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04/05/1993 - City Council Special AGENDA SPECIAL CITY COUNCIL MEETING Monday April 5, 1993 5:00 p.m. I. ROLL CALL & ADOPT AGENDA II. FINANCING PUBLIC IMPROVEMENTS THROUGH SPECIAL ASSESSMENTS; COSTS ANALYSIS FOR PROJECT 617R, CEDAR GROVE RECONSTRUCTION III. OTHER BUSINESS IV. ADJOURNMENT MEMO TO: HONORABLE MAYOR& CITY COUNCILMEMBERS FROM: CITY ADMINISTRATOR HEDGES DATE: APRIL 2, 1993 SUBJECT: SPECIAL CITY COUNCIL MEETING MONDAY, APRIL 5, 1993 A special City Council meeting is scheduled for 5:00 p.m., Monday, April 5, 1993, to discuss financing public improvements through special assessments and,more specifically, the costs analysis for Project 617R, Cedar Grove reconstruction. Enclosed on pages oZ through IC is a copy of a detailed memo from the Director of Public Works entitled, "Project 617R, Cedar Grove Reconstruction." Also enclosed without page number is correspondence from the City Attorney's office regarding the analysis of the assessment impact and financing public improvements through special assessments. There are no other formal agenda items scheduled for the meeting on Monday. City Administrator TLH/kf l MEMO TO: THOMAS L HEDGES, CITY ADMINISTRATOR FROM: THOMAS A COLBERT, DIRECTOR Of PUBLIC WORKS DATE: MARCH 30, 1993 SUBJECT: PROJECT 617R, CEDAR GROVE RECONSTRUCTION On December 8, 1992, the City Council closed the public hearing and approved the reconstruction of the local residential streets within the Cedar Grove 3rd, 4th, 5th, 6th and part of the 9th Additions. They directed staff to proceed with the formal bid solicitation and property appraisal process to allow a re-evaluation of the financial impact of this project on both the property owner from the special assessment perspective and the City's financial subsidy requirements. There are two major contracts associated with this proposed improvement. The first pertains to the street related improvements under City Contract 93-02. The second relates to the installation of streetlights through the Dakota Electric Association (DEA) or Northern States Power Company (NSP). The following shows a comparison of the improvement costs and financing sources based on the original feasibility report estimate and also on the formal bids and appraisal results. FEASIBILITY REPORT ESTIMATES Improvement Improvement Cost Assessment Revenue City Share Street Reconstruction $3,493,840 $2,376,939 $1,116,901 Streetlights $296,830 296.830 -0- TOTAL $3,790,670 $2,673,769 $1,116,901 (70.54%) (29.46%) BID & APPRAISAL ESTIMATES Improvement Improvement Cost Assessment Revenue City Share Street Reconstruction $2,969,518 1,346,000 $1,623,518 Streetlights 254.400 -0- 254.400 TOTAL $3,223,918 $1,346,000 $1,877,918 (41.75%) (5825%) 1 r - The bid and appraisal estimate was based on bids received on March 26, 1993, plus related indirect costs for engineering, administration, bonding, legal, etc. The assessment revenue is based on an analysis of an assessment impact report prepared by the City Attorney's Office on February 5, 1993, which assumes the maximum assessment of $2,000 per lot for the Cedar Grove 3rd, 4th and 5th Additions and the maximum of$1,500 per lot for Cedar Groves 6 and 9 Addition where concrete curb and gutter presently exists. The appraised amount of maximum assessment benefit ($1,500/lot and $2,000/lot) does not include streetlights. As can be seen from this analysis, based on the bids received and the maximum assessment appraisal, the assessment versus City participation percentages changed from a 70/30 to a 42/58 split. Also, the estimated amount of City participation increased approximately $761,000 (68%) from what was estimated in the feasibility report. Based on this significant increase in the City's participation and the apparent lack of assessment revenue from streetlights, the Council may want to consider whether the streetlights should be installed at this time or a later date subsequent to a petition from interested and willing property owners to finance such an improvement. If the streetlight contract was deleted from this improvement, it would change the share of financing to a 45/55 split between the homeowners and the City. While the street improvement costs (excluding streetlights) is approximately$360,000 per mile for the 8.2 miles of streets and approximately $3,900 per lot for each of the 760 lots, these averages are Lim typical. Many variables preclude the extension of these numbers in calculating a long range reconstruction cost and/or revenue source. Cedar Grove 3rd, 4th & 5th Additions, in addition to street reconstruction, includes the installation of new concrete curb and gutter while the 6th &9th Additions do not; Hence, different costs per mile and assessment rates per lot. Also, this is a major first part improvement to the ea p major P P City's reconstruction needs due to the excessive age, under-designed original construction and limited structural maintenance during the early life cycle years. The remainder of the City streets are being maintained to a higher degree with extensive sealcoating, crack sealing, patching as well as being built to a stronger design standard. Therefore, these average costs per mile or lot should not be extended for every mile of local residential street that currently exists in the City. In addition, many neighborhoods have varying degrees of density (lots per mile) as well as zoning classifications (multiple, residential, commercial, etc.). 