City Council - Workshop Meetings

City Council Workshop Meeting Cherry Conference Rooms April 16, 2025 | 8:15 PM Upon the conclusion of the Woodbury City Council meeting, estimated to be 8:15 p.m. This City Council Workshop meeting is taking place virtually and at Woodbury City Hall in the Cherry Conference Rooms. 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 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. Unfinished workshop items will be carried over to the end of the Council meeting. The intent of the workshop session is to provide a forum for City Council and City staff to discuss more in-depth Council items, exchanging viewpoints and visions prior to the item being set for Council action at a regular meeting of the City Council. Workshop sessions are neither a public hearing nor an open microphone session. No formal votes will be taken and any direction from Council will be in consensus format. The workshop session is not recorded. Workshop Agenda 1. Workshop Discussion Items - 8:15 p.m. 1A. Street Lighting Utility Fund Rate Structure – Second Presentation Annual 25-123 Storm Water Utility Fund Rate Review 2. Administrator Comments and Updates* - 9:00 p.m. 3. Mayor and City Council Comments and Commission Liaison Updates* - 9:05 p.m. 4. Adjournment - 9:10 p.m.  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 714- 3568) to make arrangements.  1A City of Woodbury, Minnesota Office of City Administrator Council Workshop Letter 25-123 April 16, 2025 To: The Honorable Mayor and Members of the City Council From: Clinton P. Gridley, City Administrator Subject: Street Lighting Utility Fund Rate Structure – Second Presentation Annual Storm Water Utility Fund Rate Review Summary On April 2, 2025, staff presented the first of three planned Council Workshop meetings to provide a “primer” on the current Street Lighting Utility Fund rate system, its challenges, and the need for a fundamental shift in methodology. On April 16, 2025, staff and Jeanine Kuwik, Vice Chair of the Audit and Investment Commission, will present recommendations on a new rate structure methodology. In addition, staff will present responses to questions from the April 2, 2025, City Council Workshop Meeting. Council will be asked to provide direction on the rate structure approach to structuring street lighting rates and asked to review the draft Council Directive on the Street Lighting Utility Capital Asset Funding and Reserve Policy (attached). At the workshop, staff will also provide an informational update on proposed stormwater rate increases for 2026. If needed, on May 28, 2025, staff will present the last of three planned Council Workshop meetings to finalize the Council Directive on the Street Lighting Utility Capital Asset Funding and Reserve Policy and a proposed structure and other utility rates for implementation in 2026. Recommendation In sum, the consultant, staff project management team (PMT) and the Audit & Investment Commission found the existing rate model overly complex and inequitable, lacking an asset management plan or long-term funding for rising energy costs and infrastructure replacement. This gap underscored the need for a new, sustainable funding methodology that addresses both equity and the full lifecycle of the utility’s assets. Staff and the Audit and Investment Commission recommend the new Street Lighting Utility Fund Council Directive policy, and Option No. 3 as the selected funded rate structure to support the Street Lighting Utility Fund. Staff will also provide some early thoughts to the 2026 Storm Water Utility Fund rate as background information only - no action required at this time. Council Workshop Letter 25-123 April 16, 2025 Page 2 Governance Mode1  Fiduciary - Stewardship of tangible assets, oversees operations and ensures efficient and appropriate use of resources, legal compliance and fiscal accountability. Fiscal Implications The proposed Street Lighting Utility Fund rate structure option, in addition to being more clear, equitable and manageable, will be more financially sustainable as the street lighting system grows and ages. Similarly, the Storm Water Utility Fund is under fiscal pressure to support the growing and ageing infrastructure, and is in need a construction cost index plus rate increase. The rate methodology is proposed to remain the same. These decisions will significantly influence the short- and long-term sustainability of these enterprise funds. These decisions will also affect the availability of funding for capital infrastructure maintenance and replacements, which are critical to ensuring the ongoing reliability and effectiveness of these utilities. Policy Street lighting and stormwater are essential services, contributing to safety, community well- being, and overall quality of life and aligns with Critical Success Factors – City Services. Public Process The anticipated schedule for adoption of 2026 Street Lighting and Storm Water