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2024-08-06 Council Minutes Edmonds City Council Approved Minutes August 6, 2024 Page 1 EDMONDS CITY COUNCIL MEETING APPROVED MINUTES August 6, 2024 ELECTED OFFICIALS PRESENT Mike Rosen, Mayor Vivian Olson, Council President Chris Eck, Councilmember Will Chen, Councilmember Michelle Dotsch, Councilmember Susan Paine, Councilmember Jenna Nand, Councilmember ELECTED OFFICIALS ABSENT Neil Tibbott, Councilmember STAFF PRESENT Kim Dunscombe, Acting Finance Director Brian Tuley, Information Services Manager Susan McLaughlin, Planning & Dev. Dir. Mike Clugston, Sr. Planner/Acting Planning Mgr. Leif Bjorback, Building Official Tristan Sewel, Planner Amber Brokenshire, Associate Planner Jeff Taraday, City Attorney Scott Passey, City Clerk Jerrie Bevington, Camera Operator 1. CALL TO ORDER/FLAG SALUTE The Edmonds City Council meeting was called to order at 6:59 pm by Mayor Rosen in the Council Chambers, 250 5th Avenue North, Edmonds, and virtually. The meeting was opened with the flag salute. 2. LAND ACKNOWLEDGEMENT Councilmember Eck read the City Council Land Acknowledge Statement: “We acknowledge the original inhabitants of this place, the Sdohobsh (Snohomish) people and their successors the Tulalip Tribes, who since time immemorial have hunted, fished, gathered, and taken care of these lands. We respect their sovereignty, their right to self-determination, and we honor their sacred spiritual connection with the land and water.” 3. ROLL CALL City Clerk Scott Passey called the roll. All elected officials were present with the exception of Councilmember Tibbott. COUNCIL PRESIDENT OLSON MOVED, SECONDED BY COUNCILMEMBER PAINE, TO EXCUSE COUNCILMEMBER TIBBOTT. MOTION CARRIED UNANIMOUSLY. 4. PRESENTATIONS 1. MAYOR'S FINANCE UPDATE Mayor Rosen relayed next Tuesday the council will have a presentation regarding the results of the community survey which will help inform the budget process. Next Tuesday’s meeting will also include the most robust mid-year report the council has ever received which will show where the City is now and Edmonds City Council Approved Minutes August 6, 2024 Page 2 projections into the future. Tonight the council will be discussing financial policies and next Friday the council will spend eight hours at a retreat talking about the budget. He acknowledged it has been a rough ride this week around the world in terms of the market; stocks fell sharply across the globe on Monday, in fact Japan’s NIKKEI had its worst day since the 1987 Black Monday. Edmonds is not an island and those type of things also impact the City. There is continued concern about a recession which also has an impact on the City’s return on investments and cost of money. At last week’s council meeting, council indicated they intend to preserve and use the $200,000 allocated for homelessness and some ideas regarding the use have been generated which will be presented during committee meetings in order to immediately move that process forward. 5. APPROVAL OF AGENDA COUNCIL PRESIDENT OLSON MOVED, SECONDED BY COUNCILMEMBER PAINE, TO APPROVE THE AGENDA IN CONTENT AND ORDER. COUNCIL PRESIDENT OLSON MOVED, SECONDED BY COUNCILMEMBER CHEN, TO MOVE COUNCIL AND MAYOR COMMENTS BEFORE THE EXECUTIVE SESSION TO ITEMS 10 AND 11 AND MOVE EVERYTHING ELSE DOWN. MOTION CARRIED UNANIMOUSLY. MAIN MOTION AS AMENDED CARRIED UNANIMOUSLY. 6. AUDIENCE COMMENTS John Brock, Woodway, lives near the Edmonds Marsh, a Woodway councilmember, a board member of Edmonds Environmental Council, a regular volunteer for the Edmonds Marsh restoration efforts, and jointly owns his childhood home in Edmonds with his siblings said he is keenly interested in preserving, protecting and restoring environmental treasures everyone enjoys, including drinking water. He requested the council consider a moratorium or temporary restriction on any development, redevelopment or activity that might increase stormwater runoff inside the two critical aquifer recharge areas (CARA) within Edmonds, primarily to reduce the risk of PFAS forever chemicals entering the Deer Creek Aquifer and contaminating the drinking water supply for Edmonds south of 220th and all of Woodway. This area is served by the Olympic View Water District and has 5,075 customers, 85% of whom live in Edmonds. A particular concern in the Deer Creek CARA are the QVA soils exposed at the surface. This compacted clean sand layer, deposited at the end of the last ice age, is the storage medium for the aquifer. Mr. Brock continued, normally the QVA layer is buried deep underground and is usually protected by other alluvial soils deposited over it that help filter the surface water that recharges the aquifer. The Deer Creek CARA has no such natural protections. In April 2024, new federal limits for these per- and polyfluoroalkyl substances, or PFAS forever chemicals, were substantially reduced to only 4 parts per trillion. Washington State Growth Management Act specifically requires the protection of all critical CARAs. As such, limiting development and redevelopment within the CARAs to protect clean drinking water, even temporarily, would not be a regulatory taking as it would clearly protect public health and safety. The City of Edmonds’ comprehensive plan and development codes should explicitly protect the CARAs. Using these tools to limit stormwater runoff within the CARAs would be the prudent and responsible thing to do. 7. RECEIVED FOR FILING 1. WRITTEN PUBLIC COMMENTS 8. APPROVAL OF CONSENT AGENDA ITEMS Edmonds City Council Approved Minutes August 6, 2024 Page 3 COUNCIL PRESIDENT OLSON MOVED, SECONDED BY COUNCILMEMBER PAINE, TO APPROVE THE CONSENT AGENDA. MOTION CARRIED UNANIMOUSLY. The agenda items approved are as follows: 1. APPROVAL OF COMMITTEE MEETING MINUTES JULY 16, 2024 2. APPROVAL OF COUNCIL SPECIAL MEETING MINUTES JULY 23, 2024 3. APPROVAL OF COUNCIL MEETING MINUTES JULY 23, 2024 4. APPROVAL OF PAYROLL AND BENEFIT CHECKS, DIRECT DEPOSIT AND WIRE PAYMENTS 5. APPROVAL OF CLAIM CHECKS AND WIRE PAYMENTS 6. CARBON RECOVERY PROJECT - AMENDMENT #3 PARAMETRIX PSA 7. ILA BETWEEN PD AND UW 8. MOUNTLAKE TERRACE ILA 9. LEGAL ASSESSMENT COMMITTEE EVALUATION AND RECOMMENDATION OF CITY PROSECUTOR IN 2024 9. COUNCIL BUSINESS 1. PRIVATE REZONE REQUEST AT 9514 228TH ST SW (PLN2024-0032) Mayor Rosen opened the closed record review of the planning board’s recommendation to approve a rezone of the parcel at 9514 228th St SW from RS-8 to Community Business-Edmonds Way in File PLN2024- 0032. An open record public hearing was held by the planning board on July 10, 2024. This is a closed record hearing which means consideration is limited to review of the record created by the planning board and only those who participated in the planning board hearing will be given an opportunity to be heard during this closed record hearing. Anyone who participate during the closed record hearing who would like to speak again this evening may not introduce any new facts that were not presented to the planning board. Mayor Rosen continued, the city council will be acting in a quasi-judicial capacity on this agenda item. In other words, councilmembers will be acting like judges, not like legislators. Because councilmembers will be acting like judges, this hearing must be fair in form and substance as well as appearance. To ensure the hearing is both fair and appears to be fair, he will ask councilmembers to make certain disclosures if applicable in response to a series of questions. Questions that may trigger disclosures from councilmembers include, 1) bias – whether any councilmember has an interest in this property or issue, whether any councilmember stands to gain or lose any financial benefit because of the outcome of the hearing, and whether councilmembers can hear the hearing in a fair and objective manner, 2) ex parte – whether any councilmember engaged in communication outside the hearing with opponents or proponents on the issue to be heard and if so, the member must place on the record the substance of the communication so other interested parties have the right at this hearing to review the substance. He asked whether any councilmembers would be recusing themselves from participating on this issue for any of the reasons stated. City Attorney Jeff Taraday requested each councilmember respond to each of the four questions one at a time. Mayor Rosen asked whether any councilmember had an interest in the property or issue. All councilmembers responded no. Mayor Rosen asked whether any councilmember stood to gain or lose any financial benefit because of the outcome of the hearing. All councilmembers responded no. Mayor Rosen asked whether councilmembers could hear and consider the matter in a fair and objective manner. All councilmembers responded yes. Edmonds City Council Approved Minutes August 6, 2024 Page 4 Mayor Rosen asked whether any member of the council had engaged in communication outside the hearing with opponents or proponents on this issue to be heard. Councilmembers Eck, Chen, Dotsch, Paine and Nand responded no. Council President Olson’s response was not audible. Mayor Rosen summarized it did not appear any councilmember would need to recuse themselves. As Council President Olson’s response was not audible, he requested she restate her comment. Council President Olson said she did not have ex parte communication with any of the parties but attended the planning board hearing when this subject was heard. Mayor Rosen asked if any audience member objected to his participation as chair of the meeting or the participation of any councilmember in the proceedings. There were no objections voiced. Associate Planner Amber Brokenshire introduced the proposed private rezone request of 9514 - 228th St. SW from Single family (RS-8) to Community Business – Edmonds Way (BC-EW). A public hearing was held before the planning board on July 10, 2024 and the board recommended approval of the rezone. She reviewed: • Rezone process o Site specific rezone are a Type IV (quasi-judicial) permit o The planning board holds public hearing and makes recommendation to city council on whether the piece of land should be zoned in a different way o City council holds a closed-record review of the Board’s recommendation and adopts an ordinance if they approve of the zone change o The zoning map is updated by staff accordingly • Site • Site Context o The proposal