5. Staff Report-Draft Assessment Policy - �i
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Staff Report
Date of Meeting: September 10, 20l 3
To: City Council
From: Kristina Handt, Administrator
Re: DRAFT Assessment Policy
Agenda Item #: 5.
Background:
At the July and August work sessions the Council began discussion on assessments and directed
staff to bring a draft to a future meeting that included assessing for initial pavement and
reconstruction. Mill and Overlays would be funded from the Local Road Improvement Fund or
other source and seal coating and crack filling would remain in the Public Work Dept of the
general fund.
Issue:
What should be included in the City's assessment policy?
Proposal Details:
Included in your packet is a draft assessment policy. The policy begins with a purpose statement,
the initiation of public improvements (consistent with state statute), definitions,procedures, and
financing of improvements.
The significant portions of the policy begin on page four with the Assessment Method. The
"unit method"would be used for residential and agricultural areas and the "foot frontage
method" for commercial and industrial areas.
The section on paving gravel roads is consistent with the previous township policy. In this case,
75% is assessed to properties on non-collector streets and 25% assessed on collector streets.
The section on assessing for reconstruction is new. The Council should discuss what the
appropriate level of assessment is in the case of reconstruction. Examples viewed at the previous
meeting ranged from 20-100 %assessed to property owners. Also, those on collector roads
would pay similar to if they were non-collector roads. The map classifying roads is included in
your packet.
New streets would be 100%assessed. This would typically happen at the time of development
and be paid by the developer, not the future property owners.
A section on deferring special assessments, consistent with state statute, was also included.
Fiscal Impact:
Discussion on the specific impact will be determined on a project by project basis. Assessing for
roads will allow road work to be completed while limiting the impact on the tax levy. Assessing
also allows the City to borrow far funds to complete projects.
Options:
1) Direct staff to have the policy reviewed by the City Attorney and placed on a future
Council agenda for adoption.
2) Amend the policy,then direct staff to prepare for placement on a future Council agenda
for adoption.
3) Table until next work session for more discussion.
4) Do not proceed with adopting a Special Assessment Policy for Public Streets.
City of Scandia, Minnesota
Assessment Policy for Public Streets
Draft, September 2013
Purpose
The purpose of this Street Assessment Policy is to establish a fair and equitable manner of
recovering and distributing the cost of public improvements. The procedures used by the City of
Scandia for levying special street assessments are those specified by Minnesota Statutes
§Chapter 429, which provides that "all or a part of the cost of improvements may be assessed
against benefiting properties."
The assessment policy is intended to serve as a guide for a systematic assessment process in the
City. There may be exceptions to the policy or unique circumstances or situations which may
require special consideration and discretion by city staff and the City Council.
Initiation of Public Street Improvements
A public street improvement can be initiated in the following manner:
1. Petition by property owners that own at least 35%of the frontage on the street to be
improved.
2. Resolution by the City Council ordering the public improvement when, in the Council's
judgment,the improvement is needed, and action is required. The criteria which the City
Council may use as a basis to determine the public need for the improvement include
traffic volume,maintenance costs, and the general public safety.
3. A resolution ordering any improvements initiated by the Council or by owners of less
than 35%of abutting property owners requires a four-fifths majority vote of all members
of the Council. A resolution ordering any improvements initiated by owners of not less
than 35% of abutting property owners requires a majority vote of all members of the
Council. A resolution ordering any improvements initiated by all owners of abutting
property, and assessing the entire cost against the property, may be adopted without a
public hearing. The Council may consider the request of a Developer to construct the
improvements and assess them.
Definitions
Unit Method —The Unit Method of assessment is defined as the quotients of the identified
assessable costs divided by the number of lots, parcels, or properties benefiting from the
improvement. When parcels that can be further subdivided are found to benefit from the
proposed improvement, the number of lots attributed to that parcel will be determined from the
number of potential lots that could be obtained from subdivision, using current subdivision
regulations. Corner lots subject to an assessable street improvement will be assessed 100%of the
unit assessment when the property address fronts the assessable improvement. Corner lots
assessed under the "unit" method assessment shall be responsible for 150% of the costs when the
improvements abut the property on more than one street.
