CITY OF SHORELINE

SHORELINE CITY COUNCIL

SUMMARY MINUTES OF SPECIAL MEETING

Monday, November 29, 1999

6:30 p.m.

Shoreline Conference Center

Mt. Rainier Room

PRESENT: Mayor Jepsen, Deputy Mayor Montgomery, Councilmembers Gustafson, Hansen, King and Lee

ABSENT: Councilmember Ransom

1. CALL TO ORDER

The meeting was called to order at 6:37 p.m. by Mayor Jepsen, who presided.

2. FLAG SALUTE/ROLL CALL

Mayor Jepsen led the flag salute. Upon roll call by the City Clerk, all Councilmembers were present, with the exceptions of Councilmember Lee, who arrived shortly thereafter, and Councilmember Ransom.

Councilmember Hansen moved that Council excuse Councilmember Ransom. Councilmember Gustafson seconded the motion, which carried 5 - 0.

3. REPORT OF CITY MANAGER

City Manager Robert Deis invited Council to the All-City staff meeting on December 10^th.

Mr. Deis asked Council to consider two items not included in the Council packet: 1) a motion to authorize the City Manager to amend the Lease Agreement with Highland Plaza LLC (continued from November 22^nd); and 2) a motion to authorize the City Manager to execute an Addendum to the Highland Plaza Lease Agreement to exercise the three-year lease extension at a rate of $13.00 per annual square foot. He said that although this represents an increase of $2.50 per annual square foot, it is still well below the market value for comparable office space. The item was brought forward off-docket because of the timing for exercise of the three-year extension.

4. PUBLIC COMMENT

(a) Pat Moyer, 1121 NW 200^th Street, addressed the solid waste franchise. He said that in 1995, the City stated its intention to take over the operation of solid waste collection by September, 2000. He advised that preparation of bid specifications should now be underway to assure sufficient lead time for the contractor to acquire equipment and establish the operation. He said the 2000 budget should contain additional funds for staff and expanded professional services.

Mr. Deis said the City is currently negotiating with Waste Management, Inc., and one facet of the strategy is to enhance the City’s capability to oversee this service. There is money in the budget to negotiate the service contract but not specifically to enhance the City’s administration of it.

Kristoff Bauer, Assistant to the City Manager, commented on State legislation mentioned by the speaker that changed the law regarding the waiting period for a new city’s cancellation of the Washington Utilities and Transportation Commission certificate for operation of a solid waste collection system. He noted legal action taken by one of the providers relating to that law, pointing out that this issue was discussed in Executive Session.

Responding to Councilmember Gustafson, Mr. Bauer said by contracting for the service, the City would have a role in oversight of the rate-setting process. The issue is the amount of resources needed to perform that function. He said staff will return to Council about options in an Executive Session.

Mayor Jepsen pointed out that there is a contingency fund in the budget to handle the need for additional resources.

5. APPROVAL OF THE AGENDA

Councilmember Hansen moved approval of the agenda. Deputy Mayor Montgomery seconded the motion. Councilmember Hansen moved to add the two items mentioned by Mr. Deis to the consent calendar. Councilmember Gustafson seconded the motion, which carried 5 - 0 and the agenda was approved as amended.

6. CONSENT CALENDAR

Councilmember Hansen moved approval of the consent calendar as amended. Deputy Mayor Montgomery seconded the motion, which carried 5 - 0, and the following items were approved:

Minutes of Workshop Meeting of November 15, 1999

Motion to authorize the City Manager to amend the Lease Agreement with Highland Plaza LLC at an annual cost of $18,500 to acquire additional lease space located in Suite 109 of Highland Plaza

Motion to authorize the City Manager to execute an Addendum to the Highland Plaza Lease Agreement to exercise the three-year lease extension at a rate of $13.00 per annual square foot

7. ACTION ITEMS: OTHER ORDINANCES, RESOLUTIONS AND MOTIONS

(a) Ordinance No. 214 granting Seattle Public Utilities Water Division a non-exclusive franchise to construct, maintain, operate, replace, and repair a water system within public rights-of-way of the City of Shoreline, Washington

and

Ordinance No. 215 granting Seattle Public Utilities Wastewater Division a non-exclusive franchise to construct, maintain, operate, replace, and repair a sanitary sewer system within public rights-of way of the City of Shoreline, Washington

Mr. Deis pointed out that these are interim two-year agreements, which mirror the terms that were developed in the franchise with Seattle City Light (SCL).

