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HomeMy WebLinkAboutCCMinutes_2008_07_22 161 Brookings City Council July 22, 2008 The Brookings Ciry Council held a meeting on Tuesday,July 22, 2008 at 5:00 p.m., at City Hall with the following members ptesent: Mayor Scott Munsterman, Council Members Julie Whaley, Mike Baxdey, Ryan Brunner (via phone),Tim Reed, Mike McClemans, and Tom Bezdichek. City Managex Jeffrey Weldon, City Attorney Steve Britzman, and Ciry Clerk Shari Thornes wexe also present. 2009 Budget Discussion. City Manager,Jeffrey Weldon,presented to the council for theix fitst review and subsequent approval, the proposed operating and capital budget for the City of Brookings for fiscai yeaY 2009; exclusive of the municipal utilities and hospital. Additional review is scheduled for August 12`h. First reading of the 2009 Budget Oxdinance will be held on August 26�'. 6:00 P.M. CITY COUNCIL MEETING Consent Agenda: The Liquor Store Discussion from the planning session was added to the action meeting. A motion was made by McClemans, seconded by Bezdichek, to apptove the consent agenda,which included: A. Action to approve the agenda, as amended. B. Approval of the July 8 and July 14, 2008 City Council minutes. C. Action on Resolution No. 58-08 to award bids for a Landfill All Purpose Spraying Machine. Resolution No. 58-08 Resolution Awarding Bids Landfill�1I1 Purpose Spraying Machine Whereas,the City of Brookings has receaved the following bid fox one(1)2008 r1ll Puxpose Spraying Machine: New Waste Concepts,Inc. Base Bid $82,191.00 . Trade-In 1996A!lPurpore SprayingMacbine SerialNumber RI�4R-2194 $ 8,000.00 Net Price �74,191.00 Now Thexefore,Be it Resolved that the bid itom New Waste Concepts,Inc.,in the amount of $74,191.00 plus the trade-in for the above-mentioned 2008 r111 Purpose Spxaying Machine be accepted. D. Action on Resolution No. 61-08 declaring Fire Department equipment surplus. Resolution No.61-OS Declaring Surplus Propertq WHEREAS,the City of Brookings is the owner of the following described vehicles formerly used by the City of Brookings Fire Department: Engine 3: 1981 GMC Smeal Pumper 1000 GPM Top-mount Model TC7D042 VIN# 1GDL7D1E88V56974 Brush 3: 1985 r1I�1 General HumVee Serial#535148 (Purchased from SD Fedexal Property 1lgency in 2000) WHEREr�S, in the best financial interest, it is the des�e of the City of Brookings to sell same as surplus property; WHERF,AS,the City Manager hereby authorized to appoint thxee quali6ed appraisess to appraise the value of the property; NOW,THEREFORE,BE IT RESOLVED by the governing body of the City of Bxookings,South Dakota,that this property be declaxed surplus propexty accotding to SDCL Chapter 6-13. E. Action on Resolution No. 63-08,Authorizing Change Order (CCO#1 Final) For 2008 Edgebrook Go1f Course Cart Path and Moriarry Park Sidewalk/Bike Path Project, Contracted Dated September 4, 2007 to Howry Construction Company, Rockwell City, Iowa. Resolution No.63-08 A Resolution authorizing Change Order(CCO#1 FINr1L)for 2008 Edgebrook Golf Couxse Cart Path and Moriarty Paik Sidewalk/Bike Path Ptoject,Contracted Dated September 4,2007 to Howry Construction Company,Rockwell City,Iowa. Original Contract Bid Price Schedule 1. EdgeBrook Goif Course Cart Path • Bid—2,5001ineal feet @$14.76 LF= $36,900.00 • �ctual—measuzed lineal feet, 3088 LF @$14.7G LF= 545,578.88 �dditional $ 8,678.88 16 � Schedule 2. Moriarty Park Sidewalk/Bike Path • Bid—1,8001ineal feet @$14.76 = $26,568.00 • �ctual—measured lineal feet, 2,045.3 LF @$14,76 LF= 1 8. 3 Additional $ 3,620.63 Total Original Contract Bid Price(Schedule 1 &2) �63,468.00 Total Final Contract Price(Schedule 1&2) $75,76G.71 llddition to Contract $12,298.71 BE IT RESOLVED by the City Council that the following Change Order be allowed for 2008 Cart Path and Sidewalk/Bike Path Construction: CCO Number 1 (Final)—�ldjust contiact with an incxease of$12,298.71 On the motion,all present voted yes;motion carried. ABLE Award. The Shamrock was presented with the 2008 ABLE (Abiliry,Belief,Leadership, and Equality)Award by the Brookings Committee for People who have Disabilities. Onen Forum. Beverly Dobbs, 131 Jefferson Avenue,asked the Council to review the current animal control ordinance and consider a limitation on the number of pets allowed at each residence. City Manager Weldon said he has a draft ordinance that the Council can review on August 12'�. Mrs. Dobbs also asked for clarification on rentals and density i.ssues asking the Council to consider modifications to the current laws. Discussion and�ossible action on a Memorandum of Understanding between the Citx of Brookings and South Dakota State University for the Wellness Center. A motion was made by