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HomeMy WebLinkAbout10-14-24-WS �R EN HILLS Approved: October 28, 2024 CITY OF ARDEN HILLS,MINNESOTA CITY COUNCIL WORK SESSION OCTOBER 14,2024 5:30 P.M. -ARDEN HILLS CITY COUNCIL CHAMBERS CALL TO ORDER/ROLL CALL Pursuant to due call and notice thereof, Mayor David Grant called to order the City Council Work Session at 5:30 p.m. Present: Mayor David Grant, Councilmembers Tom Fabel, Brenda Holden, Tena Monson and Emily Rousseau Absent: None Also present: Interim City Administrator Jessica Jagoe; Finance Director Joua Yang; Public Works Director/City Engineer David Swearingen; Assistant Public Works Director, Lucas Miller and Assistant to the City Administrator/City Clerk Julie Hanson 1. PUBLIC INQUIRIES/INFORMATIONAL Gregg Larson 3327 North Snelling Avenue - He wants to address the issue of franchise fees. He thinks some of the tables in the agenda are not correct in how the calculations were done and how the comparisons were made. He spoke to Finance Director Yang but couldn't resolve the issue. First item is the survey conducted by Arden Hills' residents, which is not a legitimate survey. That should have nothing to do with determining whether Arden Hills' residents want a franchise fee. It wasn't a scientific survey with a randomized group of participants. He thinks the survey was a meaningless exercise. His second point is there is a table in the packet that talks about the revenue requirement for bonding. For a 15-year bond that comes to $395,000 annually. The bottom of the table talks about raising a revenue requirement of$395,000 for residents. That is not a good way to go about this because homeowners pay up to 40% of the income tax that is raised in Arden Hills. The third point is the franchise fee is a regressive tax. If you take the 1,454 homes that fall within or below the median market value, they will end up paying 55% of the franchise fees. The 1,195 homes valued above the median market value would pay 45% of the franchise fees. So the people who are most able to pay for increased taxes are not the people who will pay the majority of these increases. This is especially evident if you compare the franchise fee monthly increase with property tax increase for manufactured housing. His final point is, if the expectation was that non-profit franchise fee revenue would produce a significant amount of revenue, it's not true. If the table reflects accurate estimates, Bethel and North Heights Lutheran Church will pay $3,348 ARDEN HILLS SPECIAL CITY COUNCIL WORK SESSION—OCTOBER 14, 2024 2 annually. That's the same amount that Land 0 Lakes or Boston Scientific would pay. He doesn't think it's right that a non-profit would pay the same as a large company in property taxes. It's not right. A franchise fee is not a good way to go if you want to increase revenue. A 15-year bond, financed through property taxes. 2. RESPONSE TO PUBLIC INQUIRIES None. 3. AGENDA ITEMS A. Franchise Fee Discussion Update Mayor Grant welcomed Mike Wilhelmi from Xcel Energy. Mike Wilhelmi said he doesn't have anything new to present but is available to answer questions. Finance Director Yang continued the conversation regarding funding for the Lake Johanna Fire Department. The focus is specifically on the Preliminary 2025 General Obligation CIP Bond Schedule provided by Ehlers and Electric Franchise Fees rate options provided by Xcel Energy. Finance Director Yang reminded that at the September 23 Work Session, council directed staff to work with Xcel Energy to provide council with various rate options that align with Ehlers' bank qualified AAA BQ Bond schedules. It is difficult to predict where interest rates will land. However, based on anticipated federal interest rate conditions,the AAA bank qualified current rates would be the most likely scenario the city should anticipate. The Attachment B contains nine electric franchise fee rate options at the AAA bank qualified rates and corresponding revenue targets of$330,000, which is based on a 10-year bond; $395,000, which is based on a 15-year bond; and $542,000, which is based on a 20-year bond. Finance Director Yang said staff is seeking direction from council on what term or debt schedule council would like to move forward with. The fee options assume the residential properties are assessed a monthly fee between $2.50 and $4.25. Small C&I:Non-Demand properties are assessed a monthly fee between $3.25 and $5.75, and other property rates varying slightly. Attachment C provides a comparative analysis of the franchise fee and/or property tax increase and the impact to residential, manufactured home, apartments, and commercial properties under the $395,000 revenue target. Staff recommends adoption of the franchise fee rate structure no later than November of 2024. That timing is crucial to allow Xcel Energy enough time to meet Public Utilities Commission requirements of 90-days and to ensure cash is available to cover the first debt service payment in February of 2026. A public hearing for adoption of the ordinance is not required. During the September 23 work session, council consensus was not to hold a public hearing but rather add the topic as a new business item to include the steps council took to inform residents of the process. Finance Director Yang said the second item