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HomeMy WebLinkAboutMinutes i� ��tJV� �ri°t � y � ............................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... ���� �ri e ar�d PC�� t MINUTES COTTAGE GROVE CITY COUNCIL December 6, 2017 COUNCIL CHAMBER 12800 RAVINE PARKWAY SOUTH REGULAR MEETING - 7:00 P.M. 1. CALL TO ORDER The City Council of the City of Cottage Grove, Washington County, Minnesota, held a regular meeting on December 6, 2017, at Cottage Grove City Hall, 12800 Ravine Parkway. Mayor Bailey called the meeting to order at 7:00 p.m. 2. PLEDGE OF ALLEGIANCE The audience, staff, Mayor, and City Council Members recited the Pledge of Allegiance. 3. ROLL CALL The following were present: Mayor Myron Bailey, Council Member Steve Dennis, Council Member Wayne Johnson, Council Member La Rae Mills, and Council Member Dave Thiede. Also present were: Charlene Stevens, City Administrator; Korine Land, City Attorney- LeVander, Gillen & Miller, PA; Les Burshten, Public Works Director; Christine Costello, Director of Economic Development; Zac Dockter, Parks and Recreation Director; Joe Fischbach/HR Manager/City Clerk; Jennifer Levitt, Community Development Director/City Engineer; Rick Redenius, Fire Chief; Robin Roland, Finance Director; Pete Koerner, Police Captain; AI Beasley, District Fire Chief; Molly Pietruszewski, Recreation Supervisor; Harry Taylor, Public Works Supervisor; Cathy Mohr, Assistant Finance Director; Gary Orloff, Streets Foreman. 4. OPEN FORUM Mayor Bailey opened the open forum and asked if anyone in the audience wished to address the Council on any item that was not on the agenda. As no one wished to address the Council, Mayor Bailey closed the open forum. 5. ADOPTION OF AGENDA CITY OF COTTAGE GROVE • 12800 Ravine Parkway • Cottage Grove, Minnesota 55016 www.cottage-grove.org • 651-458-2800 • Fax 651-458-2897 • Equal Opportunity Employer City Council Meeting Minutes December 6, 2017 Page 2 Motion by Council Member Thiede to adopt the agenda; second by Council Member Dennis. Motion carried: 5-0. 6. PRESENTATIONS A. 8th Annual Winter Lights and Decoration Contest Staff Recommendation:Award winners of the 8th Annual Winter Lights and Decoration Contest. Molly Pietruszewski of the Parks & Recreation Department stated Mayor Bailey, Council Member Dennis, Jean Brown, from the Bulletin newspaper, and her went out to judge the holiday lights; there were 19 nominations. Photos of the houses will be in the Bulletin and also on the City's Facebook page. It took them about two hours to view all of the houses. There were two houses chosen this year: 7862 Immanuel Avenue South, winners Jim Wirkus and Bill Davison. The second house was 6220 Hearthstone Avenue South, winner was Wade Parrot. The winners were given a planter as a prize and congratulated by the Council Members. B. Certificate of Appreciation to Bolton and Menk, Inc. for Woodridge Park Inclusive Playground Donation Staff Recommendation: Present Certificate of Appreciation to Bolton and Menk, Inc. for their considerate donation of$39,630 in engineering and design services towards the Woodridge Park Inclusive Playground. Mayor Bailey stated that Bolton and Menk was one of the first contributors and also one of the last to donate to the Inclusive Playground's success; their engineering firm worked with staff, designers, and builders from concept to construction. He presented a Certificate of Appreciation to them for their donation of services totaling $39,630. Mayor Bailey and the Council Members thanked Bolton and Menk for their considerable donation. C. Park Grove Library Redevelopment Staff Recommendation: Joe Welter, Building Services Project Manager for Washington County, will provide a brief presentation on the redevelopment of the Park Grove Library. Mr. Welter will review why there is a need for redevelopment of the library, the process Washington County will use to guide the redevelopment to ensure that a new library reflects the values of the community, provide a general timeline of the process, and a listing of the various entities involved in the redevelopment process. Mayor Bailey introduced Joe Welter, Washington County Building Services Project Manager, to give an update on the redevelopment or possible rebuilding of the Park Grove Library. Project Manager Welter thanked Commissioner Karla Bigham for her work to have this project included in the 2019 bond package; he stated she's been very engaged in this project from the onset. Margaret Behr, a librarian and acting manager City Council Meeting Minutes December 6, 2017 Page 3 of the Park Grove Library, was also present. He stated both Christine Costello and Jennifer Levitt have been involved with this project. The Park Grove Library is one of the most used libraries in Washington County. The current building is 33 years old, and many of the major building systems are at or nearing the end of their useful life expectancy. The current building does not allow the ability to provide expected levels of services, including community meeting spaces and flexible space for innovative programs, now and in the future. Libraries have seen an expanded need for public access to computers and wireless Internet. HGA Architects has been chosen for this project. Project Manager Welter stated they hope to have the design completed somewhere in the summer of 2019, with construction wrapping up in the fall of 2020. He stated the community