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
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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%)
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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 ,
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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.
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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)
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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
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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
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limited State and County roadways. In the mid-1950's (35-40 years ago), the
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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,
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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,
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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:
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CIP Improvement Schedule
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• 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.
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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.
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REVENUE SOURCES
The following is a summation with a brief description for the various revenue
sources available to the City.
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County. State b Federal Participation •
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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.
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'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 $60,960.00 for 1992.
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$vecial Assessments
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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
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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.
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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
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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
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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
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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.
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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
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