Kristoff Bauer, Assistant to the City Manager, distributed new versions of both ordinances, which change Section 7.1.3 in both to address proposed "Facilities" rather than "electrical lines." In Section 10.4 the word "is" was added to line 10 and the word "from" deleted from line 12.

Mr. Bauer said Seattle Public Utilities (SPU) had a franchise with King County that expired prior to incorporation, so the City has been operating "on the honor system" without franchise agreements. Staff has been working on these franchises since October, and SPU has been cooperative. He mentioned the "ownership and responsibility" issue, noting SPU has said in the past that it is responsible for the main line only. This means it would not repair or maintain the sections of service connections within the City’s right-of-way. Section 6.9.2 resolves this issue and provides that all water pipes in the right-of-way will be the responsibility of SPU. He said other improvements in the franchises include requirements that SPU coordinate with Shoreline’s Capital Improvement Program (CIP) and participate in its Comprehensive Planning process. Another key issue was relocation of manholes in the right-of-way, which is now a contractual obligation spelled out in the agreement.

Turning to the franchise fee, Mr. Bauer explained that the sewer franchise fee for 2000 will be $221,616 and the water fee will be $197,834. The City had anticipated that the fees would be passed through to customers as a six percent variable charge. However, SPU’s billing process does not allow them to include a variable fee on the current bill. So SPU divided the estimated fee by the number of customers and will charge $1.35 per month for water and $2.31 per month for sewer. These will be fixed fees regardless of usage. Commercial water customers will pay $13.51. In addition to these increases, SPU water customers will see a rate increase of 19 percent and sewer customers an increase of almost five percent.

Councilmember Lee arrived at 7:06 p.m.

Continuing, Mr. Bauer pointed out that in Section 4.4 SPU commits that it will not be a party or support legal or legislative action to inhibit or remove Shoreline’s authority to implement the franchise fee. He concluded that SPU has reviewed the agreement and is comfortable with it and is hoping for expeditious Council action.

Deputy Mayor Montgomery moved to approve both Ordinance No. 214 granting Seattle Public Utilities Water Division a non-exclusive franchise to construct, maintain, operate, replace and repair a water system within public rights-of-way of the City of Shoreline, Washington and Ordinance No. 215 granting Seattle Public Utilities Wastewater Division a non-exclusive franchise to construct, maintain, operate, replace and repair a sanitary sewer system within public rights-of-way of the City of Shoreline, Washington. Councilmember Hansen seconded the motion.

Responding to Councilmember Gustafson, Mr. Bauer explained that in 1997 Council adopted an interlocal agreement with Shoreline Wastewater Management District in which the District agreed to take steps to acquire SPU wastewater services. The City agreed to assist as necessary. The study process of the quality of SPU’s infrastructure is nearing conclusion. The next step is the development of a transition plan and rate analysis. He noted that the District had expressed the desire for a 25-year franchise to guarantee its independence. Mr. Bauer concluded that with regard to water service, a study will be coming to Council in the new year.

Mayor Jepsen suggested deleting the words "with similar circumstances" from Section 8. Mr. Bauer explained that this phrase was part of the SCL franchise and was the basis of protracted discussions. Mr. Deis added that SCL has different rate setting and service for various customer classes. He explained that this phrase indicates that Shoreline is not asking for special treatment, but that customers under similar circumstances should receive similar services. Mr. Bauer explained the differences in service levels among customers.

Responding to Mayor Jepsen, Mr. Bauer said the rate increases are across the entire service area. Shoreline customers already experience a 14 percent rate differential, which is not expected to grow. He noted that this differential is not as high as it has been in the past.