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Front Foot Method —The front foot method of assessment is defined as the quotients of the
identified assessable costs divided by the total assessable frontage benefiting from the
improvement. Adjustments shall be made for odd-shaped lots to an average front footage that
would be the equivalent to the frontage of a rectangular shaped lot of the same area and depth.
The purpose of this adjusted front footage is to equalize assessment calculations for lots of
similar size. Corner lots assessed under the "front foot" method shall be responsible for the costs
identified for the improvement for the full frontage of the property that fronts the improvement.
Assessable Street Improvement Costs—The assessable costs of a street improvement project
includes the cost of all necessary construction work required to accomplish the improvement,
acquisition of right-of-way and easements, engineering, legal, administrative, financing,
appraisals, and other identifiable costs. The street improvement project includes bituminous
surfacing, aggregate base, sub-grade correction, drainage improvements such as curb and gutter,
ditches, swales, storm sewer, and storm water management retention or treatment as required for
the improvement.
Interest. The City will charge interest on special assessments at a rate specified in the resolution
approving the assessment roll. If bonds were sold to finance the improvement project, the
interest rate shall be two percent(2%) more than the average interest rate of the bonds,rounded
to the nearest quarter of a percent. If no bonds were sold,the interest rate shall be set at the same
rate.
Prepayment. Property owners may pay their assessments in full interest free for a period of 30
days after the assessment hearing. After such period interest shall be computed from the date
specified in the assessment resolution. The City will transmit a certified duplicate of the
assessment roll with each installment, including interest, to the County Auditor, or in lieu of such
certification, annually certify to the County Auditor by November 30 in each year,the total
amount of installments of and interest on assessments on each parcel which are to become due in
the following year. Prior to certification of principal and interest or the first installment thereof,
to the County Auditor, a property owner may make a partial prepayment of the principal to the
City. Such partial prepayment must be at least $100.00. If the partial prepayment is made after
the 30-day"interest free" period allowed by state law, interest will be charged on the amount of
the partial prepayment from the date specified in the resolution and paid along with the partial
prepayment. After the City has made the first certification of principal and interest to the County
Auditor,prepayment will be accepted only for the total amount still owing including interest and
must be made prior to November 15 of any year. If a parcel has two or more separate special
assessments, prepayment of the remaining principal balance may be made on one or more
assessment totals. Tax-exempt parcels such as churches and school properties may make only
one partial prepayment to the first certification to the County Auditor. The remaining principal
after the partial prepayment will be paid in equal installments over the remaining term of the
special assessments.
Extensions. Where an improvement is designed for service of an area beyond that receiving the
initial benefit, the City may pay for increased project costs due to such provisions for future
service extensions. The City will levy assessments to cover this cost when a new improvement
is installed as an extension of the existing improvement upon identification of such additional
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amount in the notice of hearing for the extensions or new improvements. As an alternative, the
City may assess these costs to the area of future benefit immediately.
Collector Road —A road designated as a major or minor collector by the Comprehensive Plan
(as depicted on Map 25, Roadway Functional Classification, 2008-2030 Comprehensive Plan.)
Public Improvement Procedure
The following is the general procedure followed by the City Council for all public improvement
projects from initiation of such a project through certification of the assessment roll to the
County Auditor. Formats for the various reports and resolutions referenced in this section are
made a part of the policies and procedures of the City.
1. Staff reviews petition or Developer's request for submission to Council.
2. Council accepts or rejects petition or request. If based upon a petition, the Council
adopts a resolution declaring whether the required percentage of property owners has
signed. If the petition or request is accepted, Council orders preparation of feasibility
report.
3. Staff prepares feasibility report. The report shall preliminary evaluate whether the
proposed improvement is necessary, cost-effective, and feasible and whether it should be
made as proposed or in conjunction with another project. The report shall include an
estimate of the cost of the improvement as proposed. Council may refer the report to the
Planning Commission.
4. Council accepts or rejects feasibility report. If accepted, Council orders public hearing
on the improvements.
