Workshop Item: - Jon Haukaas, Director of Public Works
Title
REVISING 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.
• Established 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. At 33%, it would reduce the annual levy by an average of $500,000.
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.