 2024. Public Process Due to the extensive length of public process items associated with these topics, only 2023 process is noted below. A list of previous public process can be found in past year’s Council Workshop letters. • February 8, 2023: Council Resolution Authorizing Acceptance of City of Woodbury Water Treatment Plant Design and Partial Pipeline Design Grant from MPCA in the amount of $12,500,000 and Approval of Budget Amendment to the Water and Sewer Utility Fund • March 22, 2023: Council Resolution Authorizing Acceptance of City of Woodbury Water Treatment Plant and Pipeline Design Project Grant Amendment #1, from Minnesota Pollution Control Agency in the Amount of $3,888,543 and Approval of Budget Amendment to the Water and Sewer Utility Fund. • April 12, 2023: Council Resolutions Authorizing the Mayor and City Administrator to Execute a Letter of Engagement with Advanced Engineering and Environmental Services, LLC (AE2S) as the City’s Consultant and Engineering Firm for Wellhead Temporary Water Treatment • April 12, 2023: Council Resolution Authorizing Acceptance of City of Woodbury Wellhead Temporary Water Treatment Grant Amendment from Minnesota Pollution Control Agency and approval of Budget Amendment to the Water Sewer Utility Fund Council Workshop Letter 23-255 November 15, 2023 Page 4 • May 24, 2023: Council Resolution Authorizing Acceptance of City of Woodbury Water Treatment Plant Property Acquisition Grant Amendment #1, Contract #188269 from Minnesota Pollution Control Agency • June 23, 2023: Audit and Investment Commission Meeting Review of 2024 Utility Rates and Recommendation • June 28, 2023: Council Workshop Discussion on the proposed Council Resolution regarding Water Supply and Growth Management • July 19, 2023: Council Resolution Affirming the City of Woodbury’s Continued Commitment to the Management of Growth and Water Supply • July 19, 2023: Council Resolution Amending Council Directive CD-COMDEV-3.1 Phase 2 Growth Management Strategy • August 9, 2023: Council Resolution Authorizing Acceptance of City of Woodbury Communications and Public Engagement Services Grant Amendment #1, Contract #211361 for up to $128,400 from the Minnesota Pollution Control Agency to reimburse the City’s expenses for Implementation of Communications and Public Engagement Plan for LTWTP Project and Approving a Budget Amendment to the Water and Sewer Utility Fund (Enterprise Fund) • August 9, 2023: Council Resolution Authorizing the Mayor and City Administrator to Execute a Letter of Engagement with Advanced Engineering and Environmental Services, LLC (AE2S) as the City’s Consultant and Engineering Firm for continued Woodbury Water Treatment Plant Professional Services for Communications, Branding and Public Engagement • August 16, 2023: Council workshop discussion on the drinking water strategic initiative: water treatment implementation • August 23, 2023: Council Resolution affirming Council’s August 16 workshop direction • August 23, 2023: Council Resolution Authorizing Acceptance of City of Woodbury MPCA Administrative Grant amendment • September 6, 2023: Council authorization and acceptance of the MPCA grant for City of Newport Interconnect and sustained water service evaluation and budget amendment Written By: Mary Van Milligen, Public Works Director Jim Westerman, Assistant Public Works Director Tony Kutzke, City Engineer Approved Through: Clinton P. Gridley, City Administrator Attachments: 1. Pipeline Corridor Map 2. Architectural Concept Plan 3. October 18, 2023, Co-Trustee Conceptual Drinking Water Supply Plan Annual Update 4. October 18, 2023, Co-Trustee Future Funding PowerPoint  Tamarack Wellfield Woodbury WTP - Pipeline Design 7 6 12” East Wellfield Raw Water Wellfield Manifold Pipeline Construction Segment Temporary Water 9 12” 11 Transmission Pipeline Pipe Project and Sequencing Schedule Map 4 Treatment Plant 16” 14 FIGURE 1 - OVERALL PIPELINE PROJECT 3 5 30” 30” 12 30” 24” Valley Creek Rd. 20” 17 18 8 10 2 East Tamarack Wellfield Raw Af 16” 16” Wellfield Radio Dr. to Water Collector Pipelines nR d. 36” PIPELINE SEGMENT CONSTRUCTION SEQUENCE Cottage Grove Dr. 36” 16 Settlers Ridge Pkwy. 2024 Construction Start 13 2025 Construction Start Tower Dr. Interlachen Pkwy. 15 2026 Construction Start 2027 Construction Start Lake Rd. Tamarack Wellfield Water Transmission Pipelines Raw Water Pipeline (Bailey Rd. to Valley Creek Rd.) Distribution Pipeline Woodbury Dr. 20” Pioneer Dr. Woodlane Dr. and Hargis Pkwy. Distribution Pipeline Existing Booster Station South Wellfield Raw Water Transmission Pipeline Bailey Rd. Distribution Pipeline & Water Storage Tank Existing Water Tower Tank 16” 20” 24” Bailey Rd. 24” 20 Pipeline Junction Vault #1 24” 16” 36” Radio Dr. 36” Distribution 36” 21 Hargis Pkwy. Pipeline Tamarack Wellfield Water Transmission Pipelines # Raw Water Well 24” 19 (Radio Dr. to WTP and WTP to Bailey Rd.) 42” Raw Water Well with Temporary Treatment Skid Woodlane Dr. 30” Hargis Pkwy. South Long-Term Water Wellfield 16” Treatment Plant 30” Radio Dr. South Distribution and Raw Water Pipelines Dale Rd. 22 24” Dale Rd. Distribution Pipeline 9-15-23 Northwest View Concept Approach Concept Southeast View Concept  Draft October 2023 Minnesota 3M PFAS Settlement Conceptual Drinking Water Supply Plan Annual Review, 2022–2023 Draft October 2023 1. Annual Review Purpose The Conceptual Drinking Water Supply Plan (Conceptual Plan), released on August 18, 2021, serves as a guide for using the 3M per- and polyfluoroalkyl substances (PFAS) Settlement (Settlement) funds to provide safe, sustainable drinking water to the affected communities in Minnesota’s East Metropolitan Area. The Minnesota 3M PFAS Settlement website (https://3msettlement.state.mn.us/) has additional information on the Settlement and the Conceptual Plan. As a part of the Conceptual Plan, the Co-Trustees—the Minnesota Pollution Control Agency (MPCA) and the Minnesota Department of Natural Resources—recognize the need to annually evaluate progress in implementing projects (Figure 1). In addition, the Co-Trustees recognize that actual costs will likely differ from the estimated project costs in the Conceptual Plan, and therefore the amounts set in each fund allocation will need to be regularly evaluated. Figure 1. Process Diagram for Evaluating the Conceptual Plan Project Design, Implementation, Evaluation, and Reallocation The Co-Trustees are conducting an annual review of the Conceptual Plan implementation efforts, to evaluate progress, review how actual costs compare to estimates in the Conceptual Plan, and determine whether a funding reallocation is warranted. The first Conceptual Plan Annual Review (Annual Review) covered progress made since the release of the Conceptual Plan (August 18, 2021) through the fiscal year (FY) 2022 end (June 30, 2022), and was released in early 2023. This second annual review provides a year-in-review of progress made in FY 2023 (July 1, 2022 through June 30, 2023), and discusses anticipated progress for FY 2024 (July 1, 2023 through June 30, 2024). In this report, Section 2 provides an evaluation of progress in implementing the Conceptual Plan, Section 3 provides an overview of new information that has affected or may affect the implementation of the Conceptual Plan, and Section 4 discusses anticipated fiscal year 2024 projects. Finally, Section 5 provides Minnesota 3M PFAS Settlement 1  Draft October 2023 a review of contingency funding and a discussion of whether there was a need for a funding reallocation in FY 2023. 