staff seeks direction on is the new business item at the October 28 meeting. What additional thoughts, if any, should staff consider? ARDEN HILLS SPECIAL CITY COUNCIL WORK SESSION—OCTOBER 14, 2024 3 Finance Director Yang said Mike Wilhelmi can help answer any specific questions regarding rate options, structure or implementation. Mayor Grant asked if the options provided are the only options. Mike Wilhelmi said the council has a wide variety of options. These options were selected based on previous discussions. He noted Option B in each of the scenarios is a neutral option for rate payor types. Option A will place more of the burden toward the large C&I customers. Option C would be residential customers paying more of the overall burden. He noted each option produces about the same revenue. These were the options he chose to present. Xcel Energy has no position on if franchise fees should be used or on the amounts. Mayor Grant asked if the option would have to be approved by the Public Utilities Commission (PUC). Mike Wilhelmi said when the City and Xcel reach an agreement it will need to be filed with the PUC. That would give them the authority to levy the taxes on behalf of the City. Then Xcel would collect the money and give it to the City on a quarterly basis. Councilmember Holden said it was brought up that non-profits are being asked to pay a majority of this. That was not the intent. She said Land 0 Lakes already pays property tax. She asked if 40%of their tax already goes towards police and fire. Finance Director Yang confirmed. Councilmember Holden said if Land 0 Lakes is already paying a big share for the fire department. She said North Heights isn't paying and Presbyterian Homes and Health Partners are big users of the fire department and don't pay anything. She said, knowing that the commercial properties already pay a large amount of their property tax towards the fire department, she doesn't have a problem with charging the non-profits a small amount for it. She's okay with the $3,000. Councilmember Rousseau said that was one of the reasons the decision was made to stick with funding just the fire department and not try to include bonding for the trails. This is separated differently than a tax levy is. This gives it a more even spread. She said previously there was interest in looking at a 15-year and hoping to pay it off early if Rice Creek Commons goes forward there would be more electric users. She is interested in talking about the 15-year under Option A-2 with the $395,000 every year. Councilmember Holden agreed. It's an extra half a million dollars going from a 15-year to 20- year, in interest alone. Mayor Grant said the 20-year is out of the question for him. The total interest on a 20-year is huge. He thinks we'd be better off to scale it back to 15 years, maybe even 10 years. Councilmember Monson is okay with the 15-year option. Her question is if the 15-year is selected, do we want to match the franchise fee to the payment, or do we want to have a higher franchise fee to help pay it off faster. If interest rates go down, refinancing could be an option. She supports Option A-2. ARDEN HILLS SPECIAL CITY COUNCIL WORK SESSION—OCTOBER 14, 2024 4 Mayor Grant is concerned that we don't know what the fire department vision is going to cost. He thinks we'd be best off to make sure we are covered. He thinks Option A-3 is not out of the question. His second choice would be Option A-2. The fire station is estimated at$24 million. He looked at what the residential monthly impact is around$3.00 but if it was a property tax it would be $9.00. If we come up short, we'll have to go back and levy the amount equal to three times the amount of what you could have received had we scaled it up now. Councilmember Holden asked if he wanted to make sure we're covered because we don't know what the cost is. We can use the money to pay it early. Mayor Grant said according to Ehlers, we can refinance, but we're limited to 10-years. He stated the options are a little unclear. He said the options become really constrained, if the entire amount is not covered. He noted the cost is not going to go down, but it can go up. Councilmember Monson said the Fire Board believes it is between $20-$25 million. This is an estimate with the information we have. Mayor Grant said Option 3 at$542,000 seems to be too much. He would like to see an option somewhere between the $395,000 and $542,000. He remembers discussion where $3.86 would be $455,000. He thinks that seems to cover all options. Councilmember Rousseau asked if$50,000 equals about 1% levy increase. Finance Director Yang confirmed. Councilmember Rousseau said if the cost to build this was a little more, and we needed to go up to $4.20 every month that would be a 1% levy increase next year. Finance Director Yang confirmed. Councilmember Monson would be open to getting more franchise fees than what is bonded for to help pay it off early and for the reasons Mayor Grant discussed. Especially if the wait is 10 years before it could be refinanced. She would be open to an amount between the $395,000 and $542,000. Mayor Grant asked Mike Wilhelmi if that is possible. Mike Wilhelmi confirmed. He didn't think that would be a problem. He asked the council if they had a more specific number to target. Councilmember Fabel