1 4-98 5-year CIP, the Public Works Department will be In anticipation of preparing the 99 , P P P g Y P calculating a life cycle cost for each mile of street by running several variations of the City's pavement management computer program for street maintenance. 2 Attached to this memo are copies of previous correspondence that address the reconstruction, maintenance and financing needs of the City's streets. I will be available to review and discuss in further detail any aspect of this project or the enclosed information at the Special Council Workshop on April 5. Respectfully submitted, Director of Public Works v - TAC/jj cc: Mike Foertsch, Assistant City Engineer (W/Enc.) Gene VanOverbeke, Director of Finance (W/O Enc.) Jim Sheldon, City Attorney (W/O Enc.) Enclosures: Memo of 5-22-92 (CIP Needs & Financing Issues) Memo of 9-29-92 (Project 617R Financing/Assessment Philosophies) 3 ' CIO TO: THOMAS L. HEDGES, CITY ADMINISTRATOR FROM: THOMAS A. COLBERT, DIRECTOR OF PUBLIC WORKS DATE: MAY 22, 1992 SUBJECT: STREET RECONSTRUCTION AND MAINTENANCE C.I.P. NEEDS AND FINANCING ISSUES INTRODUCTION • Early in 1992, the City Council formally adopted the 1992-96 Five Year C.I.Y. for the City. A significant part of that overall C.I.Y. is associated with the proposed reconstruction, repair and/or upgrading of our street infrastructure system. Since Eagan is such a young community, our past involvement has been primarily involved with constructing new streets. However, as our community continues to mature, some of the first streets built within our community have • reached or exceeded their original life expectancy and have deteriorated to the point where reconstruction is necessary. In evaluating the condition of our street infrastructure system, the Public Works Department has attempted to prioritize these needs and create a five year C.I.P. However, since this is a new phase of our community's growth, it is very important that we evaluate the financial impact of implementing a long term reconstruction/maintenance program. This memo will provide some of the basic information that should be taken into consideration in discussions relating to creating a comprehensive program with related policies that the community will follow from here on out. HISTORY Eagan originally started as a farming community with access provided through 8 g limited State and County roadways. In the mid-1950's (35-40 years ago), the ri Y y 8 first cluster o: local residential developments started to'appear in the northern portion of Eagan, (i.e. Country Home Heights and McKee Addition). This was followed in the late 50's by the Cedar Grove, Oslund-Timberline and Valley View Plateau Additions. With Eagan being a Township at that time, these residential streets were constructed privately by the. develo er prior to the establishment of any standards. However, with the exception of Country Home Heights, they were constructed with bituminous surfacing and bituminous curbs, with limited (if any) storm sewer facilities. In 1983, the Ci ty recognized ed that these streets had reached the end of their life gn expectancy and were in need of reconstruction. Subsequently, the Cedar Grove 1st and 2nd Addition was reconstructed to current City standards with concrete curb and gutter, 7-ton per axle bituminous surfacing and additional storm sewer facilities. Approximately 55 percent of the costs associated with this reconstruction was assessed to the adjacent property owners on a per lot basis with the City assuming all remaining costs. Although the City did not have a formal five-year capital improvement program, it was anticipated that the City would proceed with a progression of reconstruction and upgrading bf these older streets as their useful life had expired. In 1984, it was proposed that Rahn Road would be reconstructed as a second phase of this informal program. However, 1 • • • • • due to significant opposition by the affected property owners, the City Council at that time canceled the program and decided to wait until there was more public concern and support for these projects. Subsequently, the City's street maintenance program was limited to isolated patch and repairs, crack sealing and seal coating. However, during the late 1980's, the City started to receive increasing complaints and editorials regarding the deteriorating