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HomeMy WebLinkAbout2012-04-18 PACKET 04.A.ii.REQUEST OF CITY COUNCIL ACTION COUNCIL AGENDA MEETING ITEM # DATE 4/18/12 a PREPARED BY Public Works Les Burshten ORIGINATING DEPARTMENT STAFF AUTHOR COUNCIL ACTION REQUEST Accept and place on file the minutes of the March 12, 2012 Meeting of the Public Works Commission. STAFF RECOMMENDATION Approve the March 12, 2012 minutes of the Public Works Commission. BUDGET IMPLICATION $ $ BUDGETED AMOUNT ACTUAL AMOUNT FUNDING SOURCE ADVISORY COMMISSION ACTION SUPPORTING DOCUMENTS ❑ MEMO /LETTER: ❑ RESOLUTION: ❑ ORDINANCE: ❑ ENGINEERING RECOMMENDATION: ❑ LEGAL RECOMMENDATION: ® OTHER: Approved minutes of the March 12, 2012 Public Works Commission Meeting COUNCIL ACTION TAKEN: ❑ APPROVED ❑ DENIED ❑ OTHER DATE REVIEWED APPROVED DENIED ❑ PLANNING El 1:1 El ❑ PUBLIC SAFETY ❑ ❑ ❑ ® PUBLIC WORKS 4/9/12 ❑ ® ❑ ❑ PARKS AND RECREATION ❑ ❑ ❑ ❑ HUMAN SERVICES /RIGHTS ❑ ❑ ❑ ❑ ECONOMIC DEV. AUTHORITY ❑ ❑ ❑ ❑ ❑ ❑ ❑ SUPPORTING DOCUMENTS ❑ MEMO /LETTER: ❑ RESOLUTION: ❑ ORDINANCE: ❑ ENGINEERING RECOMMENDATION: ❑ LEGAL RECOMMENDATION: ® OTHER: Approved minutes of the March 12, 2012 Public Works Commission Meeting COUNCIL ACTION TAKEN: ❑ APPROVED ❑ DENIED ❑ OTHER March 12, 2012 Pursuant to due call and notice thereof, a meeting of the Public Works Commission of Cottage Grove was duly held at Cottage Grove Public Works, 8635 West Point Douglas Road, Cottage Grove, Minnesota on Monday, March 12, 2012 at 7:00 p.m. 1. CALL TO ORDER Commission Chair Gary Kjellberg called the meeting to order at 7:00 p.m. 2. ROLL CALL Members Present: Alex Chernyaev, Gary Kjellberg, Jeff Rolling, Matthew Forshee Staff Present: Ryan Schroeder, City Administrator Robin Roland, Finance Director Harry Taylor, Public Works Supervisor Jennifer Levitt, City Engineer Gary Orloff, Streets Foreman Also Present: Derrick Lehrke, City Council Member Justin Olsen, City Council Member Nancy Hanzlik, IMTF Member Cheryl Kohls, IMTF Member Ken Brittain. IMTF Member Excused: Jeff Podoll, Michael Edman, Herb Japs, David Olson Jason Field Chair Gary Kjellberg opened the meeting by requesting all attendees introduce themselves. New Commission Member Matthew Forshee indicated he has lived in Cottage Grove since 2002 and was a graduate of the University of MN. He and his wife moved to Cottage Grove following his graduation and he is currently a civil engineer. Other attendees are listed above. 3. APPROVE MINUTES Upon a motion by Jeff Rolling, seconded by Alex Chernyaev, the February 13, 2012 Minutes were unanimously approved, Public Works Commission March 12, 2012 — Page 2 A. Appointment of Vice Chair and Secretary: It was suggested to table this item until the April meeting. 5. NEW BUSINESS A. IMTF Policy Review — Background and Scope of Review — Ryan Schroeder City Administrator Ryan Schroeder stated he included a memorandum in tonight's packet in response to the concerns expressed at the February meeting regarding the scope of this committee comprised of Public Works Commission Members and IMTF Members. He also indicated a proposed schedule of topics was distributed to outline what this group will be discussing each meeting for the next several months. There was some discussion regarding which members would have voting privileges. Both Public Works Commission Members and IMTF members will have equal votes so the end product document will be a report from everyone participating in this process. Schroeder understands there was also a question regarding public participation. These meeting are public, however are not public hearings, therefore, it's not a requirement the Chair allow active public participation. On a project scope, Schroeder indicated this is actually a revisit of the 2005 IMTF Report that was adopted by Council that year. The intent was not to go over the entire report but to review a limited set of items within the 2005 IMTF report. That scope was to address those items which have been the most frequent questions from the public since 2005. The timeline was selected in order to provide review and recommendations to be considered prior to the 2013 Pavement Management Process. The City Council specifically directed this group discuss the 7% interest rate that has been in effect over the past approximately 17 years. Council now has specifically requested review of the cost share formula in consideration of any change in the interest rate to maintain equity between past and future pavement management neighborhoods. Since the IMTF Report in 2005, there have been pavement management projects in 2007, 2008, 2010 and 2011 which impacted 1,168 residential parcels and 200 commercial parcels. From a residential perspective, there