Minutes of the regular meeting of the City Council of Apple Valley, Dakota County, Minnesota, held December 9th, 2004, at 8:00 o'clock p.m., at Apple Valley Municipal Center.

PRESENT: Mayor Hamann-Roland; Councilmembers Bergman, Erickson, Goodwin, and Grendahl.

ABSENT: None.

City staff members present were: City Administrator Lawell, City Clerk Mueller, City Attorney Dougherty, City Engineer Gordon, Finance Director Ballenger, Assistant Finance Director Broughten, Assistant to the City Administrator Grawe, Public Works Director Heuer, Parks and Recreation Director Johnson, Police Chief Johnson, Community Development Director Kelley, Police Captain Lohse, City Planner Lovelace, Human Resources Manager Strauss, and Fire Chief Wassmund.

Mayor Hamann-Roland called the meeting to order at 8:00 p.m. Everyone took part in the pledge of allegiance to the flag.

APPROVAL OF AGENDA

MOTION: of Erickson, seconded by Bergman, approving the agenda for tonight's meeting as amended. Ayes - 5 - Nays - 0.

AUDIENCE - RECOGNITION FOR COMMITMENT TO HIGHER EDUCATION

Mayor Hamann-Roland asked if anyone was present to address the Council, at this time, on any item not on this meeting's agenda. Dr. Ron Thomas, President of Dakota County Technical College; Dr. Cheryl Frank, President of Inver Hills Community College; and Dr. John Pyle, of St. Mary's University; were present to thank the Council for its support and spoke about the success of the higher education partnership now operating in the old City Hall building. They presented a plaque to the City recognizing its commitment to higher education.

CONSENT AGENDA

MOTION: of Goodwin, seconded by Bergman, moving consideration of 2005 street light rates and Valleywood Golf Course and Ice Arena fees to the regular agenda and approving all remaining items on the consent agenda. Ayes - 5 - Nays - 0.

CONSENT AGENDA ITEMS

MOTION: of Goodwin, seconded by Bergman, approving the minutes of the regular meeting of November 23rd, 2004, as written. Ayes - 5 - Nays - 0.

MOTION: of Goodwin, seconded by Bergman, adopting Resolution No. 2004-252 accepting, with thanks, the donation of $1,562.50 from the American Heart Association toward the purchase of an Automated External Defibrillator (AED) for use by the Fire Department. Ayes - 5 - Nays - 0.

MOTION: of Goodwin, seconded by Bergman, approving a Revised D.A.R.E. and Police Liaison Services Agreement with Independent School District No. 196, for 2004-2005, as attached to the Police Chief's memo dated December 1, 2004, and authorizing the Mayor and City Clerk to sign the same. Ayes - 5 - Nays - 0.

MOTION: of Goodwin, seconded by Bergman, appointing Kern, DeWenter, Viere, Ltd., as auditors for the year 2004, at a cost of $36,000.00, and authorizing the Mayor and City Clerk to execute the Letter of Understanding, as attached to the Finance Director's memo dated December 6, 2004. Ayes - 5 - Nays - 0.

MOTION: of Goodwin, seconded by Bergman, approving renewal and issuance of 3.2 Percent Malt Liquor Licenses for 2005, as attached to the City Clerk's memo dated December 6, 2004. Ayes - 5 - Nays - 0.

MOTION: of Goodwin, seconded by Bergman, adopting Resolution No. 2004-253 restating, amending, and adding fees and charges for certain City services effective January 1, 2005. Ayes - 5 - Nays - 0.

MOTION: of Goodwin, seconded by Bergman, approving revised City Attorney's fees for 2005 legal services as attached to the Assistant to the City Administrator's memo dated December 9, 2004. Ayes - 5 - Nays - 0.

MOTION: of Goodwin, seconded by Bergman, adopting Resolution No. 2004-254 establishing revised uniform land values for calculating cash in lieu of land contributions for public land dedications resulting from subdivisions, at $150,000 per acre for single family residential, $175,000 per acre for multiple family residential, $100,000 per acre for industrial, and $260,000 per acre for commercial uses. Ayes - 5 - Nays - 0.