condition of Rahn Road. Subsequently, in 1990 Rahn *Road was reconstructed with a certain amount of opposition still remaining. PAVEMENT MANAGEMENT SYSTEM Recognizing the continual deterioration of all City streets as i natural process of its life cycle combined with the rapid expansion of our transportation system, there was a need to create a program where staff would inventory and evaluate the system to economically prioritize the maintenance requirements.with a shrinking budget. In 1989 and 1990, the City created a Pavement Management Program (PMP) whereby every square yard of public street was reviewed and evaluated based on its current condition, year of construction, structural design and past maintenance history. With this information, a computer program then was able to determine where any particular street was in its life cycle. Certain streets had been subjected to an accelerated aging process either due to traffic loads, poor soil conditions, poor drainage or any other combination of factors. Subsequently, every street was assigned a rating of its Pavement Condition Index (PCI) on a scale of 1-100. The attached graphic showing the relationship of Pavement life versus PCI shows that Eagan streets have a tendency to exceed the normal 20 year life expectancy. However, it still reflects the general deterioration of streets to a point when reconstruction becomes necessary (approximately 26 years). With this program, the City was then able to put together a Five Year C.I.P. allowing us to address the worst situations first while helping to identify the extent of reconstruction or repair required. 3-YEAR CAPITAL IMPRO' i NT PROGRAM (CIP) The benefits of a 5-Year Capital Improvement Program are self evident. They allow the City staff to prioritize the evaluation and design of future projects in an orderly manner. It allows the City to project its future expenditures and to anticipate and plan for the proper financing of those needed improvements. It also allows the affected property owners an opportunity to anticipate and plan for those improvements. A community with a present population of approximately 52,000 and a projected future population of 80,000+ is expected to anticipate the future demands and properly plan for them in an orderly, efficient and economical manner. Early in 1992, the City Council formally adopted a 5-Year Capital Improvement Program for 1992-1996. This CIP estimates the projected costs of these anticipated improvements as well as identifying the source of funding. However, the funding source was limited to special assessments or City financing. The City's ability to identify and ensure adequate revenue sources to cover its financial participation needs to be discussed in further detail. In addition, 2 • 410 . t . • f .. the political and increasing judicial restraints on special assessments also necessitates the need to revisit that source of financing as well. The following information relates to the proposed 1993 residential reconstruction/overlay program. PROPOSED RESIDENTIAL RECONSTRUcTION/OVERLAY PROGRA. . 1993 geconstruction AreaE 2r. Constructed Cedar Grove 3rd Addn. 1.71 '61 31 yrs. Cedar Grove 4th Addn. 1.87 '61 31 yrs. Cedar Grove 5th Addn. 66 26 2.3 6 '66 yr s. Cedar Grove 6th Addn. 1.57 '69 23 yrs. Timberline 0.97 '69 23 yrs. Valley View Plateau 0.88 '62 • 30 yrs. Wescott Square 0.25 '73 18 yrs. Subtotal 9.61 miles Overlay Area Niles 7r. Constructed Lu Evergreen Addn. 1.29 '68 24 yrs. Kolstad Lane 0.18 '72 20 yrs. Blackhawk Hills Rd. 0.43 '74 18 yrs. Woodgate 1st, 2nd, 3rd Addn. 1.37 '74 18 yrs. 3.27 miles • 1993 is the most agressive year of the 5-year CIP due to the fact that a great many of these streets have exceeded their original life expectancy and are in need of immediate reconstruction. As we get into the 5-year CYP, the majority of the work is associated with limited patch/repair with structural overlays as a means to extend the life expectancy and subsequent inevitable reconstruction needs. Due to the advanced planning and design associated with the capital improvement program, the following is a general schedule recommended for its implementation: 3 • CIP Improvement Schedule • • 5-Year CIP General Public Hearing June '92 • Following year's improvement '93 October '92 • Formal plan and spec approval February '93 • Contract award March '93 • Construction April-October '93 With a multiple year program, there is a natural continuous overlapping for this ongoing program. • IMPROVEMENTS/ASSESSMENT POLICY, The major source of financing infrastructure related improvements has relied heavily on special assessments to benefitted properties. Subsequently, it has been anticipated that special assessments would continue to be involved in the City's CIP reconstruction program. In 1989, the City Council directed staff to review the current special assessment policy and to recommend modifications