includes one parcel currently taking access from 228th St SW o The site contains a single-family residence o Edmonds Way designation was established in 2017 under Ordinance 3627 Edmonds City Council Approved Minutes August 6, 2024 Page 5 • Aerial image of proposed site with contour lines to demonstrate elevation changes • Rezone Review Criteria – ECDC 20.40.010 o The Planning Board review considered the following factors in reviewing the proposed rezone:  Comprehensive Plan  Zoning Ordinance  Surrounding Area  Changes  Suitability  Value • Comprehensive Plan and Compatible Zoning o Comprehensive Plan Designation  Edmonds Way Corridor o Compatible Zoning  BP, BN, BC, or similar commercial zone and RM zones  RS is not compatible zoning o A rezone to BC-EW would be consistent with the Comprehensive Plan • Zoning Ordinance o In 2007, Ord. 3627 established the Community Business-Edmonds Way (BC- EW) designation to recognize unique nature and physical constraints of the Edmonds Way corridor o The BC zone reserves areas to allow for mixed-use development which includes multiple dwelling unit(s) that support business uses o A rezone on this site would allow for a future mixed-use community within walking distance of existing commercial and service uses at Westgate o Rezoning the site to BC-EW is consistent with the purposes of the zoning ordinance • Surrounding Area o Properties north zoned RS-8 single family residential o Properties to west zoned BC-EW, developed with single family residences o Properties to east zoned RM-1.5, currently vacant o Edmonds Way south of parcel is a mix of RM and BC o Westgate intersection ¼ mile west Edmonds City Council Approved Minutes August 6, 2024 Page 6 • Changes o Annexed 1990 o Two parcels to west rezoned in 2007 o Two parcels to the east rezoned in 2011 o Westgate Mixed Use (WMU) Zone established in 2015 o Several parcels south of Edmonds Way recently rezoned as well • Suitability o Physically – fairly level with access to Edmonds Way o Economically – applicant owns two parcels to west as well o Site is near existing and future mixed-use and commercial development o Served by Community Transit • Value o Rezone would allow more intense mixed-use development and would increase the value of the land and would ultimately allow for additional housing units and/or commercial space o Any future project at the site would have to comply with all codes in place at the time of redevelopment such as building, fire and engineering codes as well as zoning and critical area codes • Public Notice and Comments o Notice of Application issued on May 17 and Notice of Public Hearing/SEPA DNS issued on June 12, 2024 o Two public comments were received with the notice of application in opposition to the proposed rezone based on concerns about traffic, site access from 228th St. SW, parking for future development, and landscaping o Public testimony at the public hearing: site access from 228th St. SW vs. preferred Edmonds Way, concerns about traffic, parking, removal of trees for development, impacts of commercial zoning on adjacent residents • Conclusion and Recommendation o The rezone is consistent with ECDC 20.40.010 o Design standards and development regulations will ensure that public health, safety, and welfare are protected. o Based on the findings of fact, analysis, conclusions and attachments to the staff report, the planning board forwarded a recommendation of APPROVAL to city council. Mayor Rosen opened comments from the applicant. There was no one present representing the applicant who wished to speak. Mayor Rosen opened comments from anyone who participated in open record public hearing at planning board. There was no one present who wished to speak. Mayor Rosen invited councilmembers to ask clarifying questions of the parties of record and cautioned they may not ask for information outside the record. Edmonds City Council Approved Minutes August 6, 2024 Page 7 Councilmember Eck referred to this being compatible with zoning in the area that she was familiar with and the intent not to go to neighborhoods to build multifamily housing. She expressed support for the rezone request. Councilmember Chen referred to concerns voiced by the public about increased traffic on 228th and parking and asked how those concerns were addressed. Ms. Brokenshire responded those concerned citizens were informed that would be addressed during the redevelopment process. The developer will be required to submit traffic studies and provide adequate parking for the uses they plan to develop. Those issues are not addressed at the rezone phase, but with any redevelopment proposal. Councilmember Chen relayed his understanding those issues would be addressed via a different process at another time. He commented the application fits into the lot west of this parcel which is already zoned CB-EW and would blend with that development so he had no problem with the application. Councilmember Dotsch referred to the zoning across street, RM instead of BC, and asked if that allows commercial. Ms. Brokenshire responded there is both multifamily residential RM and BC-EW across Edmonds Way. Immediately to the west there is BC-EW and RM, and RM to the east, a mix of zoning surrounds this parcel. Councilmember Dotsch observed retaining the RM zoning would not include an option for commercial. Ms. Brokenshire answered that was correct; the applicant applied for BC-EW zoning because they own the two lots to the west which are already zoned BC-EW so there would be one development parcel on larger lot. Councilmember Dotsch referred to the map with the surrounding zoning, the neighbors’ concerns regarding access, and comprehensive plan commercial development goal E on packet page 104, “A major concern is that more intensive development that occurs along the corridor should not interfere with the flow of through traffic or intrude into adjoining established communities.” and E.1 “Permit uses in planned multiple-family or small-scale business developments that are designed to minimize contributing significantly to traffic congestion.” The location of this parcel versus the two to the west is more similar to RM with regard to traffic access for residential versus commercial. She was inclined not to move commercial so close to the curve due to the amount of ingress/egress with commercial versus residential. Ms. Brokenshire responded the developer would be required to analyze the site distance when they are developing the lot. If the City’s engineering department determines there is not enough sight distance for the curve, they would ask for it to be changed with the development. Because the applicant owns the two lots to the west, they could potentially move the entrance further west away from the curve. Councilmember Dotsch commented if they did that, access could be provided on the back side closer to single family. Ms. Brokenshire answered there was also discussion about accessing residential on the lot from 228th and commercial from the front. That determination has not made at this point because there is no development proposal. Councilmember Dotsch asked about the applicant’s plans for development. Ms. Brokenshire responded the applicant has not provided any direction with regard to his plans for the lot. Councilmember Nand referred to the SEPA checklist on packet page 152, Paragraph 4a which lists deciduous and evergreen trees as types of vegetation found on the site and 4b which asks what kind and amount of vegetation will be removed or altered and the response is none. She understood under a SEPA checklist no trees would be removed, and asked if trees would be removed with redevelopment, commenting the trees covered a good amount of the lot. Ms. Brokenshire answered tree removal will be addressed with development; the SEPA checklist says none because it is the review criteria for a rezone. When the developer plans to redevelop, landscaping will be required in accordance with the landscaping chapter which requires tree replanting, street trees, etc. Councilmember Paine commented with the adjacent property zoned BC-EW, it was clear the zoning could go either direction. She supported this land use change because it is adjacent and they have a common landowner. Edmonds City Council Approved Minutes August 6, 2024 Page 8 Mayor Rosen asked if anyone objected to any new evidence introduced. There were no objections voiced. Mayor Rosen closed the public hearing and invited the council to deliberate and take action. COUNCIL PRESIDENT OLSON MOVED, SECONDED BY COUNCILMEMBER NAND, THAT THE COUNCIL DIRECT THE CITY ATTORNEY TO DRAFT AN ORDINANCE FOR ADOPTION FOR THE REZONE OF 9514 228TH ST SW FROM RS-8 TO BC-EW FOR A FUTURE CONSENT AGENDA. MOTION CARRIED (5-1) COUNCILMEMBER DOTSCH VOTING NO. 2. FINANCIAL POLICIES Mike Bailey, financial consultant, relayed the financial policies have been reviewed a few times by the finance committee and he appreciated the progress was made during those discussions. He suggested councilmembers ask questions and make comments on the policies during a section by section review. He reviewed: Financial Reporting Policy Councilmember Dotsch relayed at the AWC Municipal Budget Workshop she attended last week, one of the recommendations was a quarterly snapshot of the funds and at that time providing a potential amendment preview to avoid surprises. Mr. Bailey responded both quarterly reports and the rhythm of amendments were subjects of discussion by the finance committee. Since monthly reporting has become so robust, it was felt that negated the need for a quarterly report. He said Councilmember Dotsch’s takeaway from the workshop is a good one; if something occurred during the month that staff believes will trigger an amendment, keeping that in front of council and the public is a good practice and could be incorporated into the monthly report. Councilmember Dotsch pointed out monthly reports are only presented to committee. Mr. Bailey answered they are reviewed at committee and then passed onto council. Councilmember Dotsch preferred to have the report presented to fully council as she feared it got lost if it was not on the agenda, summarizing the more preparation and information the council has, the better at this point in time. Fund Balance Reserve Policy Councilmember Chen referred to his email about proposed amendments. He referred to the section, Reserve