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10.a Wyldewood Acres HOA Request Staff Report Date of Meeting: November 21, 2023 For: Honorable Mayor and Council From: Kyle Morell, City Administrator Subject: Wyldewood Acres HOA Sewer System Request Background: Wyldewood Acres is a 28-unit development constructed in 2003 between Scandia Trail Road and 205th St N. along Odell Ave N. The development was constructed with private water and sewer systems. The Homeowners Association (HOA) has drafted the attached letter for Council. As their letter states, their sewer system is not compliant with the new MPCA sewer system regulations. This is the same set of regulation changes that require the City to upgrade the Bliss System. Current Proposal: The HOA would like the Council to consider one of two options: 1) create a subordinate tax district that encompasses the entire development (which will open the door to possible grant funding), and 2) take ownership of our wastewater treatment facility with the financial responsibility falling on the association members. Discussion: At our October 17 Council meeting, we discussed options outlined in a memo from the City Attorney about ways the City could assist the HOA. Currently, only low-interest loans are available to them, but with the City’s assistance, they may be eligible for grant funding. Staff committed to talking with the MPCA to evaluate its options. Staff spoke with Bill Dunn, Clean Water Revolving Fund (CWRF) Program Manager, at the MPCA about the HOA’s options. The City cannot apply on behalf of the HOA without committing to taking over ownership of the system. All grant opportunities available through CWRF or the Public Facilities Authority (PFA) require public ownership of the system. If the City agreed to take over ownership of the system, then a subordinate tax district would be established to allow the City to levy expenses against the Association members. Additionally, the Wyldewood Acres Development Agreement would need to be revised, and the dedications placed against the properties giving them ownership of the system would need to be reviewed and amended. As the attached letter from the City Attorney states, pursuing the proposal from the Wyldewood Acres HOA would involve significant professional and legal expenses. If the Council decides to pursue this further, an Agreement with the HOA to cover the City’s expenses should be considered. Currently, Staff is not in favor of taking over another community sewer system. Options: 1) Continue to pursue the Wyldewood Acres HOA’s proposal and enter into an Agreement for professional and legal services. 2) Reject the HOA’s proposal and decline to offer assistance. Recommendation: Option 2 Attachments: Wyldewood Acres Homeowners Association Letter dated 09 18 23 Letter from City Attorney re Wyldewood Acres 10 19 23 City Council of Scandia September 18, 2023 Dear City Council Members, Thank you for your conƟnual work and efforts for our Scandia community. As board members of Wyldewood Acres homeowner associaƟon, Paul Hoppe, Linda Mickley, and Aaron Soule, would like to meet with you for a special working session to discuss sewer management soluƟons for our self-managed system. Over the past 2 years, our board members have met with the City Administrator, Kyle Morell, and then before Kyle, with his predecessor, regarding new MPCA regulaƟons and our wastewater treatment facility permit. The Wyldewood Acres homeowner associaƟon contracts with Natural Systems UƟliƟes (NSU) for the management and maintenance of our sepƟc system. The MPCA informed the associaƟon of new wastewater nitrogen regulaƟons and that our current system does not meet those regulaƟons (which were not in place when the system was built in the early 2000s). The MPCA also informed the associaƟon our wastewater permit had expired. We have since renewed our permit and are on the road to determining opƟons to upgrade the system to MPCA guidelines and plan for the facility’s future. However, because the associaƟon owns the system, we are limited to private grants and state loan programs, thereby missing out on the opportunity of federal, state, and county grant funding programs. The board would like to meet with the City Council to discuss the possible implementaƟon of one of two opƟons: 1) create a subordinate tax district that encompasses the enƟre development (which will open the door to possible grant funding), or 2) take ownership of our wastewater treatment facility with the financial responsibility falling on the associaƟon members. These opƟons will allow the City to ensure the system is updated according to the MPCA permit. It is in good running order into perpetuity and provides access to grant funding and the experƟse to run such a facility. If the City assumes ownership of the facility and establishes a special taxing district encompassing the Wylewood Acres development to cover all financial operaƟng costs, there would be no adverse financial impact on the residents of Scandia. The board has already approached the residence of the development on the concepƟonal idea of creaƟng a special taxing district to assume ownership, direcƟng our board to explore the opƟon with the City. The associaƟon has looked into changing over to a county permit. However, our system is too large based on the county calculaƟons. Over the past year, the associaƟon has taken