2. Progress on the Implementation of the Conceptual Plan Priority 1 of the Settlement aims to fund a variety of projects to enhance the quality, quantity, and sustainability of drinking water in the East Metropolitan Area. The Conceptual Plan allocates $700 million in available funding from the 3M Settlement, which is the amount of Settlement funding available after payment of legal fees and deducting the $20 million set aside for Priority 2.1 Settlement funding includes three priority funding allocations: capital infrastructure, operation and maintenance (O&M), and drinking water protection (Figure 2). Figure 2. Conceptual Plan Priorities Including these three priority funding allocations, the Settlement defines the following five funding allocations out of the available $700 million: • Capital funding (45%,2 or $317 million) allocated to plan, design, construct, and install the drinking water supply infrastructure for public water systems and private wells. The Conceptual Plan provides the affected communities with a tailored project list to meet the long-term goals of the Settlement based on their specific needs and cost estimates. • O&M funding (16%, or $115 million) allocated to operate and maintain public water systems for an estimated 20 years and private well treatment systems for an estimated 30 years, as outlined in the Conceptual Plan. • Drinking water protection funding (10%, or $70 million) allocated to improve drinking water quality at the source, to target contamination cleanup in order to benefit drinking water quality for wells impacted by PFAS. This will start with source assessment and feasibility evaluation of PFAS impacts on soil, groundwater, surface water, and sediments along the Project 1007 corridor that are transported to the drinking water. More information about Project 1007 can be found here: https://3msettlement.state.mn.us/project-1007. • Contingency funding (26%, or $183 million) allocated to potentially fund work in several different areas of uncertainty, including providing treatment for drinking water wells that are not included in the capital and O&M budgets of the Conceptual Plan because they did not meet the treatment threshold at the time. 1 The second priority of the Settlement is to restore and enhance aquatic resources, wildlife, habitat, fishing, and outdoor recreational opportunities in the East Metropolitan Area and in downstream areas of the Mississippi and St. Croix Rivers. 2 Percentages do not sum to 100% because of rounding. Minnesota 3M PFAS Settlement 2  Draft October 2023 • State administration (2%, or $15 million) allocated to administer and implement the Conceptual Plan, including review and development of grant agreements; tracking progress of project implementation; annual review and reallocation; reporting; and preparing for and holding public meetings. The Settlement funds have been placed into interest-bearing accounts distributed by allocation. Within FY 2023 (July 1, 2022 to June 30, 2023), the accounts had earned a total of approximately $24.7 million in interest. The interest earned in FY 2023 remains in the interest-bearing accounts (Box 1). Details on the projects funded through interest earned in previous fiscal years can be found in the 2022 Annual Review. Box 1. Allocation of Interest Earned on Settlement Dollars Settlement funds are in interest-bearing accounts, and, as of June 30, 2023, had earned approximately $24.7 million in interest. The interest earned in FY 2023 remains in the interest-bearing accounts split by allocation: • $12.09 million is in the capital fund allocation. • $3.51 million is in the O&M fund allocation. • $1.66 million is in the drinking water protection fund allocation. • $5.58 million is in the contingency fund allocation. • $1.90 million is in the state administration fund allocation. 2.1 Awarded Implementation Funding In fiscal year 2023 (July 1, 2022 to June 30, 2023), the state spent approximately $32.3 million in Settlement funding across the five funding allocations. The cumulative spending of Settlement funding between the release of the Conceptual Plan in August 2021 and June 2023 is shown in Figure 3.3 Spending during FY 2023 includes: • Capital funding ($15.4 million) spent on: o Planning and design for water treatment plants in the cities of Cottage Grove and Woodbury o Planning for two interconnects with Newport o Connecting properties with private wells in various neighborhoods to municipal water in the cities of Cottage Grove, Lake Elmo, Lakeland/Lakeland Shores, and Woodbury o Installing whole-home water filter systems, also called point of entry treatment systems (POETSs), for private wells over the treatment threshold, in communities across the East Metropolitan Area o Temporary treatment of additional wells in Cottage Grove and Woodbury to meet their water demand until the permanent water treatment plants are in place o Finalizing ion exchange pilot studies and administrative and communications tasks in Woodbury and Cottage Grove 3 Section 2.1 in the Annual Review focuses only on funding from the $700 million included in the Conceptual Plan. Any discrepancies with the legislative report reflect the different time period for the legislative report (January 1, 2023 to June 30, 2023) and the inclusion of temporary spending and spending on projects funded with interest earned before the release of the Conceptual Plan. Minnesota 3M PFAS Settlement 3  Draft October 2023 • O&M funding ($1.5 million) spent on maintenance of granular activated carbon (GAC) filters in POETSs across the East Metropolitan Area and O&M for St. Paul Park’s and Oakdale’s permanent water treatment plants. • Drinking water protection funding ($5.7 million) spent on Project 1007, including contractor support for the feasibility study, and drinking water monitoring for public and private systems. • Contingency funding ($8.3 million) spent on Request for Funding projects to extend water mains and connect homes to the municipal drinking water supply system in Lake Elmo. These projects were similar to expedited projects in that they were consistent with the Conceptual Plan, were time- sensitive, and were reviewed and approved with input from the work groups. However, these projects were funded with contingency funds because interest earned prior to this year, which was intended to cover the expenses, was not sufficient to cover these projects and to maintain the capital allocation. Contingency is also being used for O&M costs for the temporary drinking water treatment plants for Cottage Grove, Oakdale, and Woodbury. • State administration ($1.4 million) spent on administering and implementing the Conceptual Plan, including state and contractor review and development of grant agreements, tracking project implementation progress, annual review and reallocation, reporting, and preparing for and holding work group and public meetings. Project status information is available at https://3msettlement.state.mn.us/investing-east-metro- drinking-water. Figure 3. Funding Spent Across Project Types, August 2021–June 20234 4 Figure 3 includes only funding from the $700 million included in the Conceptual Plan. It does not include spending from interest earned or spending on temporary treatment. Minnesota 3M PFAS Settlement 4  Draft October 2023 2.2 Implementation of Grant Agreements The Conceptual Plan identifies projects the Co-Trustees intend to fund; however, communities are not automatically allocated the portion of capital or O&M outlined in the Conceptual Plan. Rather, project implementation is driven by the communities through a grant process with the state. The state reviews information provided by communities and develops grant agreements to enable project implementation. Many communities will have multiple grants over several years for different phases of a given project (e.g., planning and