is opposed to the franchise fee. He said the City needs money for the expenses it has coming up. Borrowing money makes sense for that. It is appropriate to adequately cover the risk of additional expense. Mayor Grant said this would be a 15-year at 75 basis points with AAA rating. Having it based on $420,000. Maybe we want to go with $430,000. That would assume the $24 million. ARDEN HILLS SPECIAL CITY COUNCIL WORK SESSION—OCTOBER 14, 2024 5 Councilmember Monson said using the $395,000, if we wanted a 10%cushion that would be $434,500. If we want to go down to 5% it would be $415,000. Mayor Grant said knowing that$15,000 doesn't go very far, knowing we're building a fire station, he would like to see the $435,000. Councilmember Holden asked when we have to bond. Finance Director Yang said it is May of 2025. Councilmember Holden asked when we'll get the bid back. Councilmember Monson said it should be sometime this spring. Before May,because that's when they are hoping to start construction. Councilmember Holden wondered if we bring in extra money, using the 5%or 10%, will we pay down the debt,that year. Or would we hang on to it another year. Her intent is if people are putting in money to pay for the fire station, we should use it to pay for the fire station that year. Whatever we bring in, in a year, should go towards paying the bond in that year. She understands we may be short one year but the interest savings would be significant. She wants to understand if the money will be spent in the year it was collected. Mayor Grant didn't think that decision needed to be made today. Councilmember Holden said if we're going to hang on to the money, in case we are short one year, she would prefer the 5%. But if the intent is to pay this down she would prefer the 10%. Every year we don't have to pay, is more money we aren't paying towards interest. Mayor Grant thinks the 10%option gives a little cushion in case it comes back too high, or if it doesn't quite cover. Councilmember Rousseau asked if all the money collected in the year, if it were higher,would it go towards the next year, if we were short. Finance Director Yang said it would not. Mayor Grant asked if a franchise fee could be structured for at 15-year period. Mike Wilhelmi said you could adjust this to any length. The agreement is 20-years but the fee agreement lives as long as you let it. If you just leave it alone it will be one rate for 20 years. If you want to come back and adjust it,you have the ability to do that. Mayor Grant said in our case,this is just for the fire department building. That's the only thing we're spending these funds on. He can't speak to what future councils may do,but the intent of this council is to use the money strictly for the fire station. ARDEN HILLS SPECIAL CITY COUNCIL WORK SESSION—OCTOBER 14, 2024 6 Councilmember Holden said that in a 15 year period, they are going to want another fire truck for$1.5 million. Paying off this debt so that the levy pays for fire equipment is a priority. Then they won't have that extra fee so they can put the other money on the levy. Mayor Grant wanted confirmation that this council has agreed this fee will go for the building only. Councilmember Rousseau said that was her understanding from the beginning. Councilmember Monson said if we get payment early or we have money before the bonding that's required, she would expect that to go to the fire station and no other use. Councilmember Holden said she wasn't worried about another use, she doesn't want to hang on to money while paying interest. She thinks hanging on to the money because we may be short later, essentially loses the City money. Mayor Grant asked if we can use the fee schedule at Xcel to project the amount of money needed for the 15-year period. Finance Director Yang confirmed. Mayor Grant said there should be no surprises. Finance Director Yang confirmed. Councilmember Monson clarified we have a bond and a specific payment for that bond. We are going to raise franchise fees 10% above that amount for 15-years. If rates drop, we maybe won't need $395,000. She speculated if it was $375,000 as a requirement on the bond payment, would we only take an additional 10%over the $375,000 vs. $435,000 or do we have to set the number? Mayor Grant said we have to set the number. He wants to make sure that we are covered for the building. He realizes we might create a scenario where there is some extra money. He doesn't know if we can foresee that scenario, at this point. That may be a discussion for a future council 4 or 5 years out. Councilmember Fabel said the bond debt is to the bond holders. Bond holders are entitled to receive a certain amount of money every year, based under the contract. If there is more revenue coming in, than is required for those payments, we can't pay off the bond holders early and make that obligation go away. The debt will be structured in a way that is prescribed in advance. Mayor Grant said you can call a bond. He thinks this is a callable bond. Finance Director Yang confirmed. Mayor Grant said we could pay off the bond holder early. After 10 years, maybe before, you can refinance. We haven't really talked about that option. A bond holder who knows it can be refinanced for a shorter period of time might be less likely to buy the bond. So it could