Levels for City Maor Operating Funds on packet page 233, and proposed amending the Water Utility Fund Reserve from 12% to 20%, amending the Sewer/Wastewater Treatment Plan Fund from 12% to 20%, and adding a Storm Utility Fund Reserve of 20% of annual operating budget expenditure. Mayor Rosen suggested the council consider those one at a time. Council President Olson commented those are in a different section and not the one the council was currently considering. Mr. Bailey suggested, rather than reviewing the policies subsection by subsection, addressing the financial reserve and working capital reserves together. The amendment Councilmember Chen is proposing is in the Fund Balance Reserve Policy. COUNCILMEMBER CHEN MOVED, SECONDED BY COUNCILMEMBER NAND, TO AMEND THE WATER UTILITY FUND RESERVE FROM 12% TO 20%. Councilmember Chen commented 20% is comparable to the General Fund operating fund reserve level which is a combination of 16% General Fund Reserve and 4% Contingency Fund Reserve. Given the water utility fund is an enterprise fund, there will be unforeseen capital expenditures and he preferred to increase the reserve to 20% to be conservative. Edmonds City Council Approved Minutes August 6, 2024 Page 9 Councilmember Nand asked if Public Works has commented on how restricting an additional 8% of their capital would affect operations or their ability to pursue maintenance. Ms. Dunscombe answered Public Works has not had a chance to view it. Councilmember Nand commented she preferred to have more feedback from staff regarding whether restricting an additional 8% of their revenue would affect their ability to operate vital services before she would be comfortable committing to this additional restriction. She understood from a policy level why Councilmember Chen wanted to see parity between the General Fund Reserve and the Restrict Fund Reserves. Councilmember Paine commented Councilmember Nand makes a fair point. She had hoped the council would discuss the policy and development of the policy before finetuning it. For example, in an email received today, some community members feel 20% is too high. She preferred to hear from all the directors regarding how the existing policies or revisions impact their operations. The council also needs to understand how increasing reserve fund levels would impact rates and possibly be out of balance with needs. She recalled from serving on the PPW committee that there was some interest in creating access to funds to support the local contribution for grant applications, but that is something the council has yet to discuss. She appreciated the thought Councilmember Chen put into this, but preferred to have more information regarding the impacts to programming and rates. Councilmember Eck valued what she suspected was the intent of Councilmember Chen’s motion and thought it was aspirational, but also shared the concerns expressed Councilmembers Paine and Nand. She asked Mr. Bailey his opinion whether 12% was the standard level. Mr. Bailey answered in his experience 12% was relatively standard, but reserves vary based on a variety of factors including the risk of volatility in the revenue streams and risk of projects such as the treatment plant. Risk assessment is something Ms. Dunscombe suggested, but there has not been time to perform that assessment. A policy can be put in place and reviewed after additional work is done. The proposed policies reflect the typical levels. The right levels for fund balances and reserves are the questions the Government Finance Officers Association (GFOA) receives most often; the trite answer is it depends – it depends on risks, environmental factors, etc. A baseline reserve is two months’ worth of expenditures which is 16% of expenditures so if something unanticipated happened, activities could be supported for two months if revenue streams were disrupted. Councilmember Eck summarized with that information and her concern 20% may be too ambitious at this point, she was unsure she could support the motion. Council President Olson commented it is important for councilmembers to know what the reserves are today, recalling 20% was a reduction of the current reserve. Mr. Bailey relayed his understanding the current reserve levels are higher than this and are the result of activity without the benefit of policy guidance. Establishing reserve level for enterprise funds would be new to policy guidance; the council already has guidance on the General Fund Reserve and the Contingency Reserve Funds. Council President Olson explained the Water Utility is currently at 20%. If council intends to make a decision without staff guidance, it may be prudent to remain at the current level. Changing the reserve does not change what the department is currently doing; revising the reserve to the amount in the policy would be a change. The most conservative thing to do while waiting for staff input is to accept the amendment as stated. She emphasized the need for approved financial policies going into the budget process; the intent is to adopt the financial policies on consent or the council agenda before the council recess in August. Councilmember Dotsch asked if a 20% reserve was factored into the utility rate study. Ms. Dunscombe answered reserves were taken into consideration in the rate study in 2023. Councilmember Dotsch expressed support for keeping the reserves as they currently exist. If there is more capital activity, the reserve should be increased. Due to the City’s aging infrastructure, Edmonds is a prime example of a city where surprises happen. Maintaining the existing higher reserve would be a good practice and if the next rate study determines it is too high, lowering it could be considered. Edmonds City Council Approved Minutes August 6, 2024 Page 10 Councilmember Nand asked Councilmember Chen if the amendment is not approved, he would find it acceptable if she made a motion to remove reserve levels for City major operating funds from consideration of the policies tonight and direct Ms. Dunscome to bring back information about appropriate levels based on feedback from directors and the affected departments. Councilmember Chen responded the finance committee has discussed this and that was one of the questions, following up with Public Works whether 12% was a reasonable reserve level. However, due to personnel changes, that information flow was interrupted and now the council is a point where the policy needs to be approved before the budget is underway. He pointed out the following, 1) Edmonds is an old city and its infrastructure is aged and there is a higher inherent risk that things could go wrong and 12% is less than 2 months of expenditures; 2 months is about 20% which is the reason for his proposed amendment, and 2) the policy does not reference a plan for replenishing the 12% reserve for the enterprise funds. The General Fund Reserve policy contains extensive policy documentation about replenishing the reserve. Council President Olson raised a point of order, commenting Councilmember Chen was not speaking to the motion. Mayor Rosen said he would allow Councilmember Chen to continue. Councilmember Chen continued his proposal was to establish the reserve for the utility funds at 20% which represents 2 months of operating expenditures. If that is determined to be too high in the future, the policy could be amended. Councilmember Eck said she was not adverse to 20%. She asked Mr. Bailey the ramifications of remaining at 20% versus the 12% originally proposed in the policy. Mr. Bailey answered there would be little to no ramifications, the only potential change would be during a future rate setting exercise where the current and previous reserve could be compared. Councilmember Paine asked how long it would take to do a risk assessment. Ms. Dunscombe answered it would take some time to do it well. There has been discussion about reviewing financial policies at the beginning of every year, even the mid-biennium, to ensure the policies reflect how the council wants to build the next budget. If it started early, next year would be great time for that process. Councilmember Paine relayed her feeling that 20% was too high and that 12% was probably a better level. She also did not want the council to review policies over and over without the necessary data. She supported having input from the directors as they are best able to comment on the effects it would have. Councilmember Nand said she was initially concerned about the impacts this would have to the operations of Public Works and the other affected enterprise funds, but Councilmember Chen makes a compelling argument so she intends to support the motion. She requested an update from Ms. Dunscombe at the next finance committee with feedback on the change in the reserve level from the affected departments and whether they preferred 16% or 20%. MOTION CARRIED (4-2), COUNCILMEMBERS ECK AND PAINE VOTING NO. COUNCILMEMBER CHEN MOVED, SECONDED BY COUNCILMEMBER NAND, TO AMEND THE SEWER/WASTEWATER UTILITY FUND RESERVE FROM 12% TO 20%. Councilmember Chen commented his reasoning for this amendment was similar; one compelling reason for a 20% reserve is the current situation with the WWTP and the new gasification technology which is struggling, something that keeps him awake at night. He concluded it was prudent to have at least 2 months of operating funds in reserve. Council President Olson asked the status quo, whether the current reserve was 20%, not 12% as reflected in the policy. Mr. Bailey relayed his understanding that the current reserve level was at least 20%. Council Edmonds City Council Approved Minutes August 6, 2024 Page 11 President Olson pointed out the 12% in the draft policy is lower than the current reserve. She agreed with Councilmember Chen’s comments. Councilmember Paine asked it the intent was to bolster the General Fund with funds from a utility fund, would that most likely be borrowed from the water utility fund. Ms. Dunscombe answered that was probably the most likely fund to borrow from. Councilmember Paine asked if that was because it was the largest. Ms. Dunscombe answered sewer is the largest but has WWTP consideration so it would be better to borrow from the water utility. The stormwater fund is small. Councilmember Paine commented without input from the directors and without a proper risk assessment high, she felt 20% was