design, construction, and O&M phases). Once a grant agreement is in place, each community follows their own processes for implementation, coordinating with the state as necessary. For private wells, the MPCA will continue to manage the installation and maintenance of POETSs using contractors. Since the Conceptual Plan release, Co-Trustees have prioritized funding the projects outlined in the Conceptual Plan and have completed individual project funding reviews within the expected six- to eight-week timeframe. For grants that contain elements that are not specifically evaluated in the Conceptual Plan, the Co-Trustees must ensure that projects are consistent with the Conceptual Plan and that adequate funding is available to cover project costs. The level of reimbursement (i.e., cost share) of construction costs would be based on cost-effectiveness and eligibility of projects under the Settlement and as identified in the Conceptual Plan. Additional review time may be required as more information is gathered; however, the Co-Trustees are regularly refining the implementation process to increase efficiency. The state had a total of 31 grant agreements active in FY 2023 (July 1, 2022 to June 30, 2023), using Settlement funding. Of the 31 grant agreements, 16 are ongoing, 8 are newly executed, and 7 have been closed (Table 1). • Twenty-two of the grant agreements are associated with capital projects. Six were closed during the annual review period, seven were newly executed, and nine are ongoing (executed prior to FY 2023). o The nine ongoing projects include land purchases5 and planning activities for new permanent water treatment projects in Cottage Grove and Woodbury (including Woodbury’s ion exchange pilot study), temporary treatment of additional wells in Cottage Grove and Woodbury, and the connection of homes to municipal drinking water supply systems in Cottage Grove and Lake Elmo. o The seven newly executed agreements are for Cottage Grove planning, design, and communication, Newport interconnect planning, connecting St. Paul Park’s third well to treatment and watermain improvements, and Woodbury administrative and design costs. o The six closed grant agreements include Cottage Grove’s ion exchange pilot study and planning and pre-construction activities for Well 13 and water mains to replace contaminated wells as well as the municipal connection of Salem Church in Woodbury. 5 Land purchases by the City of Cottage Grove and City of Woodbury for their water treatment facilities are associated with grant agreements that were executed prior to the release of the Conceptual Plan (August 18, 2021). Minnesota 3M PFAS Settlement 5  Draft October 2023 • Two grant agreements are associated with O&M: an ongoing grant for the St. Paul Park’s permanent water treatment facility and a newly executed grant for Oakdale’s permanent treatment for Wells 5 and 9. • Seven grant agreements are associated with contingency funding. One is for temporary treatment O&M in Oakdale; that facility was closed during the annual review period, and the work is now captured under a different grant. Six more are ongoing to extend water mains and connect homes in Lake Elmo neighborhoods to the municipal drinking water supply system and for temporary treatment O&M in Cottage Grove and Woodbury. Table 1. Number of Settlement Grant Agreements, July 2022 through June 2023 Funding Allocation Ongoing Grant New Grant Agreements Number of Grant Category Agreements (Open) Executed (Open) Agreements (Closed) Capital 9 7 6 O&M 1 1 0 Contingency 6 0 1 Total 16 8 7 2.3 Comparison of Estimated Costs to Awarded Funding The overall sum of grant funding awarded for municipal capital projects in the fiscal year 2023 (July 2022 to June 2023) review period exceeds the estimated sum included in the Conceptual Plan for those projects.6 Figure 4 shows this comparison using capital project grant amounts for Cottage Grove, Woodbury, St. Paul Park, and Newport, the four communities that submitted grant forms and subsequently had grants awarded during the review period. Projects may take place over multiple years, and grant amounts awarded (and compared in this section) may include full project costs even though the projects may not be completed within the annual review period. In some cases, project costs were lower than estimated in the Conceptual Plan, but in most cases, costs were higher than estimated. In instances where construction costs exceed the estimates in the Conceptual Plan, a combination of factors has contributed, including, but not limited to, increase in construction costs since the original estimates were completed, current bidding climate, and/or change in construction assumptions or methods. All four communities identified new planning needs, including grant administration and communication, and increased planning/design costs due to increased construction scopes. Large cost differences from Conceptual Plan estimates are mostly attributed to changes in design and engineering assumptions. In one instance, a water main could not be installed in parallel with an existing water main because of utility constraints; therefore, a larger-diameter pipe had to be installed to accommodate the necessary flow. 6 A comparison to estimates in the Conceptual Plan is not always exact, because some communities separate portions of projects into several different grant agreements, combine the costs of individual project elements, and/or propose projects that are different than the Conceptual Plan projects such that the costs cannot be directly compared. In instances where the project was not in the Conceptual Plan, the Conceptual Plan estimate used is $0. Total grant agreement amounts are being compared to Conceptual Plan estimates, not necessarily the amount reimbursed during this review period. Minnesota 3M PFAS Settlement 6  Draft October 2023 In other instances involving water treatment plant design, engineering assumptions continue to evolve and reveal that the design and construction require more funding than what was in the Conceptual Plan. For example, in some communities, changes in water demand growth projections and/or new PFAS concentration data since the Conceptual Plan was released have led to additional wells requiring treatment or changes in treatment strategies, such as designing for larger treatment plants, overcoming additional distribution system challenges, and incorporating approaches to adaptability for long-term treatment. Some of these changes (e.g., treating additional wells or adding pretreatment where warranted) were anticipated in the Conceptual Plan, while other changes (e.g., evolving system operations and the magnitude of inflation) were not. As planning and design efforts move ahead, and these additional engineering considerations become known, actual project costs continue to further exceed the cost estimates in the Conceptual Plan. Unexpected projects also increase costs for both construction and professional services, such as temporary treatment and communications costs. Figure 4. Cost Comparison of Conceptual Plan Estimates and Grant Awards for Cottage Grove, Woodbury, Newport, and St. Paul Park (Combined) Municipal System Projects, July 2022–June 2023 At a community level, Figure 5 shows the funds awarded per community during the review period. One community, Cottage Grove, has experienced professional services costs similar to the Conceptual Plan estimates. Cottage Grove completed planning and design for the smaller of their two planned water treatment plants, where considerable planning prior to the Conceptual Plan release, notably Cottage Grove’s ion exchange pilot study, has kept planning efforts post-Conceptual