be more costly. Those decisions should be talked through with Ehlers. He agrees that the bond schedule is what it is. To cut it short, you can refinance but that's the bond holder's schedule. Mayor Grant said this is a work session to gather information with no final decisions being made. He thinks he heard three members agree with the $435,000. ARDEN HILLS SPECIAL CITY COUNCIL WORK SESSION—OCTOBER 14, 2024 7 Councilmember Rousseau said she would be willing to do the $435,000, as well. Mayor Grant asked Mike Wilhelmi to adjust the information based on the $435,000. He asked for schedule timing. He thought they need to make this decision by the next council meeting. Interim City Administrator Jagoe confirmed. She said Finance Director Yang was also seeking confirmation that it should be a 15-year term. To allow for the 90-day review for the PUC, the debt service to be issued, and when the first payment is due. Council's schedule for approval of the ordinance and agreement would be at the next October meeting,to stay on track. Mayor Grant wanted clarification that there won't be a public hearing but there should be a chance for residents to give an opinion. Councilmember Monson said Council previously talked about messaging it that the preliminary tax levy didn't include this. So because it wasn't included in the preliminary tax, which would have added another$400,000 to the levy, we have to do a franchise fee. Mayor Grant agreed. He said Senior Communications Coordinator Cardona could put something on the website. There would be no official public hearing but residents could share their opinion during the council comments. Councilmember Monson thought she read it would be a New Business item on the agenda. Mayor Grant confirmed it would have to be a New Business to adopt something. Interim City Administrator Jagoe said if we did an official public hearing,we would separate that from the New Business item. So, there would be a memo with an action item for the public hearing, the council would open it for any comment and then we would go into the New Business item. The hearing is not required so we can just add it as a New Business item. The City is required to put notice of any ordinance, whether it's zoning or city code, 10 days in advance. So it would go out as a News Flash on the website. That's a requirement regardless if there is a public hearing or not. Councilmember Holden said we are no longer considering a public hearing because we can't change the tax levy at this time. Prior discussion was that this would be an informative thing where we could take public comment. We can't tell residents that we are considering this. The message needs to be what we did, how we came to the conclusion and why we are doing it. She thinks if a resident is against it and speaks their opposition it's unfair to say we already made up our minds. This needs to be explaining what we did, how we did it and why we did it. We need to let residents know we're open to hearing their comments, but this is what we had to do. Mayor Grant asked for clarification if Councilmember Holden is saying it needs to be a public hearing with a staff presentation in front of the public hearing. ARDEN HILLS SPECIAL CITY COUNCIL WORK SESSION—OCTOBER 14, 2024 8 Councilmember Holden said no. This doesn't require a public hearing but residents can make their comments at any time. She thinks it will be residents asking questions about how Council chose the individual amounts. She wants it to be clear that this is not up for consideration. Mayor Grant said we are building the fire station. That's true. Councilmember Holden said we need to lay it out. We're building the fire station. We chose to do bonding. We chose to use franchise fees. Mayor Grant said we can have residents come up during the public comment section at the beginning of the meeting but then they won't have the information. His recommendation would be to do it as a public hearing. Staff would give a full presentation. Then anyone at the meeting will have all the information and then it can be opened for a public hearing. Councilmember Holden would like to make sure residents aren't coming in thinking this is up in the air and their comment may impact if it's a yes or no. We are beyond that. Councilmember Fabel said if there is strong opinion against the use of franchise fees,the alternative is to put off the fire department decision for a year. Mayor Grant thinks the cities of Shoreview and North Oaks would be against that option. Councilmember Holden said we have a contractual agreement that it will be built in 2025. Councilmember Monson said there is also some state bonding that needs to be used, but she isn't certain by what date. Interim City Administrator Jagoe understands that the cities will need to show their matching funds at the time that the state dollars are issued. That's usually when the permit is issued. So,the state dollars come in and the three participating cities need to show their matching dollars. Mayor Grant said that's when we show the sources and uses. Interim City Administrator Jagoe confirmed. Mayor Grant said putting it off a year is not possible. He summarized that Mike Wilhelmi will bring back $435,000 in a similar format as presented tonight with three ways to reach that $435,000. Councilmember Holden