would be invited to several meetings, including social media and in-person contacts, to provide feedback during each phase to help formulate the final design of the library. Mayor Bailey thanked Project Manager Welter for providing the information. D. 2017 APWA-MN Project of the Year Award for our Interim Water Treatment Facilities Project City Engineer Jennifer Levitt stated the City was honored by the American Public Works Association of Minnesota for our interim water treatment facilities project being named the project of the year. Nominations come in from across the state, and they felt Cottage Grove's project was unique; they recognized the efforts put forth by our team. We were recognized at the APWA's fall conference. There was an innovative construction technique, as the City was the general contractor working in the state of emergency; they were impressed with the communication plan and partnerships within the community to solve the challenges. They knew we had unusual circumstances and conditions, and the City rose to the challenge to make that happen; specifically, completing a project in eight weeks that would typically take more than a year to design. They saw a significant benefit to the industry with our treatment plants and how could that further research for PFC treatments. Engineer Levitt recognized our engineering consultant, Stantec, who did a fabulous job in helping us through the design, implementation, and construction management. There were a number of contractors who worked extensive hours to help deliver our project and lift the watering ban. Letters will be provided to those contractors for additional recognition and appreciation for their service to Cottage Grove and our residents. She felt the Cottage Grove team rose to the challenge and solved the problem and met our community's needs. Mayor Bailey complimented the staff for their efforts during the difficult situation this summer and congratulated them. 7. CONSENT AGENDA A. Approve the November 1, 2017 City Council Special Meeting Minutes. B. Approve the November 1, 2017 City Council Regular Meeting Minutes. C. Approve the November 15, 2017 City Council Regular Meeting Minutes. City Council Meeting Minutes December 6, 2017 Page 4 D. Receive and place on file the approved minutes for the Arts Commission meeting on October 3, 2017. E. Accept and place on file the minutes of the October 23, 2017 Planning Commission meeting. F. Authorize service agreement with St. Croix Recreation to construct a playground at Old Cottage Grove Park for the amount of$40,559. G. Appoint Wayne Butt to fill the vacated position on the Economic Development Authority to a term ending on December 6, 2023. H. Approve the issuance of rental licenses to the properties in the attached table. I. Adopt Resolution 2017-158 certifying delinquent utility bills to 2018 Property Taxes. J. Approve the final payment for the Cayden Glen Final Streets Project to McNamara Contracting in the amount of$174,167, and accept the project. K. Adopt Resolution 2017-157 approving the feasibility report and authorizing the preparation of plans & specifications for the Summers Landing 2nd Addition Street & Utility Improvements. L. Accept the quotes for the Central Fire Station Furniture, Fixtures, and Equipment Package in the total amount of$135,658.54; Furniture Package: Henricksen, $119,184.41; Signage Package: Inpro, $3,574.13; Window Treatments Package: Offsource, $12,900.00. M. Adopt Resolution 2017-154 deferring two special assessments from the 2017 Pavement Management project for qualifying property owners. N. Pass Ordinance 988, which amends City Code Title 7, Chapter 4, relating to plantings and landscaping on boulevards. O. 1) Authorize the Parks and Recreation Department to enter into a Lease Agreement with the St. Paul Park-Newport Lions Club to conduct lawful gambling activity at River Oaks Golf Course. 2) Adopt Resolution 2017- 159 approving the St. Paul Park-Newport Lions Club Premises Permit Application to conduct lawful gambling activity at River Oaks Golf Course. P. Authorize renewal of the liquor licenses for 2018 to Apple Minnesota, LLC/DBA Applebee's Neighborhood Grill & Bar; Carbone's Pizza of Cottage Grove, Inc./DBA Carbone's Pizza of Cottage Grove; and Cottage Grove Economic Development Authority/DBA River Oaks Golf Course. Q. Adopt the 2018 Legislative Agenda. R. Accept the quarterly update on the Strategic Plan. Mayor Bailey wished to pull Item G and Council Member Dennis wished to pull Item N for further comment and/or discussion. Mayor Bailey stated he, Christine Costello, and Council Member Dennis performed interviews for a position on the Economic Development Authority; of the two candidates interviewed, they chose Wayne Butt, the owner of Furber Farms in old Cottage Grove. He's been very active in the community. They recommend the Council approve his appointment to the Cottage Grove Economic Development Authority tonight. City Council Meeting Minutes December 6, 2017 Page 5 Council Member Dennis stated he became involved in the Boulevard Tree Ordinance Amendment project and worked with several department directors. In the past, residents have cut down community-owned boulevard trees. The previous policy did not address any consequences for those actions. Director pockter and he surveyed multiple municipalities to learn what ordinances they had; we then added our language, thoughts, and fines relative to Cottage