specifically taking into consideration the City's future reconstruction needs. On September 8, 1989, a report was submitted to the City Council that presented a proposed special assessment policy resulting from evaluation of previous City projects and a survey of other older communities. The following is a list of typical improvements and related financing sources associated with reconstruction. A. Any improvement necessary to bring the street up to City standards is to be assessed 100% (i.e. concrete curb and gutter if none previously existed, etc.). B. 75% of the costs to remove and reconstruct or patch and repair with an overlay is to be assessed to low density (R-I, II and III) residential with 100% of the costs to be assessed to all higher zoning classifications. C. Any repair to the City's sanitary sewer, water main and related services would be financed 100% by the City's Utility Renewal & Replacement Fund. D. Upgrades or modifications to the existing storm sewer system would be financed 100% by the City's Storm Water Utility Renewal 6 Replacement Fund. However, if inadequate or no storm sewer facilities previously existed, any new additions would be included as a cost of the street improvement and similarily assessed (75%- 100% see "B") E. The installation of any neighborhood residential streetlight system would be assessed 100%. However, if only major intersection streetlights were installed, that would be financed 100% by the City's Street Light Utility Fund. 4 • t. - I ' REVENUE SOURCES The following is a summation with a brief description for the various revenue sources available to the City. • County. State b Federal Participation • • Improvements initiated by the State or Federal Highway System historically have been financed 100% by those agencies with limited participation required by the City for only improvements to local roads as necessary to compliment the major improvement. The County finances 55% of street and 50% of signal improvements on any County road. Their participation in storm sewer facilities located within or as necessary to handle County road improvements is limited to $6,000 per mile. • 'Odor Street Fund $uilding Permit Road Unit Charge (RUC) This is a fee collected with the issuance of every building permit to help finance the oversizing orcommunity collector and arterial streets as necessary to accommodate the additional traffic generated by this new development. This amounts to - approximately $380 per single-family residence and $1,140 per acre for nonresidential property. Connection Fees/Waivers, These are additional contributions collected as a part of the platting or building permit process in recognition of benefit received from previous unassessed public improvements or anticipated future roadway improvements. jroverty Taxes A portion of the General Fund levy is collected and allocated to the Major Street Fund to help finance annual maintenance and/or construction needs. runicipal State Aid (NSA), A portion of the State gas tax is allocated to all municipalities over 5,000 population. This allocation is based on a two part formula. The first part is based on a city's population ratio to the state's population. Subsequently, as the City of Eagan continues to grow in population, our •piece of the pie" gets larger. However, a city's population is based on the latest official census. The second part of the formula is based on the communities "needs". This is based on the estimated cost to complete the designated M.S.A. street system within the community. Again, a city's total construction •need ($)" is proportionate to the total needs of all communities eligible for state aid funding. The City of Eagan's 1992 construction allocation is $1,165,660.00. In addition, the City is allocated $1,500 per state aid street mile which amounted to $60,960.00 for 1992. • S • • $vecial Assessments • All new construction for local improvements necessary to handle the City's growth has been financed 1001 through special assessments against benefitted properties. State law restricts the City's ability to levy special assessments against private property to the extent that the value of the property has been'increased by the installation of those improvements. Historically, there has 'not been,a problem in recognizing the benefit associated with installing new infrastructure which provides an improvement to property that previously didn't exist. However, it has become increasingly difficult, especially in times of economic recessions, • to prove that the value of property has increased by replacing an existing improvement such as a reconstruction or overlay improvement. OTHER REVENUE SOURCES, While the previously listed major revenue sources have been the "backbone" of financing our communities improvements, as we mature, their long term reliability quickly diminishes. For example, as we are building out, our building