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Home My WebLink About2010-11-08 PACKET 2.A.REQUEST OF CITY COUNCIL ACTION COUNCIL AGENDA MEETING ITEM # DATE 11/8/2010 ` PREPARED BY Administration Ryan Schroeder ORIGINATING DEPARTMENT DEPARTMENT HEAD COUNCIL ACTION REQUEST Workshop: Public Improvement Assessments. SUPPORTING DOCUMENTS ® MEMO /LETTER: Memo from Brian Voelker. Memo from Robin Roland. ❑ RESOLUTION: ❑ ORDINANCE: ❑ ENGINEERING RECOMMENDATION: ❑ LEGAL RECOMMENDATION: ® OTHER: Attachments. ADMINISTRATORS COMMENTS ity A m' istrator ®� Date COUNCIL ACTION TAKEN: Document3 CITY OF a AGROVE To: Honorable Mayor and City Council Ryan Schroeder, City Administrator From: Brian A. Voelker, Public Works Management Analyst Date: Thursday, October 28, 2010 Subject: 2010 Pavement Management Assessment Introduction /Discussion At the October 20, 2010 City Council meeting the City Council requested additional information on how other communities in the metro area assess for similar pavement management projects to Cottage Grove's 2010 Pavement Management Project. Metro City Assessment Comparison The Public Works Department completed an assessment survey of twenty -three rural and metro cities. The survey compares the assessment methods, what percentage of the street improvement is assessed to the property owner, the interest rate of assessment payment and the most recent amount that a residential property has been assessed for a similar project. Residential and non - residential properties are typically assessed per lot, front footage, residential equivalent unit or a combination. Every city surveyed assesses for a certain percentage of the street reconstruction but many vary on how they assess for utilities or other amenities such as sidewalks or bike paths. The difference between the assessment to the benefitting properties is typically paid by the general fund, public utility fund, a pavement management fund, or a combination of all three. Attached are two surveys: one that was completed by city staff in the last week and the other that was collected in 2007 by a consultant. The staff survey includes information in the notes section of what a typical residential property has been assessed in the last three years for a reconstruction project. The second survey has significantly more cities, and more variables, but does not provide an updated residential assessment amount for each community. Rural and Small City Assessments None of the cities surveyed have a similar assessment policy as the City of Cottage Grove that separates or distinguishes between the urban and rural neighborhoods. However, a number of the cities surveyed were small town communities in Washington County, similar sized cities in rural Minnesota, or small communities in the Metro Areas such as: CITY OF COTTAGE GROVE MINNESOTA 2009 Po bt'mn filet Coural Esiimates REU- Residenlid Eqdvalent Unit FF Front Footage Based on a lot with the front footage with 80 feet, the assessment ranges from $1,178 to $10,000 for a reconstruction project. The City of Grant assessed 100% of the project costs to properties adjacent to a 22' street that was improved from gravel to bituminous resulting in a $10,352.00 assessment. This is very typical for areas that are rural and upgrade to an urban standard. Interest Rate Charges If the property own chooses not to prepay the assessment, it will be collected on their property taxes starting in the following year. Many of the cities surveyed different on the period of collection due to the type of bonds that each city issues. But there seemed to be a consisted interest rate of 2% above bond rate that the city receives. A few cities don't set or publish their rates until they decide if the are going use bonds as a means of financing the project. Assessment PavemefA ana ementPro erWAssesmentPeKenta aq 2009' Residential Streets Oglities Mill and Oveda Sidewalks Notes Forest lake 17,496 FF 1090 70% 70% M Reddentlal9,460 Grant 4,219 per lot 100 °lo Gravel to %mhus22 N roadl with nrM shouldar 10,352 per unit Hasins 22,491 FF 2010 Averae Assessment 4t 4336MD6R Cot 41,17840to$4,783.20, Hugo 13,140 per lot 18% $5,2.00�unit and Retail, Commercial, Inkr;1ral Etc 5750$6ont fools e 198nksto 36,240 FF $15 FF $(8 FF $8 FF Moorhead 32,117 FF 3035% 3035% NA NA 2010 FF Rates -Reconstruction S90 800 tot $7,2100, Rehadthfu $4950 FF, Northfield 19,859 Bnfh 5115 FF 2010 Residential $I15 per foot Si. Antl ony 3,217 SO °b SPb r 096 5090 R. Paul Park 5,221 33 1 b 2009- M Lot $2, 43440($ 21.44 +$2.99)Ston Sew $2.99 FF. SnUi $2,017puml victorU 6,727 per Mt 50% 50% 2f9 N 58 to S10000 2009 Po bt'mn filet Coural Esiimates REU- Residenlid Eqdvalent Unit FF Front Footage Based on a lot with the front footage with 80 feet, the assessment ranges from $1,178 to $10,000 for a reconstruction project. The City of Grant assessed 100% of the project costs to properties adjacent to a 22' street that was improved from gravel to bituminous resulting in a $10,352.00 assessment. This is very typical for areas that are rural and upgrade to an urban standard. Interest Rate Charges If the property own chooses not to prepay the assessment, it will be collected on their property taxes starting in the following year. Many of the cities surveyed different on the period of collection due to the type of bonds that each city issues. But there seemed to be a consisted interest rate of 2% above bond rate that the city receives. A few cities don't set or publish their rates until they decide if the are going use bonds as a means of financing the project. \ \ \ \o \ \ \ \\ \ I G 9 ffil js 11 M i . w -�, T �o w o ¢ Ow Z5 O- 5 r� 0 z 0 5 0 S ro u $ V - 2 O n O x ^vn F fr I P E � > E � 5� c 0 7 > ce ce ce ce re ce ee m _ V < < O ry o S � ? ce ce ce e 8 tt k O g g h ce O ce - .ce 'y x L� s° tttt Ne e tt - b o d � � e 8 3 - - _ - - � - ti - - x 8 - a - 5 s c y < L � I I m Y_, a, :. s z o 5 0 S ro u $ V - 2 O n O x ^vn F fr I P E � > E � 5� c 0 City of Cottage Grove Department Finance TO: Honorable Mayor and City Council Ryan Schroeder, City Administrator FROM: Robin Roland, Finance Director DATE: November 5, 2010 SUBJECT: Interest rate on Special Assessments Introduction During the October 20, 2010 Public Special Assessment Hearing for the 2010 Pavement Management project, concerns were expressed regarding the 7% interest rate to be charged if assessments were certified to residents' property taxes. Discussion The IMTF Special Assessment Policy for public improvements Section 6.2 - Interest rate reads "The interest rate of special assessments shall be at a rate established annually by the City Council at the time of the certification of the levy." Effectively, this provision is satisfied each year when the special assessment public hearing is held. The interest rate on all pavement management special assessments has been 7% since the program's inception in 1994. Certain 'equity' between payers exists over the last 15 years as all have paid the same interest rate on certified assessments. According to a December 2007 memo from Ron Hedberg "Council policy on this matter was apparently set through approval of bond documents that related to the first pavement management project in 1994. The documents stated that the rate of interest would be at a rate of 1.5% greater than the TIC (total issuance costs) but not less than 7 %." Special assessments may be paid in the first 30 days after adoption without interest. It is only after the assessment is certified that interest is applied. The certified assessment is a financing tool that is offered to residents and as such, interest rates applied should be compared to the interest rates of other available financing tools. At the Council meeting staff presented current interest rates on home equity credit lines (4 %), unsecured lines of credit at a bank (from 9.25% to 13.25 %) and credit cards (up to 24 %). Special assessments are collected to repay the costs of the project. If project costs are paid for through the issuance of bonds, the bonds must be repaid over time at a specified interest rate. Special assessment payments received during the first 30 days are invested by the City and used to make future debt payments on bonds. All other special assessments (principal and interest) are collected through property tax payments over the specified time period and are used as they are received for bond payments. As the documentation in this packet attests, Honorable Mayor, City Council, and Ryan Schroeder Page 2 of 2 other cities use a policy formula to determine the interest rate on certified special assessments which takes into account the interest rate on the bonds to be paid. Although this policy has its justification, it is not the only acceptable policy on special assessment interest rates. In the case of the 2010 Pavement Management project, the City has used existing funds on hand to pay for project costs. Special Assessment principal and interest payments collected will be returned to the pavement management capital project fund. An assessment calculation spreadsheet is included with this memo to reflect the annual impact on those who choose to certify the assessment to their annual property taxes. Assessment Calculation for River Acres Pavement Management 2010 Initial Assessment Amount: $5,277.00 Terms: Years 15 Interest 7% Total on Balance to pay Principal Interest Property Taxes off to City 2011 351.80 369.39 721.19 $4,925.20 2012 351.80 344.76 696.56 4,573.40 2013 351.80 320.14 671.94 4,221.60 2014 351.80 295.51 647.31 3,869.80 2015 351.80 270.89 622.69 3,518.00 2016 351.80 246.26 598.06 3,166.20 2017 351.80 221.63 573.43 2,814.40 2018 351.80 197.01 548.81 2,462.60 2019 351.80 172.38 524.18 2,110.80 2020 351.80 147.76 499.56 1,759.00 2021 351.80 123.13 474.93 1,407.20 2022 351.80 98.50 450.30 1,055.40 2023 351.80 73.88 425.68 703.60 2024 351.80 49.25 401.05 351.80 2025 351.80 24.63 376.43 (0.00) Totals Paid 5,277.00 2,955.12 8,232.12