Grove. There are over 25,000 trees in the City's asset database, which are worth millions of dollars. They're planted in parks and along trails and areas that line our streets; they're all designated as easements under City control. He reviewed the benefits of the trees, including increasing property values and improvement of business viability and economic growth. This Ordinance Amendment is really about education and promoting the goodness and value of the trees; it's not designed as a punitive measure. If people aren't aware who owns a tree on their property, they should contact the City to learn who owns it and what, if anything, can be done to it. These assets belong to everyone. Council Member Thiede stated there are probably a lot of people who don't even know they have a boulevard tree, as he did not know himself that he had one until he became a Council Member. He stated he didn't specifically see anything in the Ordinance Amendment that said the City would have to notify the homeowner of anything the City was going to do to the tree(s). He felt perhaps something should be posted on the City website regarding who to contact if there are questions. He felt a little bit of work needed to be done on the Ordinance Amendment before it's passed. Council Member Johnson stated it's never safe to assume what people do or do not know, especially regarding their home and/or property. He didn't feel there's enough education for new homeowners in Cottage Grove; he didn't want them to experience a fine from the City for something they were unaware of. He felt there needed to be more public education on this item; most people think the boulevard belongs to them as they mow it, shovel it, etc. until they run into a situation where they learn differently. There's nothing in the Ordinance Amendment ensuring education of property/homeowners. Council Member Johnson felt the Ordinance Amendment was too punitive for people who make a mistake; he stated he couldn't support it right now. Mayor Bailey asked staff when a new homeowner comes into town if there was anything given to them regarding notifications regarding City Ordinances. Administrator Charlene Stevens stated there isn't typically any kind of a welcome letter that outlines homeowner responsibilities; it would be more incumbent upon the property owner to contact the City with their questions, which they encourage. Mayor Bailey asked if there was anything on the City website for anyone new to Cottage Grove; Administrator Stevens stated there is something on there, but it doesn't include information on boulevard trees. She stated they could certainly add that, as they're in the process of making updates and changes to the website. Mayor Bailey stated that ignorance is not bliss and people need to have some responsibility to check on things. Mayor Bailey City Council Meeting Minutes December 6, 2017 Page 6 stated because he was hearing concerns, he felt they could pull this item off for a separate vote. Motion by Council Member to approve the agenda, except Item N, second by Council Member Dennis. Motion carried: 5-0. Motion by Council Member Mills to approve Boulevard Tree Ordinance 988 Amendment, which amends City Code Title 7, Chapter 4; second by Council Member Dennis. Motion carried: 3-2 (Nay votes by Council Members Thiede and Johnson). 8. APPROVE DISBURSEMENTS A. Approve payments for the period of 11/15/2017 through 12/7/2017 in the amount of$2,485,815.48. Motion by Council Member Mills to approve disbursements; second by Council Member Dennis. Motion carried: 5-0. 9. PUBLIC HEARINGS — None. 10. BID AWARDS — None. 11. REGULAR AGENDA A. Final 2018 Property Tax Levy and Budget Staff Recommendation:Adopt Resolution 2017-155 Certifying Property Tax Payable in 2018. Adopt Resolution 2017-156 Revising the 2017 Budget and Adopting the 2018 Budget. Finance Director Robin Roland stated this process began in May; there were several different meetings and workshops and public input via Facebook Live in August. According to State Statute, regarding the budget process, there are rules; the preliminary levy and budget have to be put in front of the City Council before September 30 for approval. It can be reduced but it cannot be increased. On September 6, the City Council passed the preliminary levy, which was then submitted to Washington County, per State Statute, and was used in preparing Truth in Taxation Notices. Those Notices were mailed by the County in mid-November, and each homeowner in Cottage Grove should have received one; it compared their 2018 proposed taxes to their 2017 taxes at a City, County, and School District level, along with other taxing districts. That Notice indicated that tonight the City Council would be considering the tax levy and budget for 2018, and if anyone wished to comment or have input for the levy and budget, tonight was their opportunity. The levy, as discussed in September, has not changed; it's an approximately 3% increase over 2017. The Strategic Plan was used as the basis for all of our considerations regarding the 2018 budget and the levy. Total City Council Meeting Minutes December 6, 2017 Page 7 levy for 2018 will be $15.2 million; 10% is due to debt service payments and 87% of the levy will go to the General Fund to finance operations in 2018. The tax base growth between 2017 and 2018 was 8.6% more, $31.6 million in total tax capacity; that includes residential, commercial, industrial, and