really haven't been any appeals that have gone out through the process. There have been folks that have expressed objection to a project. One individual that made an appeal to the court in a Public Works Commission March 12, 2012 — Page 3 recent Pavement Management project subsequently dropped that appeal. The City had seven commercial assessment appeals related to the 2007 Jamaica Roundabout Project. Because of the issues of the Jamaica Roundabout Project, the City now does predevelopment benefit appraisals. The City contracts with an independent appraiser to indicate what the expected assessment will be to ascertain the assessment can be supported. Properties that represent a reasonable spectrum through the subdivision or area are chosen for these appraisals. Schroeder stated primarily, the largest concern is cost sharing and interest rate because those are the items where the City receives continual feedback. Residents ask "Am I getting value for my project? Am I paying too much ?" IMTF Member Cheryl Kohls stated at one time, interest rates were much higher and at the time, people thought 7% was a good rate. Rolling also asked why the 2009 Pavement Management Project was skipped? It was indicted this topic will be discussed at a later time as the group goes through the process discussion. B. Assessable Item Review and Recommendation — Jennifer Levitt City Engineer Jennifer Levitt commented that before the group discusses how to break things down a percent basis, it should be determined: "What's all in the Assessment Bucket"? Before it's decided how to divide what's in the "bucket ", let's all agree what's in the "bucket" to start with. In the memo provided in the meeting packet, Levitt hoped to show what the City considers base level service for residents, to provide some background between how the City conducts the operation /maintenance side of projects and how those items are funded in order to be in agreement as to what the City is assessing. Sanitary Sewer During the scope of a pavement management project, there may be slip lining and spot replacement areas excavated where pipes have separated and must be repaired. Manhole structures may need rehabilitation or may need to be sealed for Inflow and Infiltration (I & I). One thing that can be placed in the assessment "bucket" is sanitary sewers. Any time routine maintenance is required, it is funded out of the City's utility fund. Public Works Commission March 12, 2012 — Page 4 Water Main Levitt stated water mains were a big issue in the 2008 Pavement Management area. Water mains had never been replaced in the City to the extent that was done during this project. It is very important for the City's Assessment Policy to serve as a guide when issues like this occur. During this 2008 Pavement Management Project, 6 blocks of water main replacement was completed. Water main replacement was placed in the "bucket" of assessable items, including the valves and the actual installation of pipes. Routine maintenance such as televising and flushing are covered by the Utility Fund. Jeff Rolling asked if all these items are included in pavement management or assessed at the time they come up. Levitt responded they are included in the feasibility report when the project is out for bid. If they are done during the project, they are placed in the assessable "bucket' and at the end, are divided out 45 percent. IMTF Member Cheryl Kohls inquired if there have been any opposition to the water main /storm sewer assessment. Levitt replied there was a fair amount of discussion on the water main replacement because it had a higher price tag than is typically seen. In the end, residents supported it and opposition was not heard at the assessment hearing. Levitt feels residents recognize the deficiency in their neighborhood and understand the need for replacement. Storm Sewer Levitt commented this is an area where few complaints are made because many drainage issues are fixed at that time. Pine Coulee and River Acres are fine examples where substantial storm water work was needed. Residents are ultimately very pleased with the improved drainage. Few pond projects have been done as part of our pavement management projects. Rainwater gardens have been constructed in a number of our areas. It is recommended that storm sewer continue to be an assessable item. Streets In 1994, it was agreed that a full reconstruct, mill /overlay and pavement reclamations would be assessed. Sealcoats would not be assessed (never historically assessable). It is recommended to continue to assess surface repairs as a total project cost as outlined in the policy. Public Works Commission March 12, 2012 — Page 5 Street Amenities When it comes to