A vote was taken on the motion to approve both Ordinance No. 214 and Ordinance No. 215 granting non-exclusive water and sewer franchises to Seattle Public Utilities Water Division and Seattle Public Utilities Wastewater Division respectively, which carried 6 – 0, and these ordinances were approved.

8. NEW BUSINESS

(a) Development of Year 2000 User Fee Schedules for the City’s Fee Based Services

Mr. Deis distributed a "Six-Year Financial Plan" which reflects adjustments to the original proposed budget. He outlined the assumptions made in the financial forecast and concluded that given these caveats, it appears that the City is "OK" from an operating standpoint. He noted that if Council chose to have a lower revenue from fee increases, the amount in capital transfers would probably be reduced. If the Council chose not to increase fees at all, the approach would probably be to reduce expenditures or the amount of gambling tax revenues allocated to capital. This would make the City more dependent on the gambling tax.

John Hawley, Senior Budget Analyst, said there has been an annual review of the City’s User Fees in the Overhead Allocation Plan, although Development Services fees have not been updated since January 1998 and Parks fees have not been updated since the adoption of the King County fees in 1996. He reviewed five questions the City asks in its fee review, and he explained the matrix of "User Benefits and Fees versus Taxpayer Subsidies."

Turning to Development Services (DS) hourly rate scenarios, Mr. Hawley said building permit fees (which are set by the Uniform Building Code) generate 34 percent of DS revenue, while 66 percent of revenue comes from hourly rate charges. The chart showed cost recovery rates for 1998, 1999 projected, 2000 proposed and 2000 with new fees. The City should charge $114 per hour to recover 80 percent of the DS expenditures.

Mr. Hawley said staff recommends increasing the 2000 proposed revenue base by $90,000 because development activity has increased over the last few months since the budget was developed. The other recommendation is to adjust hourly rates to 80 percent cost recovery based on the 2000 Proposed Budget rather than prior year actuals. He compared this proposal to the amount generated by the rates charged by Seattle and King County. He noted that Initiative 695 requires that all future user fees be voted upon, so the fee ordinance includes language to adjust all City fees annually based on the Consumer Price Index (CPI) without an election. He pointed out that Council has the option of not increasing fee schedules based on the CPI in any given year.

Concluding, Mr. Hawley demonstrated the impacts of the change on a person building a house. He noted two exceptions to the hourly rate: the appeal fee and building permit costs tied to building valuation and the Uniform Building Code. He said a revision to the proposed fee schedule will now include code enforcement language which deals with civil penalties and abatement costs.

Responding to Councilmember Gustafson, Tim Stewart, Director of Planning and Development Services, commented on Seattle’s fee structure.

Responding to Councilmember Gustafson, Councilmember Hansen said the cost recovery goal has been set at 80 percent because Council felt there are some development activities that relate to education of the public, and it would not be fair to burden the developer with these costs. Mayor Jepsen added that there is community benefit to the educational and neighborhood involvement efforts of staff.

Mr. Stewart pointed out that the new Development Code will change many land use processes, creating a new baseline. He commented that staff may handle building permits versus land use permits somewhat differently in the future. He noted another issue of how much customer service to provide on the permit side. Getting good neighborhood input at the pre-application stage may reduce conflict at the end of the process and reduce appeal costs.

Mayor Jepsen said he was leaning toward the 1999 Projected as the recovery model, which would be $101/hr. versus $114/hr.

Councilmember Lee commented that changes in the permit cost for something like a fireplace installation represent a large increase.

Councilmember Hansen felt the City should adopt the rate that would most reasonably allow for the 80 percent cost recovery based on the 2000 Proposed Budget. Mayor Jepsen argued that he would rather look at history.

Councilmember Gustafson felt that with I-695 impacts to deal with, he would support the staff proposal. Deputy Mayor Montgomery and Councilmember King agreed.

Mr. Deis noted that the Council could forgive the CPI increase next year if the projections are not on target.

Mayor Jepsen expressed consensus of the majority of Council to adjust the hourly rate to 80 percent cost recovery based on the 2000 Proposed Budget ($114/hr.) and to increase the 2000 proposed revenue base by $90,000 due to increased development activity in 1999.