5. Staff posts and publishes hearing notice and mails notices to affected property owners as
provided in Minn. Stat § 429.031(a).
6. Council conducts public hearing.
7. Within six (6)months of the hearing date, Council adopts or rejects resolution ordering
improvement to be constructed and advertisement of bids. If adopted, staff prepares final
plans, advertises for and opens bids as provided in Minn. Stat. § 429.041, prepares bid
tabulation, makes recommendation to City Council for award, and prepares proposed
assessment roll. Bonds to finance project costs may be issued at any time after the
improvements are ordered.
8. Council reviews proposed assessment roll and orders assessment hearing.
9. Staff publishes hearing notice, mails notice of hearing date and proposed assessments to
the affected property owners as provided in Minn. Stat. § 429.061.
10. Council conducts assessment hearing and adopts, revises, or rejects resolution
determining the amount of the total expense the City will pay, if any, and establishing the
assessment roll. If adopted, Council authorizes certification of the assessment to the
County Auditor.
1 1. Council awards contract based on the bids received.
12. Staff certifies the assessment roll to the County Auditor.
13. Staff supervises construction and prepares payments.
Financin� of Public Improvements
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The City encourages public improvement projects as the area (s) benefiting and needing such
improvements develop. Examples of this policy can be seen through the subdivision regulations,
zoning ordinance, and building codes. Developers are required to provide the needed
improvements and services before development occurs, thereby avoiding unexpected hardships
on the property owners purchasing such property and the general public. However, it is
recognized that certain areas of the City have developed without all needed public improvements
and that methods must be found to provide these improvements without causing undue hardships
on the general public or the individual property owner.
Special assessments are generally accepted as a means by which areas can obtain improvements
or services; however, the method of financing these is a critical factor to both the City and the
property owner. Full project costs spread over a very short term can cause an undue hardship on
the property owner and, likewise, city costs and systems costs spread over a long period of time
can produce and undue hardship on the general public of the City.
It is the policy of the City to not defer assessments except in cases where hardship to senior
citizens 65 years of age or older or persons retired by virtue of a permanent and total disability
would result. Also, the City Council may elect to defer assessments on undeveloped land for a
specified length of time or until the lands are developed. Terms and conditions of any such
deferral will be established in the resolution adopting the assessments.
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Assessment Method
The assessment rate shall normally be by the "unit"method in residential or agricultural areas.
The "front foot'' method of assessment may be used for streets serving commercial or industrial
development, as determined by the City Council. Corner lot properties shall be included in the
assessment roll when the property mailing address fronts the improvement.
Design Standards
Construction and reconstruction of public improvements shall be consistent with the Engineering
Standards approved by the City Council. The life expectancy, or service life, for street
improvements, including concrete curb and gutter, sidewalk, trails, and storm sewer, is 20 years,
unless otherwise stated in the resolution ordering the public improvement.
Initial Bituminous Pavement Imnrovements for Gravel Streets
Initial bituminous construction for existing gravel streets in rural zoning districts consists of the
shaping of the existing aggregate surface, supplementing the existing aggregate base to specified
thickness, constructing the bituminous base course to the specified thickness and width,
construction of the bituminous wear course to the specified thickness and width. Sub-grade and
drainage improvements will be constructed as determined necessary by the City Engineer. The
constructed width and material thickness is to be in accordance with the Typical Rural Street
Section detailed in the Engineering Standards adopted by the City Council, unless otherwise
determined by the City Council.
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Initial bituminous pavement improvements for existing gravel streets shall be assessed based on
the following formula:
1. Total bituminous cost(both base course and wear course) divided by the number
of assessable units= cost/unit
2. Cost/unit x 0.25 =collector road assessment per unit
3. Cost/unit x 0.75 =non-collector road assessment per unit
The City Council may make an exception to this policy in the case where the city is determined
to benefit from the improvement or where special conditions exist. In no case will less than 20
percent of total project costs be assessed to benefiting properties.
Reconstruction of Existin� Residential Bituminous Surfaced Streets
Reconstruction of existing bituminous surfaced streets shall be assessed at a rate of 75%of the
costs of the improvements to the benefitting properties, with frontage on the street proposed for
the improvement, and adjustments for corner properties. The City of Scandia will participate in
the remaining 25% of the improvement costs.
