MAYOR AND COUNCIL
ROCKVILLE, MARYLAND

Meeting No. 06-08
March 10, 2008

The Mayor and Council of Rockville convened at 7:08 p.m. on Monday, March 10, 2008, in the Mayor and Council Chambers, Rockville City Hall, 111 Maryland Avenue, Rockville, Maryland.  Prior to the meeting, the Mayor and Council met in Executive Session at 6:15 p.m. in the Diamondback Terrapin Conference Room pursuant to 1) Section 10-508 (a) (7) and 10 -508 (a) (8) of the State Government Article of the Annotated Code of Maryland to consult with counsel to obtain legal advice and to consult with staff about potential litigation concerning the Town Center project; and 2) Section 10-508 (a) (9) to consider matters directly related to collective bargaining negotiations.

Present at the Executive Session were the Mayor and Council, City Manager Scott Ullery, City Attorney Paul T. Glasgow, Deputy City Attorney Catherine Tuck Parrish, Director of Personnel Carlos Vargas, Acting Director of Community Planning and Development Services Ed Duffy, and Recreation and Parks Director Burt Hall.  At the meeting, the Mayor and Council discussed matters related to possible legal strategies regarding the issue with the pavers for Town Center and matters related to collective bargaining with the City’s union.  The Mayor and Council adjourned at 7:00 p.m., with the understanding that the Executive Session would resume after their public meeting adjourned.

In attendance: City Manager Scott Ullery, City Attorney Paul T. Glasgow, and City Clerk Claire Funkhouser.

Re: Opening Remarks

Mayor Hoffmann said that she had presented testimony in Annapolis on Saturday, March 8, on the bond bill for the renovation of the old Post Office and that she had been pleased to be accompanied by Senator Jennie Forehand and Delegates Kumar Barve and Jim Gilchrist.  She cited the remarks that she had made at the meeting on March 3 regarding the Courthouse, saying that the remarks, which criticized the members of the delegation for their position on the location of the District Courthouse, had been stronger that she had intended.  The Mayor thanked the delegation for their support in the past and present and said that she looked forward to a mutually beneficial working relationship in the future.

Re: Agenda Review

City Clerk Claire Funkhouser said that there were no changes to this evening’s agenda.

Re: City Manager’s Report

City Manager Scott Ullery reported on the following:

• Once again, the City received an award excellence for its audit report
• Today was the first day of paid parking for the Town Center garages for which the City received approximately $4400 in revenue, which did not include County workers or long-term patrons.  Some problems with the electronic wayfinding signs on the garages was fixed this weekend and all security cameras are now functioning

Based on an email received by the Mayor and Council earlier today, Councilmember Marcuccio asked for some clarification about the way in which people might obtain pre-paid cards for the meters by mail.

Re: Zoning Ordinance Update

Chief of Planning Jim Wasilak said that the worksession last week focused on issues related to mansionization, height, and floor area ratio.  Other issues emerging during discussions include impervious surfaces and home-based businesses.  It is possible that a new category for what would be considered “no impact” businesses may be recommended.  This may entail some provisions for the allowable square footage for home-based businesses.   Mr. Wasilak stated that the record would close on March 28.

Re: Appointments

Upon motion by Councilmember Robbins, duly seconded by Councilmember Marcuccio, and unanimously passed, Debbie Dwyer was appointed as a member of the Human Rights Commission until March 1, 2012 and Yvonna Love was appointed as Chair until March 1, 2009.

Re: Citizens' Forum

Re: City Water Rates 

City Manager Scott Ullery said that this evening’s topic was a follow-up to the worksession with the Mayor and Council that had taken place on Tuesday, February 11, and would serve as a prelude to the discussion on this aspect of the budget that will be presented to the Mayor and Council on March 24.  Mr. Ullery said that the information to be presented would entail a significant outlay of resources.  Mr. Ullery also said that the fees for another sizable program related to water, the stormwater utility program, would not be implemented until FY 2009. 

In terms of things that would mitigate the impacts of the increase expected for water, Mr. Ullery said that revenues would allow for $100 tax credit for homeowners.  Staff was also researching other ideas, such as a tax deferral program suggested by Councilmember Britton.