said we have agreed to the $435,000 and 15-years and now we are just needing to figure out how we get there. Mayor Grant confirmed. Councilmember Monson said Council is in agreement, but she thought it would be helpful to give Mike Wilhelmi a target residential rate. Is there a cap we don't want to go above for the residential fee? She would be fine staying at $3.50 but wouldn't want to go higher. ARDEN HILLS SPECIAL CITY COUNCIL WORK SESSION—OCTOBER 14, 2024 9 Councilmember Rousseau said it's a 10% increase so residential could probably be held to $3.10 or$3.15. Mayor Grant said it needs to be a$0.25 increment. He thought$3.25 or$3.50 is okay. Councilmember Monson said we can also hold it at$3.00. Mayor Grant agreed we could hold it at $3.00 and that puts the rest back on the industrial and commercial. Councilmember Monson thought seeing a$3.00, $3.25 and $3.50 option is the way to go. Mayor Grant agreed. He said we don't have to make the decision here. He wondered if two weeks before the next meeting is possible. Mike Wilhelmi confirmed. Mayor Grant asked if Staff or Mike Wilhelmi need anything further from tonight's discussion. Interim City Administrator Jagoe said Staff is clear on the terms. She wanted to be clear that what was put on the website doesn't have to be the final rate. It's just a draft. She asked for clarification if Council would prefer a public hearing or just a New Business item with attachments and a memo that outlines the how and why background would suffice. Councilmember Rousseau asked if there can be another opportunity for the public to speak, responding to the public presentation. Mayor Grant said Council can set the agenda in any order we want. He said usually will encourage residents who are present for a public hearing to hold their comments until that item is discussed. The advantage is that Staff will probably answer some of the public's questions through the public presentation. Councilmember Monson thought the clearest way for people to understand that they can come for comment would be an official public hearing. She agrees with Councilmember Holden that it needs to be clear that the public hearing is informative. The public is welcome to make comments and ask questions. Interim City Administrator Jagoe reminded a public hearing is not required for this application. When a public hearing is required, a notice is printed in the newspaper. We are always required to post an ordinance on our website. She wondered if Council wanted Staff to notice in the paper, as well as on the website, or just on the website as is required for an ordinance. Councilmember Holden thought it was fairly cheap to place it in the newspaper. Assistant to the City Administrator/City Clerk Hanson said it would be less than $100. Councilmember Holden said she would have no problem with putting it in the newspaper. ARDEN HILLS SPECIAL CITY COUNCIL WORK SESSION—OCTOBER 14, 2024 10 Councilmember Fabel asked if Mike Wilhelmi is familiar with the draft ordinance presented in the agenda packet. Mike Wilhelmi confirmed. It is Xcel's draft ordinance. Councilmember Fabel said the draft ordinance outlines Xcel will have authority over location facilities, field locations, street opening, and restoration. He wondered if they have that authority now. Mike Wilhelmi confirmed. They have statutory authority and there is a franchise agreement in place. This would be an update to that agreement. Councilmember Fabel stated that there isn't anything new here. Mike Wilhelmi said that because there are no existing franchise fees, they pay permit fees. Typically in cities where there are franchise fees, they ask to be excluded from permit fees and that is in there. Councilmember Fabel said the ordinance might suggest to residents that for the privilege of collecting a tax on behalf of the City,Xcel is getting this authority, is not true. Mike Wilhelmi confirmed. There is no additional authority granted with this ordinance. Interim City Administrator Jagoe said that with this council item on the 28th,there will be an update of the agreements, as well as, the renewal of the gas franchise agreement. The memo will outline what agreements exists today and what the changes will be. B. Adult Use Cannabis Zoning Discussion Interim City Administrator Jagoe highlighted the main points of the draft ordinance, included in the agenda packet. Cannabis business is defined in state statute. There are a variety of different cannabis businesses that corelate to the types of businesses that the Office of Cannabis Management(OCM) will facilitate. The license types and types of uses are provided. The Micro- and Mezzo-businesses are unique within the cannabis use list because they are similar to wineries and breweries. The City Attorney verified the Micro-Business allows for on-site consumption. The Micro- and Mezzo-businesses can operate multiple locations and they can also have multiple types of uses,to include retail, manufacturing, etc. all in the same facility. The City will register businesses and the OCM will license them. Previous council direction was to limit this to one single registration. State statute says the City can limit for retailers,the Micro- businesses and Mezzo-businesses. That only applies to the retail component. The City is not allowed to limit the registrations