agricultural properties in Cottage Grove. That growth is what helped the tax rate go down for 2018. The total tax capacity, since 2013, has grown by over 40%, which is significant. She reviewed the increase in the median market value of a home in Cottage Grove in 2018 to approximately $242,000. On a home valued at that amount, the taxes would be about $918 City tax, which is a 1.33% increase in the actual City tax. The budget for 2018 is $16,848,225; 79% of the General Fund budget is supported by property taxes. Permit revenues are increased in 2018 based on the historical value of money collected for permits, as well as expected development activity for 2018. Regarding expenditures, 69% is for personnel services, the largest expense, which includes salaries and benefits; that includes a contract wage increase for the majority of our employees at 3%. A position change for 2018 is the part-time, seasonal Building Inspector will now become a full-time Building Inspector. That position is needed to support the 2018 building activity in Cottage Grove, both residential and commercial. The transfer out of the General Fund of$550,000 will go directly to the Equipment Replacement Fund and will cover most of the cost of the equipment in the budget to be replaced in 2018. City taxes per residence are approximately $76.53 per month; she reviewed the breakdown of how that money is allocated amongst Police, General Government, Public Works, Debt Repayment, Parks & Recreation, Fire Service, Capital Equipment, and the EDA. There will be two increases on utility rates; the storm water fee and the streetlight fee have been on a five-year plan. To increase these rates to sustain the operations for these funds, storm water will increase by .20/month to $5 per month per residential unit; streetlights will increase to about $4 per month for most residential customers. For relief from property taxes, there are three different property tax options, credits, or refunds: Homestead Credit Refund, a Special Property Tax Refund, and the Renter's Refund. Residents should contact the Department of Revenue, Property Tax Refund Division, with any questions. The City has put together a budget video, which shows what your tax dollars pay for; it will be available on the City website and on the Facebook page by the end of the week. Director Roland encouraged the Council Members to listen to any comments by the public. Afterward, if there are no changes to the budget and to the levy, as discussed, she encouraged the Council to adopt the resolutions listed above. By adopting the 2018 City budget, that will authorize the purchase of the budgeted capital equipment for the General and Equipment Replacement Funds, according to the City's purchasing policy. She stated she'd take any questions. City Council Meeting Minutes December 6, 2017 Page 8 Mayor Bailey asked if there was anyone in the audience who wished to speak on this item; no one wished to speak. Mayor Bailey congratulated and thanked the staff, Director Roland and her team, and everyone who put budgets together, including the Council Members; he stated he was very impressed that we're able to hold the line and yet provide the services our citizens want and need. Our growth is nice to see, and we're doing that strategically. Motion by Council Member Thiede to Adopt Resolution 2017-155 Certifying Property Tax Levy Payable in 2018; second by Council Member Dennis. Motion carried: 5-0. Motion by Council Member Mills to Adopt Resolution 2017-156 Revising the 2017 Budget and Adopting the 2018 Budget; second by Council Member Thiede. Motion carried: 5-0. Director Roland thanked the Mayor and Council for their leadership and guidance. 12. COUNCIL COMMENTS AND REQUESTS Council Member Mills stated they had an excellent Arts Commission meeting last night, and she thanked Zac and Becky for leading them through some strategic goals for 2018. She stated there's a Paint `N Sip coming up in January, and there's information about that on Facebook. Council Member Thiede stated he had requested a personal meeting with Howard Levy, who is one of the principals at EBL & S, the developer and owner of the property where the Home Depot was formerly located. He and Council Member Dennis met with Mr. Levy, and they were discussing what's taking so long and what we could expect. It's still the commercial contracts that are left over from Home Depot and other entities that want to come in, that have certain requirements that are still binding on what can go into that property. Mr. Levy made a commitment; he felt that by the end of the first quarter 2018, we should have contracts signed. Council Member Dennis and I are making a commitment to stay in touch with him and make sure things move along. Council Member Thiede stated they're still looking for a theme for Strawberry Fest; their next meeting is on December 18, and they'd like to lock in a theme on that date. He encouraged people to get their ideas in for consideration. Council Member Johnson asked when the Workshop for the permitting would take place; Administrator Stevens stated it might possibly be on December 20 if they can get the logistics worked out with the vendor. If not, it would be the next Council Meeting in January. Council Member Johnson asked, regarding boulevard trees, if there was a way we could work with the local realtors to just have a Welcome to Cottage Grove, here's a City Council Meeting Minutes