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Stormwater Utility - Work SessionMEMORANDUM December 13, 2002 TO: FROM: SUBJECT: The Honorable Mayor and City Council Members Michael C. Van Milligen, City Manager W©RK SESSION - DECEMBER 16, 2002 Stormwater Utility The Stormwater Utility Work Session is scheduled for Monday, December 16, 2002, at 4:45 p.m. in the Carnegie Stout Public Library Auditorium, with dinner served at 4:15 p.m. Attached is the material from the Citizen Advisory Committee. Michael C. Van Milligen MCVM/j.h Attachment cc: Barry Lindahl, Corporation Counsel Cindy Steinhauser, Assistant City Manager Gus Psihoyos, Assistant City Engineer Mike Koch, Public Works Director City of Dubuque Storm Water Utility Project Citizen Advisory Committee Presentation to City Comqcil December 16th, 2002 4:45 PM Work Session Agenda II. III. VIII. Citizens Advisory Committee (CAC) Background and Overview - Steve Sedgwick, CDM CAC Member Introduction - Mike Portzen, CAC Chairperson CAC Consensus Opinion on Storm Water Funding Principles - CAC members Non Consensus Items - Steve Sedgwick, CDM Next Steps/Questions - Steve Sedgwick, CDM C:\W~DOWS\Temporary Intemet FilesX,OLt<2F054kAgenda rev I .doc Memorandum From: Date: Subject: Dubuque Citizens Advisory Committee Michael Oleson- CDM Dan Lau- CDM Steve Sedgwick- CDM December 12, 2002 December 5, 2002 CAC Meeting ¢7 Summary On December 5, 2002, CDM conducted the seventh meeting of the Citizens Advisory Committee (CAC). This memorandum summarizes the important aspects of the presentation, discussion, questions and action items. The meeting was chaired by Mike Portzen, with the formal presentation by Dan Lan and Steve Sedgwick and assisted by Michael Oteson. Also providing short presentations were Mike Portzen (CAC- Chairperson) and Michael C. Van Mill/gen (City Manager). Mr. Portzen presented information on impacts of property taxes. Mr. Van Milligen was invited to attend the meeting by the Chairperson to answer specific funding policy questions and to present two potential financial scenarios for the CAC to consider. Meeting Format/Purpose The purpose Of the meeting was to rev/ew and obtain direction from the CAC on the storm water program level and expenditures. The CAC was also asked to provide direction on revenue sources, including the utility, to meet the storm water program. Meeting Topics/Agenda Meeting #7 Topics (an overview of the following): · Questions From Last Meeting · Property Tax Compm'ison (M. Protzen) · Meeting Objectives · Storm Water Program Alternatives · Hightight's from Pre-CAC Meeting (Dec. 4m) · Existing and Future Program Cost Review · Financial Scenarios (M. Van MiUigen) · Preliminary Council Recommendations? CAC Meeting #7 December ~12, 2002 Page 2 Questions/Comments Is the billing cost allocation shown in the table (Attachment No. 1) an existing billing system cost that is being reallocated? This is a reallocation ef an existing City cost for doing the cUrrent bi~Un.gs for water, re~ase, and sanitary (4 utilities vs. cUrrent 3), but there are some additional costs to modify the system to accommodate storm water. The new biil would likely have to come in an envelope as opposed to a post card. These costs are included in the admir~stration function in the Expanded Program costs. What is the CIP related Engineering cost shown in the table (Att. No. 1)? Is the $330K for hiring additional engineering staff? The $330K shown is 15% of CIP cost which is reserved for engineering to cover the costs of inspection, survey, project management, etc. This cost includes some current staff lime spent on these activities associated with CIP projects. Under an expanded CIP program, additional engineering effort would be requh'ed to support the new capital projects. The additional time was initially assumed t? be provided through ' outside consulting services. Why does that cost not stay with each project? It was shown this way to provide a means to identify the engineering effort to support the CIP. However, these activities are typically funded t!n-ough the CIP as part of each project. Is that $330K being taken out of CIP cost? Yes, the $330K is based on an assumption of a $2.2mjl CIP for that year and is subtracted frona the $2.2n~dl and moved to Engineering (Operating side) and Capital is then shown as $1.87M. For projects such as Carter Detention Basin for $875K, does that total include engineering fees? Yes, 15% of that cost is for Engineering Related Costs. Explain CIP O&M activity in the handout (Att. No. 1)? CIP O&M includes currently budgeted O&M activities such as catch basin reconstruction, detention basin cleaving, and storm sewer repairs which are handled by the Engineering department and are outside of the Operation and Maintenance Department. Note, we have subsequently discussed with the City where certain O&M costs might be shown to be more consistent with their funding source. As a result of this discussion, some O&M costs may be moved from the Operating side of the budget to_ the Capital