Whaley, seconded by Reed,to approve a Memorandum of Understanding between the City of Brookings and South Dakota State University for the Wellness Centex. Discussion: Dr.Michael Beger, Vice Presldent ofAdministration for South Dakota State Univer�ity,pre.rented the propo.red Memorandum of Underrtanding betiveen the City of Brooking.r and SDSU. This MO U i.r pur.cuant to City Ke.rolution No. 1>5-96 that declar�d the city'r intent to.rale.r tax farnd.r for the Wellness Center. Dr. Reger reque.rted thi.r item be tabled until he can pre.rent it to the Board of Kegent.r. A motion was made by Reed, seconded by McClemans,to table. All present voted yes,Brunner abstained,motion to TABLE passed. Resolution No. 59-08—Annexation. A motion was made by Bardey, seconded by�Ihaley, to approve Resolution No. 59-08,annexing the north 940 feet of the west 2,340 feet of the SE '/a of Section 1-T109N-RSOW. All present voted yes;motion carried. Resolution No.59-08 �1NNEX1ITION VUHERE�S,The City of Brookings is authorized pursuant to South Dakota Codified Law 9-4-1 to annex contiguous territory upon receipt of a written petition, describing said territory sought to be annexed, signed by not less than thtee-fourths(3/4)of the legal votexs and by the oumer os ownexs of not less than three-fourths(3 f 4)of the value of said territoLy,and WHEREAS,The City of Brookings desires to annex the following descabed property,to wit: Tlie North 94fl feet of the West 2,340 feet of the SE'/.of Section 1-T109N-RSOW WHERE�IS,the aforesaid land is contiguous to the pxesent boundaries of the City of Brookings,and WI�REr1S The City of Brookings has seceived a Petition Fox rl.nnexation of Territory signed by the owners of greater than three-fourths(3/4) of the value of the aforesaid property and there being no legal voters residing in said territory,now therefoze, BE IT RESOLVED By the City of Bxookings,South Dakota,that the property described above is heieby annexed to the City of Brookings. Resolution No. 60-08—Change Ordet. A motion was made by Bardey seconded by Reed,to appxove Resolution No. 60-08, authorizing Cha.nge Order#4 (CCO#4), for 2008-03STI, Downtown Streetscape Project. All present voted yes;motion carried. Resolution No.60-08 �1 Resolution Authouzing Change(Jrder#4(CCO#4)Fox 2008-03ST'I Downtown Streetscape Project 163 Winter Bxothe�s Undexground,Inc.,Sioux Falls,South Dakota BE IT RESOLVED by the City Council that the following change order be allowed for 2008-03SSI, Downtown Streetscape Project: Construction Change Order Number 4:Adjust estimated the bid contract for the following bid items at the appropriate bid prices for a total decrease of�170,522.00 to the conttact: • Omit Bid Item No.C8(Safety Bollard) • Add Bid Item No.C15 (Safety Bollard Concrete Pad) • Omit Bid Item No.E6 (3-Head Traffic Signal Light-incandescent) • Omit Bid Item No.E8(Traffic Signal Controllei w/cabinet—TS2) • rldd Bid Item No.E22(3-Head Traffic Signal Light—LED) • Add Bid Item No.E23 (Txaffic Signal Controllet w/ cabinet—LMD 40) • rldd Bid Item No.E24(3-M Opticom Pxe-emption System) Ho�e VI Housing Re-hab Grant Program. Randy Hanson,Mills Construction,asked the City Council to consider supporting a HOPE VI Main Street Grant Application. Doris Roden provided the following additional information regarding the HOPE VI Main Street Program. She said a portion of Federal HUD HOPE VI funds axe set aside fox gtants to small communities that have Main Street programs. Eligible communities must have a population of less than 50,000, and 100 or less physical public housing units. The purpose of the HOPE VI Main Street Program is to provide assistance to smaller communities in the development of affordable housing in connection with a Main Street revitalization effort. HOPE VI funding can be used as gap financing to teconfigure obsolete office/commercial space into income pYOducing xental housing. Roden said Brookings meets the criteria for HOPE VI funding with a population under 50,000, no public housing units and a Main StYeet revitalization program,which we all know as Downtown Bxookings Inc. There is $4 million available for 2008 HOPE VI Main Stteet grants. Only local governments may apply for the funding. Application must be submitted electronically to Grants.gov by August 18. Any other organization or property owner has to team with their city. The Housing Project may belong to a private owner,partnership, corporation,local government,Main Street organization, non-profit, etc. There is a mandatory 5%Applicant Match which can be in cash or in-kind. If the application was made for$1 million, then the 5% applicant match would be $50,000. In this project that ma.tch would come from the private developer AND/OR