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Home My WebLink About2010 07-26 City Council Manager Workshop Packet AGENDA MAPLEWOOD CITY COUNCIL MANAGER WORKSHOP 5:15P.M. Monday, July 26, 2010 Council Chambers, City Hall A.CALL TO ORDER B.ROLL CALL C.APPROVAL OF AGENDA D.UNFINISHED BUSINESS 1.Presentation by Tautges and Redpath Ltd. on 2009 Audit of Comprehensive Annual Financial Report [CAFR] 2.Maplewood Water System Financial Review – Discussion of Long-Term Funding Strategy E.NEW BUSINESS F.ADJOURNMENT THIS PAGE IS INTENTIONALLY LEFT BLANK AGENDA NO. D-1 AGENDA REPORT To: Jim Antonen, City Manager From: Gayle Bauman, Finance Manager Date: July 20, 2010 Re: Receipt and Presentation of Comprehensive Annual Financial Report (CAFR) for 2009 and Presentation by Auditor HLB Tautges Redpath, LTD BACKGROUND Members of the City Council have received a copy of the Comprehensive Annual Financial Report (CAFR) and an electronic version is available on our website as well. The CAFR will be submitted to the State Auditor’s Office after acceptance by the Council. A 45 day extension was granted by the State Auditor’s Office. David Mol, Partner with the firm of HLB Tautges Redpath, Ltd. will present the results of the audit at the July 26 workshop. The council will be asked to formally accept the CAFR at the July 26 regular meeting. HIGHLIGHTS The General Fund had an unfavorable variance from budget of ($161,188) mainly due to a Transfer In that was expected from the Employee Benefits Fund which did not occur due to lack of funds being available. The General Fund balance at the end of 2009 is $6,512,140. Fund Balance is required to fund operations during the first half of the following year until the next property tax payment is received from Ramsey County. The legal debt margin at the end of 2009 is $117,545,829.The city has $75,560,703 in total long-term debt. Of that amount, $5,445,000 is subject to the legal debt margin. Debt service funds increased by $31,149; from $12,669,078 to $12,700,227. The Employee Benefits Fund Net Assets decreased from $127,362 to ($61,965). INTERNAL CONTROLS The City’s Finance Department has undergone some significant personnel changes since the end of 2006. Deficiencies have been identified in the following: Over the past four years, preparation of the CAFR has been done by our auditors rather than staff. While this is not an unusual circumstance, it needs to be noted by the auditors. Adjusting entries completed after fieldwork was done were required more frequently than should be expected and reconciliations of accounts were not sufficiently completed. Not all journal entries were approved as required. Bank reconciliations were not completed in a timely manner. Staff will implement changes to correct all deficiencies noted above in 2010, time permitting. RECOMMENDATION No action is requested at this time. S:\Citizen Services\CTY_CLRK\Agenda Lists and Reports 2010\Agenda Reports\7-26-2010 workshop reports\D1 presentation by Tautges and 2 Redpath LTD on 2009 Audit (CAFR)- workshop.doc Work Session Agenda Item D2 AGENDA REPORT TO : James W. Antonen, City Manager FROM: Charles Ahl, Assistant City Manager/Public Works Director SUBJECT:Maplewood Water System Financial Review – Discussion of Long-Term Funding Strategy DATE:July 21, 2010 INTRODUCTION On April 12, 2010, the City Council approved a study of the method of Maplewood accounting and financial approaches to theSt. Paul Regional Water Services (SPRWS)and North St. Paul Water utilityfor the water supply. The consultants have completed the first portion of their study and are prepared to present their findings and recommendations. Attached is a copy of their report. BACKGROUND The consultants have concluded that thecurrentMaplewood approach to financing forcapital improvements to the Water system providing service to our residents is not adequate to fund our current or projected needs. Those costs have average approximately $500,000 per year over the past 5-8 years. The consultants have concluded that the City will likely have similar