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8.3. SR 07-25-1994 ! ~'\( ( )-! !Ii{ River ITEM 8.3 MEMORANDUM TO: MAYOR & CITY COUNCIL FROM: PAT KLAERS, CITY AD~~ DATE: JULY 21, 1994 { Y. SUBJECT: $3,800 TRUNK SEWER AND WATER ASSESSMENT RATE . For the past six months or so, the City Council has debated the existing City policy of charging $3,800 per acre for trunk sewer and water improvements. A major area of concern regarding this policy is in the northeast area of our urban service district. At this time, the northeast area is the smallest service area, has fewer property owners involved when compared to other districts, and appears that it will be the quickest to completely develop. The City Engineer and City Attorney will be in attendance at this Council meeting as well as local developer, Rick Foster, to help facilitate the City Council's discussion on this topic. The City has followed an assessment policy of charging $3,800 per acre for trunk sewer and water improvements. This dollar amount is assessed out to benefited property owners on a gross acreage basis regardless of its zoning classification. The Assessment Manual technically calls for this amount to be assessed on a project area basis, but the City has been following the practice of charging this cost out on a city-wide basis. The major issue to be discussed by the City Council is whether or not the cost for trunk utilities should be different for different project areas or whether or not the cost should be consistent and uniform for the same utility throughout the City. A second issue to review is if the assessments should be based on actual costs or on estimates. We currently use estimates based mainly on our practice of assessing out the benefits for public improvements before these improvements are actually completed in order to avoid problems with . assessment appeals. The length of time for completing an entire project area P.O. Box 490. 13065 Orono Parkway · Elk River, MN 55330 · (612) 441-7420 · Fax: (612) 441-7425 . (i.e., the Western Area project goes all the way out to Waco Avenue) is also a factor. An additional issue for City Council discussion is the possibility of charging trunk assessment based on the zoning classification in that project area and not on a gross acreage basis. Some comments regarding this $3,800 per acre policy includes the following: . . The $3,800 per acre amount in some cases may appear to be higher than the actual costs in the area, but this assessment rate also has to cover such items as: o Green Acre assessments that are deferred. o The 1992 Assessment Policy change whereby two years interest free assessments are offered for "tillable" green acres property. o Covers "newly identified" undeveloped areas that are taken out of the original total assessable area due to such items as wetlands or ponds. o Covers project change orders such as the recent change to a 30" casing instead of the proposed 20"-24" casings for the trunk sewer and water underneath Highway 169 into the Hillside development area. o Covers special cases where part of the trunk system is installed but not assessed out until the other part of the trunk system is in place; such as for the Nord property in the northwest area and the Hillside Fourth property near the water tower. . The assessment amount provides for the identical cost for all property owners/developers for trunk improvements; this provides for a consistent and uniform assessment policy. . The amount under discussion is an assessment figure and not a City fee; therefore allowing this amount to be paid over time rather than up front when a plat is recorded. The City could change its policy to a fee basis and designate the fee to cover trunk sewer/water assessments and any other utility related expenditure. . Typically the City will not know if the $3,800 amount is appropriate until the entire project area is developed. The City is currently starting Phase II of the Western Area project which may take three or four phases to complete. This $3,800 amount could be high or low depending on the actual cost of the improvements and the total assessment area for these improvements. It will take years to determine if the cost is completely accurate and by that time the original property owners or developers may be long gone . . and it would be impossible to obtain additional funds if this $3,800 amount is low. . The Council can change the City assessment policy at any meeting, and has done so in the past, in order to treat property owners fairly. Therefore the City needs any surplus funds that may be available to payoff the bonds if policy changes take place and the City has a shortage of funds to meet its bond obligation (We may again see an assessment policy change for the Sandpiper Estates area). If the $3,800 assessment amount is not sufficient to meet the bond repayment schedule, then, at the end of the project, the City will need to tax the entire City for the necessary funds to meet our bond obligation. . If the City did not assess out one established, uniform, and consistent amount for trunk improvements throughout the City, we may very well see the western area at $3,800 per acre, the northwest area at $4,200 per acre, the northeast area at $3,400 or less per acre, and the east area at $4,600 or more per acre for the trunk sewer and water system. The question becomes, "does this make sense or should everyone pay the same amount for the same utility and the same benefit?" The benefit to the landowner or developer for the opportunity to develop the property in an urban manner exceeds the $3,800 per acre amount regardless of the actual cost for the improvements. The City could conceivably assess out the improvements on a zoning district basis, but issues arise regarding reassessment for future rezonings and what you charge PUD's, plus the difficulty from an administrative point of view in tracking all of these activities. Also, there is a legal question of whether or not we could reassess out trunk costs with a rezoning request or whether or not we have to wait until a plat follows the rezoning request. This could cause a delay in receiving funds to payoff the bonds. Such a rezoning district system would be more complex to administer and would open up the City to more criticism due to more "judgment" from the City being necessary. For example, we could have separate assessment rates for the following sewer and water areas: Rlc, RId, Rle, R2a, R2b, R3, R4, the C District (Cl, C2, C3) and the 1 District (1-1 and 1-2). Finally, assessing out by zoning district still does not eliminate the guesswork in establishing assessment amounts if the entire project area is not completed in one phase or if the assessment takes place before bids are awarded. . There is clearly no right or wrong answer to the charging for trunk improvements. The establishing of an assessment rate before a project area is 100 percent completed is an art and not an exact science. The City is looking for a fair, consistent, uniform and equitable assessment method on a city-wide basis, plus something that is relatively easy to administer and which will cover all of our expenses regardless of changes in our assessment . method. If any "extra" funds are available at the end of a project, these funds will remain in a City designated reserve to help offset future utility costs or major repair/maintenance expenditures. Staff continues to support the $3,800 per acre assessment policy on a city- wide basis regardless of zoning classification and recommends that the City Council confirms this policy. . .