quite high and she worried about hoarding public dollars without substantiative information to support it. MOTION CARRIED (4-2), COUNCILMEMBERS ECK AND PAINE VOTING NO. COUNCILMEMBER CHEN MOVED, SECONDED BY COUNCILMEMBER NAND, TO ADD a 20% RESERVE FOR THE STORMWATER FUND. Councilmember Chen pointed out the budget book has three enterprise funds, water, sewer and stormwater. The current policy omitted this fund which is why he wanted to add it. Council President Olson said although this was a good thought, she would not support it without additional staff input because it was a change to add a reserve. Councilmember Chen explained there are reserve funds in the stormwater fund, it is just isn’t reflected in the policy. Council President Olson asked if the reserve is currently 20%. Ms. Dunscombe advised that was her understanding. Council President Olson supported the status quo for the reserve on the utility funds. It is weird because the policy reflects a lower percentage and the amendment is to raise them, but in actuality, they are staying at the level they currently exist. To the extent the council does not have the additional staff input or the risk assessment, it is prudent to keep the reserve at the current level. Councilmember Nand was glad Councilmember Chen wanted to add a reserve for the stormwater fund. She expressed support for staff input, because if the status quo is too restrictive based on the departments’ goals, she would be in favor of lowering the reserve to 16% or 12%. She recognized due to staffing fluctuations, that type of inquiry wasn’t possible now. She looked forward to an update at next month’s finance committee if staff had the time and ability to gather that feedback. MOTION CARRIED (4-2), COUNCILMEMBERS ECK AND PAINE VOTING NO. COUNCILMEMBER DOTSCH MOVED, SECONDED BY COUNCIL PRESIDENT OLSON, TO ADD ON PACKET PAGE 234 UNDER FUND BALANCE AND RESERVE REPLENISHMENT, ITEM 3, “A PLAN AND TIMELINE UP TO 3 YEARS FOR REPLENISHING THE MANDATED RESERVE POLICY LEVELS.” Councilmember Dotsch recalled the AWC workshop also talked about plans and timeline for replenishing reserves. There are required replenishment timelines such as up to three years, but not establishing a timeline makes it less impactful. Mr. Bailey suggested stating the plan to replenish will include a proposed timeline rather stating a specific number of years. Given the City’s current situation in the General Fund, replenishing that within three years may have other consequences that the council may find unacceptable. The notion of a timeline as part of the plan for replenishment has a lot of merit, but he wondered if the council wanted to put a hard stop on what that timeline might look like. Councilmember Dotsch restated the motion: TO ADD A PLAN AND TIMELINE FOR REPLENISHING THE RESERVE. THE REVISED WORDING WAS ACCEPTABLE TO THE SECONDER. Edmonds City Council Approved Minutes August 6, 2024 Page 12 Councilmember Paine agreed a plan for replenishment was needed, but if the timeline was too long it may not be effective and if it was too short, the impacts on the community would be profound and put the City at risk for failure to meet the timeline. There will be things going to the voters in the next 1½ - 2 years that will be impactful to the community and including replenishment in the mix could really affect people’s checkbooks. She suggested adopting a proposed timeline in a council resolution when there is a proposal. It will be important to understand the financial impacts of various proposed timelines for a replenishment plan. She summarized there are risks of too long or too short of replenishment timeline. Mr. Bailey said the current situation is an excellent example of that dilemma. Incorporating a requirement for a timeline is good and then the council can consider how the plan best meets the community needs and eventually adopting the plan via a resolution. He was unsure that needed to be in the policy for the council to take that action. Councilmember Nand recalled when the draft financial policies were discussed at the finance committee meeting, she had an extensive discussion with Acting Finance Director Dunscombe and Mayor Rosen about when benchmarks for the replenishing reserve would be established. The council declared a fiscal emergency last year and she has been waiting to hear when replenishment will start and what the plan will be. However, she was hesitant to include language in the policy that would restrict the finance department from presenting the most prudent financial plan to maintain levels of service that community members expect given the grim financial forecast. Councilmember Nand referred to language under Fund Balance and Reserve Replenishment, “…the Mayor shall present to the City Council an annual Replenishment Plan within 60 days…” It was her understanding that once the council adopts the financial policy framework, the 60 day period begins for the administration to provide a replenishment plan to address the fiscal emergency which council approved last year to allow access to the reserve funds. Mr. Bailey agreed, the council will be provided a variety of presentations including next Tuesday and at the retreat as well as the budget itself on October 1 that will directly address the issues Councilmember Nand raised. Councilmember Nand said for that reason she was comfortable with the drafted language as it exists. She respected the concerns addressed by councilmembers, but could not support the amendment. MOTION CARRIED (5-1), COUNCILMEMBER NAND VOTING NO. Councilmember Paine referred to Item 3 in the Objectives section, “Provide prudent guidelines regarding the establishment , use and replenishment of City committed or assigned fund balances reserves,” relaying her understanding the directors have a lot of control over their budgets. She suggested adding language to the job descriptions about adherence to budgeted amounts. She noted that is a financial move but also making it a shared responsibility rather than just resting the finance director’s shoulders. Mr. Bailey clarified Councilmember Paine was suggesting as a matter of practice that the City incorporate fiscal responsibility as a condition in department director job descriptions. Councilmember Paine agreed that was her intent. Councilmember Paine referred to last sentence on packet page 233 and continuing onto page 234, “Uses of Fund Balances or Reserves stipulated as minimum balances by this policy shall have occurred when expenditures are authorized via an appropriation of the council. Incidental use of available fund balances (Governmental Funds) or reserves (Enterprise Funds) for incidental cash-flow shall not constitute a "utilization of Fund Balances or Reserves" under this.” She relayed her understanding if spending went into it a little bit didn’t mean desperate measures were required but it needed to be monitored. Councilmember Paine referred to language added at the top of packet page 234, “Incidental use shall not exceed $5 million or be for more than 60 days without prior council approval.” She asked how $5 million was determined. Mr. Bailey answered if a fund was in a cash flow deficit, this language was intended to refer to fluctuations that occur over the course of a month depending on cash flow, revenues, etc. The cash flow of a given fund is evaluated at month end as matter of practice and if the deficit is anticipated to be as Edmonds City Council Approved Minutes August 6, 2024 Page 13 much as $5 million or more, the finance director would make the council aware to ensure there were no concerns that it was higher than the policy level permitted. Councilmember Paine commented it wasn’t likely that Finance would be doing the spending. She commented this policy is just a buffer, to say don’t go beyond that line and $5 million is substantial. Mr. Bailey answered in the context of the General Fund where the total budget is $50 million and the cash flow this year with a relatively low fund balance, $5 million has been sufficient. Next year, he was certain the council would be involved in monitoring cash flow balances in the General Fund as the City continues to work its way out of its financial struggles. Councilmember Nand referred to the 60-day timeline for notification of council of incidental use over $5 million and recalled a suggestion she made at the Finance Committee meeting that 45 days would be more prudent. She recognized there are significant fluctuations due to the twice/yearly deposit of property tax revenue. She asked Mr. Bailey if 45 days would make more sense. Her primary concern was the City was dipping into reserves, council was approving budget amendments and spending more and more money and did not know for two months that the fund was in the hole and a fiscal emergency needed to be declared. Mr. Bailey answered the current language will serve the City well because, 1) council is getting robust information every month and the monthly report includes a cash flow statement which allows council to monitor it on a month-to-month basis and reports are provided more timely now, 2-3 weeks following the end of the prior month, and 2) this work is done at the end of each month so a mid-month view is actually impractical. It would be better to leave it a 30 days which he believed was too short or 60 days which he continued to believe served the council’s purpose well because of the robust monthly reporting. Councilmember Nand asked whether an internal mechanism could be instituted that the administration has to notify all the directors at 30 or 45 days when they need to tighten their belts, before the administration’s notification to council. Mr. Bailey responded when cash is very tight, it is very common for the finance function to work closely with those who are spending the money to help create awareness and manage those expenditures so that larger expenditures occur when the City is in a better cash position. Since Ms. Dunscombe has been in this role, that dialogue has been occurring. That would be the way he would typically handle it. To the extent it would be necessary, cash flow could be managed through the timing of disbursements through the finance function as well. Interfund Loan Policy Mr. Baily pointed out this is a new policy for the council. Councilmember Paine referred to the sentence, “All long-term interfund borrowing will…” and asked what