Plan to a minimum. In contrast, Woodbury has experienced significantly higher costs than the Conceptual Plan estimates. Woodbury began the major design phase for their centralized water treatment plan, which will serve the whole community. Woodbury identified the need for their own pilot study to assess treatment technologies and the potential need for pretreatment after the Conceptual Plan was released. Higher Minnesota 3M PFAS Settlement 7  Draft October 2023 planning and design costs for Woodbury are also a result of the need to design a larger treatment plant, and additional hydraulic challenges due to higher community demands, moving to a centralized water source, and the need to treat additional wells because of expected lower MDH health-based values (HBVs) and EPA maximum contaminant levels (MCLs). In addition, the Conceptual Plan generally did not account for things like communication efforts and planning and designing temporary treatment. Such activities have depleted the already limited resources in the planning estimates and will create higher capital and O&M costs in the future as well. However, the Conceptual Plan is designed to adapt to and cover these higher costs so long as they are Settlement-eligible. St. Paul Park’s major water main project to connect its third well to the existing treatment facility and connect treated water to water towers launched during the review period. Costs were higher because of different design and construction assumptions than were accounted for in the Conceptual Plan. Newport started planning for their interconnects with Cottage Grove and Woodbury and had very little approved costs to compare with the conceptual plan estimates during the review period. Figure 5. Cost Comparison of Conceptual Plan Estimates and Grant Amount Awarded for Cottage Grove, Woodbury, St. Paul Park, and Newport Municipal System Projects, July 2022–June 2023 Funding for O&M costs for long-term municipal drinking water treatment is under way, but it is too early in the process to make a comparison to Conceptual Plan estimates. Some permanent treatment systems are in place, but the treatment plants are not yet constructed according to the proposed design in the Conceptual Plan; therefore, costs are not yet comparable. More data will be available once additional long-term systems come online and/or when existing systems are completed and incur media change- outs in the next few years. Minnesota 3M PFAS Settlement 8  Draft October 2023 A cost comparison was also conducted for POETSs and municipal water connections costs. For state contractors and their vendors, capital and O&M costs for POETSs are comparable to the costs estimated in the Conceptual Plan. For new POETS installation, capital costs are around $2,644. The Conceptual Plan POETS installment cost estimate was $2,500, plus a contingency of 25% for construction and 15% for professional services associated with capital projects. With the contingency and professional services accounted for, the total capital cost estimate in the Conceptual Plan is $3,500, which is approximately 21% higher than the fiscal year 2023 expenditure per POETS. O&M costs have increased to just above the Conceptual Plan estimate of $1,000/system/year. This will impact O&M funding over the long term, but in a less significant way compared to municipal system costs. Five neighborhood connections were completed during the review period in the communities of Cottage Grove and Lake Elmo. However, these neighborhoods were connected as part of expedited projects initiated prior to the Conceptual Plan and the cost comparison has not changed over the past fiscal year. The previous cost comparison can be found in 2022 Annual Review. 3. Impacts to Implementation from New Information The Conceptual Plan was built with a degree of resiliency to proactively account for future potential changes. For example, the Conceptual Plan includes a designated contingency allocation for future changes and unknowns that is more robust than traditional approaches. A 25% contingency was built into capital costs, rather than using a more traditional 10%, and an additional $16 million in capital funds was set aside to cover potential future inflation of costs.7 While the Conceptual Plan outlines estimated costs for projects, unknown conditions continue to introduce additional costs as communities implement drinking water infrastructure projects. This section focuses on new information and unexpected conditions during the annual review period that have had the greatest impact on implementation. 3.1 Changing PFAS Health Values for Drinking Water EPA released draft MCLs for perfluorooctanoic acid (PFOA) and perfluorooctane sulfonic acid (PFOS) in March 2023, with final MCLs anticipated by January 2024. The Minnesota Department of Health (MDH) is also reviewing the new information, and plans to release updated HBVs for PFOA and PFOS in late 2023. It is anticipated that the new HBVs and MCLs will be more stringent than the MDH’s current HBVs and health risk limits (HRLs). The MPCA and MDH are going through various scenarios to better understand how anticipated future, lower values may impact wells in the East Metropolitan Area. Based on different regulatory scenarios, the need is clear for additional sampling of some public and private wells to determine the potential impacts to the East Metropolitan Area. The MDH is working with communities to increase sampling at public wells, and the MPCA continues to sample private wells based on plume location. The state agencies are working with communities that are currently planning and designing long-term treatment for their municipal drinking water systems. The Co-Trustees determined that design costs for providing PFAS treatment to existing municipal wells not currently included in the Conceptual Plan to 7 These funds are associated with the capital fund allocation and are beyond what is in the separate contingency allocation described in Section 5.1. Minnesota 3M PFAS Settlement 9  Draft October 2023 receive treatment are Settlement-eligible for Cottage Grove and Woodbury. These communities are currently in the process of designing/constructing their new long-term water treatment plants. This includes municipal wells with a health index (HI) below 1. The Co-Trustees also determined that some additional construction costs to treat wells may be eligible for reimbursement if those costs are associated with exceedances of the upcoming PFOA and PFOS HBVs and MCLs. The level of reimbursement is based on cost-effectiveness and eligibility of projects under the Settlement and as identified in the Conceptual Plan. Lastly, a grant agreement must be in place prior to any bidding and any construction costs incurred, and would detail portions of the project(s) that are currently eligible for reimbursement and portions of the project(s) that would be potentially eligible in the future. 