Utility Rates is as follows: Audit and Investment Commission – Street Lighting Utility Rate January 29, 2025 Primer Audit and Investment Commission – Street Lighting and Storm March 21, 2025 Water Utility Rate Study – Recommendations City Council Workshop No. 1 – Street Lighting Utility Rate Primer April 2, 2025 City Council Workshop No. 2 – Street Lighting Utility Rate Structure April 16, 2025 and Storm Water Utility Rate Discussion City Council Workshop No. 3 – Street Lighting and Storm Water May 28, 2025 Utility Rate – Final Discussion Minimum of 3- 5 months for utility billing changes, verification, back June – December 2025 testing, and implementation for any new rate structure changes Final Adoption of utility rates and fees for 2026 December 2025 Implementation of new rates January 1, 2026 1 Items marked “fiduciary” are primarily business-oriented topics; “strategic” items are primarily related to long- term strategies or goals; and “generative” items are primarily meant to produce new thoughts or ideas. Council Workshop Letter 25-123 April 16, 2025 Page 3 Background In 2024, the City initiated a Street Lighting and Storm Water Utility Fund Rate Study to assess the long-term adequacy of the funds in supporting both operating and capital expenditures. The rates for the Street Lighting Utility Fund, in particular, had not been evaluated for over a decade and had seen minimal changes despite rising costs due to inflation and aging infrastructure. This prompted the need for a comprehensive review to address financial sustainability and operational challenges. As the PMT evaluated the existing methodology, it became evident that the Street Lighting Utility Fund required a complete overhaul. The current rate schedule was overly complex, inequitable, and difficult to explain. Furthermore, there was no asset management or recapitalization plan in place to account for rising energy costs or the long-term replacement of infrastructure. This gap underscored the need for a new, sustainable funding methodology that addresses both equity and the full lifecycle of the utility’s assets. On January 29, 2025, and March 21, 2025, staff presented to the Audit and Investment Commission an outline of the current rate structure, a proposed new rate structure, and requested input on a new Council Directive to memorialize methodology and assumptions for funding street lighting. Recommendations and input from the Audit and Investment Commission will inform the Council at the April 16, 2025, City Council Workshop Meeting. City Council Workshop – Meeting No. 1 On April 2, 2025, staff presented to the Council on the Street Lighting Utility Fund. This initial meeting outlined the challenges with the existing rate structure and emphasized the need for a fundamental shift in methodology. City staff presented three different “philosophical” options that provided the foundation for a long-term, sustainable, and transparent funding approach that ensures fairness, equity, and proportionality. The three different options included: Category Option No. 1 3 Option No. 2 Option No. 3 Residential 2 New Uniform Rate New Uniform Rate New Uniform Rate Rural Estate and N/A New Uniform Rate Percent of ERU based Urban Reserve 2 Rate 1 Commercial, N/A ERU based Rate1 Percent of ERU based Public/Semi-Public Rate 1 Agricultural N/A N/A N/A Notes: 1. An Equivalent Residential Unit (ERU) is a standardized measure representing the typical benefit a single-family residential property receives from intersection lighting. This unit serves as the baseline for determining rates across all property types. 2. Residential Properties: One Equivalent Residential Unit (ERU) is defined as a single- family residential lot or the number of dwelling units per property. 3. Option No. 1 most closely matches the current rate structure, Option No. 2 defines all properties by the number of ERUs and allocates accordingly, Option No. 3 recognizes the reduced number of adjacent streetlight intersections and/or internal lighting of commercial, public/semi-public properties. Council Workshop Letter 25-123 April 16, 2025 Page 4 The Audit and Investment Commission reviewed the draft Street Lighting Utility Capital Asset Funding and Reserve Policy and provided the following feedback:  One member suggested the City evaluate an official “DarkSky” (https://darksky.org) approach to street lighting. Staff believes this is a valuable idea for future consideration through the Environmental Stewardship Strategic Initiative Implementation Plan.  They requested greater clarity regarding the treatment of Rural Estate and Urban Reserve properties, emphasizing that these should each be considered one Equivalent Residential Unit (ERU).  One member requested additional analysis to determine a more precise percentage of shared lighting usage across Rural Estate, Urban Reserve, Commercial, Public, and Semi-Public properties.  