street amenities, the policy specifically lays out three items: Transportational Trails, Recreational trails and Streetlights. Transportational Trails These trails are adjacent to collector streets. For example, Hinton Avenue, 80� Street, and 95th Street, are all collector style streets that have a trail adjacent to them. It is recommended to continue to assess transportational trails as a total project cost as outlined in the policy. Recreational Trails are designed and built with bituminous and are typically 8 feet or greater in width. They are located in public trail way easements or in parks and open space area that are not adjacent to improved streets. Recreational trails are not assessed as the total project cost. In the 2008 Pavement Management Project, a substantial amount of recreational trail work was completed. Those recreational trails were not assessed. Street Lighting: The City of Cottage Grove owns and operates their own streetlights with the exception of one area of Xcel -owned streetlights. The system must be maintained and be consistent with the conduit that's in the ground. It is recommended to continue to assess street light work as a total project cost as outlined in the policy. Cheryl Kohls inquired if the City chooses to upgrade the streetlight style, and the residents are opposed because of cost, must they pay for the upgrade? Levitt responded there are two types of residential streetlights standards: 1. Decorative (used in the East Ravine area) and 2. The standard "acorn" fixture in the remaining areas. These two types of streetlights would be considered the base level lights and that is what residents would pay for. It would be unfair for the City to require residents to pay extra. The City would have to pick up costs above that base level. Levitt commented one item missing on a street amenity is the landscaping. Perhaps this is an aspect that should be added. For the Jamaica Avenue Roundabout project, there was an assessment for landscaping. Motion made by Nancy Hanzlik, seconded by Ken Brittain to affirm the IMTF Assessable Items as included in the 2005 IMTF Policy (Sanitary Sewer, Water, Stormwater, Streets, Street Amenities). Motion was unanimously carried. C. Special Assessment Process and Formula — Robin Roland, Finance Director Finance Director Robin Roland commented she appreciates the opportunity to attend tonight's meeting. She began by stating in order to pay for Pavement Management Public Works Commission March 12, 2012 — Page 6 Projects, the City issues debt under Minnesota State Statute 429, the Special Assessment Statute. It talks in very general terms of the process that has to be followed for a special assessment to take place in a city. Pavement Management Projects are included in the City's Five Year Capital Improvement Plan (CIP). Before a pavement management project is implemented, a request must be approved by Council for a feasibility report prepared by a consulting engineering firm. The feasibility report is brought back to be approved by Council at which time a public hearing date is set. A notice of this public hearing is sent to the property owners in the area of the project (those who will be benefitting from the project). The notice will have very specific language which will outline the work to be done, the areas where this work will be done and what the total cost of the project is expected to be from the feasibility study. A projected assessment is amount is given (giving property owners an estimate of what that special assessment may be at the end of the project). It should be noted that the Meeting Notice is also advertised in the local paper as a requirement of the State Statute. The notice must be mailed 14 days in advance of the public hearing. The public hearing has to be advertised in the newspaper twice. At the public hearing, everyone who has received a notice in the mail is invited to come and listen about the project and explain any concerns they might have at that meeting. At the conclusion of the public hearing, Council decides whether or not the project will be ordered. If they order the project, the generalized assessment amount is determined, (known as a pending assessment) against all of those benefitting properties. Once the project is ordered, bids and specifications are then prepared to be brought back to Council. The Council may then approve the bids and specs and will authorize them to go out for bid. Again, there are advertising requirements for these bids (usually a 30 -day wait between when the Council goes out for bid and when the actual bids come in). At the conclusion of the project, an assessment hearing is held. Once again, a notice is sent to every residential