long term borrowing meant. Mr. Bailey said short term debt is one year so long term would be beyond one year. Councilmember Chen referred to Short-Term Debt Policy and asked how that borrowing occurs. Mr. Bailey said at each month end, the cash accounts are reconciled and cities pool the cash from the various accounts into one account that they manage collectively which maximizes the benefit of pooled cash for purposes of investment, etc. At month end, the checking account, investment accounts are reconciled and the portions of that cash pool associated with each fund are identified and that is when a fund deficit from a cash perspective is identified. If there is a cash deficit at the end of the month, whatever the amount is determined to be at month end is borrowed by that fund from the pool and an entry made into the City’s accounting records where the appropriate rate of interest as set by policy is charged to that fund as an expenditure and credited back to the pool as a whole so the benefit of the interest is shared on a prorate basis for all the funds based on how much that fund represents of the pool. The new policy calls for that interest to be disclosed in the monthly reports. Edmonds City Council Approved Minutes August 6, 2024 Page 14 Councilmember Chen relayed his understanding of Mr. Bailey’s explanation that the City was borrowing money from the investment pool without identifying a specific fund to borrow from and the interest is booked as an accounting entry based on the interest rate the pool earns and the interest allocated back to the pool. Mr. Bailey agreed, explaining the pool interest earnings are allocated to the funds with balances. He asked if interest allocation was done each month. Ms. Dunscombe answered yes. Councilmember Chen commented that practice is quite different from short or long term borrowing where the source is typically identified. He will not propose an amendment at the policy level, but in practice he suggested identifying the principle because when money is borrowed, the principal and interest are repaid, but this policy only addresses the interest and not the principal. He suggested talking offline regarding how to identify the source for booking the accounting entry. Mr. Bailey relayed in his experience, he has shown councils examples of the mechanics to show how the interest is booked to the funds that essentially loaned the money to the fund that is in cash deficit. Councilmember Nand recalled an issue Council President Olson raised with Ms. Dunscombe via email regarding the definition of municipal advisor, whether that is bond counsel, the finance director or someone else. Mr. Bailey answered municipal advisor is a defined term and he recommended adding it to the list of defined terms. Years ago, the Securities and Exchange Commission decided what was traditionally called a financial advisor would be called municipal advisors and would be regulated. The City has selected a municipal advisor to advise on all City debt. It would be advisable to include the municipal advisor in these conversations so they are aware of the dynamics occurring in the City’s debt portfolio, because even though they are below their radar, but it can sometimes rise to a level of interest that they would want to know about. The City’s municipal advisor advised the council in its most recent utility bond issue and he recommended it be added to the list of defined terms in the policy. Councilmember Paine referred to the Short Term Debt Policy, relaying she was uncomfortable with having short term borrowing happening and only reported in monthly reports. She asked if that was the current practice. Mr. Bailey answered yes and it has been happening administratively. One of the first things he recommended this year was to adopt a policy to create clarity because money was being borrowed internally and there was visibility. What is recommended is the standard practice in his experience; the council receives a monthly report that shows interest paid as well as a cash flow report. It is uncommon for councils to receive the cash flow report, but in this case it makes sense to provide the council significantly more visibility. Councilmember Paine asked if Mr. Bailey recommended notice to council when this occurs, specific notice when a cash flow shortage occurs outside the monthly reports. Mr. Bailey asked what she meant by specific notice. Councilmember Paine explained notice to council that General Fund borrowing due to a cash flow shortage is occurring. Mr. Bailey answered a cash flow analysis of the larger operating funds such as the General Fund, Street Fund, and Utility Funds will be done in anticipation of the upcoming budget, especially when reserve levels are as low as they are in some funds. Property taxes are 20+% of the City’s revenues twice a year, a practice that is routine in organizations like fire districts. COUNCIL PRESIDENT OLSON MOVED, SECONDED BY COUNCILMEMBER NAND, TO ADD A DEFINITION FOR MUNICIPAL ADVISOR. Council President Olson commented in Edmonds it has always been called bond counsel. Mr. Bailey explained they are two different things. MOTION CARRIED UNANIMOUSLY. Budget Policy Edmonds City Council Approved Minutes August 6, 2024 Page 15 Councilmember Paine asked if “outstanding credit rating” could be changed to “investment grade credit rating” in the purpose section on packet page 235. Mr. Bailey answered it is council’s prerogative. Councilmember Paine said her research did not find “outstanding” as a metric that was used. COUNCILMEMBER PAINE MOVED, SECONDED BY COUNCILMEMBER CHEN, TO CHANGE “OUTSTANDING CREDIT RATING” TO “INVESTMENT GRADE CREDIT RATING.” Council President Olson said she was not familiar with either term and asked the intent of “outstanding.” Mr. Bailey said outstanding was used in the previous draft so it was carried forward. It was his understanding the term “outstanding” was intended to imply very high like AAA using the Moody or Standard & Poor’s scale. Investment grade would be through a B rating; C ratings are below investment grade. Another alternative would be a strong credit rating or other term that reflects the council’s intent. His impression was to reflect the council’s intent to have policies and practices that merited very high credit ratings. Council President Olson commented her intent would be at least AA or above so investment grade would not be an option. She noted that affects the interest rate when the City wants to borrow. Mr. Bailey said the council could choose to say AA or above; it is a statement of intent to have policies and practices that result in an evaluation of the City’s credit that would be at investment grade, AA or above or outstanding. Councilmember Paine restated the motion. CHANGE “OUTSTANDING CREDIT RATING” TO “HIGH INVESTMENT GRADE CREDIT RATING.” THE REVISED WORDING WAS ACCEPTABLE TO THE SECONDER. Councilmember Nand asked if was anticipated the City would ever have such a debt load that it would be below investment grade or below B and whether that happens. Mr. Bailey answered it does happens, he would hesitate to speculate that it would ever happen in Edmonds. Below investment grade rating is certainly within the realm of possibilities. Councilmember Nand assumed that would be a transitory status. Mr. Bailey referred to Detroit, Michigan, which recently achieved an investment grade credit rating,; they have been below investment grade for quite some time. Councilmember Nand wondered if this would somehow impact the City’s ability to leverage for major infrastructure, etc. Mr. Bailey commented there are a lot of things that go into the timing and quality of credit and submitting for review for a credit rating; having strong policies that the City consistently follows is high on that list. Council President Olson was not confident that everyone who reads high would know what it meant; she preferred AA or AAA so she will not support this amendment. MOTION ENDED IN A TIE, COUNCILMEMBERS ECK, PAINE AND NAND VOTING YES; COUNCILMEMBERS CHEN AND DOTSCH AND COUNCIL PRESIDENT OLSON VOTING NO. Mr. Taraday advised unless this policy is adopted by ordinance, Mayor Rosen could break tie if he wished. Council President Olson asked if Mr. Bailey had a recommendation for how the council would adopt this policy, whether it would be by ordinance. Mr. Bailey answered no, in his experience policies are typically adopted as a statement of intent by the council which would typically be a resolution. MAYOR ROSEN VOTED YES, BREAKING THE TIE, AND THE MOTION CARRIED (4-3). Mr. Bailey referred to the Operating Budget Policy, relaying one of the questions he often hears is whether the policies are intended to be aspirational or the current state. They are intended to aspirational although most want to meet and exceed their policies but may not always find themselves in that situation. Because the policy exists doesn’t mandate certain things, but it would be appropriate to call out any shortcomings Edmonds City Council Approved Minutes August 6, 2024 Page 16 from the policy, for example in a budget, if the budget did not meet the City’s policy standards. In budgets he prepared, he recommended calling that out to make it clear to the council and public. The budget policies are a bit aspirational but intended to become the new standard. Mr. Bailey referred to the policy regarding the Long Range Financial Strategy, acknowledging confusion by the finance committee about how this is characterized and suggested could be stated more as a policy statement than a task. Councilmember Paine asked how seeking grants would fit into a Long Range Financial Strategy as some large capital projects can be ongoing for several years. Mr. Bailey answered that would be a consistent approach, especially for grants that sustain multi-year projects. COUNCIL PRESIDENT OLSON MOVED, SECONDED BY COUNCILMEMBER CHEN, TO BRING THE FINANCIAL POLICIES AS AMENDED TO A FUTURE CONSENT AGENDA FOR APPROVAL. Council President Olson commented it would be nice to see the changes that the council approved implemented into the policy before final approval. Mr. Bailey commented based on the amount of work that has gone into the policy, the council’s intent will be clear to staff and will be used to inform the budget process. Council President Olson expressed appreciation for all the work that went into the policies. MOTION CARRIED UNANIMOUSLY. Mayor Rosen declared a brief recess. 