A minority of the Commission recommended increasing the ERU percentage assigned to Commercial, Public, and Semi-Public properties, noting that these entities may be better positioned to absorb higher rates. In response to this input, staff revised the draft policy to clarify that Rural Estate and Urban Reserve properties are each counted as one ERU. After evaluating the feasibility of conducting a detailed lighting usage study, staff concluded that such a study is not practical or feasible. Instead, staff recommends assigning 25 percent to 50 percent of one ERU to Commercial, Public, and Semi-Public properties, striking a balance that supports fairness, equity, and transparency in cost distribution. Written By: Chris Hartzell, Engineering Director Kristin Seaman, Environmental Resources Coordinator Approved Through: Clinton P. Gridley, City Administrator Attachment: 1. Draft - Street Lighting Utility Capital Asset Funding and Reserve Policy 2. Presentation – Rate Study Updates  Adopted: XX-XX-XX Number: CD-FIN-X.XX Revised: Mayor: City Administrator: For: Finance Subject: Street Lighting Utility Capital Asset COUNCIL DIRECTIVE Funding and Reserve Policy PURPOSE The purpose of this policy is to establish a long-term, sustainable, and transparent funding approach for the Street Lighting Utility Fund that ensures fairness, equity, and proportionality. The funding model emphasizes a benefit-based allocation rather than direct consumption to ensure all properties contribute equitably to intersection lighting costs. The Street Lighting Utility Fund operates as a self-sustaining enterprise, maintaining sufficient reserve balances to address unexpected maintenance needs. It remains separate from other government funds and is dedicated solely to street lighting services. This policy ensures the long-term sustainability, equity, and financial responsibility of the Street Lighting Utility Fund while providing clear guidance on rate allocation, reserve management, and infrastructure renewal. POLICY CONSIDERATIONS A. Equitable – The rate structure should ensure that all properties pay fairly and equitably based on a defined contribution to intersection traffic and safety needs. B. Sustainable – The funding model provide stable, predictable revenue for ongoing maintenance, of the lighting system and cost of energy to light intersections and traffic signals. C. Public Transparency – The rate structure shall be simple, defensible, and clearly communicated to residents and businesses. D. Reserve Management – The City shall maintain adequate reserves to support long-term asset management and financial stability. The Chief Financial Officer and Budget Manager will conduct an annual analysis of reserve balances, with adjustments directed by the City Council as necessary. STREET LIGHTING RATE STRUCTURE Since street lighting benefits all properties indirectly by improving safety and accessibility throughout the community, the rate structure will provide the foundation upon the determination of what properties benefit and to what degree. The following framework shall be utilized for allocating street lighting rates: CD-FIN-X.XX Street Lighting Utility Capital Asset Funding and Reserve Policy Council Directive CD-FIN-X.XX Street Lighting Utility Capital Asset Funding and Reserve Policy Page 2 of 4 Category Definition (as per the City’s Comprehensive Plan) % of ERUs 1 Single-family homes, multi-family residential, mixed Residential 2 100% residential, and medium/high-density housing. Rural Estate, Urban Low-density and larger lot residential areas outside Reserve, and Non- urban and suburban cores and residential 33% lighted Residential neighborhoods without neighborhood lighting. Neighborhoods 2 Commercial: Includes commercial, 3M Site, Industrial, Mining, Places to Work, Places to Shop, City Center, and Mixed Use. Commercial, Public / Semi-Public: Defined in the City’s 33% Public/Semi-Public 3 Comprehensive Plan. (e.g. City buildings, churches, schools, Central Park, Washington County Service Center, etc.) Agricultural Land exclusively used for agricultural purposes. N/A Notes: 1. An Equivalent Residential Unit (ERU) is a standardized measure representing the typical benefit a single-family residential property receives from intersection lighting. This unit serves as the baseline for determining rates across all property types. 2. Residential Properties: One Equivalent Residential Unit (ERU) is defined as a single-family residential lot or the number of dwelling units per property. This section includes all Residential, Rural Estate, and Urban Reserve properties. 