and commercial property owner. This notice will have an exact assessment amount that will impact each individual homeowner. The notice also explains to the homeowner what to do if they object to the project at that time. This notice also indicates what the Council expects the interest rate to be. If any residents object, they are allowed to speak. If a homeowner does not feel they are being assessed fairly or properly, for whatever reason, in order for them to maintain their legal right, they must do one of two things: They must come to the meeting, stand and give their name and address and verbally object at the meeting, OR they must send a letter notifying the City Administrator, the Mayor and the City Council of their objection prior to that meeting taking place. If they do not, and the Council approved the Public Works Commission March 12, 2012 — Page 7 assessment, they have no legal recourse to go back against the City on that assessment. If a resident objects at the meeting or in writing prior to the meeting, and if the Council approves the assessment at that time, there are more specific legal requirements residents have to keep their legal rights in place. Appraisals Finance Director Roland explained these appraisals are now done up front. The appraiser hired by the City looks at a selection of properties and assesses how much the additional value would be added to the property with the proposed improvement project. Council Member Justin Olsen asked for an explanation of the differentiation between that sort of a benefit appraisal as opposed to a homeowner having their home appraised for a mortgage refinance or something to that nature. It is frequently heard from some residents that their neighbor's home is half the size, isn't kept up and the assessment to that property is the same as theirs. Finance Director Roland responded that when a homeowner receives a real estate appraisal, someone actually comes into their home and evaluates the amenities, etc. and then decides in the market place what those amenities will bring. The appraiser the City hires looks at the houses in the area, sizes of the lots and whether or not it's reasonable to assume the value to the property will increase over time. Ryan Schroeder stated the homogeneity of the land is important. Another question that is brought up by homeowners is "how will this impact my taxes ?" The response is that it will not directly, the county assessor isn't involved. Council Member Lehrke wished to follow up on this for clarification. When he is asked if the assessment will increase taxes, it's a somewhat confusing issue. The City is not telling the County to reassess properties but when the County reviews the property, they will see it's gone up in value. He has dealt with properties in multiple counties and what he is hearing is that they are going out and looking for these things. The assessor hired by the City of Cottage Grove is provided with a map of all the streets and the City outlines very specifically what the improvements are going to be. The City does not disclose what the proposed assessment value is at that time. Finance Director Roland indicated this is intentional because the City desires an honest appraisal. She added the City has used the same appraiser for a number of years, not just for pavement management projects but for other projects as well. The appraiser is accredited and independent of the City. When properties are all in an area of similar home styles and lot sizes, he may look at three or four of the 50 -60 properties to get an idea to see what this will impact. A couple of years ago in River Acres, there wasn't that homogeneity. There were some lots that had direct access to the roadway, and there were some lots that had indirect access. At that point the appraiser looked at more than just three properties, even though there were about 115 properties in that area. There were approximately ten different Public Works Commission March 12, 2012 — Page 8 properties evaluated. The City's ultimate goal is to be able to defend against any claim that they are not being equitable. Roland went on to state once the Special Assessment Hearing comes along, and everyone who wishes to speak has that opportunity, the Council then makes the decision, 'Are we going to assess this project back against the property owners or notT If the assessment is passed, the residents will once again receive notice and are given 30 days to determine if they will accept the option to pay the amount in full. Once that 30 day period is up, and they can partially pay any amount over $500 in that 30 days to reduce the amount assessed against their property. If it's a $5,000 assessment and they have $1,000 saved up, they can pay down that assessment so only $4,000 goes on their next 15 years property taxes. Assessments are certified to the County 30 days after the hearing, with interest. The interest rate is part of the Resolution the Council adopts. As Finance Director Roland indicated in her memo, the interest rate historically has been 1 '/z percent above the bond rate, but no less than 7 percent. Finance Director Roland indicated that if a resident ended up owing $4,000 on the assessment and didn't wish to pay the 7% interest rate offered by the City, they have the option of going to their bank and obtaining a short term loan or a home equity line of credit. It was noted that back in 1994, 7% was a really good interest rate and remained so for a number of years up to perhaps the last three or four. IMTF Member Ken Brittain mentioned if he were to go get a personal loan right now, it's 12% which is 8% above what the mortgage rate is. The 7% offered by the City is a lot lower than a typical person's eligibility to obtain that rate. Roland agreed and stated it's been consistent for all these years and has remained competitive. The City is not requiring that residents accept our financing. Residents have a choice. Commission Member Jeff Rolling stated at some point this group will discuss what is fair and equitable and perhaps the 7% rate will stand the test of time. He also inquired when the City offers the financing to the citizens. Roland responded that this is a State Statute and we are required to assess a minimum of the project cost and that minimum has to be 20% of the project cost in order to get the 429 bonds. Rolling also reiterated that there is no requirement that states which interest rate the City must offer. Roland responded that this is a policy decision to be made by the City Council. Roland added the assessments not paid in full are certified to the property taxes. The County splits them up over a 15 year period. If you are selling your house and live in the assessment area, a homebuyer's title company may call the City and inquire if there are any pending assessments on this property. And the City may say "Yes, there's a pending assessment of $7,000 (as an example) and we expect it to be September when we have this hearing ". The title company will then go back and before you close on your property, they would find a number they would withhold from the proceeds at the time of the sale in order to pay that pending assessment. When you sell your house, Public Works Commission March 12, 2012 — Page 9 and it's time of closing, the title company takes the funds out and sets them aside so when the special assessment hearing takes place and the assessment is adopted, the funds are sent immediately to the City and the assessment is paid for that property so the person buying your home isn't responsible for it. We have had that happen, unfortunately. Some title companies have not done their due diligence. Once that assessment is certified to your property taxes, then if you sell your house after that they put it on the market the next year, whatever the remaining balance on your property taxes is. The special assessment (just the principal not the interest) has to be settled up or closed out at the time the property changes hands. So usually, your purchase agreement you have with the sale of your home will identify that property taxes will be paid by the seller out of the proceeds and that would include the special assessment that we are talking about. Council Member Lehrke inquired if there is a maximum interest rate the City can charge. Roland responded that no, it's a policy decision. Lehrke asked what is stopping the City from forcing a project on residents and charging them whatever they feel is appropriate? Roland stated this is why the policy decision is made by an elective board. Finance Director Roland stated the City can only assess 45% of the total project cost. To make it easy to understand, let's say the project costs $1 million dollars. $450,000 of that will be assessed and $550,000 has to come from someplace else. The City will take out a loan and issue the bond to pay for those project costs. It was noted that about 35 % -40% of residents pay cash for their assessment during the first 30 days. Rolling stated this topic may come up later, but historically speaking, how much does the bond rate fluctuate on the market? Roland responded the City has issued general obligation improvement debt eight times in the last 19 years. Schroeder stating the thing to remember as you thinking about the policy of bond rate plus 1 '/2 or 2 %, this isn't all simultaneous. The City may construct the project in 2010 but issue the bonds in 