side. The future expanded O&M program seems very large, how many years does it go out? The O&M activities under the expanded program are intended to provide the level of service required for the City to provide ongoing, proactive maintenance in support of its infrastructure. This is based on information previously provided to the CAC relative to the frequency of each mzRntenance activity. What is the difference in cost between existing and expanded programs to the Operating side of the budget? The City has budgeted a net increase of $370,000/year in new dollars on CAC Meeting #7 December 12, 2002 Page 3 the operating side of the budget. Note, this cost increase is based on re-categorizing several O&M activities from the Operation budget to the CIP budget as mentioned earlier. Didn't we say that O&M was front end loaded? Although it is theoretically possible that maintenance costs will go down in the future with proact/ve maintenance and new capital projects, we have conservatively assumed that the same level of service will be necessary for maintenance. Does the $2.2mil shown in the table (Att. No. 1) include the $330K for Engineering? Yes, it is shown on that table with the $330K included. However, the financial model has the $330K broken out and included with the Engineefmg Function. What other Capital Improvements are there in the City? The City has capital improvement projects for: streets, water mains replacements, repairing sardtary sewers, storm sewers, and building maintenance. The City pays for these projects as follows: san/tary sewer projects are paid from the sanitary fund; water projects are paid by water bills; street projects are paid by Road Use Tax and Local Option Tax; and, storm sewer projects are paid for out of DRA and the General Fund. Can property taxes be used to pay for capital projects? Probably not, the City receives about $15 millian/year in property taxes with most of it going to funding operations such as salary etc. We need to clean up the numbers and see "what's really where" relative to the Operating and Capital budgets? Yes, we have attempted to do this and will revisit the issue given that the City is working on their budget so we can further clarify the numbers. If we have a billing system in place, why do we have to reallocate the billing cost? Isn't some mount of money coming from the other three utilities? The billing system is in place but modifications w/Il have to be made to add a storm water utility and it is not fa/r to have the three current utilities pay the entire cost if the storm water utitity is adding a charge. Will they (other 3 utilities) pay less?- Yes, but we can, t tel1 you an exact mount as system costs go up ekrery year. My feeling is that we are going to tax people out of existence and we need to do projects such as Carter and W. 32-a, and come to grips with what we have before proceeding with more projects. Your City Manager is asking a lot of our citizens to pay for projects that r~ally have not been defined very well at this point. Aren't there better solutions out there? I wish there was a simple answer but I'm no expert. The City hires qualified consultants to provide us with the answers to our storm water problems. The experts have told us what they feel are the best solutions to our problems and have given us their best estimates of the cost to implement them. We can only trust the experts to give us sound advice and then make our decisions accordingiy. CAC Meeting #7 December 12, 2002 Page 4 As a homeowner I'd rather pay money in the form of property taxes versus a user fee or utility fee. We ~re going to pay it either way. A user fee though pays based on rmxoff contribution not taxable value. Mike Protzen w/Il have a short presentation on property taxes. Is the use of DRA funds Hmited only by Council policy? The DRA Distribution funds are distributed based on City' Council Policy but DILA also has legal requirements on where "distribution" money can be used. Can't a property tax be specific to storm water? Can't we earmark the tax so it doesn't go to the General Fund. The City Council on an annual basis approves the budget and ff priorities would change could move money in the general fund away from storm water. What do the streets contribute to this problem (in terms of runoff or costs)? I believe we are ignoring that part of the scheme. If you didn't have streets, you wouldn't have storm sewers. Besides being part of the di'alnage system, streets are implicitly bu'flt into the equation to define storm water costs by parcel. Everyone has a street in front of his or her home tot business). Previous studies in other communities have shown that allocations of streets to individual properties generally do not appreciably change the potential charge to each property. In a user fee scheme, can you exempt the non-profit? No, that approach is not legally defensible. Are there sources of funding to subsidize non-profits? The General Fund through taxes can be used to subsidize the utility. A few other communities have