3.2 Inflation and Other Cost Increases It is anticipated that construction of capital projects under the Conceptual Plan will likely take approximately 10 years to complete. Costs for materials and labor are expected to increase over this time due to ongoing and anticipated construction sector inflation, which the Conceptual Plan assumed to be 3% annually when determining the amount of capital and O&M funds set aside to cover potential future inflation costs. Currently, Settlement funds are in a State Board of Investment interest-bearing account and earned approximately 4% over the past fiscal year. This outperforms the original 1% annual earnings anticipated in the Conceptual Plan for funds allocated to capital projects over 10 years and the 3.5% anticipated for O&M. However, actual costs continue to be higher than what was anticipated in the Conceptual Plan because of previous increases due to material cost increases, labor shortages, and supply chain issues. For example, between January 2020 and July 2023 material and equipment costs increased by 41% for water treatment, 30-40% for ductile iron, and over 100% for plastics and rubber. Cost indices show a stabilization of costs over the last six months, which suggests that additional significant cost increases due to inflation are not expected in the future.8 Moving forward, Co-Trustees anticipate that increased costs may result in the need to use funds from the contingency fund allocation (see Section 5.1 for additional information about the use of contingency funding). 3.3 Accounting for Temporary Drinking Water Treatment Systems Under the terms of the Settlement, 3M provided up to $40 million for a period of up to five years (February 20, 2018–February 20, 2023) to fund temporary drinking water treatment solutions. The $40 million was in addition to the Settlement grant amount. Since this provision expired on February 20, 2023, Settlement funds from the capital allocation are now used to fund the remaining and additional construction of temporary treatment construction and O&M costs. Temporary municipal GAC treatment systems are currently operating in Cottage Grove, Oakdale, and Woodbury. The temporary treatment system in Oakdale is in addition to the permanent GAC treatment 8 The Chemical Engineering Plant Cost Index: https://www.chemengonline.com/pci-home; Producer Price Index by Industry: Iron Foundries: Ductile Iron Pressure Pipe and Fittings: https://fred.stlouisfed.org/series/PCU3315113315111; Producer Price Index by Commodity: Rubber and Plastic Products: Plastics Water Pipe: https://fred.stlouisfed.org/series/WPU072106033. Minnesota 3M PFAS Settlement 10  Draft October 2023 system already in place. The St. Paul Park water treatment facility was initially built as a temporary treatment system but is now operating as the long-term treatment facility as identified in the Conceptual Plan. St. Paul Park is currently connecting their third well to this long-term treatment facility. Under the terms outlined in the 2007 Consent Order, the MPCA sought cost recovery of state expenses related to these temporary treatment systems. The MPCA submitted the final invoice to 3M for reimbursement of temporary expenses. In total, MPCA has recovered $29,742,089 from 3M in costs related to temporary systems, along with expenses to provide bottled water until individual home GAC treatment systems were installed from February 20, 2018 to February 20, 2023. Since this provision expired on February 20, 2023, Settlement funds are now used to fund the remaining and additional construction of temporary treatment construction and O&M costs. Cottage Grove and Woodbury have since requested temporary treatment for additional wells that meet or exceed an HI of 1 so they could meet their water demands and remain compliant with MDH’s current HBVs. They will use the temporary treatment systems until the long-term water treatment systems are in place. Future requests for temporary treatment systems will be evaluated on a case-by-case basis. From February 20, 2023, to June 30, 2023, $5,130,059 of Settlement funds were spent on temporary treatment systems. This number includes vessels that were purchased for Woodbury and Cottage Grove’s temporary treatment that will be transferred over for permanent treatment. 4. Projects in Fiscal Year 2024 and Anticipated Impact on Settlement Funds Communities are continuing to move forward in implementing projects outlined in the Conceptual Plan. The Co-Trustees, in coordination with communities, anticipate several projects in fiscal year 2024 (with some already under way), including the following activities across the Settlement accounts. • Capital fund allocation is anticipated to be spent on the following projects: o Planning, design, and construction on permanent water treatment plants and associated water main extension and installations in Cottage Grove, St. Paul Park, Woodbury, and Prairie Island Indian Community, including necessary equipment for the long-term operation of treatment facilities and new wells, as appropriate o Final site work at temporary treatment facilities in Cottage Grove and design and construction of temporary treatment facilities in Woodbury9 o Sealing of private wells in Afton, Lake Elmo, Lakeland, Lakeland Shores, Newport, Oakdale, St. Paul Park, and the townships of Denmark, West Lakeland, and Lake St. Croix Beach o Continued planning for emergency and/or sustained water system interconnections for the City of Newport to Cottage Grove and Woodbury o Start of the water main extension in Lake Elmo to 18 homes in the Homestead neighborhood and construction of other water main improvements o Preparation of preliminary plans for new water treatment plants, including consideration of permanent and temporary treatment in Lake Elmo, with construction to follow if necessary o Abandonment of an existing well in Woodbury • O&M fund allocation is anticipated to be spent on the following projects: 9 At the time of publication of the Annual Review, Cottage Grove had submitted an additional request for design and construction funding for temporary treatment at Wells 9 and 11 but the final Co-Trustee review of that request had not yet occurred. Minnesota 3M PFAS Settlement 11  Draft October 2023 o Permanent treatment facilities in St. Paul Park and Oakdale • Drinking water protection fund allocation will continue to be expended on Project 1007, including contractor support for the feasibility study, and drinking water monitoring for public and private systems. • Contingency fund allocation is anticipated to be spent on the completion of the Request for Funding projects in Lake Elmo and O&M costs for the temporary drinking water treatment plants for Cottage Grove, Oakdale, and Woodbury. • State administration fund allocation will continue to be expended administering and implementing the Conceptual Plan, including state and contractor review and development of grant agreements, tracking project implementation progress, annual review, reporting, and preparing for and holding work group and public meetings. Temporary treatment continues to be implemented at wells to enable communities to meet their water demands until permanent solutions are in place. As discussed in Section 3.3., all funding for temporary treatment construction and O&M has been provided for by the Settlement funds and drawn down on the account. To date, requests for funding for temporary treatment have exceeded the anticipated demand, and the Co-Trustees will continue to examine how permanent solutions can be accelerated to meet water treatment needs and minimize the need for and costs associated with temporary treatment. Additional temporary treatment requests are individually reviewed as needed. 5. Contingency Fund Allocation and Fund Reallocation As the Conceptual Plan continues to be implemented, the Co-Trustees will evaluate progress on projects, compare actual costs to estimates, and monitor where and when funds may warrant reallocation. The Conceptual Plan includes contingency plans to ensure it is flexible and resilient to help address uncertainties into the future and fund safe drinking water in additional areas if necessary. (See Section 5.1 for additional detail.) Contingency funds may be used during implementation of the Conceptual Plan if Co-Trustees determine it is necessary to implement projects that are consistent with the Conceptual Plan; use of contingency funds does not require fund reallocation. In addition to the contingency fund allocation, the Conceptual Plan also provides a framework to reallocate funding; this includes incorporating work group and public feedback, should it be necessary (see Section 5.2 for additional detail). If Settlement funds are depleted in the future, the 2007 Consent Order requires 3M to fund treatment costs for drinking water wells with a health advisory (issued when the PFAS HI ≥1). A summary of the Consent Order is available at https://3msettlement.state.mn.us/about. 