2012. If the question is asked what the bond rate will be at an assessment hearing, it is unknown for certain because bonds may not be issued for a couple of years. Council Member Olsen inquired how the City has generally timed the market with respect to reimburse ourselves or pay ourselves back for projects. Schroeder responded that if the City intends to go to market to issue a debt for our capital gains, we have a limited amount of time to do that so a resolution is prepared that indicates the City is intending to go to market. There are times when existing resources are used or cash is paid. If the project is too small to finance, cash is paid. In general terms the City strives to fund all projects. We pay attention where the market is and figure out what the best time will be. Public Works Commission March 12, 2012 — Page 10 Council Member Lehrke inquired if the City must pay, as an example, 55% of a $1 million dollar project, does the City need to levy that, plus interest? Roland responded the City is sent an amortization schedule. That amortization schedule is principle and interest on that $550,000. Lehrke reiterated that's what he was asking: When the City is paying 55% of the project, plus the interest rate for that 55% and if no residents pay cash (to keep the example simple) you have that 45% and you are being charged a 1.76 interest rate, where does that balance go? Perhaps there are other costs that occur, but let's say there are no other costs, no overruns, just a simple, straight forward project. What is that extra rate that we charge residents who are having the project done? Where does that eventually go? Roland responded it goes into the fund for the bond. If the City levies money for bonds, the primary concern until those bonds are done and paid, is that we accumulate funds to pay those bonds. There are always going to be delinquent assessments, sometimes up to 10 or 15 years. If there is excess at the end of the bond, the funds can then be rolled into other funds per Council policy, per Council's desires, and that can go wherever it needs to go. It can go to the general fund, it can go to another debt fund, it can go to a capital projects fund as it's a City Council Policy decision. The primary reason the City is assessing and /or levying is to pay that debt service. The debt schedule sent to the City when the bonds are sold, that levy amount is supposed to be 105 %. The City must levy 105% of the principle and interest in any given year. IMTF Member Cheryl Kohls had one final question: Is the City making a profit on the 7% interest? That's what people want to know. They may not be happy to know they are covering for potential people that default on their assessment. Roland responded that this question will be addressed at a later date. Commission Chair Gary Kjellberg summarized that since the City's debt is not bonded until perhaps two years later, and we are talking about prime rate, it is unknown what the prime is going to be two years from now. We need to keep that in mind regarding the interest rate that is agreed upon that the City will charge. 7. OLD BUSINESS None. Public Works Commission March 12, 2012 — Page 11 Public Works Supervisor Harry Taylor reported: • Public Works Divisions are in the process of finishing up their Good to Great program. • The Utility Division (Streetlight Department) is in the process of purchasing a new aerial bucket truck. This unit will replace the unit purchased back in 1998. • Sewer cleaning is in progress • We are awaiting street sweeping quotes. It is anticipated city wide street sweeping will begin on Monday, April 9 • Boulevard trees are being trimmed Jennifer Levitt reported that the City has received an award from the Minnesota Erosion Control Association for environmental excellence. This was awarded for a project that was done with the Watershed District and AmeriCore. 10. CITY COUNCIL UPDATE Council Member Lehrke reported he was not at the last meeting because he was out of town in Washington, D.C. The meeting before that, (February 15), the Charter Commission was discussed. The petition has been gone through and it's now in the judge's hands. 11. COMMISSION COMMENTS AND REQUESTS Commission Chair Gary Kjellberg stated in his opinion, if this is a Public Works Commission meeting, the quorum should be determined by the number of Commission Members present. Council Member Lehrke commented that next month the City Attorney will be present so that concern can be addressed at that time. HPAIIIIIIIET010111 N Z I IViIA' 11 ➢ Motion to adjourn was made by Jeff Rolling, seconded by Alex Chernyaev. Motion was unanimously carried. Meeting adjourned at 8:54 pm Respectfully submitted, Patricia Storby