9.e) Staff Report-Street Improvement Districts � !� �
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SCANDIA
s�arrReporr
Date of Meeting: April 16, 2013
To: City Council
From: Kristina Handt,Administrator
Re: Street Improvement Districts
Agenda Item#: 9.e)
Background:
An initiative the League of Minnesota Cities has been working on for a number of years, Street
Improvement Districts, has advanced through several committees at the Legislature and the
League is asking member communities to contact their legislators in support of SF 607 and HF
745. These bills would allow cities to collect fees from property owners within a district to fund
municipal street maintenance, construction, reconstruction, and facility upgrades. If enacted,this
legislation would provide cities with an additional tool to build and maintain city streets.
Additional background information from the League is included in your packet.
Issue:
Should the City support legislation that would allow cities to create street improvement districts?
Proposal Details:
As has been noted in the past, the City has fallen behind in funding for road maintenance and
reconstruction. The annual budget includes about $300,000 for contracted road maintenance and
repairs. This is about half of the amount that the Pavement Management Plan identified in 2008
would be needed to maintain all roads with a 7 or higher rating.
Included in your packet is a resolution supporting Street Improvement Districts. While staff
does not have a specific project area in mind at this time, the legislation would allow cities to
create Street Improvement Districts but not require cities to do so. If this legislation became law,
it would provide another"tool in the tool box" for the City to consider when faced with road
funding issues. Each project and available funding sources would be evaluated at the appropriate
time.
Fiscal Impact:
None at this time
Options:
1) Approve Resolution 04-16-13-06
2) Amend and then Approve Resolution 04-16-13-06
3) Do not take a position on Street Improvement Districts at this time
Recommendation:
Option 1.
CITY OF SCANDIA
RESOLUTION NO: 04-16-13-06
A RESOLUTION SUPPORTING LEGISLATION AUTHORIZING THE
ESTABLISHMENT OF MUNICIPAL STREET IMPROVEMENT DISTRICT5
WHEREAS,Minnesota contains over 135,000 miles of roadway, and over 19,000
miles—or 14 percent--are owned and maintained by Minnesota's 853 cities; and
WHEREAS, 84 percent of municipal streets are ineligible for dedicated Highway
User Ta�c Distribution Fund dollars; and
WHEREAS,the more than 700 Minnesota cities with populations below 5,000 are
ineligible for dedicated Highway User Tax Distribution Fund dollars; and
WHEREAS,city streets are a separate but integral piece of the network of roads
supporting movement of people and goods; and
WHEREAS,existing funding mechanisms, such as Municipal State Aid(MSA),
property taxes and special assessments, have limited applications, leaving cities under-
eyuipped to address growing needs; and
WHEREAS,maintenance costs increase as road systems age, and no city--large
or small—is spending enough on roadway capital improvements to maintain a 50-year
lifecycle; and
WHEREAS, for every one dollar spent on maintenance, a road authority saves
seven dollars in repairs; and
WHEREAS,the Council of the City of Scandia finds it is difficult to develop
adeyuate funding systems to support the City's needed street improvement and
maintenance programs while complying with existing State statutes; and
WHEREAS,cities need flexible policies and greater resources in order to meet
growing demands for municipal street improvements and maintenance.
NOW,THEREFORE,BE IT HEREBY RESOLVED BY THE COUNCIL
OF THE CITY OF THE CITY OF SCANDIA, WASHINGTON COUNTY,
MINNESOTA,that it supports enabling legislation that would authorize cities to
establish street improvement districts to fund municipal street maintenance, construction
and reconstruction.
Adopted by the Scandia City Council this 16`h day of April, 2013.
Randall Simonson, Mayor
ATTEST:
Kristina Handt, Administrator/Clerk
O �
j,EAGUE oF CONNECTING & INNOVATING
MINNESOTA SINCE 1913
CITIES
Briefing paper---2013
Minnesota cities and street improvement districts
League position
The League supports HF 745 (Erhardt, DFL-Edina)and SF 60'7 (Carlson, DFL-Eagan), legislation
that would allow cities to create street improvement districts. This authority would allow cities to
collect fees from property owners within a district to fund municipal street maintenance,
construction, reconstruction, and facility upgrades. If enacted,this legislation would provide cities
with an additional tool to build and maintain city streets.
Suppot'ters
HF 745/SF 607 is also supported by the following organizations:
• Association of Metropolitan Municipalities
• Coalition of Greater Minnesota Cities
• Minnesota Association of Small Cities
• North Metro Mayors
• Minnesota Transportation Alliance
• City Engineers Association of Minnesota
• Minnesota Chapter of the American Public Works Association
Background
Just as the state has fallen behind in making transportation investments, some cities faced with
budget challenges have made the difficult decision in recent years to hold off on scheduled street
improvement projects. Maintenance projects, such as seal coating and overlays, can prolong the
li�ecycle of streets to 50 to 60 years. Without ongoing maintenance, the average life expectancy of
local streets is approximately 25 to 30 years. For every $1 spent on maintenance, a road authority
saves $7 in repairs. But this maintenance requires a reliable dedicated funding source other than
the current volatile property tax system.
For the same reasons, cities are also falling behind on the reconstruction projects necessary to help
keep property values stable; and, cities lack viable options for building new transportation
infrastructure to attract and retain the investments by businesses that keep Minnesota's economy
strong.
Existing funding mechanisms for street maintenance and reconstruction are inadequate. Special
assessments can be onerous to property owners and are difficult to implement for some cities.
Special assessments are not always useful for funding collector streets and other streets that do not
abut private property. Property tax dollars are generally not dedicated and are sometimes diverted
to more pressing needs such as public safety, water quality and cost participation in state and
county highway projects. Municipal state aid(MSA) is limited to cities over 5,000 population--147
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of 853 cities in Minnesota--and cannot be applied to more than 20%of a MSA city's lane miles.
Existing MSA is not keeping up with needs on the MSA system.
Kev messages
• This is enabling legislation.No city would be reyuired to create a municipal street
improvement district.
• The street improvement district authority legislation is modeled after Minn. Stat.435.44,
which allows cities to establish sidewalk improvement districts.
• This authority would provide a funding mechanism that is fair. It establishes a clear
relationship between who pays fees and where projects occur,but stops short of the benefit
test that sometimes makes special assessments vulnerable to legal challenges. It also does
not prohibit cities from collecting fees from tax exempt properties within a district.
• Fees paid under a street improvement district would be deductible just as property taxes
are.
• This tool allows cities to perform maintenance and reconstruction on schedule. Timely
maintenance is essential to preserving streets and thereby protecting taxpayer investments.
� • This tool would allow property owners to fund expensive projects by paying relatively
small fees over time. The tool could be used to mitigate or eliminate the need for special
assessments.
LMC Contact:Anne Finn,Assistant IGR Director, 651-281-1263, a inn(�a,lmc.org
Updated March 13, 2013