December 6, 2017 Page 9 place for you to get more information, and then basic information new residents would want to know. You can see on Facebook where people are asking questions of where to find things. Administrator Stevens stated they could speak to local realtors to learn what they felt would be valuable; they could do that and also direct people to the City website. Council Member Johnson stated he saw listed on the City's Events Page the At Home Battle Buddies, but that is no longer going to happen; so, that item can be removed. Mayor Bailey stated the Holiday Train will arrive in Cottage Grove on December 9; the train arrives at approximately 5:15 p.m., but the events actually start around 4:00 p.m. This is the 15th anniversary of this event; the expectation is we will top $1,000,000 in money donated for the local Friends in Need Food Shelf with the donations that are currently coming in, along with donations received that evening. There are additional festivities that will occur this year; the Arts Commission put together a Festival of Trees so there will be a nice place to take photos with your family. 3M donated money for a light show to take place as part of this event. There will be different food vendors; also, the Cottage Grove Lions, Newport-St. Paul Park Lions, the Cub Scouts, people from St. Rita's, and many other groups will be participating. Mayor Bailey encouraged everyone to attend, but asked people to think about the purpose of this event, to raise awareness and money for the Friends in Need Food Shelf. He encouraged people to do what they could to donate, either with food or money directly to the food shelf; there will be trucks available for doing so. He recommended donating toiletry type items, toothpaste, toilet paper, etc., which have no expiration date. The Friends in Need Food Shelf can do a lot more with money to purchase food, so if you're able to donate in any way, he encouraged people to do so. He hoped to see everybody there. On December 10, there is a Santa brunch at the River Oaks Event Center; reservations are necessary. You can go to Facebook or the website, and there's a phone number there to call to sign up. They only have space for approximately 325 or 350, so he encouraged people to make reservations. There will be an opportunity for a horse- drawn carriage ride through the golf course, which is new this year. He encouraged everyone to attend. Mayor Bailey stated this will be the final meeting in the Council Chambers for the rest of 2017; the local cable access group will be revamping the Council Chambers with technology upgrades to the sound and video systems. The next meetings going forward will take place in the training room; they will not be televised live. They will be recorded and then rebroadcast on local cable access on a future date. 13. WORKSHOPS — OPEN TO PUBLIC — CONFERENCE ROOM A. Water and Sewer Rate Study Report—Workshop (Jointly with the Public City Council Meeting Minutes December 6, 2017 Page 10 Services Commission) Staff Recommendation: Receive information on the Revenue Sufficiency and Rate Design Study and provide additional comments. Attendees: Karen Cavett and Maria Tiegs, both with SEH, worked on the rate study; Nate Estrem, Project Engineer; Robin Roland, Finance Director; Jennifer Levitt, Community Development Director/City Engineer; Cathy Mohr, Assistant Finance Director; Charlene Stevens, City Administrator; Council Member Mills, Council Member Dennis, Mayor Bailey, Council Member Thiede, Council Member Johnson; Bob Dornsbach, Public Services; Lise Rediske, Public Services; Kent Griffith, Public Services; William Serpico, Public Services; Bob Campbell, Public Services; Jeff Podoll, Public Services; Tammy Anderson, Public Works Administrative Secretary; Gary Orloff, Public Works Streets Foreman; Harry Taylor, Public Works Supervisor; Les Burshten, Public Works Director; Pete Koerner, Police Captain; Rick Redenius, Fire Chief. Engineer Levitt stated SEH was hired in April, 2017, to conduct the study to ensure that Cottage Grove's future water and sewer rate structure is sustainable. Karen Cavett of SEH will present the study results and the analysis for the rate structure. Ms. Cavett stated they wanted to look at the fee structure, as well as the expenses, and understand capital expenses and operation maintenance expenses; with that information, they developed a plan to ensure the revenue generated would be sufficient. They wanted to cover Cottage Grove's expenses not just for the next five years but took it out to 40 years, with major capital improvements, to make sure if there was something beyond five years, they'd be looking ahead and would be aware of it. The plan takes that into account. Between the water and sewer funds, water has one unique aspect, conservation. The DNR requires all communities with a population over 1,000 to have conservation measures. Rates either encourage conservation or there's a flat rate for every 1,000 gallons; Cottage Grove has been doing conservation rates for a number of years. State Statute requirements were incorporated into the rate study; one of those is gallons per capita per day is 75 gallons per person of water usage or less. Right now, Cottage Grove is at 77 gallons so we want to encourage conservation to get within the guidelines. The second goal in the State Statute is water loss, or unaccounted for water, of less than 10%; that could be from flushing