for the other non-retail uses. Councilmember Monson asked for clarification that a Micro-business or a Mezzo-business one of those would meet our retail requirement. ARDEN HILLS SPECIAL CITY COUNCIL WORK SESSION—OCTOBER 14, 2024 11 Interim City Administrator Jagoe confirmed. When you get into the manufacturing, we cannot prohibit. Mayor Grant asked if one brewery had THC options would satisfy the retail component. Interim City Administrator Jagoe confirmed. That would be the one retail business. Mayor Grant asked if it could be a big box store selling nothing except weed. Interim City Administrator Jagoe confirmed. Councilmember Rousseau asked if allowing the one retail location in the B-2 district, would restrict a cannabis testing center or an R&D facility. Interim City Administrator Jagoe said the way it is drafted in the land use table, all the uses are a conditional use, similar to the low potency. The zoning ordinance says these are allowed through the conditional use process, so it would go before the Planning Commission and the City Council. The next step would be the number of registrations allowed. We followed similar patterns for retail and manufacturing components. This essentially mirrors the traditional retail and manufacturing zoning districts. So if any manufacturing is allowed, cannabis would now be allowed by conditional use. Councilmember Fabel thought if we wanted to keep cannabis off County Road E or Lexington, we could do that by modifying the zoning, essentially zoning them out of the main streets. He'd like to do that. Mayor Grant said that could be done by using and overlay. He said that we must allow one retail business based on City population and wondered if we are allowed to limit the number of retailers. Interim City Administrator Jagoe confirmed. The City is required to allow at least one and can limit it to just one. Mayor Grant asked if Council would like to limit the retail businesses to just one. Council agreed. Councilmember Rousseau said she would be interested in a business that does the potency testing, rather than a traditional retail location. Mayor Grant said a testing facility wouldn't satisfy the one retail registration component. Interim City Administrator Jagoe confirmed. She said we can't prohibit them but we can be selective about which zoning district they are allowed in. Councilmember Rousseau asked if we can put a cap on it. ARDEN HILLS SPECIAL CITY COUNCIL WORK SESSION—OCTOBER 14, 2024 12 Interim City Administrator Jagoe said we can't prohibit but will have to verify with the City Attorney if we can cap the registrations. Staff was looking at it as do we want to limit the zoning districts. The secondary piece is the registration ordinance. She will get verification from the City Attorney before this comes back to council. Councilmember Holden asked for clarification on what Councilmember Rousseau is talking about. She asked if she talking about a business that tests cannabis potency that would then be sold at a retail location. Councilmember Rousseau was thinking along the lines where there are food scientists that are testing the potency. Councilmember Holden asked if that is different than a retail location. Interim City Administrator Jagoe said cannabis testing facilities falls under the research and development. Councilmember Holden thinks testing a gummy bear for potency is different than R&D for medical purposes. Interim City Administrator Jagoe will clarify with the City Attorney. Councilmember Monson summarized we have agreed to one retailer. Staff will find out if the City can cap the other uses. It can not be prohibited. She thinks Council should look down the list and discuss each use and discuss where it may be allowed. Mayor Grant asked if council wants to be more conservative or liberal. Councilmember Fabel said he wants to be more conservative. He would like to keep this out of the public eye with no flashing signs and people smoking up and acting crazy on County Road E. Councilmember Holden said we really only have one retail area. That's Lexington Avenue and County Road E. If we don't put it in a retail area,where will it go? Flashing lights are not allowed. Councilmember Fabel asked if there is a flex zone for retail. Interim City Administrator Jagoe said it is written into the commercial districts. Mayor Grant said he is hearing Council would like to be conservative, in terms of what is allowed for retail. He stated along Lexington there is B-3 right up against Lexington and B-4 is behind that. If we want to be conservative,we can allow it in the B-4 district. Councilmember Rousseau said Cub is in the B-3 and they are already carrying the low potency THC. That would give a little more opportunity for something small to go in that area. She is open to the B-4, as well. Councilmember Holden doesn't want it under neighborhood business. ARDEN HILLS SPECIAL CITY COUNCIL WORK SESSION—OCTOBER 14, 2024 13 Interim City Administrator Jagoe said the way it's drafted right now, cannabis sales would not be allowed under neighborhood business. Councilmember Holden said that low potency edibles are allowed in neighborhood business. Interim City Administrator Jagoe confirmed. She said the way that was written is it's tied to someone who had a liquor or tobacco license. There was not zoning