ADMINISTRATION - Jon Haukaas, Director of Public Works
Title
AMENDING PUBLIC IMPROVEMENT SPECIAL ASSESSMENT POLICY
Background
In conjunction with the creation and implementation of the Pavement Management Program (PMP) in the fall of 2010, the City of Blaine made significant revisions to the Special Assessment Policy to create a workable assessment policy that was fair to all property owners while providing reasonable funding sources to sustain an ongoing PMP. Prior to these revisions, 100% of all street reconstruction project costs were assessed to benefitting properties and bituminous overlays were not assessed at all. After revising the Special Assessment Policy the following assessment rates were adopted:
• Reduced the assessment rate to 25% for single family residential properties on all reconstruction projects.
• Reduced the assessment rate to 50% for commercial/industrial/high density residential properties on all reconstruction projects.
• Established a flat rate assessment of $500.00 per lot for single family residential and $10.00 per front foot for commercial/industrial/high density residential properties for bituminous overlays. The rates were established for the 2011 construction year and then indexed annually for inflation.
• Established a ten year assessment period for street improvement projects except for bituminous overlays which are assessed over a five year period.
From 2011 to 2018, the PMP generally spent between $1,000,000 and $4,000,000 on yearly street rehabilitation projects. With more than half of the City streets being 20 years old or older, the amount of streets that will need costly rehabilitation is expected to rise dramatically in the coming years. If the Council desires to increase the PMP yearly projects to a level where an individual street will have some sort of rehabilitation done every 20 to 25 years it will require somewhere between 9 and 12 miles of streets to be rehabilitated per year at costs likely ranging from $6,000,000 to $10,000,000 per year. This level of funding, which could include a combination of both PMP funds and Municipal State Aid Funds, combined with the current assessment rates will pose some challenges to the City in future years.
The 25% assessment rate for residential (single family) properties can result in less than 20% of the total project cost being assessed. This means the City cannot bond for the project under State Chapter 429 Statutes, complicating the bonding process. On the smaller projects in the past, this was often able to be avoided by funding the project with City PMP funds and not issuing bonds. This will not be a viable alternative with increased yearly PMP projects.
Debt service levels in future years will grow considerably with an increase in the PMP yearly projects, especially at current assessment rates. This will require additional tax levy capacity.
To address these challenges, staff is recommending that the Council revise the Special Assessment policy as follows:
• Adjust the assessment rate to 50% for single family residential properties on all reconstruction projects.
• Adjust the assessment rate to 66% for commercial/industrial/high density residential properties on all reconstruction projects.
• Establish a flat rate assessment of $1,400.00 per lot for single family residential and $27.00 per front foot for commercial/industrial/high density residential properties for bituminous replacement projects for the 2019 construction year and then index for inflation yearly.
Staff is also recommending that the Council continue to assess bituminous overlays at the rate laid forth in the current assessment policy and continue to use a ten year assessment period for street improvement projects except for bituminous overlays which are assessed over a five year period.
Based on bonding 7.5 million dollars annually for pavement management projects, over the next 20 years, adjusting the residential assessment rate from 25% to the recommended 50% would reduce the annual required debt service levy by an average of $1.7 million.
Based on current Council policy of maintaining a level tax rate, a change in the assessment would provide additional levy capacity for either the General Fund or for other specific programs such as parks and trails maintenance/rehab where tax levies are currently targeted.
In addition, Staff is recommending the following language changes to the Special Assessment Policy:
• Add “All properties of a similar nature on an improvement project will be grouped together for purposes of calculating assessments using the Unit Method. As such there may be differing unit assessments on an improvement project based on the different property types present.” to Section III.6.b Unit Method.
• Change “will” to “may” in “Such lots may be measured and assessed on their average width, with the lot width at the setback line taken into consideration where appropriate” in Section III.6.c Front Footage Method.
• Add “condominiums or townhomes” to the sentence “In addition, corner Industrial and Commercial properties, multi-family residential properties of 5 units/acre or greater density (i.e. apartments, condominiums or townhomes), and manufactured home parks will be assessed for any improvement on each side abutting the property” in Section III.6.c Front Footage Method
• Add “Individually owned properties, i.e. “condominiums” or “townhomes” located on a common owned parcel will be assessed by taking the front footage of the common owned parcel and dividing it equally amongst the individually owned condominiums or townhomes.” to Section III.6.c Front Footage Method.
• Add “For improvement projects where there are multiple condominium or townhome common owned parcels, a hybrid Front Footage/Unit Method may be used where the total of all common owned parcel front footages is divided equally amongst all of the condominiums or townhomes.” to Section III.6.c Front Footage Method.
• Add “The property has frontage abutting the street.” to Section IV.6.d.
• Add “when assessed on the long side.” To the sentence “Corner lots will be assessed for each street abutting the property. A 150 foot corner lot credit will be given on the long side of the property when assessed on the long side.” in Section IV.6.d.
Recommended Council Action
By motion, adopt revised Special Assessment Policy.
Body
WHEREAS, on May 2, 1991, City Council approved Resolution No. 91-53 adopting a Public Improvement Special Assessment Policy in order to standardize procedures for determining special assessments for City Council authorized public improvement projects; and
WHEREAS, subsequent amendments were adopted in September 1991, February 1995, April 1999, October 2010, May 2012 and August 2012 which were incorporated into the adopted policy; and
WHEREAS, the City Council has determined that it is in the public interest to operate a Pavement Management Policy to maintain City streets in a cost-efficient manner and provide the public with functional, safe and efficient travel; and
WHEREAS, the continued operation of a Pavement Management Policy requires changes and updates to the existing Public Improvement Special Assessment Policy.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Blaine to amend the adopted Public Improvement Special Assessment Policy as follows:
1. Adjust the assessment rate to 50% for single family residential properties on all reconstruction projects.
2. Adjust the assessment rate to 66% for commercial/industrial/high density residential properties on all reconstruction projects.
3. Establish a flat rate assessment of $1,400.00 per lot for single family residential and $27.00 per front foot for commercial/industrial/high density residential properties for bituminous replacement projects for the 2019 construction year and then index for inflation yearly.
4. Adopt the proposed language changes to the Special Assessment Policy.
PASSED by the City Council of the City of Blaine this 17th day of January, 2019.