2017-10-17 CC Agenda PacketPLEASE TURN OFF CELL PHONES & PAGERS IN COUNCIL CHAMBERS.
CITY OF MOUND MISSION STATEMENT: The City of Mound, through teamwork and cooperation, provides at a reasonable cost,
quality services that respond to the needs of all citizens, fostering a safe, attractive and flourishing community.
AGENDA
MOUND CITY COUNCIL TUESDAY, OCT 17, 2017 - 6:30 PM
SPECIAL MEETING WORKSHOP MOUND CITY COUNCIL CHAMBERS
1. Open Meeting
2. Approve agenda, with any amendments.
Brian Simmons, Bolton & Menk, with an overview of Mound's infrastructure
and capital improvement needs
4. Catherine Pausche, Director of Finance and Administration, discussing
past and future funding of infrastructure improvement projects
5. Catherine Pausche, Director of Finance and Administration, discussing
options and considerations for the structure of utility billing rates
6. Public comment period
Council direction to Staff on how to proceed with preparing the final
budget, including the levy and utility rates, for consideration
at the December 12th final meeting of the year.
8. Adjourn
Page
Presentation will be
posted on website by
Saturday at noon
1-10
11 - 19
20
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October 12, 2017
Mayor Wegscheid
Council Members
City of Mound
2415 Wilshire Boulevard
Mound, MN 55364
Dear Mayor and Council Members,
The format of the typical fall budget workshop is being altered to focus on the Capital
Improvement Program (CIP) and corresponding impact on the levy and utility rates. Staff
continues to work on creating a comprehensive 10 -year long term financial plan, complete with
building, equipment and infrastructure inventories that will incorporate units of measure,
estimated useful life, and estimated replacement cost and timing. The ultimate goal will be to
create a financing plan that will reduce reliance on debt to fund infrastructure improvements in
the next generation of streets. The comprehensive nature of this analysis will require more time
than initially anticipated, and Staff plans to bring forward a draft in first quarter of 2018.
While the detailed inventories are still being compiled, the basic principles of the financial plan
are known:
1) General Obligation (G.O.) bonds for the street improvements were for 15 years and will start
to mature faster than the 20 year utility revenue bonds. G.O. debt service will peak in 2018
assuming no other bonds are issued. Similarly, debt service on the utility revenue bonds will
peak in 2019 and 2020 if no other bonds are issued.
2) Our City Tax Rate peaked in 2014 at 57%. The City Tax Rate = Total Levy / Taxable
Market Value (TMV). This peak was primarily a result of the tax base shrinking 40% due to
the housing crisis/recession. The City's total levy increased an average of 1.5% since 2009.
The market has started to recover, bringing the tax rate down. While the City has never
managed to tax rate, it can serve as a barometer of the relative value of services provided.
For instance, if we set a goal to keep the tax rate at or below 45%, what resources can be
generated to fund improvements internally, particularly as the debt matures?
3) Create an option to make interfund loans from "capital reserve funds" to finance the
remaining utility improvements with repayment delayed until after 2028. Then repayment
will begin as the next generation of street improvements (mill & overlay) will be needed.
This will provide for lower/smoother rate increases and will hopefully avoid having to use
-1-
Page 2
the special assessment process for the next generation of street improvements.
Building on this approach, the following tables have been provided for discussion.
Table 1. General Fund and Special Levy Projections, demonstrates the amount of reserves
that could be generated if the levy is maintained and the debt service begins to diminish. We
currently have special levies to support the TIF districts 1-2 (Mound Marketplace) and 1-3
(Mound Harbor District). Staff is proposing to temporarily postpone these levies for 5 years to
free up capital reserves. The TIF generated and any corresponding deficiencies will be
addressed at that time.
Table 2. Enterprise Funds - Revenue, Net Income(Loss) and Bond Balance since 2000,
shows that as investments in utility infrastructure increased, the debt and deficits started to rise,
which drove rate increases. Overall, the funds have been stabilized, but additional investment is
still needed. Funding these improvements with interfund loans with low interest rates and
deferred payments will allow the projects to be completed, while minimizing additional increases
to the utility rates in the short term.
Table 3. Scenario 1. Expedited Sewer and Storm Improvements, shows that an 10%
increase per year would be needed for Sewer, in addition to $5M in interfund loans.
Table 4. Scenario 2. Spread/Prolong Sewer and Storm Improvements, shows that by
delaying the pace of remaining improvements after the final street project, sewer revenues would
need to increase 3% with an estimated $5M in interfund loans through 2022.