restrictions for the low potency. We said it was allowed as an accessory use in any commercial district, if they had the liquor or tobacco license. It couldn't be the principal use. For the cannabis discussion,that could be the principal use and the only thing they sell so it is not proposed to be allowed at all in the neighborhood business district. Councilmember Monson said it should not be allowed in B-1. She would support B-4. She's okay with Lexington or County Road E, however, she does not think a Mezzo-business or a Micro-business is appropriate because of the scale they could be. As she understands it, those businesses grow their own,package their own and sell their own products. She wouldn't want that allowed in a retail area. But she would be open to allowing that in the gateway business area. Mayor Grant thinks B-4 is where you allow it. All of them. Interim City Administrator Jagoe said that's the retail component of micro business, cannabis sales,the mezzo business. The other uses including manufacturing, agricultural, indoor cultivation, R& D will be left as conditional uses in the industrial areas. Councilmember Monson asked if Council could walk down the list one by one. She asked if Council agrees that B-4 is the district. Mayor Grant said B-4 would make sense for all cannabis business types. It would not be his preference that a 50,000 square foot empty building on Lexington have a growing facility. Councilmember Rousseau said she would love for anything to go into that space. Mayor Grant agreed he would love that space to be filled but not with this. Councilmember Holden thinks B-4 is a quiet area. There are a lot of small businesses back there. There are a lot of unknowns including hours of operation. She assumes a lot of the customers will come in at 2:00 in the morning. This isn't regulated, like alcohol. She thinks it will be important to have police coverage. On Lexington it's a lot more visible and the hours could be limited, based on location of the site. Interim City Administrator Jagoe said that is one of the questions Staff has. Would the Council want there to be standards to include limiting hours of operation. That can be incorporated it the ordinance language. Council can outline that if an individual applies for the registration, the business can only operate during certain hours. Mayor Grant thinks Council probably does want to restrict it. ARDEN HILLS SPECIAL CITY COUNCIL WORK SESSION—OCTOBER 14, 2024 14 Councilmember Fabel thinks, under the police power, the City would have the authority to impose limitations on this usage of land over and above what we may impose on other commercial uses. Councilmember Rousseau would like to see more restrictions on operations rather than location. She thinks B-3 might be a better location. While the regulations are still being developed, it would be wise to restrict the operating times and that customers are being asked for identification before entering the space. Mayor Grant would only want it allowed in the B-4 district. He thinks the operational guidelines will come from the OCM. Councilmember Monson would be open to allowing a business that is strictly a retailer in B-3. Mezzo- and Micro- businesses in B-4 as a conditional use, and the gateway business would allow for a larger operation. Councilmember Holden asked if anyone knows when we will know the rules and regulations. Interim City Administrator Jagoe said OCM has provided a draft ordinance. As individual cities start to put together their ordinances,they are doing so with the legal interpretation from City Attorneys and then OCM responds with their own interpretation. It's still very fluid. She anticipates that whatever is decided now, will be amended. Councilmember Holden said that knowing that the rules and regulations aren't clear and there are empty buildings on Lexington she would support B4 for retails sales and it could be expanded to B-3 later. If the hope it to start small, B-4 is probably the place to start. Mayor Grant said that when a retailer opens up,people will find it. He recapped that Councilmember Holden and Councilmember Fabel are in favor or B-4. Councilmember Monson has indicated B-3 or B-4. He asked what Councilmember Rousseau thinks. Councilmember Rousseau is open to B-3 or B-4. She asked how many Micro- and Mezzo- businesses are in Minnesota. Interim City Administrator Jagoe did not know. Councilmember Rousseau wondered if there are insurability restrictions on these businesses. She remembered some bars were looking into offering THC drinks but chose not to because of the insurance cost and uncertainty. She is okay with B-3 or B-4. That would also allow businesses to do it as an accessory part of their business. Mayor Grant said he heard the majority of Council agrees B-4 is appropriate for the retail component, with the option to expand it later, if appropriate. It would be much harder to allow it and then retract that, if a business has moved in. He asked about non-retail uses. ARDEN HILLS SPECIAL CITY COUNCIL WORK SESSION—OCTOBER 14, 2024 15 Interim City Administrator Jagoe has looked at where R&D or warehousing would be consistent with other businesses. She thinks the gateway district or I flex. Councilmember Holden thinks just gateway. Mayor Grant said it's a nice area for that. Councilmember