3. Commercial & Public/Semi-Public Properties: ERUs are assigned based on developable acreage, calculated as 1 ERU per 0.25 acres. ASSET MANAGEMENT & RENEWAL POLICY Streetlights are a physical asset that represents a long-term investment and service commitment to ensure that intersections are lit to provide safe travel to and from neighborhoods, business, and destinations outside the community. The City’s street lighting system and energy for signals are provided by Xcel Energy and regulated through the Public Utilities Commission. The City funds intersection lighting through two mechanisms: 1. Standard Rate: Covers both energy costs and capital replacement, ensuring continuous system renewal. Available Xcel Energy outdoor lighting options under this rate plan are LED luminaire Traditional and Cobra styles and Style A poles at the time of enactment of this Council Directive. CD-FIN-X.XX Street Lighting Utility Capital Asset Funding and Reserve Policy Council Directive CD-FIN-X.XX Street Lighting Utility Capital Asset Funding and Reserve Policy Page 3 of 4 2. Pre-Pay Rate: Requires upfront capital funding (often via the development process), resulting in lower ongoing rates until the 25-year maintenance agreement expires, after which the City assumes financial responsibility. Available Xcel Energy outdoor lighting options under this rate plan are LED luminaire Traditional, Acorn, Lantern, Cobra, Contemporary, Modern, and Evans styles and Style A, B, C, and D poles at the time of enactment of this Council Directive. For both payment structures, Xcel Energy maintains and operates the street lighting system. 1. Xcel Energy Rate Structure: The City does not have the staffing capacity to establish a street lighting maintenance division that operates and maintains a city-wide streetlight system. Therefore, the City intends to continue to utilize the standard and pre-pay rate system established by the Public Utilities Commission and their agreements with Xcel Energy. With new development, LED luminaire and pole styles shall generally be consistent with neighboring developments. Upon expiration of pre-pay agreements and streetlight systems require replacement, the City will transition affected streetlights to the standard rate structure (with available led luminaire and pole styles consistent with adjacent properties), with Xcel Energy handling ongoing renewal and maintenance thereafter. 2. Capital Replacement Life-cycle: The prediction of life cycles for street lighting varies from 25 – 35 years, depending on materials, exposure to elements, and other environmental factors. The recommended replacement renewal cycle shall be planned for 26 – 30 years for capital planning purposes. Xcel Energy will determine when an individual streetlight or grouping of streetlights require a “new” maintenance agreement following the 25-year initial maintenance period. RESERVE BALANCE POLICY The Streetlight Utility Fund target reserve levels are listed below: 1. Operating Reserve: This reserve provides working capital for the estimated cost of energy, day-to-day operations, and necessary minor capital asset replacements based on the anticipated life-cycle described herein. The operating reserve will be funded at a target level equal to 90 days of operating expenses from the following year’s adopted budget for the Street Lighting Utility Fund. 2. Renewal and Replacement (Capital Asset) Reserve: All the pre-pay street lighting system assets represent a liability as they will eventually need to be replaced following the 25-year maintenance agreement with Xcel Energy. This liability grows continuously as construction costs increase over time and the system expands as the City grows. CD-FIN-X.XX Street Lighting Utility Capital Asset Funding and Reserve Policy Council Directive CD-FIN-X.XX Street Lighting Utility Capital Asset Funding and Reserve Policy Page 4 of 4 The purpose of this policy is to establish a reinvestment approach that provides a predictable and stable source of funding for renewal and replacement of capital assets. This approach sets aside cash in the amount equal to the City’s annual depreciation for the pre-pay street lighting system and the annual cost of energy to streetlights and signals. This approach uses the pay-as-you go strategy for system renewal and replacement needs. Each budget year, a specific dollar amount will be budgeted for one year’s worth of depreciation and funded through the utility’s rate structure. The goal is that the utility will generate enough surplus cash to fully fund the utility’s long-term system and capital replacement needs. 