Wendy Barry, Director of Parks, Recreation and Cultural Services, reiterated that fees have not been raised since 1996. She explained how the cost of service analysis determines direct costs (instructors, facility rentals, supplies, transportation) and overhead costs allocated based on a proportionate share. She pointed out that under the current fee schedule, the City is recovering just under 40 percent of costs for aquatics, facility rentals, general programs and the teen program. With the new fee schedule, the estimated cost recovery rate is 48 percent. She explained how the fees are currently calculated, noting the regional market analysis has shown that current pricing is below market with the exception of swimming lessons. She noted the difficulty of ensuring accurate program comparisons.

Continuing, Ms. Barry said staff proposes to continue the high-subsidy programs, including the free teen drop-in program, the summer playground program and special recreation programs for the developmentally disabled. A significant percentage of participants in these programs are low income. There will be increases in costs for specialty trips for teens. Free community events such as Celebrate Shoreline and Hamlin Haunt would continue. Pricing for swimming lessons will not increase but the price for drop-in swims, water exercise and specialty classes will increase. Frequent users of the facilities will still be able to purchase ten-class punch cards and monthly and annual passes. Private pool rental rates will increase, as will lane charges for private swim teams.

Turning to pricing for facility rentals, Ms. Barry said picnic shelter rental will increase by $5. She described the various increases in ball field rentals for games and practices. She said increasing the charges will encourage user groups to use their field times effectively. She emphasized that field charges have not increased since 1994. She reported on conversations with all organizations that will have an increase of $1,000 or more, noting these groups have been very understanding.

The proposed cost recovery formula takes the direct costs plus up to 25 percent of overhead costs for youth programs and up to 35 percent for adult programs. The ordinance allows a maximum of 50% for overhead costs, which provides enough flexibility for a very unusual event that dictates a greater cost-sharing. The ordinance allows for less overhead cost recovery for the summer playground program, special recreation programs for the developmentally disabled and for teens.

Ms. Barry acknowledged that price increases will impact low-income participants. She feared that King County scholarship grants will be discontinued, but she said the budget does anticipate development of scholarships or a discount program or fee waivers. This will come forward in January.

In response to Mr. Deis, Ms. Barry explained that Councilmember Ransom had concerns about the 50 percent overhead recovery. She went on to say that he now seems satisfied with her explanation of the proposal. He also had a concern about a per-unit cost. She said there are difficulties in determining a per-unit cost for recreation programs, and she did not have such statistics.

Councilmember Gustafson added that Councilmember Ransom had a concern about the field costs and the 100 percent increase for practice time. Ms. Barry noted that the practice time cost is still significantly less than a game fee. She said there is a wide spectrum in charges for adult field use.

Responding to Councilmember Gustafson’s question about why a specific percentage for cost recovery is not identified for youth and adult programs, Ms. Barry explained that having a specific cost recovery objective for indirect costs may eliminate certain programs because they are over the market. The 50 percent rate would only apply to a highly specialized commercial program. She summarized that youth recreation class fees would be calculated including 20-25 percent overhead and that adult recreation classes would be calculated including a 30-35 percent overhead.

Responding to Councilmember King, Ms. Barry said the scholarship/discount/waiver information has not been finalized at this point. Councilmember King said there are individuals in the community who would like to contribute to a scholarship fund. Ms. Barry said the City has accepted donations in the past and the community is doing its part to provide athletic scholarships. Councilmember King offered to work on this project next year.

Responding to Councilmember Gustafson, Ms. Barry said the users that staff has contacted have generally asked whether there will be increased maintenance with the fee increases. She said she has explained the CIP as it affects ball fields and parks. She said the fields were worked on this year. Furthermore, staff is working on developing a quicker feedback mechanism for maintenance issues. Users generally understand the rationale behind the increases. She said soccer organizations are better positioned than softball and baseball organizations to deal with such increases. The City will work with the user groups to respond to their needs

Mayor Jepsen said it would be useful to know the percentage of the user groups’ budgets the increase represents. He pointed out that people will probably expect increased services or better maintenance with the fee increase, although this is not what will occur. Ms. Barry noted that staff is developing a standards manual that will show minimum standards for various park features. Mayor Jepsen reiterated that if the City increases the amount of funding for park maintenance, the money will not come from these fee increases.