the city. For instance,if 40 parking spaces could be configured on the grounds of the propexty and 45 were requixed, the city could provide an in- kind match of five parking spots in the city parking lot. The city would need to document the value of those parking spaces for the application. T'he application would document the value that the private developer would put into the project. And the grant could help leverage other (non-Federal) funding sources—pxivate funds,a private loan,building materials, construction, architectuxal and engineexing woxk, etc. The Main Street portion of the HOPE VI Program was fitst offered in 2005. Five projects were awarded that year fox appro�mately$500,000 each. In 2006, only one community applied and received$500,000. In 2007, the grant limit was raised to $1 inillion and three communities were awaxded$1 million each. One of those communities was Oskaloosa, Iowa. They are developing the second floor of three adjoining Main Street storefront buildings into eight affordable housing units. Hanson said Teen Challenge of the Dakotas engaged Mills to do a new facility outside of town and needs to sell the existing facility and utilize those funds to start their fund raising efforts. Hanson said his company feels this building would be great for affordable living units near the downtown. The plan is to have 28 units. The chiropractic office will stay. He has hired a professional grant writer to do the paperwork. Weldon asked for clarification on the City's cuxrent and long term obligations undex this grant. Action on any documents related to this grant need to be scheduled for the August 12`�. Hanson will provide additional information at that time. 16 � Resolution No. 62-08 —Real Estate Purchase Agreement. A motion was made by Reed, seconded by Whaley, to approve Resolution No. 62-08, a Resolution Authorizing the Execution of Real Estate Purchase Agreement. All present voted yes;motion carried. Resolution No. 62-08 Resolution rluthorizing the Execurion of Real Estate Purchase�lgreement BE IT RESOLVED by the City Council of the City of Brookings,South Dakota as follows: WHEREAS,the City of Brookings desires to purchase the following described property: Lot Fifteen (15), Block Twelve(12),of East Acres Second�lddition to the Ciry of Brookings, County of Brookings,State of South Dakota,and WI-�EREr1S,the propeity has been offered for sale and the City of Brookings has received a proposed Purchase rlgreement,the terms of which are satisfactory to the City of Brookings; NOW THEREFORE,IT IS HEREBY RESOLVED by the City Council of the Ciry of Brookings, South Dakota,as follows: �. That the City acquire tide to the above-described pxoperty pursuant to a Purchase rlgxeement with Jennifez K.Kastner and Greg R Kastner fox future land use needs of the Citq of Bxookings, South Dakota;and B. That the Mayor,City Clerk and City Manager are authorized to execute the documents required to complete this transaction in accordance with this Resolution. Resol�tion No 64-08—Real Estate Purchase Agreement A motion was made by Bartley seconded by Reed, to approve Resolution No. 64-08, a Resolution Authorizing the Execution of Real Estate Purchase Agreement. All pxesent voted yes;motion carried. Resolution No.64-08 Resolution�uthorizuig the Execution of Real Estate Purchase rlgreement BE IT RESOLVED by the City Council of the Ciry of Brookings,South Dakota as follows: Wf-�ERF�1S,the City of Bxookings desires to purchase the following described property: Lot One(1)and the East Ten(10�Feet of Lot Two(2),Block Thirteen(13),of East r�cxes Second �lddition to the City of Brookings,County of Brookings,State of South Dakota,and VUHEREIIS,the property has been offered for sale and the City of Bxookings has received a proposed Purchase rlgreement,the terms of which are satisfactory to the City of Brookings; NOW THEREFORE,IT IS HEREBY RESOLVED by the City Council of the Ciry of Brookings, South Dakota,as follows: r1. That the City acquire tide to the above-described pxopexty puxsuant to a Purchase Agreement with Eric rldams,Power of 1�ttomey for Nevorah J.