permit road unit charges will quickly decrease. While our population may increase, our completion of our municipal state aid system will greatly diminish our "needs" and subsequent share of the gas tax allocation. The judicial system's lack of support for the special assessment process quickly renders that unreliable at best for future reconstruction programs. Subsequently, additional/different sources of revenue must be pursued to create a viable ongoing capital improvement program as necessary to maintain the City's transportation system. The following are two potential alternatives. General Obligation Bonds, This source of bonding is financed through an ad valorem tax addition to the property taxes. In essence, everyone who owns real property in the City would be contributing on an annual basis to finance the City's ongoing Capital Improvement Program. With our property tax system, higher valued property would contribute proportionately greater amounts to this program. Transportation Utility Fee • Similar to the City's Sanitary Sewer, Water and Storm Sewer Utility, this would allow the City to collect a monthly/quarterly fee from every property based on a traffic generated basis. However, this requires specific permissive legislation before our community can implement such a utility. Presently, our community is actively involved in co-sponsoring and promoting such legislation for consideration in 1993. GENERAL CONSIDERATIONS As mentioned previously, the City is entering into a new stage of maturity for our community. We are at a point in time where careful consideration must be given to our future transportation maintenance and reconstruction program. . Whether the method is property taxes or utility fees, this requires all property owners to contribute on an annual ongoing basis for transportation maintenance 6 /d. • L program that may or may not directly affect them. . Contrarily, special assessments are levied only against adjacent properties when their particular street is improved. Fairness and equity dictates that the City not vacillate between one method or the other. While combinations of the two major methods appear to be most practical, it would be best to decide on a method and stay with it into the future. This becomes the difficult policy decision that we must establish in the very near future so that this long delayed Capital. Improvement Program can be commenced as soon as possible. Our deteriorating infrastructure requires our immediate attention. I will be providing more in depth discussion and will be available for further clarification at the Council Workshop scheduled for Tuesday, May 26, 1992. • Respectfully submitted, C.../////2. Director of Pub is Works cc: Mike Foertsch, Asst. City Eng. Arnie Erhart, Supt. of Streets/Equipment Gene VanOverbeke, Director of Finance TAC/j f/j j • • 7 / • . AVERAGE PCI. g 0 N- i • I: I" 4I■ I I . t ": gm i - C111 I 1 II m Z A I I im 0 I I � rn m i W - XI 1 rn U) "0 cn > C 0 v 0z . ,.... . A 1 13 _ # . imi_ ar : - . .. Di 1 ri . i Di , 1 . • . 1 , . .t . . O 1 -- Reconstruction •�Structur reventative Hainteaa c� llaintenaims MEMO TO: MAYOR & CITY COUNCIL % THOMAS L HEDGES, CITY ADMINISTRATOR FROM: THOMAS A COLBERT, DIRECTOR OF PUBLIC WORKS DATE: SEPTEMBER 29, 1992 SUBJECT: PROJECT 617R, CEDAR GROVE STREET RECONSTRUCTION FINANCING/ASSESSMENT PHILOSOPHIES STREET RECONSTRUCTION 5-YEAR CIP On May 26, the City Council held a special meeting/workshop to review the construction needs and financing issues associated with implementing the recently adopted 5-Year Street Reconstruction Capital Improvement Program (CIP). After a presentation documenting the needs and benefits associated with a scheduled continuous five year program, the Council then discussed various special assessment methods and philosophies in relation to the most recently adopted policy and the increase in market value/benefit to the affected properties. City Council then directed staff to investigate further options that may be available for final determination at a later date. MARKET VALUE BENEFIT At the request of staff,the City Attorney's office retained two appraisers through a detailed RFP evaluation and interview process to investigate the extent of benefit associated with these proposed reconstructive improvements. The result of that analysis and opinion is contained within a separate report prepared by the City Attorney. CALCULATION OF ASSESSABLE COST There are seven general type of improvements associated with a typical reconstructive project. The following is a summary with a percentage of assessable cost in accordance with our most current Special Assessment Policy adopted on February 19, 1991. A. Patc-. and Repair with Structural Overlay 75% B. Full Removal and Reconstruction with Structural Overlay 75% C. Structural Overlay Only 50% D. New Concrete Curb and Gutter (If none exists) 100% E. Streetlights (If