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5.3. SR 08-15-1994 .M~ tO~SULTlNG ENGlNI:ER!l e/v"[ ENGiNEERING: ENVI'RONi'l',Er..'TAl /.,1I)NlC,I,D;\! P1A,~\U'.JING STRUCTURAL . SURVEYING TRAFFIC TRANSpo.nATiON 1326 Energy Park Drive St. Paul, MN 551 08 612-644-4389 Fax: 612-644-9446 .9800 She lard Parkway Minneapolis, MN 55441 612-546-0432 Fox: 612-544-6398 ITEM 5.3. I- August 12, 1994 File: 230-215-58 Honorable Mayor and City Council City of Elk River 13065 Orono Parkway P.O. Box 490 Elk River, MN 55330 RE: NORTHEAST AREA TRUNK SEWER AND WATER ASSESSMENT RATES Dear Council Members: As directed, we have calculated the actual cost and assessment rates for the trunk sanitary sewer and water for the Northeast Area of the City. The total cost of these improvements consists of two main items: first, the construction cost and associated overhead; secondly, the cost of deferral of assessments. Once these two costs had been determined, they were divided by the approximately 300 acres in the service district to come up with an assessment rate. To determine the construction cost, we used the actual cost of trunk watermain oversizing from the Hillside Estates 1st Addition, the actual cost from the trunk watermain construction to the new water tower, the bid prices from the current trunk improvement project under construction, plus a 5 % contingency since the project is not finaled yet, and we estimated the length and cost of future trunk watermain oversizing throughout the remainder of the Hillside Estates area. In doing the latter, we have also estimated the construction cost of these pipes in future years. This total construction cost and the associated overhead divided by the area of the service district resulted in a cost per acre of $2,588. The second component of the assessment rate is the cost of deferrals. In calculating this component, we have assumed that the remainder of the Hillside Estates area will develop at a rate of 20 acres per year over the next 7 years. We have also assumed that the Everett Specht lifetime estate will consist of 23 acres and a lO-year time frame. In discussing deferrals with Lori Johnson, Finance Director, we have assumed an interest rate of 6.5%. Calculating this total cost and dividing by the acreage of the service district results in a rate of $464 per acre. Combining these two costs results in an estimated assessment rate for trunk sanitary sewer and water improvements of $3,052 per acre. . Honorable Mayor and City Council August 12, 1994 Page Two It is important to note that in this service district the cost of deferrals amounts to approximately 1/6 of the total assessment rate. Given the size of this district, the total area affected by assessment deferrals is slightly less than 50%. Other service districts within the City have the potential to have a much higher percentage of assessment deferrals, given the large tracts of land in those areas. I will be in attendance at your August 15th City Council meeting shouId you have any questions or would like more detail on the method of calculation used to establish this rate. Sincerely, MSA, CONSULTING ENGINEERS ~~~ Terry 1. Maurer, P.E. . TJM:tw 215-120hug .