�ldams,for futuxe land use needs of the Ciry of Biookings,South Dakota;and B. That the Mayor,City Clerk and City Manager are authorized to execute the documents required to complete this transaction in accoxdance with this Resolution. Liquor Store Re�ort Analysis. At a recent council meeting Mike McClemans presented a xeport regarding the status of the Brookings Liquor Store and its future. Bill Purrington,Municipal Liquox Store Manager,presented the following report in response to questions raised by Council Member McClemans and others. Purrington provided a report that compared the present retail operation with a theoretical override opexation. He said the retail sales fxom 2009-2021 are based on 2008 sales plus an increase in sales fxom the sale of alcoholic beverages only., He said this is an important point since this report compates the retail operation with a theoretical override operation in which an override is applied to alcoholic beverage purchases only. 2008 retail sales are on track to increase by$400,000. Retail income for 2008 was calculated by$400,000 by 22% (GP%), subtracting$20,000 (projected expense increase per year) and adding the 2007 retail income. For purposes of this comparison Purrington projected retail sales to increase each year by$300,000 through 2011 and by 7%per year from 2012-2021. Retail purchases for 2008 and beyond are calculated by dividing retail sales by 1.28 (our markup percentage). Override income is calculated by taking 10% of retail purchases. The yearly retail income is the profit from the yearly sales increase of alcoholic beverages,minus the yearly expense increase ($20,000),plus the previous year's retail income. Using 2009 as an example, the calculation is: $300,000 (sales increase) x�2% (gross profit%) _ $66,000 (profit from the yeaxly sales increase) - $20,000 (yearlp expense increase) + $173,292(2008 retail income) _ $219,292 (2009 retail income). 165 Purrington said the crucial assumption in the calculation of retail income is that expenses wi11 incxease by no more than$20,000 per year. He believes this is a very realistic pYOjection as the Lic�uor Store has made pexsonnel adjustments which will�ealize substantial savings this year and in the future. The main reason he believes expense increases per year will stay under$20,000 is that the total of the store's yearly lease increase and personnel expense increase will be less than$10,000 and these axe the largest expenses. Ketail income vs. override income; for example the override income exceeds retail income by$134,156 in 2007, by$99,638 in 2008, by$76,718 in 2009 and by $54,156 in 2010. In 2013 the trend reverses and zetail income exceeds override income by$18,633 and increases to $119,068 in 2016 and $370,632 in 2021. A comparison was also made between the present overYide income of$438,486 plus the theoretical override income of$239,448 (2007 puxchase amount x 10%) and the transfer amount of$370,000. The difference quoted was $307,934. However, the actual difference between the two operations is $134,156 which is the amount in the last column of this chaxt (2007). Comparing override income to retail income is more valid than comparing override income to the yearly transfer amount because the yearly transfer is not an operating revenue figure. It is simply how much of the revenue from the liquor store opexation is transferred to the general fund. The total retail income for the years 2007-2016 is $3,444,497 and the total overtide income for the same period is $3,580,593. The total retail income fox the years 2007-2021 is $7,706,254 and the total override income for the same period is $6,539,798 The reason why this report was extended through 2021 is to illustrate the long term potential of the retail operation. For instance,retail income in 2016 is $599,982 which is almost si�c times the retail income in 2007. This figure grows to over$1,000,000 in 2021. Even though total override income exceeds total retail income for the years 2007-2016 by$136,096 in 2016 there is a substantial turnaxound in this arnount fox the yeaxs 2007-2021. For this time frame retail income exceeds override income by$1,166,456. In the conclusion of his report,Purrington said if the City continues to opexate the Brookings Liquor Store with city employees at the pxesent location it will make much more money in the long run than it would by leasing the store on an override basis. He believes that the City should negotiate a new long-term lease because of oux profit potential. Another xeason why he believes the City should continue to opexate at its present location is because the facility is large enough to accommodate sales of$6,000,000 and mote as projected in 2016. Another benefit of staying at the present location is that the store will not have any major capital expenditures,with the exception of cash register updates, fot the next 20-40 yeaxs. The shelving and fixtuxes at the old store lasted over 30 years and the present shelving, flooring and other ftxtures should last even longer. PuYrington said another figuYe quoted earliex regarding the Liquor Store was �1,422,309. The assertion is that the Liquor Store would gain this much in the city treasury if it converted the Store's inventory into cash and ceased operating a liquor store with city personnel. The$1,422,309 figure is