costs as we proceed with our infrastructure upgrade programs, even with our current reduced scope of projects in the Capital Improvement Plan. The water surcharge costs are covering only about 20% of this cost, with the remainder being covered by debt service covered by the tax levy. The conclusion and recommendation is to continue to explore alternative methods of addressing this issue. The consultant will review the findings of their study along with the financial projectionsfor the next 20 years. The staff has concluded that proceeding with the next phase of study to consider alternatives to the debt levy are appropriate. In addition, the recommendation is to double the current surcharge within the St Paul Regional Water Service areabeginning on January 1, 2011. RECOMMENDATION No action is recommended. The City Councilshould review the findings of the consultant team and the evaluation ofthe water service utility expenses for operating and capital expenses. Attachments: 1.Consultant Report To: Mr. R. Charles Ahl, P.E. Suite 345N Mr. Michael Thompson, P.E. 2550 University Avenue West St. Paul, Minnesota55114 City of Maplewood From: Jon Horn, P.E. Chadd Larson, P.E. Kimley-Horn and Associates, Inc. Date: July 16, 2010 Re:Water System Evaluation, C.P. 10-09 Project Update Memorandum On April 12, 2010, the Maplewood City Council authorized an evaluation of how the City is currently providing for the potable water needs of its residents. The purpose of this evaluation is to determine if the Maplewood residents/water users are “getting a good deal” on their water services. The evaluation includes engineering and financial audit tasks to answer the basic questions regarding the costs for water service in Maplewood. The intent of this memorandum is to provide staff and the City Council with an update on the status of the water system evaluation. To date, we have gathered background information; completed an evaluation of the City’s existing water system; developed a proposed 5-year CIP for water system improvements; and have evaluated the existing St. Paul Regional Water Services (SPRWS) and City of North St. Paul Water Availability Charges (WAC) to determine their adequacy to fund future water system improvements. The following is a summary of the results of the analysiscompleted to date.We are requesting staff and City Council input on some of our preliminary findings. BACKGROUND INFORMATION Approximately 80% of the City’s water main system is currently owned and operated by St. Paul Regional Water Services (SPRWS). The City of North St. Paul provides water service to Maplewood residents in the northeast part of the City(794 accounts). A limited number of properties within Maplewood are served by the cities of Little Canada(66 accounts), Roseville(5 accounts), and Woodbury (27 accounts), and a few properties are served by private wells. Attached Exhibit 1 illustrates the SPRWS and North St. Paul water service boundaries within the City. July 16, 2010 Page 2 of 5 EXISTING WATER SYSTEM EVALUATION SPRWS has provided GIS mapping information forthe water main infrastructure it owns and operates within the city. This information includesthe following: Size of Water Main Age of Water Main Type of Water Main Pipe Material Water Main Break Information The SPRWS’s water main system consists mainly of cast iron and ductile iron pipe. The cast iron pipe is typically at least 40 years old and is no longer used in water main construction. The ductile iron pipe is the preferred pipe material and has been used for most of the water main construction over the last 40 years. Based on information provided by SPRWS, there are a number of segments in their water system that are constructed of cast iron pipe, are aged, and/or have experienced numerous water main breaks. The North St. Paul water main system in the northeast portion of the City also consists of cast iron and ductile iron pipe that varies in age and condition. 