Reconstruction of existing bituminous surfaced streets that are designated as Collector streets
shall be assessed at a rate of 75%of the costs of a typical Local/Residential Street Section and
defined in the Engineering Standards as adopted by City Council. The City of Scandia will
participate in the improvement costs that exceed the Standard Local Street Section including
additional design street section thickness. additional storm drainage capacity, and additional
width required to meet the needs of the projected 20-year traffic volume projections. These City
costs are generally referred to as ``street over-sizing'� costs.
The City of Scandia may vary from this policy in the case of a street that has been transferred to
its jurisdiction from the County or State. typically referred to as "turn-back," depending upon the
condition of the street at the time of turn-back and considering any payments received by the city
from the other jurisdiction.
Construction of New Streets
Construction of all new streets will be assessed at a rate of ]00%of the cost of the
improvements, to the benefiting properties. The new streets will be designed in accordance with
the city's Engineering Standards and applicable provisions of the city's Subdivision Regulations,
as adopted by the City Council.
The assessed cost of the improvements to the benefiting properties with frontage on the proposed
street improvement will be limited to the construction costs of a typical City Local/Residential
Street Section. The City of Scandia will participate in the any street over-sizing costs for
improvements to designated Collector streets.
Non-Assessable Public Street Imnrovement and Maintenance Costs
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The City of Scandia will not assess the following:
• Maintenance of bituminous surfaced streets including bituminous patching, crack filling, seal
coating, shoulder maintenance, mowing and snow plowing
• Maintenance of existing public gravel streets including periodic grading, periodic gravel
placement, mowing, dust control and snow plowing.
Maintenance frequency is determined by the City Council and staff, and described in city
policies (such as for snow plowing, dust control, tree trimming and others) as may be adopted by
the Council.
Deferment of Snecial Assessments
The Council may defer the payment of any special assessment on homestead property owned by
a person who is 65 years of age or older, or who is retired by virtue of permanent and total
disability, and the City Clerk is hereby authorized to record the defertnent of special assessments
where the following conditions are met:
1. The applicant must apply for the deferment not later than 90 days after the assessment is
adopted by the City Council.
2. The applicant must be 65 years of age or older or retired by virtue of permanent and total
disability.
3. The applicant must be the owner of the property.
4. The applicant must occupy the property as his principal place of residence.
5. The average annual payment for assessments levied against the subject property exceed
one percent of the adjusted gross income of the applicant as evidenced by the applicant's
most recent federal income tax return. The average annual payment of an assessment
shall be the total cost of the assessment divided by the number of years over which it is
spread.
The deferment shall be granted for as long a period of time as the hardship exists and the
conditions aforementioned have been met. However, it shall be the duty of the applicant to
notify the City Clerk of any change in his status that would affect eligibility for deferment.
The entire amount of deferred special assessments shall be due within sixty days after loss of
eligibility by the applicant. If the special assessment is not paid within the sixty (60)days, the
City Clerk shall add thereto interest at a per annum interest rate of two percent (2%) above the
bond interest rate and the total amount of principal and interest shall be certified to the County
Auditor for collection with taxes the following year. Should the applicant demonstrate to the
satisfaction of the Council, that full repayment of the deferred special assessment would cause
the applicant particular undue financial hardship, the Council may order that the applicant pay
within sixty days a sum equal to the number of installments of deferred special assessments
outstanding and unpaid to date, including principal and interest, with the balance thereafter paid
according to the terms and conditions of the original special assessments.
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The option to defer the payment of special assessments shall terminate and all amounts
accumulated plus applicable interest shall become due upon the occurrence of any one of the
following:
1. The death of the owner when there is no spouse who is eligible for deferment.
2. The sale, transfer or subdivision of all or any part of the property.
3. Loss of homestead status on the property.
4. Determination by the Council for any reason that immediate or partial payment would
impose no hardship.
State Law References(s): Minn. Stat. § 435.193, Senior Citizens or retired &disabled persons
hardship special assessment deferral.
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