of hydrants or an area that might not be metered could be a loss. Cottage Grove is currently at 16.5% so that needs to be remedied; that was also incorporated into the study. Operation maintenance for the Water Fund: The City has 11 wells, 6 storage tanks, and 167 miles of water main; that infrastructure needs to be maintained. They also looked at capital improvements on the system, both short term and long term. Big ticket items, water towers or wells, were incorporated into the plan. Water conservation includes smart irrigation, rain barrels, enforcement of watering restrictions, community education, etc. City Council Meeting Minutes December 6, 2017 Page 11 For the sanitary sewer, there is one lift station and 156 miles of sanitary sewer collection. The largest expense on this system is outside the City's control; it's paying MCES for the treatment of the waste, which is a fixed fee. Capital improvements include maintaining the existing collection system. With one lift station and expansion and growth, they looked at rehabilitation costs of the lift station. Covering expenses is done through the users of the system. They looked at the population, the population trends, as well as who uses the water and how they use it. The population trend has been steady; they looked at the existing Comprehensive Plan and also the census reports and projections. There's about a 1.4% population increase per year, or about 500 individuals. We know what the average water use is per person, and we look at businesses coming into the City, and what we're going to have for flows, which will need to be treated. Once we know that, we can calculate future needs with a water tower and/or a well. The City currently has six different user types: Residential, townhome, commercial, commercial tax exempt, irrigation, and vacant. They looked at what kind of rate should be in place for the users, and they simplified it to four user types: 1) Single-family residential; 2) Multifamily residential; 3) Commercial; 4) Irrigation, unique because there's a charge for water but not for sanitary sewer. They looked at data for 2014, 2015, and 2016, and the flow per year is very uniform. They chose 2016, that was the lowest-flow year; they didn't want to pick the highest- flow year because they'll be calculating the revenue generation off of this. They looked at four different models of rate structures for water that encourage conservation. 1) Tiered system, currently used, the more you use, the more you pay; 2) Individual mode, individualized to the user; 3) Seasonal; and 4) Excessive Block. - Tiered System: Much lower rate for the first tier; as use increases, the second tier cost increases by 25%; and increases for the third tier. One of the drawbacks to this is the tiers are typically farther apart. 10,000 gallons a month will pay $1.30 per 1,000 gallons; the average single-family homeowner uses 6,300 gallons a day. Summer months 75% stay in the first tier, a few get to the second tier, 92%-93%, so they're not hitting the third tier, which would encourage water conservation. -Individual: This is very specific to yard size, water usage, house size, and what water usage should be. This is very labor intensive and each meter is programmed to the user. The meter replacement cost would be approximately $6.5 to $7 million. This was removed from the list as a possibility due to the cost. -Seasonal: Water use in the winter would have a much lower rate; but would almost double in the summer per 1,000 gallons. This option was removed as it doesn't encourage year-round conservation. -Excessive Block: Very similar to tiered system, but there are more tiers, closer together, and instead of increasing 25%, you're increasing 50%, so $1 to $1.50. The first tier is a lower number, $1.05. As users go above that, they will cross into more tiers. Tier 4 is 12,000 gallons a month, a lot of water for a single family; 6,000 gallons is City Council Meeting Minutes December 6, 2017 Page 12 pretty typical for the cities. In the winter, only about 2% of the users in the system are using that much, but in the summer, 20% of users will use that much. This rate encourages people not to go into that usage range. This was the model selected because it enforces water conservation. Rate chanqes: The current single-family base rate is $1.50; they recommend increasing that over a two-year span to phase it in. In 2018, it will increase to $2.25, and in 2019, it will be $3.00. They're trying to get the base rate higher; 40%-50% of the base rate will stabilize your rates so there's not as much fluctuation. If it's a rainy season and people don't use as much water, the City will still generate the revenue. -For multifamily residential, their use is about 25% less. Typically, they don't have yards and don't water gardens, etc. They're paying 25% less for their base fee; they're recommending $1.69 the first year and then $2.25 the second year. They'll have a year to notify their lessees of the rate increases in their leases. -The proposed water rates for commercial and irrigation will increase; they are equivalent to four single-family residences, and this increase will be phased in over two years. Irrigation was increased because it's not considered a necessary use (gardening, landscaping, etc.) so that rate will be higher than water for essential uses. Proposed water rates need to encourage conservation; maybe there could be a fund for education