3. Debt Service Reserve: This reserve provides a means of protecting against the risk of nonpayment of debt. The City will maintain this reserve to be in compliance with the existing bond covenants at the time the annual budget and rate setting process begins. The debt service reserve will be funded at a target level equal to the following years principal and interest amount. The reserve calculation will include debt supported by the Street Lighting Utility Fund and accounted for through transfers to other funds. Debt Utilization and Considerations - Debt may be used to fund large capital expenditures or a portfolio of projects that have a life greater than 15 years and a minimum cost greater than two million dollars. RESERVE REPLENISHMENT Reserve levels will be reviewed and adjusted annually as part of the budget and rate-setting process. Since expenses increase over time, rates may include incremental adjustments to maintain adequate reserve funding. Adopted by the Woodbury City Council on: December XX, 2025 – Resolution No. 25-XX CD-FIN-X.XX Street Lighting Utility Capital Asset Funding and Reserve Policy Street Lighting and Stormwater Enterprise Fund Rate Study Updates Meeting No. 2 April 16, 2025 Today’s Agenda • Key Questions and Decisions • Background • Street Lighting Utility Fund • Recommend rate structure • Review draft policy • Storm Water Utility Fund • Information only • Next steps Key Questions and Decisions • Select a Street Light Utility Rate methodology • Review and comment on draft Council Directive for Street Lighting Utility Capital Asset Funding and Reserve Policy Rate structure and proportionality Renewal policy Reserve balance • Provide Storm Sewer rate questions for next meeting  Background Street Light Rate Study Overview & Goals • Council directed review of under funded liabilities • Street Lighting and Storm Water utilities identified for deep review • AE2S/Nexus in retained in 2024 • Evaluation Goals: − financial sufficiency and rate structure − application to property types − create policy document to document decisions Street Lighting Analysis  Background Street Light Rates Street Light Rates • No significant Flat Rate Increases increase for the last 20+ years • Increases in 2023/2024 to match energy rate increases  Background Issues to Resolve • Pre-pay near end of life • No asset management strategy or evaluation for over a decade • Existing rates will not support replacement of pre-pay lights • Complex and inequitable rate structure  Background – Follow-up Intersection, County, Neighborhood • Signal lighting - $4,000 /month • Parks - $800 per month • County/City Intersections • Only at intersections • County - install • City - electricity and ongoing maintenance • Renewal per County cost-sharing • Pedestrian scale lighting on Gold Line  Background – Follow-up Intersection, County, Neighborhood • Non-lighted Residential • Royal Oaks, Park Hills, Woodbury Heights Neighborhoods, Etc. • Legal Interpretation • LED Switch Out • Traditional • Cobra • > 5 years pre-pay Background Intersection, County, Neighborhood  Review – Rate Structure Category Option No. 1 Option No. 2 Option No. 3 New New New Residential Uniform Rate Uniform Rate Uniform Rate Rural Estate and New % of ERU N/A Urban Reserve Uniform Rate based Rate Commercial, % of ERU N/A ERU based Rate Public/Semi-Public based Rate Agricultural N/A N/A N/A  Review – Rate Structure Category Option No. 1 Option No. 2 Option No. 3 New New New Residential Uniform Rate Uniform Rate Uniform Rate Rural Estate and N/A Staff New % of ERU Urban Reserve Uniform Rate based Rate Recommended Commercial, % of ERU N/A ERU based Rate Public/Semi-Public based Rate Agricultural N/A N/A N/A Key Question and Decision Rate Structure Question No. 1 • Which of the three rate options, plus the current structure does the Council prefer? (Option No. 3 is recommended) Review – Council Directive Policy Street Lighting Utility Capital Asset Funding and Reserve Focus Items • Memorializes methodology • Equitable, sustainable, and transparent? • % of ERUs for Rural Estate, Urban Reserve, Commercial, Public/Semi-Public • Asset management & renewal • Reserve balance Review – Council Directive Policy Street Lighting Utility Capital Asset Funding and Reserve Methodology • % of ERUs is similar and in line with the City’s assessment policy for shared burdened costs • Pre-pay to Standard Rate transition • Aggressive renewal cycle • Reserve balance – set to pay operating and assumed renewal requirements Key Questions and Decisions Council Directive Question No. 2 • Does the Council Directive properly memorialize the proposed methodology? Question No. 3 • Does the % of ERUs, asset management, renewal, and reserve balance reflect the values of equity, sustainability, and transparency?  Steps Completed Street Lighting Utility Fund 1. Clean slate 2. Determine long-term recapitalization strategy 3. Simplify rate structure 4. Decide what properties are included in the rates 5. Determine revenue and rate increases – Council Storm Water Utility rate analysis Storm Water Utility Fund Planned Debt Issuance Storm Water Utility Fund Fund Recovery 2032 and Beyond We are here  Stormwater Utility Fund Staff Recommendations to Council • Continue 6% rate increases 2026 • Issue project debt in 2027 $27.10 • Interfund loan $21.70 transfers from trunk funds $9.10 only if needed through 2032  Street Lighting Next Steps • April 16, 2025 – Council Workshop No. 2 • “Why & How” • May 28, 2025 – Council Workshop No. 3 - Final • Recommend a 2026 rate structure • Set preliminary street lighting and storm sewer rates • Discuss outlay for the next few years Discussion and Questions