3. GREEN BUILDING INCENTIVES DRAFT CODE AMENDMENT INTRODUCTION Building Official Leif Bjorback introduced Planner Tristan Sewell and Planning & Development Director Susan McLaughlin. Planner Tristan Sewell reviewed: • Brief Summary o Buildings emit most of Edmonds’ local climate pollution. Residences emit over a third. o Encouraging development with reduced environmental impacts via optional permit review and land use incentives. o Proposed incentives expand upon underutilized existing examples o Learn how to expand and adapt to more contexts, zones, etc. o Planning Board recommends – memo forthcoming • Policy Context o 2020 Comprehensive Plan Climate Change Element  B.1: City takes lead reducing Edmonds' GHG emissions  E.2: Programs and incentives for (re)development to reduce GHG emissions o 2023 Climate Action Plan  Climate neutrality by 2050  Action BE-2.2: Develop and implement a green building incentives program • Program Objectives o VALUABLE  Desirable to homeowners and developers, motivating the environmental outcomes  Greater incentives in exchange for ‘greener’ certification o SIMPLE  Expand upon code precedent, specifically Titles 16 & 22  Use industry standards to avoid creating unique criteria  Minimize impacts on City staff • Existing Regulations Edmonds City Council Approved Minutes August 6, 2024 Page 17 o WMU requires Built Green 1-3 Star or equivalent LEED o Extra height for LEED Gold in:  RM – Edmonds Way  BC – Edmonds Way  Westgate  Firdale Village District 2 (Multifamily Residential)  Minimal uptake – only Westgate Village • Market Influence o Edmonds  25 Built Green Projects o Neighbors and Peers  Hundreds of Built Green Projects in: - Shoreline - Everett - Kirkland • Possible Incentives o Expedited plan review – time is money o Additional building height – enables greater efficiency o Reduced setbacks – onsite location flexibility o Increased lot coverage – more developable lot area o Increased Density – number of units, floor area ratio o Reduced off-street parking – specific needs vs. one-size-fits-most • Important Notes o Incentives never supersede other regulations. o Onsite realities may limit utilization of incentives. o Possible limiting factors: Edmonds City Council Approved Minutes August 6, 2024 Page 18  Critical areas  Applicant finances  Existing development  Topography  Building and Fire codes  Stormwater  Design review, including landscaping  Street frontage improvements and right-of-way access  Shoreline Master Program Mr. Bjorback reviewed: • Program Development o Researched incentives programs in the region and nationally  American Institute of Architects  American Planning Association o Learned from peers and neighbors  Cities of Bellevue, Everett, Kirkland, Seattle, Shoreline, and Tacoma o Master Builders of King and Snohomish Counties (MBAKS) o Mayor’s Climate Protection Committee o Public forum seeking input from both industry reps and public o Met with Planning Board on 4 occasions • Construction Standards (Established Certifications) o Single-Family Residential: Built Green® 4-Star o Commercial, Multifamily, and Mixed Use: LEED™ Gold o Flexible, point-based systems – not prescriptive o Periodically updated in response to the market and regulation o Widely used and recognized in our region o Third-party verified • Point Categories o Built Green  Site and Water  Energy Efficiency  Health and Indoor Air Quality  Materials Efficiency  Equity and Social Justice  Operation, Maintenance, and Homeowner Education  Built Green Brand Promotion o LEED  Integrative Process  Location and Transportation  Sustainable Sites  Water Efficiency  Energy and Atmosphere  Materials and Resources  Indoor Environmental Quality  Innovation  Regional Priority • Draft Permit Review Incentives Edmonds City Council Approved Minutes August 6, 2024 Page 19 Mr. Sewell reviewed: • Draft Land Use Incentives Mr. Bjorback reviewed: • Enforcement – Case Studies o Examples from other jurisdictions:  Certification required within 6-30 months of issuance of Certificate of Occupancy  Financial penalty models: - Flat rate - Percentage of work valuation - Per square foot  Remit any waived or reduced fees in full  Liens may be issued for the penalty or abatement needed to comply • Proposed Enforcement Measures o Proof of certification required prior to issuance of Certificate of Occupancy, otherwise two 2- year performance bond required:  Requires registration of the project with the certifying organization  Expedited permit review bond valued at 50% of building permit fee  Land use incentive bond valued at 5% of the project valuation  Bonds released upon approval of certification o Failure to certify within 2 years surrenders the bonds as a penalty  Expedited permit review bond processed as permit fee revenue  Land use incentive bond funds the Green Building Incentives Program • Next Steps Edmonds City Council Approved Minutes August 6, 2024 Page 20 o Discussion: September 10, 2024 o Public Hearing: September 24, 2024 o Council Action: October 1, 2024 Councilmember Nand relayed her understanding the fees charged by the LEED program can be cost prohibitive to certain developers. She asked if the proposed financial incentives would pencil out when considered against the cost of LEED certification. Mr. Sewell answered based on what staff has heard from stakeholders, they think the program offers enough carrots to cross that threshold. It should go without saying that not every project will pencil in that way; some will look at it and say it will not work for them, it may be matter of scale for some. He clarified LEED Gold is not one thing, there are a lot of different versions and has a broader application than the Built Green residential model. Based on what staff is seeing from its peers and attempt to make equivalencies, they think the program will cross that threshold. Council President Olson said in theory she is100% excited about the green incentives and when it was approved in the Climate Action Plan (CAP), everyone has been looking forward to the development of the program. However, she had concerns with regard to implementation. For example she was looking for something she was told would be in the program that she was not seeing so perhaps it was already taken out, 40% lot coverage versus 35%. Mr. Sewell said there has not been a lot coverage proposal. It was considered internally, but was not presented to the planning board. Council President Olson continued, she had similar concerns regarding reduced setback and going down a level because it actually sacrificed something that was green, sustainable and good for the environment to get this other. Setbacks were reduced in the DADU code and now someone could choose the zone smaller than the one they are in, but the setbacks in some of those zones were already reduced so this will be a very significant change. The other thought is the combination of how all things come together; she wanted to see it all at the same time because one affects the each other. With regard to the DADU code that was just approved, if a green incentive was applied to a new ADU, it can get 5 extra feet as an incentive which would conceivably make the DADU taller than the main residence. She has heard repeatedly the community does not want the weirdness of tall spires of DADUs that dwarf houses and make neighborhoods look weird. She needed to see the zone it would be applied to and the impact of the allowed height, the extra five feet or the reduced setback. She was especially concerned about setbacks as they had already been reduced. She recalled a councilmember’s email about making a motion related to timing. The intent was council action later this year, but preferred to finalize the comprehensive plan so the council knew what this program was being applied to in order to know the impacts. Councilmember Eck asked staff their thoughts about Council President Olson’s concerns. Mr. Sewell provided and reviewed illustrations of setbacks: • Single Family Residential – Built Green 4-Start o Includes remodels, duplexes, and ADUs o Excludes new SFRs in Business, Commercial and mixed use zones – remodels, ADUs OK Edmonds City Council Approved Minutes August 6, 2024 Page 21 Councilmember Eck relayed her understanding if an ADU was built to LEED or Built Green standards, it could receive additional height. Mr. Sewell explained other incentives could be offered for an ADU such as increased square footage or lot coverage which may make more sense than height for ADUs. Edmonds City Council Approved Minutes August 6, 2024 Page 22 Councilmember Eck relayed council could limit height or decrease setbacks for ADUs. Ms. McLaughlin explained this is staff’s proposal based on staff’s research, stakeholder discussions, peer review, the City’s existing code and opportunities. From a policy discussion, it is completely up to council. With regard to height, the planning board recognized green building warrants interstitial space between stories which is more common in multifamily or commercial buildings given larger ventilation systems, whether 5 feet is inappropriate in lower density residential or appropriate in mixed use and commercial zones. These are policy discussions staff welcomes council to have. Councilmember Eck asked if moving forward, would council select either LEED or Built Green or both. Ms. McLaughlin answered both, LEED is for commercial, multifamily and mixed use and Built Green is for low density residential. Councilmember Paine referred to the slide regarding possible incentives and asked if the City could choose which ones it wants. She was aware of concern regarding the percentage of lot coverage and was glad to be moving away from 40% but other things that she was interested in keeping were more permeability in residential zones to improve stormwater infiltration, retain and design around trees, etc. She looked forward to the public hearing and other presentations to get more information about land use and other elements in the comprehensive plan. Ms. McLauglin emphasized that while these are possible incentives, they are not the ones the planning board landed on. The previous table is the proposed incentive package. Councilmember Dotsch said she will be curious to see the planning board memo. She referred to the list of questions including can staff successful implement