6.7. SR 10-08-2012 Elk REQUEST FOR ACTION
River
TO ITEM NUMBER
Mayor and City Council 6.7
AGENDA SECTION MEETING DATE PREPARED BY
Work Session October 8, 2012 Justin Femrite,P.E., City Engineer
ITEM DESCRIPTION REVIEWED By
Assessment Manual/Policy/Funding Options Tim Simon, Finance Director
REVIEWED BY
Cal Portner, City Administrator
ACTION REQUESTED
Discuss the city assessment procedures and provide policy direction on street project funding and
associated updates to the Assessment Manual.
BACKGROUND/DISCUSSION
At the July 9, 2012, City Council work session, staff gave an overview of our pavement management
program. The overview explained the program methodology, highlighted existing pavement conditions,
and discussed the trending of city street maintenance over the next 40 years.
Councilmember Westgaard posed a question regarding our current practice for funding the pavement
management program with private property assessments or whether an alternative funding source should
be considered.
Staff will address the advantages and disadvantages of special assessments verses other funding sources of
the pavement management program. If the Council concludes that special assessments are the preferred
funding option,we will review some policy questions that should be considered in the update to the
assessment manual. Staff has already begun work to update the assessment manual.
Pavement Management Program Funding
Our existing pavements are in relatively good condition with a high average pavement rating. The large
growth experienced over the last 20 years has brought with it many more miles of streets. This has
resulted in a larger system to maintain and budget for improvements. Maintenance and improvements
include sealcoats, overlays, reclamations, and full reconstructions. At the July work session,the Council
was informed that in order to maintain the current average pavement condition of our street system,
additional funding is required to support the larger projects. Following are two options to consider for
future projects.
Option#1. In order to meet the increased funding needs for larger projects,the levels at which the
projects are assessed to adjacent properties could be increased. Elk River has historically funded street
improvement projects through a combination of assessments, state aid funding, and bond sales. Up to
now,this funding approach has satisfactorily met the system's needs. If this option is continued, the
private property assessments and bonding amounts need to be increased to carry out the plan. The
attached spreadsheet shows the projections for the Street Improvement Reserve Fund if assessments are
continued at the same rates.
P a w I R E a 9 Y
NA UR
Option#2. As discussed briefly at the July meeting, street improvements could be funded through a
general tax levy or,with legislative changes, a city-wide street utility fee approach. Current state
legislation does not allow for charging of a street utility fee. There have been attempts to have this
included in state statutes as an option for cities, but so far it has fallen short of being passed into law.
Funding through a general tax levy or street utility fee would continue to use state aid funding on projects
as available, but would eliminate the need to levy special assessments on property owners when
improvements are made adjacent to their property. Property owners would pay for street improvements
through the existing property tax system.
Some communities,including St. Louis Park,Minnetonka, and Ramsey,who have struggled to prove the
benefit of special assessments,have transitioned to or have been considering alternative means of
financing their pavement management plans.
There are positives and negatives to a tax levy-based approach just the same as with the assessment
approach. Below are staffs opinions of positives and negatives of each option:
Private Property Assessment Option
Pros
1) Property owner can see where their money goes
2) Continues past practice in Elk River, making it fair for all
3) Accepted process used by many cities
Cons
1) Property owners don't like large assessments for a city street
2) Potential challenges regarding the benefit of improvement
3) Can only collect what is determined to be the benefit
4) Costly to develop and administer assessment process
5) Project approvals are subject to emotional public hearings
6) Residents often challenge or delay projects based on financial impacts to them
7) Residents feel the street network is community good,not personal good
Tax Levy Based Option
Pros
1) Projects are proposed,approved,and proceed based on approved,non-biased Pavement
Management Plan
2) Lower administration costs of projects
3) Stable revenue stream
4) Can be readily adjusted to meet funding needs
5) Residents have favorable response to street projects
6) Smaller monthly or yearly fees instead of large lump sum or financing
7) Collects money from all users of the system
8) No need to prove benefit to property owner
9) Funds are directly used for corresponding service
Cons
1) Change in policy doesn't benefit previous assessments
2) Larger tax levy
paw IaEa 0
NAT- URA
If the Council would like to look closer at Option 2, staff should be directed to bring back specific
information and model policies for the consideration of the Council in the coming months. This large of
shift in policy direction would come back to the Council for discussion ahead of a public hearing process
which will take several months.
Assessment Manual Policy Updates
The existing Assessment Manual was last updated in 1989. There have been some modifications to the
policies since the 1989 update that need to be worked into the formal manual. Staff is proposing a full
update to the manual. Staff has identified a list of policy questions to be considered as follows:
1) Past practice has been to assess properties on a per unit basis as the primary method for
calculating assessments. Does the Council want to continue this practice?
2) There is some ambiguity in the current manual about how assessments are calculated for
corner residential lots. How should residential corner lots be treated?
3) Current practice has been to charge residential properties a flat fee for overlays. Most recently,
for the 2008 project,this fee was $1,963 per unit. This assessment is intended to cover 100%
of the costs of mill and overlay projects per current practices. Should mill and overlay
improvements continue to be assessed at 100% of the project costs?
4) Current practice has been to assess street reconstruction projects a flat fee for the
reconstruction of a residential street. The summation of all the assessment charges has been
near 1/3 of the total project costs. The remaining 2/3 has been funded through bonding,
state aid funds and the Street Improvement Reserve Fund. Should reconstruction projects
continue to be assessed at 33% of the project costs, or should it be increased to sustain the
Street Improvement Reserve Fund?
5) Currently there is no policy in place for full depth reclamation type projects. These projects
are more costly than a mill and overlay but do not go as far as a full reconstruction. What
percentage should full depth reclamation projects be assessed?
6) Assessment terms have varied significantly from project to project in the past. Staff is seeking
guidance on specific terms for different assessments. In general,past reconstruction projects
have been payable for up to 10 years and overlay projects have been payable for up to five
years.
7) The current Assessment Manual does not provide guidance on what properties are exempt
from assessments. The revised draft Assessment Manual has been prepared to clearly state
that cemeteries are exempt from assessments according to state law. Staff is looking for
direction on other properties the Council feels should be exempt including, city facilities, city
parks, state, county, school, and church properties.
FINANCIAL IMPACT
There is no financial impact associated with the discussion of this item.
ATTACHMENTS
■ Street/Capital Improvement Budget
Action Motion by Second by Vote
Follow Up
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