or using reduced-flow showerheads, rain barrels, etc. For water users above 12,000 gallons a day, there will be a surcharge of$1 per 1,000 gallons used. In 2018, that will generate about $30,000 and in 2019, about $40,000. That money can be used for conservation measures, education, etc. Sanitary sewer base rate changes will be similar; single family and multifamily will increase from $1.75 to eventually $4.25, 38% of your total fixed revenue. The charge is based on January-March, the lowest-flow months. The 2019 rate for multifamily will be per unit versus per connection. The Water Fund had to be increased 1% per year after 2019; that's because MCES is raising their rates an average of 4% per year. In order to meet that increase, we need to increase rates after 2019 by 1%. Looking at a single block for sanitary sewer, it's $3.45 per 1,000 for 2018, then it will increase to $3.75 in 2019. After 2019, it will increase by 1%, both the fixed and the usage charge. Water Fund: You want to have six months of operating revenue for your cash reserve. Cottage Grove is well over that; however, after 2022, in the next five to six years, there will be many expenses for water towers and maintenance. Sanitary Sewer Fund: We're really close to where we want to be for the desired cash reserve, but after 2019, there will be a 1% increase every year just to maintain this. Water Rates: Most (63%) of all water users on the system use 6,000 gallons per month or less. For use of 19,000 gallons, the rate will be $13.20, and that will increase to $17 in 2019. As usage goes up, the rates increase. They want to encourage conservation so those who conserve will not be compromised. Water rates for industry will also City Council Meeting Minutes December 6, 2017 Page 13 increase for those using more; those are mainly townhomes and HOAs and schools. They'll be phasing those increases in over time so they can budget for it. Sanitary Sewer Rates: Rates are driven by MCES; 63% use 6,000 gallons per month or less; there will be a $3 increase, from about $20.65 per month to $23.65, and another $3 increase to 2019, phasing that in. As we get to high-end users, that rate increases considerably. The sanitary sewer rates will continue to increase 1% per year beginning in 2020 until 2023. There will be a two-phased approach for the next steps: Provide information to the users, particularly the commercial users and multifamily users. Director Roland stated they're proposing this final report with the proposed rate structure be presented at the December 20, 2017 Council Meeting for Council's acceptance or approval, along with the fee schedule, which will be presented to Council on December 20. They will provide the new water and sewer rates for 2018 into that fee structure, and we ask that Council approve the first phase of these changes. They'd incorporate the first fee changes into the January, 2018 water and sewer bill, which comes out February 15. We will then bring back the 2019 changes for phasing for the residential properties and the commercial, industrial, and multifamily properties, which would be phased in, in 2019. That would be brought back as part of our budget and fee schedule in December, 2018. Director Roland stated regarding the sewer rate changes, it will get us to a positive cash balance where we need to be; that has a great deal to do with the increase in the base structure, which is the administrative charges, as well as some of the MCES charges, plus we have a limit on those sewer charges. We base our residential sewer on January through March, so whatever the average of those three months is, is what the sewer rate will be based on for the rest of the year. If you use 6,000 gallons of water on average in January through March, that's what your sewer is based on, an average of 6,000 gallons for the rest of the year. The assumption is that any water that goes into your home in those three months goes out of the house through the sanitary sewer system, which is not the case for the rest of the year. Council Member Johnson asked about the summer months water charges for the last few years, if those numbers are realistic going forward when we take into account going back to full watering with a hot summer, which we haven't had for a while. Director Roland stated as Karen mentioned earlier, we want to use the low average of number of gallons because that's the most conservative point of view. We may have a dry year in the next four-or-five years. We don't want to base our estimates on that higher level of usage; we want to base our estimates for revenue on the low level of usage. Population is increasing and so are the number of units; particularly, Dominium, Presbyterian Homes, future apartment complexes or townhome units being built, and those will significantly impact our usage in the future. City Council Meeting Minutes December 6, 2017 Page 14 Mayor Bailey stated he liked the idea of the conservation surcharge and using that money for rain barrels, sprinkler rain sensors, etc. He asked staff if we started this new process in 2018 there would really be no money in that account to work with citizens for conservation opportunities. He knows the amount will increase significantly in 2019, but he wondered if we were thinking about what we could do to help citizens with conservation efforts in 2018 that will lessen that impact of a bigger bill in 2019. Engineer Levitt stated there are