installed) 100% F. Storm Sewer Variable /e3 • PAGE TWO • SEPTEMBER 29, 1992 After calculating the assessable costs according to the above formulas, additional credits are provided depending upon the functional classification of the street (residential, collector, etc.) and the type of access (primary vs. secondary) taken from the street improvement, if any. Any change to the assessable percentage or credit calculations . should be done as a revision to the overall Special Assessment Policy rather than on a project by project basis. ALLOCATION OF COSTS TO BENEFITTED PROPERTY Once the assessable costs have been calculated there are several methods to allocate (spread) it to the adjacent benefitted properties. These are identified as follows: 1. Frontage This is a common method that has been applied many times in the past. It is usually used where the project incorporates several properties of different dimensions,zoning classifications and/or unpiatted parcels. In this case the amount of assessment per parcel can vary (i.e. Rahn Road). 2. Equal Per Lot Basis This is a very common method previously used by the City in areas where all pieces of property are of the same approximate size and similar type of use/zoning. In this case, every parcel would be assessed the same amount (i.e. Cedar Grove #1 and #2). 3. Equally Per Dwelling Unit This is a variation of the per lot equivalent and frontage method used by other communities (i.e. New Hope) but not Eagan. It is a method whereby multiple residential dwelling units are equated to a single family residence through a percentage factor based on comparison of typical market values. Example: a high density residential apartment of 12+ units per structure has each unit calculated at 14% of an "average" single family assessment. Low density multiple residential of 4-12 units per structure are assessed 20-25% of the average single family assessment. The multiple residential property is subsequently assessed more proportionately based on its number of dwelling units rather than its respective frontage from where it takes access. PAGE THREE SEPTEMBER 29, 1992 4. Sliding Scale of Market Value This is a method that has not been used by Eagan or any other community that I know of. It could be a graduated reducing scale of percentage of market value that would establish a"cap"of the calculated assessment cost. This could create difficulties in obtaining the accurate market value from Dakota County and could open up a dispute beyond the 'scope of the improvement. Example: The 1990 census calculation of median market value of the Cedar Grove homes is approximately $86,000.00. If a limit were established at 2% of market value, the average assessment would be "capped" at $1,720.00. Higher valued homes would have a lesser percentage with specific predetermined limits on both value and percentage. 5. Annual Maximum Assessment This is a method that has not been used by Eagan or any other community that I know of. It would be a predetermined set amount that could be adjusted annually by the Consumer Price Index (CPI). While this may work for strictly single family residential, it would not apply itself well to other • types of zoning due to their inherent diversity. FINANCING Until a determination of assessment calculation and allocation can be firmed up, it is difficult to determine the City's participation requirement on any given project or its Five Year CIP obligations. However, whatever method is selected, it is expected that the City will have to finance a variable portion of each project's cost. Presently, there are only three major methods of financing the City's portion; Major Street Fund, Storm Water Utility Fund and General Obligation Bonds (requires minimum 20% assessments). Each of these methods are further discussed on pages 5 and 6 of a previous memo dated May 22, 1992, a copy of which is attached for your reference. • SUMMARY If Project 617R (Cedar Grove #3, 4, 5, and 6) and Project 643 (Timberline, Valley View Plateau and Wescott Square Additions) are to be scheduled for reconstruction in 1993, detailed feasibility reports need to be completed and presented to the affected property owners through a series of neighborhood meetings and formal public hearings addressing not only the scope of the proposed improvements but the method of financing and related special assessments against private property. Therefore, a policy decision must be made as soon as possible. / .. PAGE FOUR SEPTEMBER 29, 1992 Please let me know if I can provide any additional information regarding our current assessment policy and/or previous reconstructive assessment projects. Respectfully submitted /151,11e( Thomas A. Colbert Director of Public Works cc: Gene VanOverbeke, Director of Finance Michael Foertsch, Assistant City Engineer Jim Sheldon, City Attorney Mark Hanson, Consulting Engineer Encl./May 22 memo from TAO to TLH TAC/jf /4