accelerated review. She has been told the City is three months or more behind in reviews. She has heard from developers that that is a great incentive, but it doesn’t sound like that is an option. She worried that others waiting for review get delayed even further. She summarized it seemed like a great opportunity, but one the City was not quite ready for. Ms. McLauglin responded expedited review will always be relative to the existing target date so a green building applicant would still get an expedited review regardless of the delayed target. Councilmember Dotsch said she was thinking of bandwidth right now. Ms. McLauglin said the queue list remains the same. Councilmember Dotsch said it is a great goal but may be premature to put it out to the community. She referred to the draft permit review incentives for single family residential and multifamily residential and asked whether middle housing was defined as single family. She recalled on one slide duplexes and ADUs were defined as single family, but if quadplexes are allowed in single family if one unit is affordable, would that also be considered single family. Mr. Sewell explained the City hasn’t fully accounted for compliance with HB 1110 at this phase. Councilmember Dotsch recalled the 40+% lot coverage may have been mentioned in the webinar on HB 1110. She expressed concern these regulations will be additive to other changes being made in the comprehensive plan and feared it was cart before the horse. Councilmember Dotsch continued, the comprehensive plan also addressed changing the zoning of single family and asked if current zoning would even apply. Ms. McLaughlin responded these regulations are written under the existing development code and comprehensive plan. It is anticipated single family will become low density residential in the 2025 code amendments and the comprehensive plan land use designations which would enable middle housing. In 2025 there will be a comprehensive code amendment to correct any zoning references to single family. The discussion is whether what is relevant for single family now will still relevant for a low density residential zone. The way the regulations are written, staff believes it is still compatible. The modest setback reductions for ADUs would still be consistent with the policy language and applying these incentives. Staff does not see conflicts, but there will absolutely need to be some rationalization when the code amendments are done. With regard to getting the cart before the horse, in the wake of potential new development, she would rather have a Green Building Incentive Program at the ready so any new development is green. Once some higher density standards are enabled in centers Edmonds City Council Approved Minutes August 6, 2024 Page 23 and hubs to meet growth strategies, there should be an adopted green building incentive program so new buildings are modern and sustainable. Councilmember Dotsch commented Edmonds has a lot of slopes and a height increase on a slope is quite dramatic for the surrounding neighbors. If the setbacks are reduced so buildings are closer to neighbors, that also impacts light and views. She looked forward to a better understanding of what these regulations entailed in addition to the comprehensive plan changes. She commented on the importance of visuals at public hearings to illustrate proposed changes. Councilmember Nand commented on the striking difference in the percentage of Built Green in Edmonds versus surrounding cities such as Shoreline. She was excited to have this in place before a new cycle of development begins under the state housing bills. She asked if it would be possible to do modeling to illustrate how much greenhouse gas is generated by a typical 2-story build under current construction practices versus Green Built 4 or 5 and LEED. Ms. McLaughlin answered calculations in the existing CAP indicated over 30% of emissions are from residential development. Staff could research whether the Built Green program has a way to calculate that. Councilmember Nand said she was excited to better understand the environmental impact a green building incentive program would have in real time. Ms. McLaughlin explained while this came from the CAP, the City’s ability to achieve it will also depend on the ability to achieve the CAP target of carbon neutral by 2050. It is important to follow through with reducing residential emissions. Mr. Sewell said Built Green is calibrated off the Washington State Energy Code and is intended to be 20% improvement at the 3 star level. Councilmember Chen said the direction this is heading is the right one and there may be a lot of excitement building based on something new, but it will take time to adapt to it and get to know it. He suggested it might be helpful to provide visualizations of developers taking advantage of the incentives on a DADU for example, such as maximizing 1200 square foot footprint and 24’ height limit plus the 5’ height green building incentive to assist the council and the public in understanding the maximum height and size. Ms. McLaughlin said Mr. Sewell attempted to do that in a bird’s eye view, but it could be done in SketchUp. She cautioned the design would look like a box, but it would provide some perspective. COUNCILMEMBER DOTSCH MOVED, SECONDED BY COUNCIL PRESIDENT OLSON, TO POSTPONE THE NEXT STEPS IN THE PROCESS OF IMPLEMENTING THE GREEN BUILDING INCENTIVES PROGRAM UNTIL AFTER THE 2024 UPDATE TO THE COMPREHENSIVE PLAN IS APPROVED BY COUNCIL ALONG WITH THE LAND USE MAP. Councilmember Dotsch commented the discussion provided good input especially in reference to considering baseline height changes along with potential increased lot coverage, setback changes in the updated comprehensive plan and the land use map for different areas of the City that will not be understood until approved in December. While the goal and adoption of a green building incentive program is part of the CAP and council desires to pursue this goal, there is no specific date especially when everyone does not know what land use changes will result from the comprehensive plan update. The process would be more holistic and transparent for all involved, developers and citizens, by having a chance to understand exactly how the impacts could be additive within a green incentive program in relation to the new land use map approved in December. Council President Olson agreed that delay would provide more transparency to what the public is commenting on. Until they know what the baseline is, they don’t know what green incentives will do and whether or not they support it. The council will not get valid input from the public if the public hearing is held before they have all that information. She reached out to the city attorney to ask whether DADUs could be excluded from the green incentives and he has not yet been able to provide guidance. There are so many unknowns and answers are needed before making a decision such as excluding DADUs. She recalled some Edmonds City Council Approved Minutes August 6, 2024 Page 24 of the house bills did not allow ADU/DADUs to be treated differently than single family. She was uncomfortable with proceeding until the comprehensive plan was finalized. Councilmember Paine did not support the motion to delay. Staff has been working on a green building ordinance for a while via discussion with the community, planning board and climate protection committee. There will need to be some adjustments in the code, but the value of green buildings on greenhouse gases is something the City can do now. She did not see any value in delaying. Councilmember Nand appreciated Councilmember Dotsch bringing this concern forward. Her initial thought was if there was stacking of incentives to the point the public found it objectionable and communicated that to council, the regulations could be amended. As the City is doing the comprehensive plan update and trying to present a vision to the development community, stakeholders and property owners of how Edmonds should be built/rebuilt in the future, she preferred to do it comprehensively. She did not support the motion. Councilmember Eck appreciated Councilmember Dotsch’s intent and saw the point of her motion. She asked for staff’s opinion on the motion. Ms. McLaughlin responded a public hearing was scheduled; it was important to hear from the public and to factor that into this discussion and the policy decision. Staff put a proposal forward that they think is compatible with peer cities and with existing zoning and with what they foresee as the outcome of the comprehensive plan land use framework. Ultimately while she thinks the land use incentives are critical for getting developers excited and offsetting the cost of going green, if council is ready for an expedited review, perhaps that is where to start. Green building incentives will influence development and the CAP envisioned developing this program in 2024 so she preferred to make a good attempt at it rather than putting the whole program aside. Councilmember Eck relayed her understanding this is a living document, the public and council will be providing input that staff will be factoring in. Mr. Sewell agreed with Ms. McLaughlin’s comments. Council President Olson agreed there had been a great attempt by staff and this was a very interesting and comprehensive document and she could see all the work behind it. She preferred to wait on providing setbacks as an incentive until the cumulative effects were known. She could support a proposal for green building incentives that include expedited permits, but felt it was a bad idea to proceed with any of the other incentives. She supported postponing as the council will not get valid information from the public without them knowing what it applies to. Ms. McLaughlin referred to the table with land use incentives, pointing out setbacks currently only apply to single family. How the council ultimately decides to incentivize this program, excluding low density setbacks would also be an option. Mr. Sewell advised only Built Green 5 Star or better single family residential can reduce setbacks. Councilmember Chen commented there was a compelling reason for this proposal. He wanted to understand the practical aspects from a human resources standpoint. With staff working on the comprehensive plan and the budget, he asked whether staff had the