additional grant opportunities and there's probably some money in the budget that we could use; there was a waiting list of citizens for the rain barrels, etc. this year so citizens are very eager to do water conservation. They'd be finding ways to provide revenue to support that. A gentleman asked how we could promote conservation when the City pumps all that water at the Splash Pad. Mayor Bailey stated they'd talked with Director pockter about recirculating that water and how much it would cost. Engineer Levitt stated they'd looked at that in our initial design, thinking they could irrigate the ball fields with it, but it would still have to be treated for human consumption, which would double the price of the actual system to treat it to that level. If we were to treat it for recirculation, the price increased with microfiltration and UV treatment; it's very costly for the City to do that, but hopefully in the future we'll find additional grants and opportunities for those. Council Member Thiede stated it appeared the average user was not really going to see that much increase at all. He was advised the biggest increase was going to be in the apartments, the multifamily; it's a requirement of the DNR that it be per unit so it's fair and equitable. Council Member Thiede stated it would be more noticeable for the commercial properties; if water cost is 2% of their budget, they probably won't notice it too much. However, if it's 15-20% of their budget, then they'll probably notice that impact. He wondered if they could project who would be calling the City first. Director Roland stated that's part of the reason they discussed phasing it in with commercial and irrigation over a two-year period, to give education and an idea of what's coming and perhaps estimate what their bill will be in 2019. Ms. Cavett stated other communities have sent out information to the multifamily complexes and industries, those that would see the largest change, and invite them to an open house for a presentation on the rate changes so they could plan ahead. Council Member Mills stated she knew rates hadn't been increased for a number of years, but she wondered if we could put something together that would be more of a gradual increase. Ms. Cavett advised the sewer rate would be evaluated at the end of 2022, but at the end of every year we should look at our projections to see if we're on track or if it would be need to increased 1% or 2%. Council Member Mills stated she felt the water rate increase was going to be a shock to some residents; she felt maybe it should be looked at as an ongoing thing, 1% every other year for the water, so it's not such a huge change all of a sudden. Director Roland said they could put in a different rate schedule before December 20, perhaps one third, one third, and one third, 2018, 2019, and 2020, so the Council could choose one of those options. Director Roland City Council Meeting Minutes December 6, 2017 Page 15 stated they're concerned about being customer friendly, so they can put those options together and give the Council another choice. They need to consider implementation for the DNR within the next two years. Council Member Mills asked if the DNR required a certain time period where the goals had to be reached; Ms. Cavett explained when the City needs new wells, the DNR can hold up giving the permit if they don't feel you're meeting conservation goals that have been set. Council Member Johnson stated he liked the two-year increase, rather than spreading the increase out over a longer period of time. Mayor Bailey asked if the DNR conservation was statewide or if it was specific to the White Bear Lake issue; he was advised it's statewide. It started with the Twin Cities, and the metro area had to implement it by 2015; they allowed it to slide for a number of communities because they weren't able to get their rates in place and meet that. In the metro area, most cities are increasing their rates. Director Roland asked if the Council wanted to see the report on December 20 at the City Council meeting; Mayor Bailey felt that we needed to get the process in place to be in compliance with the DNR. Mayor Bailey felt unless you're a heavy water user, there's not going to be much of a change. If anything, they'll create a fund with conservation opportunities, which is positive, so it should be addressed on December 20. Council Member Dennis agreed and stated they knew this was coming for a long time; Director Roland stated that would be part of their communication plan. Mayor Bailey felt someone should personally contact the larger HOAs and businesses and let them know what was coming and ways that the City could help them conserve water. Council Member Thiede asked if the DNR had any programs for large water users; Engineer Levitt stated that the Metropolitan Council has grants available and has provided them in Washington County. The DNR has an educational piece, which gives cities ideas they can use to send to residents to conserve water. Director Roland thanked Karen and Maria and Nate Estrem for their hard work on this project. Mayor Bailey thanked the Commission members forjoining them this evening. 14. WORKSHOPS — CLOSED TO PUBLIC — None. 15. ADJOURNMENT Motion by Council Member Thiede, second by Council Member Johnson, to adjourn the meeting at 9:11 p.m. Motion carried: 5-0. Minutes prepared by Judy Graf and reviewed by Joe Fischbach, HR Manager/City Clerk.