According to Finance Director Gavin Cohen, based on 2006 projections, the current and past water rates, coupled with known infrastructure issues, have not been sufficient to cover projected expenses.  The options for rates in all options assume an increase over a number of years.   Options for financing the upgrade in the water program would include the following:

1) Utilizing cash on hand/reserves. This is known as PAYGO
2) Obtaining grants form federal or state governments
3) Receiving low interest loans from federal or state organizations
4) Borrowing the money utilizing General Obligation or Revenue Bonds.

The “option” of PAYGO is really not realistic and would assume that none of the work on the infrastructure would be done.  Of the rest of the options mentioned, bonding would be a component of any of the ones presented this evening for the Mayor and Council’s consideration.
It was also mentioned that, as staff explored various scenarios to present to the Mayor and Council this evening after the initial presentation on February 11, it became clear that a fifteen year program is really not feasible so it was necessary to expand the optional timeframes to twenty or twenty-five years.  Director of Public Works Craig Simoneau said that, in fact, the replacement of the water infrastructure should probably be looked at similarly to the asphalt maintenance program in terms of it being a continuous program that would begin with the implementation of this program.

Mr. Simoneau said that the figures being give to the Mayor and Council were based on the middle residential pipe size of ¾ inch and a usage of 14,000 gallons of water.  The options tend to rise sharply in the beginning and then level off or to rise steadily depending on the option.  Mr. Simoneau then presented information on each of the options, some of which contain a fee called an Infrastructure Renewal Fee (IRF), which would be a component of the ready-to- serve charge, and, like that charge, be based on meter size:

Option 1A (15 years with an IRF)
This option has the shortest amount of time to complete the work

Option 1B (15 years without an IRF)
This option has the smallest increase in the beginning, but increases at a rate of 16% continuously

Option 2A (20 years with an IRF)
The rate increases 92% from FY2008 to FY2009, but has lower costs later

Option 2B (20 years without an IRF)
This option, which is the staff’s recommendation, features has a less steep rate in the first year of 43%, with 14% for several years and then 1%, resulting in the second lowest bill for FY2018

Option 3A (25 years with an IRF)
This option is very similar to Option 2A, but would take longer

Option 3B (25 years without an IRF)
This option is very similar to Option 2B, but with many more years added to the schedule

Mr. Simoneau said that the staff recommendation is for Option 2B and does not include an IRF.  Mr. Simoneau reiterated the goals of the program and the need to develop a financing strategy to support the water system.  He said that, as projected, the 25 year programs are more expensive because of the factor of inflation.

Councilmember Robbins said that she knew that something has to be done to repair and maintain the City’s water infrastructure.  She asked staff to explain the tiered structure in which the biggest users would pay a higher rate in order to encourage conservation.

Mr. Simoneau said that the primary purpose of the discussion tonight is to provide the Mayor and Council with information about the funding and rate options for the Water Facility Fund, which would include significant operational and capitol improvement expenses for the Water Treatment Plant Upgrades and Water Main Rehabilitation Program.  He also reviewed the reasons for the improvements that had been presented to the Mayor and Council on February 11, which ranged from the age of the infrastructure to increased regulations at the state and federal level.  Mr. Simoneau also reviewed the concerns about fire flow in a number of areas of the city.

Director of Finance Gavin Cohen then reviewed the reasons why this program would be considered as an enterprise fund so that its costs and revenue would be segregated from other municipal operations that might be handled through the General Fund.  Also, not all citizens are served by the City’s water system.  Mr. Cohen reviewed the history of the water fund, which has shown losses for nine out of the last ten years and said that he concluded that rates have really been too low even to sustain current costs, much less make any of the projected improvements.  Mr. Cohen alluded to a study done several years ago, which resulted in changes made by the Mayor and Council instituting the tired structure mentioned previously by Councilmember Robbins, as well as a “ready to serve” charge, and an increase in capital contribution fees.

Councilmember Marcuccio asked for some clarification about some of the figures.  She said she was trying to understand the magnitude of the debt involved.  She said she could understand if the figures change due to the economy, but also wanted to understand if the figures change due to the amount of work.

There was discussion about the current state of the economy and the straits that some of the people in the city, specifically seniors, who were finding it difficult to cope.  There was also discussion about some of the ways that the City was looking into mitigating some of the costs such as the homeowners’ tax credit mentioned before.