steps to prepare for future projects and needs. Constant flow monitoring was installed on the system in August of 2023, which allows for reading constant flow data and will aid in planning upgrades and future facility needs. The system was re-jeƩed in July 2023 for maintenance purposes. The associaƟon has begun assessments to set aside funds for future needs. Thank you for considering the opƟons outlined in this leƩer and for the opportunity to aƩend a working session with the council. Best regards, Wyldewood Homeowner AssociaƟon Board Page 1 of 2 ECKBERG LAMMERS MEMORANDUM To: City of Scandia; Kyle Morell, City Administrator From: Eric Larson, Scandia City AƩorney; ChrisƟna Benson, Assistant City AƩorney Date: October 3, 2023 Re: Wyldewood Acres Development. Private Sanitary SepƟc System. INTRODUCTION Wyldewood Acres is a residenƟal development created in 2004-05 that includes a homeowners’ associaƟon. Wyldewood Acres contains 28 residenƟal lots totaling approximately 49.67 acres over an approximate 67.19 acre development in total. The Wyldewood Acres development contains three outlots. Outlot A contains a community on-site sepƟc system. Outlots B and C contain the Wyldewood Acres community well system. All outlots are owned by the Wyldewood Acres Homeowner’s AssociaƟon, a condominium associaƟon formed to own and operate the common areas and the outlots. Wyldewood Acres Homeowner’s AssociaƟon (“AssociaƟon”) is formed pursuant to Minesota Statutes Chapter 317A and SecƟons 515B.1-101 et seq., respecƟvely known as the Minnesota Non-profit CorporaƟon Act and Minnesota Common Interest Ownership Act. The AssociaƟon is faced with substanƟal future expenses for the community on-site sepƟc system due to the system’s age and in order to meet state regulatory compliance. The AssociaƟon has requested the City of Scandia to consider taking over the community on-site sepƟc system and tax the AssociaƟon and/or AssociaƟon residents for all associated costs. SHORT ANSWER 429 Assessment. Scandia could take ownership of the Wyldewood sepƟc system and impose special assessments per Minn. Stat. Ch. 429. The assessment would cover acquisiƟon, development, construcƟon, reconstrucƟon, extension, and maintenance. Special Taxing District. A special taxing district requires approval by an AdministraƟve Law Judge (ALJ) per the procedures and laws set forth in Minn. Stat. Ch. 275, Taxes; Levy, Extension, and Minn. Stat. §§ 442A.01 to 442A.29, Sanitary Districts. Special Services District. Scandia cannot create a Special Services District for the Wyldewood Acres sepƟc system. ResidenƟal real estate may not be assessed in a special services district. Page 2 of 2 ANALYSIS Taking over ownership and responsibility of the Wyldewood Acres community on-site sepƟc system is possible but a significant challenge. Special Taxing District. The creaƟon of a Special Taxing District is involved and could be a lengthy process since its creaƟon is based on the ALJ review and approval process and, by extension, the ALJ’s calendar. A benefit of a Special Taxing District is that the City would be able to ensure reimbursement for most, if not all, of its resource expenditures through the creaƟon of a Special Taxing District, but there is no guarantee that an ALJ would approve a Special Taxing District. 429 Assessment. A 429 Assessment is a standard means for ciƟes to fund public improvements, including sanitary systems. CiƟes are restricted on what can be assessed under Minn. Stat. Ch. 429, which could impair Scandia’s ability to recapture all its expenses now and in the future. City Resources AdministraƟve and Governance Oversight) and System Expenses. In addiƟon to repair, replacement, and maintenance expenses, with City ownership of property comes operaƟonal expenses, such as insurance, administraƟve oversight, professional fees and expenses, and liability arising out of ownership. In addiƟon, there are governance expenses for either the 429 Assessment process or the Special Taxing District. As noted above, these addiƟonal resource expenditures may be more easily covered by the creaƟon of a Special Taxing District, but the creaƟon of a Special Taxing District will take longer than a tradiƟonal 429 Assessment process and take longer to create as well. City Owner LiabiliƟes. Owners of real or personal property are legally responsible for the property in all respects, including the sepƟc system discharge and environmental impacts and operaƟons. The City would need to secure both property and liability insurance for the Wyldewood Acres sanitary system. In the end, the ulƟmate liability always rests with the property owner and when that owner is a public enƟty, an enƟty that exists in perpetuity with the ability to levy, then the city is customarily the primary source that others look to. Strategies. Scandia may need to invesƟgate further as to how to legally bind the AssociaƟon and its residents to cover the above-noted expenses and liabiliƟes as well as any others, such as restricƟve covenants recorded against each residenƟal lot and/or agreement with the AssociaƟon to ensure cost recovery as well as appropriate insurance and indemnificaƟon documents. AssociaƟon. Pursuing Wyldewood Acres’ proposal further would involve significant professional expenses, including legal. An Agreement with the AssociaƟon to cover the City’s expenses and an iniƟal deposit may be a consideraƟon.