bandwidth to take on this project at the same time. Ms. McLaughlin answered the good news is the heavy lifting, the draft code amendments, has been done and the planning board supported staff’s recommendation. If the council adopts the proposed code amendments, not much more work would be required to implement and administer the program. This was developed internally with no consultant contracts so there is little to no fiscal staff impacts. Councilmember Chen summarized given the urgency of the CAP and the global direction the community is heading, he would like to hear what the public has to say. He did not support the motion. COUNCIL PRESIDENT OLSON MOVED, SECONDED BY COUNCILMEMBER PAINE, TO EXTEND UNTIL 10:45. MOTION CARRIED (5-1), COUNCILMEMBER CHEN VOTING NO. MOTION FAILED (2-4), COUNCIL PRESIDENT OLSON AND COUNCILMEMBER DOTSCH VOTING YES. Edmonds City Council Approved Minutes August 6, 2024 Page 25 4. ERP CONTRACT Information Services Manager Brian Tuley referred to information in the packet regarding the contract and an Excel spreadsheet with prices for the next 4 years to change out the existing accounting system and upgrade to the latest version of Tyler Technologies product, EERP. Work on this project began in 2021 when Tyler began hinting that updates would not continue forever. City staff started looking at what other municipalities in Washington were using. The technology department is a member of Association of County and City Information Systems (ACCIS) which has about 177 members. Because governments do not compete like the private sector, they share information. Based on a poll, a list of a six interesting contenders was developed. The finance department reviewed a couple, looking at their business functions and features. Based on review and costs, the clear winner was Tyler Technology’s EERP system. It was called Munis until last year and rebranded to EERP. It is a cloud-based system of their current system; the current system has not had any major upgrades since 2010. Mr. Tuley continued, organizations tend to stay with a system until the pain of using it exceeds the pain of changing. In this case, last year the City received notice Tyler planned to depreciate the product in 2027, giving the City 3 years to switch to another product. Staff is seeking approval for the mayor to sign the contract and proceed with implementation. Because municipalities notoriously spend a lot of time and are cautious about making decisions and getting things done timely is challenging, Tyler does not schedule the project until the contract is executed. With their current backlog, the time between execution and beginning work is about 7 months which means getting started about February; implementation takes 26-30 months; he averaged the cost at 28 months. COUNCILMEMBER PAINE MOVED, SECONDED BY COUNCILMEMBER NAND, TO AUTHORIZE THE MAYOR TO SIGN AND EXECUTE THE CONTRACT. Councilmember Paine thanked Mr. Tuley for describing the timeline. The sooner the mayor signs the contract the sooner this essential piece of the City’s infrastructure can move forward. Councilmember Nand said she was in favor of authorizing the mayor to execute the contract. She relayed another benefit of using a Tyler product is data migration is cheaper and more effective than moving to a new platform. She expressed appreciation for Mr. Tuley’s diligence with this project and bringing a recommendation to council. Mr. Tuley explained Tyler has either converted or are in the process of converting 122 municipalities to the new platform; there were previously 212 customers on Eden, the system Edmonds used. They have honed in their process, built the scripts and the City should be able to leverage the challenges of municipalities who have already gone through the process. Councilmember Dotsch said this software came up at the AWC Financial workshop she attended. She asked how the software was working for other cities, relaying her understanding there were some issues with reports, noting the timeframe would provide time to work out bugs. Mr. Tuley answered most cities have done really well; there have been a few challenges here and there, but cities with challenges are in the minority. Any uniqueness has to be specified to ensure it is incorporated. There are a good breadth of canned reports available; Edmonds’ workflow is not that unique compared to than other cities. Councilmember Dotsch asked if there was a point person in charge of this change. Mr. Tuley answered he will be the City’s project manager and Tyler will also have a project manager who will be responsible for ensuring that City resources responsible to vet information are done in timely manner. Other staff who are subject matter experts have been identified such as the utility billing specialist will be relied upon when converting utility billing, the payroll specialist and HR department will be heavily involved, and accounting will be heavily involved in the first phase. Edmonds City Council Approved Minutes August 6, 2024 Page 26 Councilmember Dotsch asked how understaffing will affect implementation. Mr. Tuley answered City staff is lean, it will be a lot of work if it is done as soon as possible or the City waits two years; there isn’t much choice, it has to be done. Councilmember Chen said he was comforted to hear there was a project manager in the City and from Tyler. He referred to the experience with OpenGov at a time when everything was rosy and good but it didn’t turn out that way. That triggers him to think about what processes need to be put in place to avoid a similar situation, especially given lean staff levels. He asked if there was a backup person on both sides. Mr. Tuley answered there are definitely backup people on the City side for him; he left the City for a period of time and returned and people acted as temporary managers while he was gone. He was confident the City has the skill set of individuals to back him up should something happens. From the Tyler side, since they formally announced they were winding down the Eden product, they have been transitioning staff out of Eden into the implementation team. There are over 40 staff dedicated to transitioning from the legacy product to the new product. Tyler has made heavy investments in the new product; it is in their interest because municipalities talk and they want to keep the best public relations. Councilmember Chen asked about the timeline for implementation, relaying his understanding it was implemented by module. Mr. Tuley answered it will be done in three phases; the first phase, accounting will be approximately 12 months and doesn’t have to be completed before the second phase, HR, starts, and a bit of an overlap when the third phase, utility billing starts. Who is assigned to which deliverables has not been completely identified. There is a RACI’s matrix in the documentation that defines the positions and what they are responsible for. He offered to provide that information. Councilmember Chen said that would make him more comfortable. Councilmember Chen asked about billing, whether the City was paying in stages. He hated to pay $400,000 and things didn’t work out and there was no recourse. Mr. Tuley answered there is an initial payment to initialize the cloud platform; Tyler leases cloud space from a bigger provider, and then the City pays for a year of maintenance. When that is set up, the City will no longer pay maintenance for the existing system. Currently the City pays $103,000/year to maintain the existing system; the new system will be $238,000/year. That licensing fee will continue as long as the City utilizes the system. Implementation fees are based on actual effort and time by the vendor; as they do things, the City will pay for their time, travel for onsite training, but a lot of work can be done remotely such as extracting data. It is a time and materials situation with estimates based on the over 100 implementations they have done. Councilmember Chen said obviously the council are not experts in this field and are placing their trust in him. He thanked Mr. Tuley for his efforts. MOTION CARRIED UNANIMOUSLY. 10. COUNCIL COMMENTS Councilmember Nand thanked Acting Director Dunscombe and Mr. Bailey for their research and incredibly hard work on the financial policy framework which required months of effort to prepare that highly sophisticated and detailed document. She believed the policies would help remedy some past issues that have led to the budget woes the City is experiencing. Councilmember Paine reminded property owners whose property abuts a sidewalks to trim vegetation creeping onto sidewalks and preventing people to pass safely, particularly people using wheelchairs. To Councilmember Nand’s earlier comment thanking Ms. Dunscombe and Mr. Bailey, Council President Olson added her thanks to the finance committee who put in a lot of work and fielded a lot of comments from residents who provided input on the policy. She reminded it is Taste Edmonds weekend beginning on Friday at 3:00 on Civic Field. Edmonds City Council Approved Minutes August 6, 2024 Page 27 In addition to thanking the finance department and Mr. Bailey, Councilmember Chen pointed out former Councilmembers Diane Buckshnis and Dave Teitzel were instrumental in the early stages of rewriting the financial policies. Councilmember Eck advised tonight is National Night Out. She missed being with her Westgate neighbors tonight and others in the community who got together. She thanked the neighborhoods who are part of National Night Out and law enforcement and other staff who participate. It is important to highlight the work law enforcement does every day to keep the community safe; the intent of National Night Out is to bring community and law enforcement together to strengthen relationships and create better understanding of each other. 11. MAYOR'S COMMENTS Mayor Rosen had no comments 12. CONVENE IN EXECUTIVE SESSION TO DISCUSS PENDING OR POTENTIAL LITIGATION PER RCW 42.30.110(1)(I) At 10:20 pm, the council convened in executive session to discuss pending or potential litigation per RCW 42.30.110(1)(i) for a period of 15 minutes. At 10:35 p.m., Mayor Rosen announced that the executive session would be extended to 10:45 p.m. 13. RECONVENE IN OPEN SESSION The meeting reconvened at 10:45 p.m. ADJOURNMENT With no further business, the council meeting was adjourned at 10:45 pm.