Councilmember Britton said that he easily understood that the infrastructure had deteriorated over time and that now significant costs needed to be incurred to cover the rehabilitation efforts.  However, he said he, like Councilmember Robbins, would like to understand more about the tiered program.  Additionally, Councilmember Britton wondered if the City had ever incorporated a rate reduction for low-income individuals.  Mr. Cohen said that Rockville had not, but that it used entities such as Community Ministries of Rockville and the REAP program to offset costs for those having difficulty paying a utility bill.  Councilmember Britton said that type of program might be an avenue to consider.  Mayor Hoffmann responded any variance in applicable might be a charter issue.

Councilmember Britton asked what difference grants would make and Mr. Cohen said that grants could be used to offset some of the costs and possibly reduce the amount of debt needed for the program.

Councilmember Gajewski alluded to an email he had sent earlier about some variations of the models that had been proposed and offered an illustration of an alternative to what had been provided by staff. 

Mayor Hoffmann said she thought that part of the goal of the models was to try to smooth out the increase so that it would be less dramatic and more predictable.  She asked why staff was not recommending an IRF.  Mr. Simoneau said this was a hard decision, noting what he referred to as the phenomena of the rates paid for by the commercial customer versus the residential customer.  He referred the Mayor and Council to the chart on which the various options were displayed.  He noted that the line for Option 2B, the staff’s recommendation, was somewhat gentle in how the increase would impact the average customer, who tended to be a residential user.  Mayor Hoffmann said she could see what was being mentioned, noting that the addition of the IRF resulted in a more dramatic rate that disadvantages residential customers.

Councilmember Marcuccio asked about the statement that “debt services coverage ratios will be calculated annually for all of the City’s enterprise funds at a ratio of $1.2 minimum.  Mr. Cohen replied that the City needed to have $1.2 in funds for every $1 in debt.

In discussion, Councilmember Robbins asked that staff come back with more information based on some of the suggestions of Councilmember Gajewski. She said it was important that we not saddle citizens with more raises in rates.  She thanked staff for their work on the presentation, which was very thorough.

Councilmember Marcuccio said she would lie to have a better grasp on what things are going to cost.  She said the $100 credit is a nice thing, but would like to see more significant tax relief.  She also suggested putting this program off for six months.

Councilmember Gajewski disagreed, saying the City needed to move forward on this right away.  He cited the problems with fireflow that were part of the infrastructure as reason enough. Councilmember Gajewski also compared the costs for the program, which in the worst-case scenario, would add about $60 to the average customer versus the cost of an additional trash pick-up, which would have been more than $100 per household.  In terms of the rise in the rate, Councilmember Gajewski said if the rate could be smoothed out even more as he hoped to suggest in his illustration, that would be great.

Councilmember Britton said he agreed that things needed to move forward and that smoothing the rate would be positive.  He asked for some creative ideas about exemptions, etc., as mentioned previously that might help certain individuals to cope with the increases.  In doing so, however, Councilmember Britton pointed out that the Mayor and Council had asked staff to do a number of things to make the costs more palatable, but if more significant reductions were needed beyond what staff could offer, it was up to the Mayor and Council to propose those.
Mayor Hoffmann said he primary concern was safety, stating if there were a fire and lives were lost due to the reduced capacity of the hydrants that had been identified, she could not live with herself.  The Mayor added that the greatest need for better fireflow seems to be is east of Route 355 where, according to the most recent Citizen Surveys conducted in 2007 and 2005, many residents do not feel that they are dealt with favorably.  Councilmember Robbins said she agreed that safety was critical, but it was also critical to figure how to pay for it wisely.

Mr. Ullery said that staff would develop an option similar to 1B, not to go longer than 20 years, but to push costs out somewhat, with a 20-year replacement program.  He asked for some clarification about what Councilmember Marcuccio felt she might benefit from in terms of information about the costs of the program beyond that presented on February 11.  Councilmember Marcuccio said that she would like a list of the projects and associated that would occur every year, based on the scenario in 2B, the staff’s recommendation.  Mr. Ullery said that he also understood that the Mayor and Council would like to have more information about the tiered rate structure in terms of how many users were in each category, the impact of charging the lowest tier up to the average customer amount and how the rate could be manipulated to provide a low income benefit similar to the tax credit.