MOTION: of Goodwin, seconded by Bergman, approving a setback variance to allow for construction of a future house to within 20 feet of the front lot line on Lot 2, Block 2, Palomino Hills (403 Cimarron Road), as recommended by the Planning Commission. Ayes - 5 - Nays - 0.

MOTION: of Goodwin, seconded by Bergman, approving reduction of subdivision financial guarantees for New Horizon Childcare Center, from $31,042.00 to 0; and New Horizon Childcare Center NRMP, from $5,437.50 to 0. Ayes - 5 - Nays - 0.

MOTION: of Goodwin, seconded by Bergman, approving Change Order No. 1 to the contract with Frontier Construction Co. for Project 02-196, Legacy of Apple Valley North Utility and Street Improvements, in the amount of an additional $49,271.60. Ayes - 5 - Nays - 0.

MOTION: of Goodwin, seconded by Bergman, accepting installation of Playground Equipment at Newell Park as final and authorizing final payment on the contract with Webber Recreational Design, Inc., and Miracle Recreation Equipment Co., in the amount of $35,000.00. Ayes - 5 - Nays - 0.

MOTION: of Goodwin, seconded by Bergman, approving hiring Kathy Jo Price for the position of Payroll Technician as listed in the Personnel Report dated December 9, 2004. Ayes - 5 - Nays - 0.

MOTION: of Goodwin, seconded by Bergman, approving hiring Scott F. Swanson for the position of Liquor Operations Manager as listed in the Personnel Report dated December 9, 2004. Ayes - 5 - Nays - 0.

MOTION: of Goodwin, seconded by Bergman, approving hiring the seasonal employees as listed in the Personnel Report dated December 9, 2004. Ayes - 5 - Nays - 0.

END OF CONSENT AGENDA

STREET LIGHTING SYSTEM RATES FOR 2005

Councilmember Bergman said surveys done at different times have shown that there are a number of street lights that are not operating. He also expressed concern about the length of time it takes for Dakota Electric to repair some of the lights. Greg Miller, CEO of Dakota Electric Association, was present and said the practice has been that when citizens call and report street lights not working, they are repaired. This year 545 lights have been repaired. The average response time is one to two days and lights are generally repaired within three days. In commercial areas, there is a rotation schedule where lights are replaced every three years. There was a problem with a particular light on County Road 42 that should not have taken as long to repair as it did.

Councilmember Goodwin asked if other cities have a procedure on surveying and reporting lights and whether the City should be involved in some type of repair parts inventory to help with the process. Mr. Miller said most cities rely on citizen reporting or have their snow plow drivers report lights. It was noted that the City newsletter contains an article asking citizens to report outages and details on where to call.

Mayor Hamann-Roland noted the street light rates increased by 25 percent for 2004 and 2005 and asked whether there could be more incremental increases in the future. Mr. Miller commented on the Public Utility Commission rate approval process which involves a study and is generally approved as a one-step increase. Street light charges are set at a fixed rate, per structure, per year.

MOTION: of Goodwin, seconded by Bergman, adopting Resolution No. 2004-255 setting street lighting system rates effective January 1, 2005, setting monthly rates for single family at $1.64, multiple at $1.24 per unit, commercial in ring route at $8.15 per acre, and other commercial at $4.33 per acre. Ayes - 5 - Nays - 0.

COBBLESTONE LAKE PLANNED DEVELOPMENT AMENDMENT

Mr. Lovelace reviewed his memo, dated December 6, 2004, concerning proposed amendments to the performance standards for Zone 2 of Planned Development No. 703, Cobblestone Lake. Zone 2 includes Egret Lodge townhomes approved November 9, 2004, and was originally intended for multi-story condominium buildings. The site was determined to be a better location for townhomes, but amendments to some of the design standards are required to bring them into conformance under the planned development.

MOTION: of Goodwin, seconded by Grendahl, passing Ordinance No. 763 amending Article A28 of Appendix F of the City Code regarding permitted uses and minimum standards and requirements in Zone 2 of Planned Development No. 703 (Cobblestone Lake); as recommended by the Planning Commission. Ayes - 5 - Nays - 0.

PROPERTY TAX LEVY & 2005 CITY BUDGET

Mr. Lawell described the budget process and meetings held to consider setting the property tax levy and 2005 City budget including a public hearing on December 6, 2004. Mr. Ballenger presented the background information and details of the budget and tax levy as covered at the public hearing.