broken down into $576,104 in inventory, $538,271 cash on hand and$307,934 profit difference that was quoted pYeviously. If the City were to "cash out" today by converting the Liquor Stoxe inventory into cash it wot�ld only receive roughly$575,000 from the sale of the inventory minus accounts payable obligations. T'he cash on hand figure is not potential income because it is already in the bank and as stated earlier the potential profit figure of$307,934 is not a valid number. T'he store's accounts payable obligation would be benefits payable which is $58,699 plus any unpaid bills for merchandise. The Ciry would also owe the balance of payments on a 10-year lease depending on whether or not someone would assume the lease. Thus,the City would gain between$400-500,000 in one-time money but would lose most of what was spent for leasehold improvements and fixtures which totaled almost$500,000. He illustrated in the chart that the store has great xevenue potential as evidenced by the fact that its retail income in the year 2016 is projected to be almost su�times more than it was in 2Q07. If the City were to "cash out" this potential revenue,which far exceeds the override potential revenue,will be lost forever. If someone other than the City opexates the liquor stoxe they will tealize this potential and not the City. After reviewing this chart and narrative Purrington said he is confident that the City Council will come to the same conclusion that he did. In his opinion, continuing to operate a retail liquor store with city personnel is the very best option for the long term interests o£the ciry of Brookings. 166 Council Member McClemans said he had reviewed oprions that were considexed for the liquor store and said the simplest and most profitable option would have been to allow another entity to lease the store. McClemans quesrioned Purrington's gross profit margin projections for the store noting that the profit margin has been in the 3.5%range when it should be 8%. He suggested the City may have an opportunitq to make more money through oudet/leased stores rather than the municipal stoxe. McClemans noted that Purrington is projecting profits over 7%in 2012 and 2013. He asked how the store's profitability would be increased. Purrington responded that sales are increasing every year which are added to the bottom line. Purrington said the store's lease is low compared to other retail spaces. He said the store needs to grow into the building and the expenses. Customer counts continue to increase. Purrington questioned the legality of allowing more than one off-sale liquor operating agreement to separate entities in a local option community. Purrington responded to questions regatding capital investments made at the new location. He said the combined cost of structure improvements and fuctures and equipment was approximately$490,000. Those expenses are reflected in an annual depreciation of$43,000. There was discussion raised by Council Member Bartley regaxding the differences between mark-up on the retail and wholesale sides of the business. He suggested there are other ways to achieve the 8% goal and that could be done through retail price increases rathe�than the override. Bartley felt that the City made a commitment to move to this location with a goal to increase sales. Retail prices can be adjusted to reach that goa1. If prices get too high and sales drop, then adjustments can be made. He was not supportive of sourcing out the liquor store if it still provides a pxofit. He questioned why the city would lease it out and pass the 10% override to someone else. The City has made a significant investment in this new operation. City Manager Weldon said the Council's goal is to reach an 8%net profit but it will take some time to get there. The liquor store now has one complete year of operating history in the new location, but it can't make the leap to 8% that quickly. The city made a commitment to a new location and process and he feels the city would be best served to let the pxocess work. T'here were additional capital expenses,but that isn't unusual in new operations. The opexating expenses aren't out of line. Steps have been taken to reduce expenses including reduction in management personnel. They will also evaluate changes in mark-up and advertising. He recommended staying the course. There was consensus to reassess the liquor store on a quarterly basis. Ad,journ. A motion was made by Bartley, seconded by McClemans, to adjourn. All pxesent voted yes;motion caxried. Meeting adjourned at 7:50 p.m. CITY OF BROOKINGS �� —..� �a\,�ooaa .��1� Scott D. unsterman,Mayor ATTEST• �° ''o�° O i pp y '°�cA .� �� y�i� ,i:0 �5.� o. O• •p� fJ(/ Shari Thornes,City Clexk