5-YEAR CIP FOR WATER MAIN IMPROVEMENTS As a part of this water system evaluation, we have developed a 5-year Capital Improvement Plan (CIP) for water main improvements. The CIP has been prepared based on the following: An understanding of the City’s proposed street reconstruction program over the next 5 years A review of the existing water mains within the proposed street reconstruction areas to determine the need for water main replacement We have assumed that any cast iron water main would be replaced at the time the streets are reconstructed to avoid future water main breaks within new street pavements Current SPRWS policy does not provide funding for water main replacement work unless certain criteria are met regarding frequency of water main breaks. We have reviewed the number of water main breaks within the proposed street reconstruction areas to determine when the break criteria are met and when SPRWS would provide funding for the water main replacement. Maplewood would need to provide a funding source when SPRWS funds are not available for the water main replacement work. Assuming that the City implements all of the street reconstruction work included within the 5-year CIP, approximately 6,000 feet of water main replacement will be required each year. This equates to approximately $500,000 in City funded July 16, 2010 Page 3 of 5 water main improvements annually. For reference, this level of investment is generally consistent with the water main replacement work that has been performed on an annual basis within the City over the last 10 years. For the purposes of future planning, we have also assumed that subsequent 5- year CIP’s will also include a $500,000 annual investment in water system improvements. We understand that the City anticipates a reduction in street reconstruction work in the future; however, we have assumed that inflationary costs would offset this reduction in work. Attached Exhibit 2 illustrates the City’s 5-year CIP for street reconstruction work and the areas requiring water main improvements. Approximately half of the projects identified in the 5-year street reconstruction program are anticipated to require water main replacement.The 5-year CIP does not include any water main replacement work in the North St. Paul service area. WATER AVAILABILITY CHARGE (WAC) FUND ANALYSIS Maplewood residents are currently billed fortheir water service directly by their water provider. The SPRWS and North St. Paul bills include a Maplewood surcharge to provide some City funds for water system related costs. The City of Maplewood uses two funds for surcharge revenues related to water sales; The Water Availability Charge Fund-St.Paul Water District (Fund 407) and the Water Availability Charge Fund-North St Paul Water District (Fund 408). As stated above, the vast majority of Maplewood residents are served by SPRWS and the majority of revenues are derived from this source. The following is a summary of each of these funds. St. Paul Water District Fund 407 SPRWS sells approximately 1.5 billion gallons of water per year to Maplewood residents. Water is metered and billed on either a monthly or quarterly basis, depending on user type such as residential or commercial, and is charged based on 100 cubic feet of water.SPRWS remits a surcharge of 2% of the total water bill, or approximately $100,000 on an annual basis, to the City of Maplewood. Attached Exhibit 3 provides a summary of the current and projected status of the St.Paul Water District fund. The fund shows a beginning fund balance deficit of ($159,251). The 2010 budget shows a further draw down of the fund balance to an expected deficit of approximately ($597,400). For the purposed of illustrating the projected status of the fund, we have assumed the following: July 16, 2010 Page 4 of 5 No increase in the 2% surcharge rateresulting in continued surcharge revenue of approximately $100,000 per year CIP costs of $500,000 per year Based on these assumptions, the fund will have a deficit of over ($4.6 million) by 2020 unless other funding sources are identified for the water main replacement work included in the proposed 5-year CIP. North St. Paul Water District