Mayor Jepsen concluded that there is a difference in approach between cost recovery for development fees, where the goal is 80 percent of the sum of direct and indirect costs, and parks programs, where the goal is direct cost recovery plus various percentages of overhead costs. These programs are much more highly subsidized.

Responding to Councilmember Gustafson’s question about the Skyhawks Academy, Ms. Barry said the City receives 10 percent of the total revenue, which more than offsets the registration costs. The proposal would increase this to 20 percent. Councilmember Gustafson asserted that the Skyhawks Academy is making a significant profit using Shoreline facilities. He wished to revisit this issue at some point.

Responding again to Councilmember Gustafson, Ms. Barry said the Parks, Recreation and Cultural Services Advisory Committee did not have time to review this proposal.

Councilmember Lee was concerned about the 100 percent increase in costs for practice use of fields.

Councilmember Gustafson said his issue is the philosophy for charging for the overhead costs. He was more inclined to go for a lower recovery rate for youth programs.

Councilmember Hansen concurred with the staff proposal.

Responding to Councilmember Lee, Ms. Barry explained that the parks maintenance workers to be hired next year will provide the same level of maintenance for about $2,000 less than the private contractor.

Councilmember Gustafson said the City and the School District need to work together on property maintenance. Mr. Deis said the first step is approval of the Memorandum of Understanding (MOU). Once the relationship is developed, a true partnership can be formed.

Mayor Jepsen expressed Council consensus not to alter the staff recommendation on fee-based services.

9. UNFINISHED BUSINESS

(a) 2000 Operating and Capital Budget Discussions

Mr. Deis explained that the City’s $65.7 million budget will be changed for December 13^th adoption to $67 million. This change reflects the funding lost due to passage of I-695, the adoption of utility taxes and franchise fees and the changes to the fee schedules. He pointed out the transfers that will be made in the various budget funds.

Mr. Deis asked for direction on a reduction in the City Council budget. Councilmember King opposed cutting this budget, noting that the time will come when all Councilmembers will need to be reimbursed for all their travel expenses. Mayor Jepsen said he offered this as part of a series of cuts, which were not accepted, so he felt it would not be worth making this cut alone.

Mr. Deis confirmed that the $700,000 in funding for the partnership at the Shoreline Center is in the budget but that nothing will move forward until the MOU is executed. He said there are terms and conditions under which this funding will be used.

Finally, Mr. Deis explained that although an election is not anticipated, $30,000 has been budgeted in the elections area, which could fund an election done in conjunction with other jurisdictions.

Mr. Deis confirmed that the Arts Council and the Historical Museum are in the budget without a cut. He noted that next year the population in the last annexation area will be included in the per capita calculation for Arts Council funding.

Councilmember Gustafson advocated the City begin analyzing a two-year budget.

Noting that private sector accounting differs from governmental accounting, Councilmember Hansen distributed a worksheet he had developed. He felt it is misleading to look at a total resources budget of $67 million because the total revenues coming in next year are projected at only $31 million, while expenditures will be approximately $37-38 million. Everything else in the $67 million represents equity built up in the past (fund balances) or operating transfers between funds. He said when he looked at the figures in this way, it raised specific questions about some budget items, which he will discuss with staff.

Mayor Jepsen said the actual operating side of the anticipated revenues is about $18.9 million.

Councilmember Hansen concluded that he is proud of the City’s finances, but that future budgets will be "bleeding off" the equity built up in the past. He asserted his opinion that the City is not wasting the taxpayers’ money at all.

Mr. Deis said future budgets can pull out all the transfers as Councilmember Hansen has done.

10. CONTINUED PUBLIC COMMENTS: None

Councilmember King offered Council a taste of desalinized water that she purchased while in Antigua, where all the water is desalinized.

11. ADJOURNMENT

At 9:20 p.m., Mayor Jepsen declared the meeting adjourned.

_______________________________
Sharon Mattioli, CMC
City Clerk