done this. Was the change of the DRA distribution to a 50/50 split voted on 2 weeks ago by the City Council? Yes Where did the money to buy the log~ng company come from? The City purchased it and sold it immediately to "Dubuque Initiative". What about the Adam Company? Most of the money for the Adam Company came from DRA funds and a federal grant. So how do we respond to all the people about money spent on the Harbor area? Where's that money coming from? The majority of the money came from Vision Iowa and federal ~ants and borrowing and savings by the City. The City was'able to leverage a significant amount outside money for this project. Can we slow down on road improvements? Will the Council go with that? Road improvements are paid out of the Road Use funds and that money can not be diverted to storm water. CAC Meeting #7 December ~2, 2002 Page 5 Will there be credits for detention basins? Yes there can be. CAC Discussion: For commercial properties, taxes will run higher than under a user fee. Commercial propert/es currently pay 2/3 compared to 1/3 for residential which is an urdair distribution of costs. · I sense that there is a fear of raising taxes for storm water. Why are we afraid if the need is warranted? Are we saying that Loras (for example) is not contributing to the problem? What's. wrong with paying for the runoff you have? I ag-tee, but what's wrong with a (utility as) better form of equity? · Even with a user fee, the School Board will find a way to come back to the residents such as raising baJtion; they'll ask for support that way. · A user fee will make business not put in parking lots because it wilt increase their user fee. · A user fee for 10 years will go away, hopefully, - Taxes don't. · Property tax goes into the General Fund and can be spent on something else other than storm water. A user fee for storm water can only be spent on storm water. · We need to send a message to community that there is a sunset. That was what I tried to accomplish with my model ( Bob Hartig's Alternative 21). · Whether or not Council accepts the user fee, we need to decide how projects should be implemented on a year-to-year basis. · A user fee anywhere above $3.00 will kill churches. · I would recommend a user fee with other shared revenue and take O & M out of it. We need to look at the basics. Do we have a need for this? - Yes, Do all of us have runoff - Yes, Lets agree on a strategy and let the experts figure the $%, We need to come to an agreement on a general direction. · Sunsets iust muddy the water. I d~n't see a need for a sunset. CAC Meeting #? December 12, 2002 Page 6 A recommendation should be based on principal not detail - the Council has the ultimate decision; we are only recommending. If it's good for the city - we should do it. We are too focused in detail - we need to get to basics. I would even recommend Mr. Van Milhven s Scenario #1, because we don't know if the money Mr. Van MiHigen is talking about wilt come. We need to go'with the worse case scenario because engineers don't look at a 5-year flood or a 10-yemr flood they look at a 100-year flood. · The difference of 50 cents here is nothing to the big picttrre. · We need a 3-pronged approach- Scenario 1, Scenario 2 (if the money becomes available), and a Sundown clause. Need to just go to Council and have faith in them, that they will make the right decision. You have to trust our City Council, t do, I feel that they have Mercy's best interest. Do it (the CIP) now; we have no idea what will happen in 5 years. We don't -know about the projects down the road 20 years from now. So we need to look at the present. · I feet the 24.5 million Scenario 1 - is more sellable to the Council. Pre-CAC Meeting Consensus Opinion On December 4, 2002, three members of the CAC who could not attend the December 54 meeting met with Dan Lau and Chairperson, Mike Portzen to discuss the City's storm water program and potential funding sources. Attending the meeting were Rick Runde, Dave Stuart and Tim Pancratz. The meeting produced the following consensus opinion that was to be reported to the full CAC on December 5th for consideration. Need to implement major CtP to address identified drainage problems as soon as possible. Magnitude of the CIP should start with target of $27 million and be reviewed annually. 2. Need Expanded Operating Program to do proactive maintenance to protect City's infrastructure. 3. Storm water program must be funded from a number of sources including the user fee. 4. City should contribute at current funding levels and should identify additional funds to keep user fee as low ~s possible. CAC Meeting #7 December 12, 2002 Page ? 5. User fee must include significant credits or incentives. 6. Alternative 12 with additional revenue contribution from the City most closely achieves 1 through 5 above. Prefer a more uniform fee without major jumps over planning period. 