Rousseau said either gateway or I flex. Councilmember Holden thinks gateway because I flex currently has nice little businesses in there and they pay good taxes. She would hate to see warehouses. Mayor Grant said gateway business is the preference of the majority of the Council. It can always be expanded. He asked what else Staff needs. Interim City Administrator Jagoe summarized the distance from schools was discussed earlier. That will be applied. Staff will look at measures for odor control. Staff will work with the City Attorney on guidelines for limiting hours of operation. She will verify if caps are allowed for the registration of warehouse and R&D businesses. She thinks Staff has enough information to prepare something for the Planning Commission in November. Mayor Grant noted there are time constraints on some of the other items on the work session agenda so it would be appropriate to recess and resume the work session after the City Council meeting. Council recessed the work session at 6:50 p.m. Council reconvened the work session at 7:30 p.m. C. Personnel Discussion Interim City Administrator Jagoe said we have received the initial estimate from NFP for health insurance. The increase for non-union employees is about 15-18%. The 2025 preliminary budget had a place holder for a 10% increase.NFP is looking at alternate plans with HealthPartners, Blue Cross Blue Shield, Medica and United Health Care. Staff has a meeting scheduled with NFP near the end of October. That is when they will provide all the plan options. Staff wanted to update Council on the information, knowing it's preliminary. In the past the health insurance discussion and some decisions on plan options have been communicated thorough the Personnel Committee. Staff is seeking Council direction if Staff can work through the final numbers and decisions with the Personnel Committee. Councilmember Holden said in the past we switched to Health Partners because they were significantly lower than the other providers. Then 3 years later they were 25%higher than everyone else. She thinks it all evens out in the end. She doesn't like the idea of people having to switch plans and possibly lose their doctor. ARDEN HILLS SPECIAL CITY COUNCIL WORK SESSION—OCTOBER 14, 2024 16 Assistant to the City Administrator/City Clerk Hanson confirmed that they do tend to offer a lower cost and after a couple years they increase it. It's happened several times. Councilmember Holden asked if the increase would be split 50/50 between the City and the employee. Assistant to the City Administrator/City Clerk Hanson said she isn't sure if the increase was divided evenly between employees and the City it the past. Councilmember Holden said that in the past the employee was responsible for 50%and the City was responsible for the other 50%. If that's changing, Council needs to know. Interim City Administrator Jagoe said she can review that and update the Personnel Committee, with Council direction to do so. She isn't sure how the percentages were split previously. Assistant to the City Administrator/City Clerk Hanson said in the past,the City has always covered the single premium. There is a formula to calculate what is fair to those with family coverage. The premium has always been covered 100%for the single. Family premiums are covered at 87%by the City with the employee paying the rest. Councilmember Monson said she would like the budget numbers. Interim City Administrator Jagoe has preliminary numbers, but adjustments can be made in the November discussions. D. Union Negotiations Update The work session was closed to discuss Union Negotiations. E. Rice Creek Commons/TCAAP Discussion This item was not discussed. F. Agenda Planning Mayor Grant asked if Council had the desire to discuss items 3E and 3F. Councilmember Holden noted the October 28th agenda is full. She assumes November 12th is full, as well. She wondered when the Committee Code of Conduct discussion will happen. She said port-o-potties is on the list. Is that about if we'll have handicap facilities at all the park or was it a general discussion regarding port-o-potties? In looking at the list of items, she would like to have a small write up about what is needed for each item. Mayor Grant directed Staff to develop a list of outstanding items. Some are time sensitive. Others are not. He said those will be prioritized appropriately. He agrees the next two work ARDEN HILLS SPECIAL CITY COUNCIL WORK SESSION—OCTOBER 14, 2024 17 sessions are full with time sensitive items. It is the time of year when a lot of the outstanding items are time sensitive and various thing need to be decided. Councilmember Monson said cannabis will need to come back, as well. Mayor Grant confirmed. Interim City Administrator Jagoe said the cannabis zoning ordinance will go straight to the Planning Commission. Council would need to discuss it again if they want input on the registration. Assistant to the City Administrator/City Clerk Hanson said she could bring that forward with the fee schedule discussion. We will need to decide what we want to charge for the registrations. 4. COUNCIL COMMENTS AND STAFF UPDATES This item was not discussed. ADJOURN Mayor Grant adjourned the City Council Work Session at 8:05 p.m. 041/2,1;/,),Lr/(1-- ( stling David Grant Deputy Clerk Mayor