Mayor Hoffmann said she was not supportive of putting the major costs in the outlying years with the only goal of smoothing it out.  She said this would only serve to put the costs onto the shoulders of one’s children and grandchildren.  Mr. Ullery thanked the Mayor and Council for their attention this evening. He said that staff would come back with their responses to the Mayor and Council as part of the budget discussion.

Re: Adoption of Resolution to Declare the Official Intent of the Mayor and Council to Bond Finance Certain Projects Under U.S. Treasury Income Tax Regulation Section 1.150-2.

Resolution No. 3-08

Director of Finance Gavin Cohen said that in no way does the passage of the resolution bind the Mayor and Council to issue debt, but that, under the law, the City was obligated to provide notice of that possibility.

Upon motion by Councilmember Gajewski, duly seconded by Councilmember Robbins, and unanimously passed, Resolution No. 3–08, declaring the Official Intent of the Mayor and Council to Bond Finance Certain Projects Under U.S. Treasury Income Tax Regulation Section 1.150-2, was adopted

Re: Future Agendas 

Mr. Ullery noted that there would be a Town Hall meeting of the Mayor and Council with the West End Citizens Association on Thursday, March 13.  The presentation of the FY2009 Budget will occur on March 24.

Re: Old/New Business

Councilmember Robbins congratulated Jenni Stepanek, mother of the late poet Mattie Stepanek, on her doctorate in early childhood education.

Councilmember Gajewski asked when the Mayor and Council could expect an update on the Environmental Strategy.  Mr. Ullery responded that he would check and return to the Mayor and Council with a date.

Councilmember Gajewski also inquired about who might be testifying on Friday regarding the District Courthouse and Mayor Hoffmann replied that it would be herself and Councilmember Britton.  Councilmember Marcuccio said that she knew that pedestrian safety and environmental concerns were a factor.  Councilmember Gajweski read the motion, which had been passed by the Mayor and Council at their meeting on March 3, which laid out the specific concerns.

Mayor Hoffmann said that she had sent an email alerting the Mayor and Council to read an email from Rotraut Bochstahler, the Chair of the Sister City Commission, regarding the possibility of the Commission investigating the possibility of a Sister City relationship with a city in China, possibly Jaixing.  The Mayor noted the presence of Jim Mc Conkey, a member of the Sister City Corporation, who was present to answer any questions.  She asked for comments from the other members of the Mayor and Council. 

Councilmember Marcuccio said that she found the memo to be lacking in information in terms of how the involvement would play out in the future.  She wondered if the City was moving too much in one ethnic direction, rather than another.  Mr. McConkey said that this had been initiated from a group of Rockville citizens and that this was simply a matter of getting the go ahead from the Mayor and Council to proceed with the investigation.  Mr. Mc Conkey said the Commission would like to come back on June 30 with more details about the specifics.  In terms of the cost, Mr. Mc Conkey said that the City did help the Commission when there were certain costs, such as those related to the 50th anniversary of the relationship with Pinneberg last year.

Councilmember Gajewski said he would like to support the possibility.  He said that, besides the United States, China was the most interesting place in the world.  Councilmember Gajewski cited the City’s large Chinese population as another consideration for pursuing this.  Upon motion by Councilmember Gajewski, duly seconded by Councilmember Britton, and unanimously passed, the Mayor and Council directed the Sister City Commission to investigate the possibility of establishing a Sister City relationship with a city in China and to come back to the Mayor and Council on June 30 to discuss this further.

Re: Adjournment 

There being no further business, upon motion by Councilmember Marcuccio, duly seconded by Councilmember Robbins, and unanimously passed, the meeting adjourned at 10:30 p.m. to immediately reconvene in Executive Session pursuant to Section pursuant to 1) Section 10-508 (a) (7) and 10 -508 (a) (8) of the State Government Article to consult with counsel to obtain legal advice and to consult with staff about potential litigation concerning the Town Center project; and 2) Section 10-508 (a) (9) to consider matters directly related to collective bargaining negotiations.  

Present at the Executive Session were the Mayor and Council, the City Manager, the Deputy City Manager, the City Attorney, and the City Clerk.  The Mayor and Council continued their discussion from before the meeting.  There being no further business, the meeting adjourned at 11:08 p.m.