Staff recognizes residents are concerned about the higher than average utility bills. A portion of
the workshop will be devoted to explaining why the investments were necessary and what were
the driving factors that compelled them (watermain breaks, need to increase volume, capacity
and quality, inflow & infiltration, sewer back-ups, etc.). In addition, the evolution of Mound's
infrastructure will be discussed, including the impact of combining three unplanned
communities, the topography and lake concerns and the benefits of transferring the wastewater
treatment facility to the Met Council and being part of the larger sewer treatment system.
Public comments will be heard at the workshop. Staff is looking for input and direction on the
financial plan as we prepare to finalize the 2018 budget, levy and utility rates. If you have
questions, please feel free to call or email us in advance.
Respectfully,
Eric Hoversten
City Manager/Public Works Director
Catherine Pausche
Director of Finance & Administrative Services
-2-
TABLE 1
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TABLE 2
TOTAL ENTERPRISE FUNDS - WATER SEWER STORM
Year
Revenue
Net Income(Loss)
Bond Balance 1
2000
1,466,550
3119,506
01
2001
1,663,105
249,975
2,185,0001
2002
1,769,274
1166,304
2,095,000;
2003
1,885,740
49,324
2,505,2861
2004
2,015,234
251,460
3,939,135;
2005
2,093,564
290,969
7,050,286;
2006
2,205,614
53,034
71955,2851
2007
2,402,242
(173,118)
9,920,2851
2008
2,454,429
(331,051)
11,325,287;
2009
2,628,541
(966,371)
15,900,287;
2010
2,880,729
(615,394)
15,205,288;
2011
3,303,404
(409,190)
17,306,2871
2012
3,478,433
(480,357)
19,047,571;
2013
3,812,799
(66,683)
22,521,175;
2014
3,870,751
(177,119)
25,467,556;
2015
4,196,173
(61,271)
28,882,5971
2016
4,579,195
365,743
30,157,638;
----
1
- 4 -
SCENARIO (Expedited Sewer/Storm) Table 3
Total Water Sewer Storm
Incr(Decr) Net Position - 2018 -3,868 63,342 -173,110 105,900
Total Exp Less Depr & Debt Svc
2,171,568
655,658
1,455,110
60,800
Add Debt Service Per Schedules
2,690,313
1,530,172
745,471
414,670
Add additional MCES
0
0
0
0
Adjusted Total Expenditures
4,861,881
2,185,830
2,200,581
475,470
Incr(Decr) Net Position - 2018
(96,881)
(155,830)
(581)
59,530
Change in Debt Service Per Year from 2018
1,410,750
275,000
925,750
210,000
2019
39,164
23,183
7,316
8,665
2020
(33,552)
(24,385)
820
(9,987)
2021
(78,862)
(52,909)
(4,129)
(21,824)
2022
(87,017)
(57,234)
(3,544)
(26,239)
Total Change in Debt Svc 2018-2022
(160,267)
(111,345)
463
(49,385)
CIP 2017 - 2022
2018
2,184,675
849,773
1,025,188
309,714
2019
1,813,553
445,553
1,158,000
210,000
2020
1,608,439
528,439
870,000
210,000
2021
1,690,783
635,783
845,000
210,000
2022
1,410,750
275,000
925,750
210,000
Total CIP 2018 - 2022
8,708,200
2,734,548
4,823,938
1,149,714
Incremental Revenue
2018 0%/10%/0%
220,000
0
220,000
0
2019 0%/105//0%
462,000
0
462,000
0
2020 0%/10%/0%
728,200
0
728,200
0
2021 0%/10°%/0°%
1,021,020
0
1,021,020
0
2022 0%/10%/0%
1,343,122
0
1,343,122
0
Total Incremental Rev 2018 - 2022
3,774,342
0
3,774,342
0
Incr(Decr) Net Position ==> this is what interfund loans would need to finance
2018
(2,100,720)
(1,028,786)
(813,085)
(258,849)
2019
(1,318,001)
(421,168)
(696,820)
(200,013)
2020
(801,377)
(475,530)
(137,671)
(188,176)
2021
(543,582)
(555,366)
186,880
(175,096)
2022
(101,180)
(299,385)
418,192
(219,987)
Total Incr(Decr) Net Position
(4,864,860)
(2,780,235)
(1,042,504)
(1,042,121)
Note: Excludes inflation/changes to capital expenditures/MCES
Debt Service Savings 2023 - 2028
(2,250,643)
(1,277,529)
(533,247)
(439,867)
Debt Service Savings 2029 - 2033
(6,568,152)
(3,841,087)
(1,639,814)
(1,087,251)
Debt Service Savings 2034 - 2037
(8,447,757)