Fund 408 The City of Maplewood collects $1.00 per account per monthof surcharge revenue for water provided to Maplewood residents by the City of North St. Paul. North St.Paul remits the revenue to Maplewood on a monthly basis and this equates to approximately $10,000 per year. FUTURE WAC SURCHARGE INCREASES St. Paul Water District Fund 407 Given the financial pressures that the St. Paul Water District Fund will continue to experience, we have completed a projection of the surchargerevenues required to bring the fund to a positive balance within approximately five to six years and then to maintain a positive balance. We are recommending an increase in the surcharge rate from 2% in 2010 to 4% in 2011, with future surcharge rate increases as illustrated in the table below. 2010201120122013201420152016 Actual Surcharge (%)2%4%5.25%6.50%7.50%8.50%9.50% Revenues($)103,400185,700253,400326,300391,600461,600536,500 In addition to the surcharge rate increases, we have assumed some limited bonding to 2015 and a one-time permanent transfer of $600,000 into the fund in 2016. The resulting 2020 fund balance would be nearly $500,000.Attached Exhibit 4 illustrates the resulting impact on the St. Paul Water District Fundwith the recommended changes. Because the surcharge revenue is based in part on the water rate, the impact on the user is a combination of the increase in the surcharge and the anticipated increase in the water rate. For 2010, the water rate is $2.15per 100 cubic feet for winter usage and $2.25 per 100 cubic feet for summer usage. We have assumed that SPRWS will increase the water rate by 4% per year. The table below shows the impact on the user at different levels of water usageassuming that the recommended surcharge rate increases are implemented. July 16, 2010 Page 5 of 5 Summer UsageUnits20102011201220132014 Low Residential30$1.35$2.81$3.83$4.94$5.92 (per Quarter) Very HighResidential200$9.00$18.72$25.55$32.90$39.48 (per Quarter) MediumCommercial120$5.40$11.23$15.33$19.74$23.69 (per Month) The 2011 surcharge for a low residential user would increase from $1.35 to $2.81 per quarter for the higher summer use. A medium commercial user would see an increase of $5.83 per month on summer usage. Attached Exhibit 5 provides a more detailed user impact summary. North St.Paul Water District Fund 408 No increases are recommended in the North St. Paul District surcharge rate at this time. There are currently no planned water main improvements in the North St. Paul service area, and North St. Paul has been willing to fund water main replacement work in the past. SUMMARY This memo summarizes the results of the analysis completed to date for the Water System Evaluation, C.P. 10-09. We are requesting staff and City Council input on some of our preliminary findings including: Review of the City’s approach to water main replacement in conjunction with street reconstruction projects Concurrence on the proposed 5-year CIP for water system improvements Discussion of possible methods of improving the health of the St. Paul Water District Fund including an increase in the current 2% surcharge rate Concurrence on the recommendation to not make any changes in the current $1per account per month surcharge for North St. Paul water customers. END OF MEMORANDUM Attachments: Exhibit 1 WaterService AreaMap Exhibit 2 5-Year CIP for Water Main Improvements Exhibit 3 St. Paul Water District Fund Summary (No Surcharge Increase) Exhibit 4 St. Paul Water District Fund Summary (with Surcharge Increase) Exhibit 5 Surcharge Increase/Water User Impact Summary COUNTY ROAD D CIR DEAUVILLE DR DEMONT AVE DEMONT AVE BROOKS AVE GERVAIS AVE VIKING DR HIGHWAY 36 E HIGHWAY 36 E SHERREN AVE COPE AVE LARK AVE LAURIE RD SANDHURST AVE COUNTY ROAD B WCOUNTY ROAD B E BURKE AVE ELDRIDGE AVE BELMONT LN MOUNT VERNON AVE E ROSELAWN AVE W BELLWOOD AVE E SUMMER AVE SUMMER AVE WATER WORKS RD W SOPHIA AVE OAK HILL CT WATER SYSTEM EVALUATION, C.P. 10-09 BISON DR WATER SERVICE AREAS ROSE AVE E JULY 16, 2010 AVENUE K Legend * AREA SERVED BY SPRWS AREA SERVED BY NORTH ST. PAUL * Includes some properties that currently do not have city water service or water service is provided DORLAND PL by an adjacent municipality KING AVE (Little Canada, Roseville, or Woodbury). ± 01,5003,0006,0009,00012,000 Feet EXHIBIT 1 (2) County Road D Court 8 DI 199412 DI 20016 2004 6 CI 1969 6 DI 2004 6 1973 8 2005 6 2004 8 0 8 DI 1988 8 DI 2004 8 DI 2004 2368,784%90 7)6:-')%6)% 6 1989 6 CI 1969 6 2004 8 DI 2004 8 DI 1988 6 1993 8 DI 1989 12 DI 1997 6 DI 2008 12 1984 6 0 6 DI 2008 6 DI 20088 DI 1989 8 DI 1983 12 DI 1972 12 DI 200712 CI 197212 CI 1972 12 DI 1987 12 DI 1973 8 DI 1984 8 DI 1982 k 16 DI 1973 8 DI 1973 12 DI 1987 k (3) TH 36/English Street ()%9:-00)(6 k ()1328%:) Intersection 8 DI 1973 8 DI 1973 ()1328%:) ()1328%:) 6 DI 1982 k &633/7%:) 8 DI 1991 8 DI 1978 8 DI 1973 k k 6 CI 1964 k +)6:%-7%:) k +)6:%-7%:) k 16 CI 19646 CI 19648 DI 1991 16 DI 1964 k k :-/-2+(6 ,-+,;%=) ,-+,;%=) 16 CI 1964 8 CI 1972 7,)66)2%:) kkk kk kkkkkkk 6 DI 2000 kkk '34)%:) 8 DI 2000 6 DI 1989 6 CI 1971 8 CI 19658 DI 20096 DI 1989 8 DI 2000 kkkkk kk 0%6/%:) 6 DI 2000 6 1965 6 CI 1964 66 D DII 11996699 6 CI 1966 kkkkkk 0%96-)6( k kk 8 DI 20086 CI 19686 CI 19648 DI 19916 DI 1969 k 8 CI 1968 8 DI 1989 k k 6 CI 1968 kkk 7%2(,9678%:) 8 DI 1991 k 8 DI 2007 8 DI 1991 k k kkkk k kk kk 8 DI 1991 '3928=63%(&;'3928=63%(&)8 CI 196516 CI 196516 DI 1969 kk 6 DI 0 kk 6 CIDI 0 k&96/)%:) kk 6 CI 1965 6 DI 20026 CI 19658 DI 2008 k k k k k k )0(6-(+)%:) 6 CIDI 0 15 CP 1993 6 CIDI 0 15 CP 1991 &)0132802 kkk k 6 CI 1963 6 DI 2006 k k k k kk kkkk kk 8 DI 2003 k 8 DI 20076 CI 1965 k k 6 DI 0 k 6 CI 1961 8 DI 1981 k k 12 CI 1966 k k 15 CP 1967 k 13928:)6232%:))k k k k k kk k 8 DI 1985 k 12 CI 1966 12 CI 1966 k k 4 CI 1961 k k k kk 6 CI 19226 CI 1922 8 DI 2002 kk kk k 637)0%;2%:);6 DI 2006 k 16 CI 1962 k 6 DI 1994 6 CI 1961 12 CI 1964 kk 2 CP 1994 kkk kk 8 DI 19798 DI 1979 k 6 DI 1994 k kk k kk k 6 DI 1974 &)00;33(%:))6 DI 1998 6 DI 2006 6 CI 19638 DI 2007 k 6 CI 1965 k 6 CI 19748 DI 1974 7911)6%:) 6 DI 2007 kk k 7911)6%:) k k 6 CI 1964 k k 8 DI 1993 k k kk 6 DI 2006 k k k 6 CI 1966 k kk 6 CI 1966 kk kkkk 8 DI 1991 k 8 CI 19656 CI 1966 k 8 CI 1974 k 1 CP 1973 15 CP 1973 k k k kk ;%8)6;36/76(;k 6 DI 2007 k k k 42 CI-CL 1960 kkkkk k kk 72 CC 1966 kk 6 DI 2009 k kk k 8 DI 2003 6 DI 2008 42 CC 1966734,-%%:)k kk k 8 DI 20088 DI 2008 k 6 CI 1961 kk k 6 DI 2008 6 DI 19746 DI 19746 CI 1973 kkkk kk k 6 CI 1961 k k k k k kkk k k k kk kk k kk 12 CI 1969 kkkk 8 CI 1963 30 CI 195630 CC 1956 kkk (7) Gladstone-Phase 3 60 DI 1988 (1) Western Hills/Larpenteur (5) Gladstone Savanna Area Streets Improvements 3%/,-00'8 (6) Gladstone - Phase 2 (4) Gladstone Area Streetscape - Phase 1 k &-732(6 8 DI 1980 12 DI 1974 k 637)%:)) 8 DI 19798 DI 1980 ;%8)67=78)1):%09%8-32'4 8 DI 1974 k =)%6'-4*36;%8)61%-2-1463:)1)287 16 DI 1987 k k (9) Bartelmy Street k kkkk k .90= k k k k k k k k k kk k k 8 CI 1965 k (8) Bartelmy Meyer k Area Streets k (10) Farell/Ferndale Area Street Improvements %:)29)/ 0IKIRH ;EXIV1EMR&VIEOW4VI k 12 DI 1986 k ;EXIV1EMR&VIEOW4SWX k k k k k k k k k ;EXIV1EMR k k k k kk k k 1EXIVMEP '- (- (12) Crestview/Highwood k Area Streets k kk 4:' (360%2(40 k /-2+%:) k kk 4VSNIGX;MXL;EXIV1EMR-QTVSZIQIRXW (11) Sterling Street 4VSNIGX;MXLSYX;EXIV1EMR-QTVSZIQIRXW (13) Lakewood/Sterling 8 DI 1987 Area Streets 6 2000 (14) Fish Creek k Open Space ± k 12 DI 1977 12 DI 1991 k 01,5003,0006,0009,00012,000 Feet )<,-&-8 7v; Q X LU 0 NI> IC -C, A M � l- M - D M C, C N M O ON1 C, l -M 7 01 M l - N 01 ID N N O N � M 7 �n ZZ N 01 O Vl N ID O ID 01 01 7 A A M C C, N Ol V 01 V N NN c� c= IC D 7 v n o A N 7 N Vl 01 7 7 O N --i N O O --i O cl� M M IC IC O r - n 01 N M A M Vl H A M l= N M O IC 7 C� cl� �n �n C, M M V1 N N 7 V C1 7 7 N 1D l --i O M M M 01 n O O 7 N D O N O Ip ll� ,--i �N r- C� ZZ M N � --i N IC M C1 � � N N M O 01 7 ID --i A A �D 's C= I H O � �n �n Packet Page Number 17 of 17 o M Vl r- O N Vl O O O O N O O 7 O c c c= C= m •� L N Y R �C O ' o "1 N O V] c0C t4 •ia M T m 101. p N p' y r' P" G' O O O �' O cCi O G' '� O O O r O � O� N Q 7 O O CQ CQ .bA Packet Page Number 17 of 17