5.1 Contingency Fund Allocation The contingency fund allocation reserves funding to address different areas of future uncertainty.10 For instance, contingency dollars may be used to fund treatment for drinking water wells that receive a health advisory in the future but were not included in the Conceptual Plan. These additional health advisories could result from several situations, including: 10 This contingency fund is a separate allocation from the 25% contingency built directly into capital costs. It is also separate from the additional $16 million set aside to cover potential future inflation described in Section 3.2. Minnesota 3M PFAS Settlement 12  Draft October 2023 • Increased concentrations of PFAS as groundwater migrates • Improvements in analytical methods that can measure PFAS constituents at lower levels • Reduced HBVs or HRLs for the PFAS compounds used to calculate the HI • HBVs or HRLs being developed for additional PFAS compounds • Final MCLs for PFAS compounds The contingency fund allocation may also be used to help PFAS-affected East Metropolitan Area communities fund the cost of providing an alternative source of drinking water because of potential restrictions on use of aquifers that affect White Bear Lake. Finally, the contingency fund allocation may be used to address project cost increases, such as increases in construction costs (e.g., inflation, labor increases) since the original estimates were completed, and/or change in construction and system operation assumptions or methods. Refer to the Conceptual Plan (Section 10.3) for additional information about the contingency fund allocation. Contingency fund allocation dollars can be used for eligible projects at any time and do not require fund reallocation. As described in Section 2, $8.3 million (or 4.5%) of the $183 million dedicated to the contingency fund allocation have been used within this annual review period for Settlement-eligible neighborhood connection projects and temporary treatment O&M. The impact of temporary treatment on the Settlement funds is discussed in Section 3.3, and current requests for additional temporary treatment funding have exceeded previous estimates. If future needs exceed the Settlement Agreement funds, the 2007 Consent Order requires 3M to fund the costs of treatment for drinking water wells with a health advisory (i.e., those wells with HI≥1). Given requests for funding received since the end of fiscal year 2023, the Co-Trustees anticipate that eligible projects will be approved using capital funding before drawing on the contingency fund allocation. 5.2 Fund Reallocation As part of the annual review of the Conceptual Plan, the Co-Trustees consider new information that has evolved over the previous year, a review of actual costs of projects, reallocation discussions as needed, and discussion of any other adjustments that may be necessary to ensure the effectiveness of the plan. After reviewing how actual costs compare to estimates and considering new information over the past year, the Co-Trustees determined that a funding reallocation was not necessary during FY 2023, because the capital project grants awarded in FY 2023 still do not exceed the total capital fund allocation (see Section 2.1). The awarded grant amounts reflect spending that will occur over multiple years and not only spending in FY 2023. As fiscal year 2024 progresses, the Co-Trustees will continue to consider new information—including impacts to drinking water treatment implementation costs under new PFAS health values, impacts to inflation in fiscal year 2024, earned interest, and project funding requests—to determine whether reallocation is needed. The Conceptual Plan provides a framework with flexibility to reallocate funds, as necessary.11 In addition to the contingency fund allocation, the Co-Trustees can review if any funds remain after the completion of projects within the drinking water protection, and determine how to spend these remaining funds, with input from the work groups and public. If any 11 In general, savings associated with the capital allocation will not be reallocated to other uses until the majority of projects are completed, while any annual O&M savings will remain within the O&M allocation. Minnesota 3M PFAS Settlement 13  Draft October 2023 funding is not needed for the state administration expenses, the Co-Trustees can also reallocate those funds with input from the work groups and public. See the Conceptual Plan (Section 10.4) for additional information about the fund reallocation strategy. Minnesota 3M PFAS Settlement 14 Future Funding Considerations Rebecca Place, MPCA and Hannah Albertus-Benham, WSP 3M PFAS Settlement Work Group Meeting October 18, 2023  Agenda • Current Spending and Earnings • Anticipated Spending • Future Reallocation 2 Current Spending and Earnings Through Fiscal Year 2023 3 Overview of Funds Allocated and Spent 4  Interest Earned in Fiscal Year 2023 by Allocation Original allocation* Interest allocated in New allocation Conceptual Plan Allocation amount FY23† amount Capital $317,000,000 $12,086,400 $329,086,400 O&M $115,000,000 $3,507,300 $118,507,300 Drinking water protection $70,000,000 $1,657,900 $71,657,900 Contingency $183,000,000 $5,581,100 $188,581,100 State administration costs $15,000,000 $1,902,500 $16,902,500 Total $700,000,000 $24,735,200 $724,735,200 Notes: * All numbers rounded to the nearest hundred. As a reminder, interest earned on Settlement funds before this last year (through June 30, 2022) were allocated to primarily expedited projects and other early projects. † Settlement funds are in interest-bearing accounts, and, as of June 30, 2023, have earned approximately $24.7 million in interest. The interest earned in FY 2023 remains in the interest-bearing accounts split by allocations, as shown in this column. 5 Overview of Funds Allocated and Spent with Interest 6  Anticipated Spending Fiscal Years 2024 and 2025 7  Impacts from New Information • New information has resulted in additional implementation costs • Changing PFAS health values for drinking water • Inflation and other cost increases • Accounting for temporary drinking water treatment systems, including new requests as well as on- going O&M for existing systems • Additional components needed • Conceptual Plan built with a degree of resiliency (e.g., conservative assumptions), but may need to use contingency funds or the fund reallocation process to cover additional implementation costs in the future 8  Anticipated Fiscal Year 2024 and 2025 Projects Co-Trustees are anticipating major projects in Fiscal Years 2024 and 2025 Several projects have estimates: Other projects are on the horizon: • Cottage Grove Low Zone Water Treatment Plant • Cottage Grove Intermediate Zone Water Treatment Plant • $42M (final design bids) • Cottage Grove Water Mains • Woodbury Centralized Water Treatment Plant • Oakdale Water Treatment Improvements • $192M (30% design estimates) • Oakdale Water Mains • Woodbury Water Mains (pipelines) • Lake Elmo (Multiple water supply options • $136M (30% design estimates) considered) • Additional projects outlined in the Conceptual Plan 9  Anticipated Fiscal Year 