(4,720,724)
(2,324,492)
(1,402,541)
Total Savings from base 2018 (14 YRS) (17,266,552) (9,839,340) (4,497,553) (2,929,659)
- 5 -
SCENARIO 2(Spread/Prolong
Sewer Storm) Table 4
Utility Funds - 2018 Budget
Change in Debt Service Per Year from 2018
2019
Total
Water
Sewer
Storm
Incr(Decr) Net Position - 2018
-3,868
63,342
-173,110
105,900
Total Exp Less Depr & Debt Svc
2,171,568
655,658
1,455,110
60,800
Add Debt Service Per Schedules
2,690,313
1,530,172
745,471
414,670
Add additional MCES
0
0
0
0
Adjusted Total Expenditures
4,861,881
2,185,830
2,200,581
475,470
Incr(Decr) Net Position - 2018
(96,881)
(155,830)
(581)
59,530
Change in Debt Service Per Year from 2018
2019
39,164
23,183
7,316
8,665
2020
(33,552)
(24,385)
820
(9,987)
2021
(78,862)
(52,909)
(4,129)
(21,824)
2022
(87,017)
(57,234)
(3,544)
(26,239)
Total Change in Debt Svc 2018 - 2022
(160,267)
(111,345)
463
(49,385)
CIP 2017 - 2022
66,000
0
66,000
0
2018
1,984,675
849,773
875,188
259,714
2019
1,258,053
445,553
762,500
50,000
2020
1,218,939
528,439
640,500
50,000
2021
1,291,533
635,783
605,750
50,000
2022
815,000
275,000
490,000
50,000
Total CIP 2018 - 2022
6,568,200
2,734,548
3,373,938
459,714
Incremental Revenue
2018 0%/3%/0%
66,000
0
66,000
0
2019 0%/3%/0%
133,980
0
133,980
0
2020 0%/3%/0%
203,999
0
203,999
0
2021 0%/3%/0%
276,119
0
276,119
0
2022 0%/3%/0%
350,403
0
350,403
0
Total Incremental Rev 2018 - 2022
1,030,502
0
1,030,502
0
Incr(Decr) Net Position ==> this is what interfund loans would
need to finance
2018
(2,054,720)
(1,028,786)
(817,085)
(208,849)
2019
(1,090,521)
(421,168)
(629,340)
(40,013)
2020
(936,078)
(475,530)
(432,372)
(28,176)
2021
(889,233)
(555,366)
(318,771)
(15,096)
2022
(498,149)
(299,385)
(138,777)
(59,987)
Total Incr(Decr) Net Position
(5,468,700)
(2,780,235)
(2,336,344)
(352,121)
Note: Excludes inflation/changes to capital expenditures/MCES
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Rate Structure and Financial Hardship Relief
1. Quarterly vs. Monthly Billing
Many cities choose to bill quarterly out of economic necessity, Mound being one
of them. Every month, 1/3 of our residential accounts and all of our commercial
accounts are sent a utility bill, for a total of about 1500 bills a month. If we were
to bill residential monthly, not only would our third party utility billing contract
costs almost triple (currently about $50K per year), the amount of work orders and
administrative oversight would increase dramatically, compromising the other
work performed by the public works and finance staff.
As a compromise, Staff has evaluated ways to provide relief to residents that may
have otherwise benefited from monthly billing from a budget planning perspective
as well as ways to reduce the risk involved in reading the meter less often. Those
ideas are described below.
2. Late Fees
We currently charge 10% of the current balance if the bill is not paid by the 15th of
the following month. This rate was established well before the year 2000, when
the average bill was much lower than today. Since our minimum bill is $208.02,
the minimum late fee would be $20.80. A summary of 2016 billing follows:
Utility Billing Revenue $ 5,055,925.08
Balances that were assessed late fees: 1,237,277.90
Percentage of total billed: 24%
Initial assessment roll balance: 478,560.19
Amount ultimately certified to 2017 taxes: 291,934.43
Percentage of total billed: 6%
Since the majority of balances initially charged a late fee are paid by November
15th (deadline to avoid assessment to taxes), Staff proposes not to assess the late
fee until the next billing cycle, which will give residents the entire quarter to pay
prior to being assessed a late fee, vs. less than a month.