Councilmember Grendahl said the City's tax levy has increased 85% since 2000 (49% without state aid statistics) while population has grown nine percent. In 2000, cash flow reserves were at 37% and 69% is projected for 2004. Growth in 2003 and 2004 should be able to pay for the taxes and there should be no other increases. Capital project funds are already included or covered within specific funds such as the water and sewer fund. She suggested the State Auditor's 2002 special study on municipal enterprise activities be reviewed. It looked at such things as fund transfers from utilities to subsidize other funds. She would like to use the $1,100,000 projected as Market Value Homestead Credit (MVHC) in the budget and not increase property taxes.

Councilmember Goodwin referred to his November 23, 2004, memo and said he agrees cash flow reserves should be discussed and he would like to see a specific policy approved. He supports the proposed budget. He commented on the loss of state aid and noted that a sample home with a market value increase of 10% without the loss of state aids would not see an increase in the City's share of property taxes.

Councilmember Bergman commented on fund balance discussion and said he disagrees that the State should tell cities to reduce fund balances when it is facing a deficit because of its actions. He asked what will happen with the balance of trunk charges when the City is fully developed. He also asked where the road escrow fund deficit is shown. Mr. Ballenger said trunk rates are set so that the balance should be zero when development is completed. The road escrow, or major street fund, is contained within the capital project funds total and is shown as a summary only.

MOTION: of Erickson, seconded by Goodwin, adopting Resolution No. 2004-256 approving setting the City tax levy collectible in 2005 at $17,929,158 and approving 2005 budgets with total revenue of $40,308,271 and expenditures of $36,476,539.

Mayor Hamann-Roland said the 2005 budget includes establishing a Future Capital Project Fund. The City's auditor reviewed the proposed reserve policy and supports it as reasonable. The City has received two bond rating increases in the past year which shows the City is doing a good job of dealing with financial issues.

Councilmember Grendahl asked for clarification on whether depreciation costs are included in the budget. Mr. Ballenger said they are. Councilmember Goodwin noted that they are as far as past costs, but replacement costs are not covered.

Vote was taken on the motion. Ayes - 3 - Nays - 2 (Bergman and Grendahl).

Councilmember Bergman said he agrees with staffing included in the budget, but voted in opposition because he wanted to see negative sports arena and road escrow fund balances taken care of tonight.

GENERAL FUND RESERVES POLICY & FUND ALLOCATION

Mr. Lawell reviewed his memo dated December 6, 2004, concerning general fund reserves policy and fund allocation. Councilmember Goodwin's November 23rd memo laid out five steps toward accomplishing this and three are proposed tonight. The reserve policy suggests maintaining a five-year average of accounts payable and encumbrances, compensated absences, and six months of operating expenditures in the general fund. It allows for fluctuation and provides for an annual review of the adequacy of reserve balances. In approving the 2005 budget, a Future Capital Project Fund was established with initial revenue of $1,112,271 from MVHC. Under the reserve policy, about $2,900,000 is available in the 2005 budget for transfer to this fund from the general fund.

Mr. Lawell reviewed potential internal fund transfers that have been previously discussed. They are the $650,622 deficit in the Sports Arena Fund, resulting from facility improvements, and the $2,511,918 deficit in the Road Escrow Fund. After the Council considers the policy, it can then consider fund allocations. Councilmember Goodwin's memo also suggested a timetable of March 2005 for prioritizing capital projects and considering a policy on the Water and Sewer Fund Balance.

Councilmember Grendahl said in 2000 the City did not have six months of cash flow available and survived on 37%. She believes the City has other funds available for cash flow.

MOTION: of Goodwin, seconded by Hamann-Roland, adopting the City of Apple Valley Reserves Policy for financial funds as attached to the City Administrator's memo dated December 6, 2004. Ayes - 4 - Nays - 1 (Grendahl).

MOTION: of Goodwin, seconded by Erickson, approving the transfer of $2,908,758 from the General Fund to the Future Capital Project Fund in accordance with the Reserves Policy for financial funds.