7. Would like to see impact on specific properties once final financial model is developed. CAC Consensus The CAC discussed the alternatives developed and distributed in advance by CDM, as well as an additional alternative that was intended to reflect Bob Hartig's scenario, and the three additional alternatives presented by Mr. Van IVHltigen. After considerable discussion, the followmo Consensus Opmaon on l~undmg Principles for the C~ty s Storm Water Management Program were developed (they have been edited below to better expla'm their intent and purpose): 1. The City should implement a major capital improvement pro,am (CIP) to address identified drainage problems as soon as possible. The magnitude of the CLP should start with target of $24.5M and be reviewed armualty. 2. The City should adopt an Expanded Operating Program to do proactive maintenance to protect the City's infrastructure. 3. The City should fund its storm water management program from a number of sources (ail existing funding sources) including the user fee. 4. The City should contribute to the storm water management program at current funding levels and should identify additional funds, such as federal grants, to keep user fee as low as possible. 5. The City should commit $5 million of the potential DRA tax settlement to fund its storm water management program_ 6. The user fee must include significant credits or incentives. CAC Non-Consensus Items: 1. User Fee Sunset - Consensus could notbe reached on a "sunset" for the user fee. Opinions included: no sunset; a 12 to 15 year sunset; and, a sunset when the major CIP projects would be completed and paid off. CAC Meeting #7 December 12, 2002 Page 8 Variability of User Fee - Consensus could not be reached on how to best approach setting the user fee and how it should vary from year to year over the 30 year planning period in the financial model. Optrdons included: a higher irdtial fee, declining over time; a uniform fee, chang-ing Iittle over fi_me; and, a lower initial fee, increasing over time. Subsidy fo~ Tax Exempt Properties - Consensus could not be reached on the need for a subsidy to tax exempt properties. Opinions included: no subsidy or some degree of subsidy to pa~tialiy offset the impact of the user fee to selected tax exempt parcel categories. The consensus and non-consensus items will be summarized on one page for use at the Coundl Work Session. Council Work Session on December 16th The following CAC members agreed to assist in presenting the consensus opt-don to the Cotmdl at the December 16th work session: · Bob Hartig · Tracy Wagxaer · Mike Portzen · Ron Smith · Bernie Fox · Mike Coty · Dave Stuart (Note, Dave Stuart participated in the pre-CAC meeting on December 4th and agreed to also represent the CAC at the work session) Action Items 1. Distribute Pre-CAC Meeting Consensus Points 2. Distribute CAC Mtg #7 Consensus and Non-consensus points 3. Run ftmding alternatives based on suggestions by the CAC members for the next meeting. Next Meeting The next meeting of the CAC will be Tuesday, January 14~. Consensus Opinion on Funding Principles for the City's Storm Water Management Program Citizens Advisory Committee December 5, 2002 (draft) CAC Consensrts Principles The City should implement a major capital improvement program (CIP) to address identified drainage problems as soon as possible. The magnitude of the CIP should start with target of $24.5M and be revi~ewed armually. 2. The City should adopt an Expanded Operating Program to do proactive maintenance to protect the City's infrastructure. 3. The City should band its storm water management progn'am from a number of sottrces (all existing funding sources) including a new storm water user fee. The City should cont~4bute to the storm water management program at current funding levels and should identify additional funds, such as federal grants, to keep the storm water user fee as Iow as possible. 5. As soon as available, the City should commit $5 milIion of the potential DRA tax settlement to fund the expanded storm water management program. 6. The storm water user fee should include sigrdficant credits or incentives. CAC Non-Consensus Items Storm Water User Fee Sunset - Consensus could not be reached on a "sunset" for the storm water user fee. Optrdons included: no sunset; a 12 to 15 year sunset; and, a sUnset when the major CIP projects would be completed and paid off. Variability of Storm Water User Fee - Consensus could not be reached on how to best approach setting the storm water user fee and how it should vary from year to year over the 30-year planning period in the financial model. Opinions included: a higher initial storm water user fee, declining over time; a uniform user fee, changing little over time; and, a lower initial user fee, increasing over time. Subsidy for Tax Exempt Properties - Consensus could not be reached on the need for a subsidy for tax exempt properties. Opinions included: no subsidy or some degree of subsidy to partially offset the impact of the storm water user fee to selected tax exempt parcel categories. S:N 20959~36147N120502 CAC #7~Consensus Optrdon on Funding Principles for the City.doc