This change will reduce the penalty revenue, with the most significant impact
being on water and sewer funds. Suggestions on how to make up some of this loss
in revenue are described in Item 4 below.
-11-
3. Not to Exceed for Extraordinary Events
In 2016, less than 3% of residential bills used more than 25K gallons in a single
quarter. Excessive usage is typically caused by a malfunctioning water softener,
leaky toilet or faucet, any of which can go easily undetected. The City monitors
high reads and will "tag" the property suggesting the owner call to arrange an
inspection. In the event a monthly meter read would have detected the issue
sooner, Staff is proposing to create a not to exceed, or maximum amount, for
residential quarterly utility bills to give residents time to address the issue causing
high usage.
In 2016, 54 bills (0.33%) were for 51 - 200+ thousands of gallons, which means
the customer paid over $715 (for 51K) for a single quarterly bill. Itis ultimately
the responsibility of the property owner to address the underlying issue on a timely
basis, so Staff recommends limiting the not to exceed to one time per account for
non -irrigation water use and would suggest making the limit 50K gallons for
residential accounts only (not commercial, condominiums, apartments, etc).
4. Variable Rates
Approximately 50% of water revenue comes from the base fees, 50% from the
tiered usage rates, whereas approximately 80% of sewer comes from base fees and
20% from the variable rate. The Council can decide to increase the base rates at a
different pace than the increase to the tiers/variable rates charged, and/or change
the tier amounts.
The attached tables show the current rates and options to achieve the 10%
(Scenario 1) or 3% (Scenario 2) increase in sewer as well as offset the reductions
in late fee penalty revenue.
5. Other Charges
Staff suggests that the Council consider credits for accounts that sign up for e -bills
(statement emailed vs. U.S. mail) and ACH auto pay, as these features greatly
increase our efficiency and reduce our expenses related to the utility billing
process. Staff suggests a $1 credit per quarter for signing up for e -bill, and a $2
credit per quarter for ACH auto -pay, which combined is offset by an $0.80
reduction in processing, postage and bank fees. It should be noted ACH auto -pay
is where the City debits the checking or savings account and is not on-line bill pay
where the resident initiates the transaction.
An opportunity for public input will be given at the workshop, after which Staff requests
direction on how to proceed with preparation of the final 2018 budget, levy and utility
rates for consideration at the December 12 final meeting of the year.
-12-
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From: Matthew Ren owmal
Sent: Thursday, September 28, 2017 5:17 PM
To: Mark Wegscheid
Subject: Water Bill Concern from a Renter
Mayor Wegscheid,
My name is Matthew Renz and my wife and I have been renting a house at 5967 Hillcrest Road in Mound for a
little over a year. While we've enjoyed living here we are continually frustrated by the cost of our water bill
which is many times higher than any other place we've ever lived (Eden Prairie, Minneapolis, St. Paul, Duluth,
Austin, TX, Fargo, ND). Had I known our typical water bill for a 2 person household would be roughly $275
quarterly, we never would have chosen to live here as it places a financial burden on us - as I'm sure it does
others as well.
I know other residents of the community have brought up questions and concerns and I appreciate the
information that has been provided so far. I've gathered from reading council meeting notes and watching the
recordings that Mound has a unique topography and an infrastructure that needs repair and improvement to
prevent future issues. As it was mentioned, Mound is 95% residential so residents will need to bear this cost as
there are no businesses or industry that can help share the responsibility. I can appreciate the need to pay for
an investment like this, but I don't see how it is fair to collect that money through a flat -rate water utility bill
"Base Charge".
The collection of funds for an investment such as water and sewage system improvements would be better
suited for property taxes. I understand that an increase in property taxes would probably result in increased
rents, but many renters qualify for a Property Tax Refund from the State of Minnesota. This is based on
income, dependents and how much property tax they paid through their rent on their residence. I don't
believe this has ever been considered or discussed in the past when the decision was made to charge for this
through the water bill.
By collecting money for water and sewer through a utility bill, the city is preventing an increase in property
taxes and keeping the highest value homeowners and landlords from paying more. It is also putting renters at
a disadvantage because we're paying for long term improvements in the city that everyone uses via a utility
bill charge that is extraordinarily high and we don't get any tax benefit.
Please take these thoughts into consideration as you and council meet to discuss utility rates in October.
Sincerely,
Matthew Renz
5967 Hillcrest Road
Mound, MN 55364
-20-