2024 and 2025 Projects Woodbury and Cottage Grove Cost Factors Construction cost increases have driven costs higher than Conceptual Plan estimates along with other factors resulting from detailed designs • These factors were determined to be Settlement eligible because they are reasonable and necessary to treat PFAS Cottage Grove Woodbury • Low Zone WTP treatment design changes: • Larger WTP capacity and more water mains due to: • Pretreatment • Additional capacity in Tamarack Wellfield realized • Clearwell storage • 2040 demand projection increased • Pump chamber • Potential to treat the South and East Wellfield wells with new or anticipated advisories • Backwash Tanks • Clearwell storage and pump station to overcome • Additional design effort to accommodate the above hydraulic challenges due to centralization factors • Backwash tanks included • Future flexibility components • Additional design effort to accommodate the above factors 10  Anticipated Fiscal Year 2024 and 2025 Projects Comparison to Conceptual Plan Current Cost Conceptual Plan Major Projects Difference Estimates Estimate Cottage Grove Low Zone WTP $42M $16M $26M Woodbury Centralized WTP $192M* $40M $152M Woodbury Water Mains $136M* $78M $58M Sum $370M $134M $236M *Estimates are based on 30% design and subject to change The settlement will have to cover an additional $236M in capital costs for these projects alone 11  Anticipated Fiscal Year 2024 and 2025 Projects Future Major Projects Co-Trustees are anticipating major projects in Fiscal Years 2024 and 2025 Several projects have estimates: Other projects are on the horizon: • Cottage Grove Low Zone Water Treatment Plant • Cottage Grove Intermediate Zone Water Treatment Plant • $42M (Final Design bids) • Cottage Grove Water Mains • Woodbury Centralized Water Treatment Plant • Oakdale Water Treatment Improvements • $192M (30% Design) • Oakdale Water Mains • Woodbury Water Mains (pipelines) • Lake Elmo (Multiple water supply options • $136M (30% Design) considered) • Additional projects outlined in the Conceptual Plan 12  Overall Anticipated Project Cost Increases WSP Conceptual Plan Cost Updates WSP updated the cost estimates from the Conceptual Plan for the purposes of discussing anticipated Settlement spending; assumptions include: • Costs have been updated to reflect inflationary increases based on market indices between 2019 and 2023 • Costs remain in present worth, and do not account for additional inflation • Municipal and private treatment to account for additional potential treatment needs based on changing health values • Additional design components for Cottage Grove and Woodbury discussed previously are also included • Cimarron Park community in Lake Elmo is included for treatment of their wells • Note that increased costs for stormwater, professional services, and contingency are accounted for as percentages of costs discussed above, the same way they were calculated in the Conceptual Plan 13 Overall Anticipated Project Cost Increases WSP Conceptual Plan Cost Updates 14 These are estimates for discussion purposes only Overall Anticipated Project Cost Increases WSP Conceptual Plan Cost Updates 15 These are estimates for discussion purposes only Future Reallocation 16 Anticipated Fiscal Year 2024 and 2025 Projects Capital Allocation versus Updated Costs Estimates 17 These are estimates for discussion purposes only Anticipated Fiscal Year 2024 and 2025 Projects Capital Allocation versus Updated Costs Estimates 18 These are estimates for discussion purposes only  Anticipated Spending and Earning in FY24 and FY25 • Priority one funds in their entirety are sufficient to cover currently estimated capital project costs • Capital fund allocation will continue to fund eligible projects, including using interest earned on capital funds, until the fund is depleted • Contingency fund allocation will then be used to fund eligible projects • Likely to use dollars from the contingency fund allocation for capital projects in Fiscal Year 2025 • Will continue to fund remaining expedited projects and O&M for temporary treatment systems 19  Anticipated Spending and Earning in FY24 and FY25 • O&M allocation will continue to maintain individual POETSs as well as permanent municipal water treatment plants • Drinking water protection allocation will complete Project 1007 feasibility study, as required under the Settlement, and fund drinking water sampling for private wells and public systems • Feedback will be sought before moving forward any projects outlined in the feasibility study • State administration allocation will continue to fund the implementation of the Conceptual Plan 20  Anticipated Spending and Earning in FY24 and FY25 • May need to discuss a formal reallocation of funds in Fiscal Year 2025, if contingency fund allocation looks to be fully utilized • In the event all of the allocations were to run out of funding, drinking water activities would revert to being reimbursed by 3M under the 2007 Consent Order 21 Questions? 22  2 City of Woodbury, Minnesota Office of City Administrator Council Workshop Letter 23-256 November 15, 2023 To: The Honorable Mayor and Members of the City Council From: Clinton P. Gridley, City Administrator Subject: 2024 Preliminary Property Tax Levy and Budget Update Summary At the City Council meeting of September 27, 2023, the City Council adopted a 2024 proposed property tax levy for purposes of the required 2024 Truth in Taxation public meeting. The public meeting on the proposed tax levy and budget adoption is set for December 13, 2023. The Council has the option to decrease the tax levy but may not increase the tax levy above the amount adopted at the September 27th meeting. Ahead of the public meeting, this workshop item is to provide the City Council any updates on the 2024 budget and hear any additional questions and/or receive direction heading into the budget and property tax levy adoption. Recommendation Staff recommends Council concur with the proposed changes and for presentation at the truth- in-taxation public meeting approving the property tax levy and budget. The 2024 budget proposed at the September 27th City Council meeting has been revised to reflect the changes as summarized below. 1. Eliminate Appraiser position and merge assessing budget with the Finance Division. This created a $10,000 savings to allow a reallocation of $2,500 each in the General Fund for Mayor & Council-Travel & Training; Administration and Police Divisions- Employee Recognition; and Community Relations-Advertising. 2. Restructure Communications into the Community Relations Division that centralizes communications, community engagement, equity, and legislative focus. This had a neutral budget impact and shifted specific personnel and operational costs from Mayor & Council and Administration to the restructured division. 3. An Energy Improvement Study for Major Facilities for $35,000 was added to the General Fund-Municipal Buildings. Use of Fund Balance was designated as the funding source on this request. 4. A DMO Coordinator position was added to the General Fund-Planning Division with a direct labor reimbursement offset from the Destination Marketing Organization (DMO) Fund. The DMO Fund experienced a net expenditure increase of $34,100 accommodated by Use of Fund Balance. Reductions to Advertising and Professional Services partially offset the Labor Reimbursement and other operational expenditures related to the DMO Coordinator position. 