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5.g) Staff Report-Street Special Assessment Policy � � �. �.� ` / � � � �• � SCANDIA Staff Report Date of Meeting: November 19, 2013 To: City Council From: Kristina Handt,Administrator Re: Street Special Assessment Policy 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. A draft was reviewed at the September meeting and a few changes were requested. The draft was also reviewed after the meeting by the City Attorney. At the November work session the Council reviewed the City Attorney's edits and directed staff to place the policy on a future agenda for adoption after adding language to the end of the prepayment definition section. Issue: What should be included in the City's assessment policy? Proposal Details: Included in your packet is the latest draft of the street assessment policy. The policy begins with a purpose statement, the initiation of public improvements, 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 most significant change from past practice can be found in the section titled Full Depth Reconstruction of Existin�Residential Bituminous Surfaced Streets. Changes discussed at the September work session to include "full depth" reconstruction language and change the assessed amount for the full depth reconstruction to 30% (property owner pays 30%of the cost and the City pays 70%) have been included in the update. Also, those on collector roads would pay similar to if they were non-collector roads. The map classifying roads is found in the Comprehensive Plan 2008-2030.The City Attorney edits from the last draft have been included as well as the following language to the end of the prepayment definition section: "In the event the total cost of the project as completed is less than the total project cost identified for assessment and approved by the City Council, the City Council shall refund the difference, but only in accordance with state law and only after all funds have been collected with a balance remaining in the City's account in excess of all project costs. The City Council shall be under no obligation to refund project costs until it is determined, in the Council's sole and absolute discretion,that all costs associated with the assessed project have been paid in full." 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 at least 20%also allows the City to borrow for funds to complete projects. Options: 1) Approve the proposed Street Special Assessment Policy. 2) Amend and then approve a Street Special Assessment Policy. 3) Do not adopt a new Street Special Assessment Policy. Recommendation: Option l. City of Scandia, Minnesota Assessment Policy for Public Streets November 2013 Pu rpose The purpose of this Street Assessment Policy is to establish a fair and equitable manner of financing, 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 Chapter 429 of the Minnesota Statutes which provides that"all or a part of the cost of improvements may be assessed against benefiting properties." This assessment policy is intended to serve as a general guide for a systematic assessment process in the City. However,there may be exceptions to the policy which involve unique circumstances or situations requiring 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 owning 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 shall include traffic volume, maintenance costs, and the general public safety. 3. A resolution ordering any improvements initiated by the Council requires a four-fifths majority vote of all members of the Council. A resolution ordering any improvements initiated by owners 35% or more of abutting property owners reyuires a simple 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 yuotient 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 as outlined in the City's Code of Ordinances. 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 1 shall be responsible for 150%of the costs when the improvements abut the property on more than one street. Front Foot Method —The front foot method of assessment is defined as the quotient 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 eyuivalent 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 include 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 required to be paid by the City. The scope of a 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 to complete the improvement. Interest. The City will charge interest on special assessments at a rate specified in the resolution approving the assessment roll. If bonds are sold to finance the improvement project, the interest rate shall be two percent(2%) greater than the average interest rate of the bonds, rounded to the nearest quarter of a percent. If no bonds are 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 eyual installments over the remaining term of the special assessments. In the event the total cost of the project as completed is less than the total project cost identified for assessment and approved by the City Council,the City Council shall refund the difference, but only in accordance with state law and only after all funds have been collected with a balance remaining in the City's account in excess of all project costs. The City 2 Council shall be under no obligation to refund project costs until it is determined, in the Council's sole and absolute discretion, that all costs associated with the assessed project have been paid in full. 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 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 executed the petition. If the petition or request is accepted, Council orders preparation of feasibility report. 3. Staffprepares 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 required by 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 required by Minn. Stat. § 429.061. 3 l 0. 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. 11. 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. Financing of Public Improvements 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 identified to provide these improvements without creating undue hardships for 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 improvements 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 an 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. Assessment Method The assessment rate shall customarily 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. 4 Initial Bituminous Pavement Improvements 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. 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 exceptions 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. Full Depth Reconstruction of Existing Residential Bituminous Surfaced Streets Full depth reconstruction of existing bituminous surfaced Local/Residential Streets shall be assessed at a rate of 30%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 70%of the improvement costs. Full depth reconstruction of existing bituminous surfaced streets that are designated as Collector streets shall be assessed at a rate of 30%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 100%of the cost of the improvements,to the benefiting properties. The new streets will be designed in accordance with 5 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 any street over-sizing costs for improvements to designated Collector streets. Non-Assessable Public Street Improvement and Maintenance Costs 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. • Mill and Overlays will be financed through the Local Road Improvement Fund, General Fund or some other revenue source but will not be assessed. 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 Special Assessments The City 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 deferment 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 or her principal place of residence. 5. The average annual payment for assessments levied against the subject property must 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. 6 The entire amount of the deferred special assessment 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 City 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. The special assessment deferral shall terminate and all amounts accumulated plus applicable interest shall become due and owing 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. 7