Councilmember Grendahl said she prefers not to increase the tax levy when the City has these funds available. Councilmember Erickson said he has always acknowledged that fund balances were going to be used toward capital projects but there was never a specific fund for them.

Vote was taken on the motion. Ayes - 4 - Nays - 1 (Grendahl).

Councilmember Bergman asked whether fund deficits are going to be addressed. Councilmember Erickson said he would consider them, but would prefer an opportunity to discuss them before acting.

MOTION: of Goodwin, seconded by Hamann-Roland, approving the transfer of $650,622 from the Future Capital Project Fund to the Sports Arena Fund. Ayes - 4 - Nays - 1 (Grendahl).

MOTION: of Goodwin, seconded by Hamann-Roland, approving the transfer of $150,000 from the Future Capital Project Fund to the Road Escrow Fund.

Councilmember Erickson asked whether there is an urgency to act on this item. Mr. Ballenger said the City has indicated to Moody's rating agency that the deficit would be paid off over time and they were satisfied with that answer. Each year approximately $50,000 is budgeted toward that as well as any excess State Aid Street funds.

Vote was taken on the motion. Ayes - 4 - Nays - 1 (Grendahl).

ORDINANCE AMENDING FEES CONTAINED IN CITY CODE

The City Clerk reviewed proposed amendments to fee schedules contained in the City Code as described in her memo dated December 6 2004. Fee adjustments are proposed for building, heating, and plumbing permits; cemetery services; public improvements; peddler/solicitor and tree work licenses; planning and development fees; and increasing the mandated Metropolitan Council Environmental Services service availability charge from $1,350.00 to $1,450.00.

MOTION: of Goodwin, seconded by Erickson, waiving the procedure for a second reading and passing Ordinance No. 764 amending the Fee Schedule Appendix of Title III of the City Code by adjusting certain fees and charges effective January 1, 2005. Ayes - 5 - Nays - 0.

VALLEYWOOD GOLF COURSE & ICE ARENA RATES

Mr. Johnson reviewed the recommendation on 2005 rates for Valleywood Golf Course and the Ice Arenas as attached to his memo dated December 6, 2004. The golf course will be offering new 20 and 10 round cards for use on weekdays. Ice rental will remain unchanged at $165.00 per hour for prime time and $110.00 for non-prime time.

Councilmember Bergman asked if the golf course fee structure allows for funding to make improvements to the course. Mr. Johnson said the fees cover operating costs, but do not cover capital improvement costs such as a clubhouse.

MOTION: of Bergman, seconded by Goodwin, setting the 2005 fee schedules for Valleywood Golf Course and Apple Valley Sports Arena and Hayes Park Arena ice rental, as attached to the Parks and Recreation Director's memo dated December 6, 2004. Ayes - 5 - Nays - 0.

MVTA PARK AND RIDE PARKING

Councilmember Grendahl said the Minnesota Valley Transit Authority (MVTA) will lose the use of Watson's parking lot for overflow park and ride parking January 1st. It was hoped this space could be used until the new transit hub on Pilot Knob Road is completed in another year. Part of the parking shortage results from the increasing number of Lakeville residents using the service.

Mr. Kelley said, due to Federal funding of the MVTA's parking lot, it cannot impose restrictions, but some type of permitted on-street parking is being considered. Councilmember Goodwin said this is an issue Lakeville needs to address and it should be brought to their attention.

MOTION: of Goodwin, seconded by Hamann-Roland, directing that a letter to Lakeville be drafted, for the Mayor's signature, concerning transit options and funding for their residents and the Mayor and City Administrator meet with Lakeville officials to discuss the issue. Ayes - 5 - Nays - 0.

COMMUNICATIONS & CALENDAR

The Council received a memo dated December 6, 2004, with a calendar listing upcoming events.

CLAIMS AND BILLS

MOTION: of Bergman, seconded by Goodwin, to pay the claims and bills, check registers dated November 30, 2004, in the amount of $9,091,526.83; December 1, 2004, in the amount of $18,626,876.63; and December 8, 2004, in the amount of $19,611,911.73. Ayes - 5 - Nays - 0.

MOTION: of Goodwin, seconded by Grendahl, to adjourn. Ayes - 5 - Nays - 0.

The meeting was adjourned at 11:18 o'clock p.m.