5. Adjustments to the Capital Improvement Fund include: addition of $60,000 for Public Works office space expansion covered by Use of Fund Balance; removal of a Critical Council Workshop Letter 23-256 November 15, 2023 Page 2 Incident Response Vehicle ($50,000 city contribution toward county asset) with this item to be revisited during future equipment planning; removal of $395,000 for a new street sweeper supported by a reimbursement agreement with South Washington Watershed District per City Council’s early purchase approval on September 6, 2023; removal of the $100,000 Public Safety Expansion Study per City Council’s approval to begin study work in 2023 on October 11, 2023; and removal of two Parks and Forestry Division equipment items based on increasing the capitalization threshold from $5,000 to $10,000 and reclassed to the General Fund with an increase in Investment Revenue to accommodate the adjustment. 6. Per City Council approval on September 27, 2023, the 2024 Roadway Rehabilitation Project included the addition of the Boulder Ridge neighborhood. This addition along with removal of the Promenade Lane (re-budgeted for 2025) project in the Street Reconstruction/Maintenance Fund created a net budget adjustment of increased project costs of $1,874,500. Special Assessment revenues along with Water & Sewer Utility and Storm Water Utility Transfer In revenues were increased. Use of Fund Balance/Reserves accommodated the increases for the Boulder Ridge neighborhood project. 7. Utility rate studies were added with Use of Reserves from the respective funds for stormwater ($45,000) and street lighting ($15,000). 8. The Sports Center Fund experienced an increase in Contracted Rental revenues of $86,100 due to finalizing an agreement with ETS Performance. With these additional revenues, the projected operating income surpasses the minimum operating income target in the Sports Center Fund. 9. The Risk Management Fund had a reduction of $200 in Interfund Charge revenues for workers compensation insurance based on the elimination of the Appraiser position and addition of a DMO Coordinator position. Governance Mode • Fiduciary - Stewardship of tangible assets, oversees operations and ensures efficient and appropriate use of resources, legal compliance, and fiscal accountability. Fiscal Implications The following table illustrates the 2024 proposed property tax levy: Sept. 27 to Sept. 13 Sept. 27 Nov. 15 2023 Budget Council Nov. 15 Proposed Workshop Meeting Workshop Changes Estimated Net Tax Capacity $161,588,417 $161,588,417 $161,588,417 $- Total Dollar Levy $48,372,932 $48,372,932 $48,372,932 $- (includes HRA Levy) Estimated City Tax Rate 27.538% 27.538% 27.538% 0.0% Percent Change in Total 8.2% 8.2% 8.2% 0.0% Dollar Levy 2023/2024 Impact on Median Value $51 $51 $51 $- Home 2023/2024 Council Workshop Letter 23-256 November 15, 2023 Page 3 Sept. 27 to Sept. 13 Sept. 27 Nov. 15 2023 Budget Council Nov. 15 Proposed Workshop Meeting Workshop Changes Percent Change in Total City of Woodbury Tax 4.2% 4.2% 4.2% 0.0% 2023/2024 Total Preliminary Budget $153,906,214 $153,906,214 $156,012,914 $2,106,700 Policy In accordance with the obligations set forth in Section 2-45 (a) (5) of the City of Woodbury Code of Ordinances, the city administrator shall prepare an annual fiscal budget and capital improvement plan for City Council and maintain financial guidelines for the city within the scope of the approved budget and capital program. Public Process The public budget process is as follows:  City Council Workshop review of five-year Capital Improvement Plan and debt service projections– May 17  City Council adoption of the 2024-2028 Capital Improvement Plan – June 28  City Council Workshop review of key budget considerations – July 26  City Council Budget Workshop – September 13  City Council adoption of the preliminary tax levy, preliminary HRA tax levy, and set Truth- in-Taxation public meeting date – September 27  City Council Budget Update Workshop – November 15  Truth in Taxation Public Meeting – December 13  City Council adoption of the property tax levies and budget – December 13 Background The annual budget is both a guide and a policy plan as the major annual city policy document that establishes the operational plan to provide continuing quality and affordable services with the flexibility of Council action to adapt to changes and issues that arise during the fiscal year. The annual budget contains detailed financial information on the city’s numerous funds and sets forth a strategy for continued progress in meeting the city’s capital investment needs. The budget document also includes the most recently approved Capital Improvement Plan which includes several non-budgeted capital project funds which are brought to Council for approval on a project-by-project basis. Written By: Lynn Haseleu, Budget Manager Approved through: Clinton P. Gridley, City Administrator Attachments: Staff Memorandum - 2024 Position Changes, Reclassifications and Promotions Approval  Staff Memorandum Date: November 1, 2023 To: Clint Gridley, City Administrator From: Jody Brown, Human Resources Manager; Angela Gorall, Assistant City Administrator Subject: 2024 Position Changes, Reclassifications and Promotions Approval Provided is a comprehensive listing of 2024 position changes and reclassifications as will be provided by a resolution (if required) to the City Council for consideration via consent agenda on November 29, 2023. Also listed are adjustments as already included within the 2024 Budget not requiring separate Council action. Previously approved Council actions related to the Community Relations Division and the DMO are not listed nor are existing classifications with position additions (i.e. police officer). (1) Create Administrative Technician I Grade 2 (Council Resolution) Create Administrative Technician II Grade 3 (Council Resolution) Remove Administrative Technician Grade 3 (Council Resolution) Promote one employee to Administrative Technician II January 2024 Retitle two employees to Administrative Technician II (2) Create Senior Human Resources Coordinator Grade 8 (Council Resolution) Promote one employee to Senior Human Resources Coordinator January 2024 (3) Create additional position of Human Resources Specialist Replacing previously planned title of Assistant to the City Administrator (4) Create Accounting Manager Grade 11 (Council Resolution) (5) Create Assistant Chief Financial Officer – Budget Manager Grade 12 (Council Resolution) Promote one employee to Assistant Chief Financial Officer – Budget Manager January 2024 (6) Promote one employee to Accounting Technician II January 2024 (7) Create Inspections Technician I Grade 2 (Council Resolution) Create Inspections Technician II Grade 3 (Council Resolution) Remove Inspections Technician Grade 3 (Council Resolution) Re-title one employee to Inspections Technician II Promote two employees to Inspections Technician I January 2024 (8) Create Information Technology Specialist II Grade 5 (Council Resolution) (9) Create Community Relations Specialist Grade 5 (Council Resolution) Staff Memorandum November 1, 2023 Page 2 (10) Create Recreation Operations Manager Grade 10 (Council Resolution) Promote one employee to Recreation Operations Manager January 2024 with wage adjustment. (11) Create Parts Technician Grade 2 (Council Resolution) (12) Reclassify Assistant Utilities Manager Grade 9 (Council Resolution) (13) Re-title the following positions: (Council Resolution) a. Accounting Technician to Accounting Technician I b. Communications Specialist to Community Relations Specialist c. Public Safety Specialist – Community Support to Community Relations Specialist – Public Safety The following recommendation is also to be implemented: Remove the following from the Woodbury Performance Pay Plan: d. Supervisor must nominate employee for an Employee Award to receive overall exceptional rating.