Minutes - Council - 11/18/1986 - Special

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Discussion Regardin~ IndUstrial Area Sewer And Water Project: Mr. Hartley explained that the two options for assessing for sewer and water improvements he is presenting this evening are profoundly different in approach but the actual cost to the property owner may not differ greatly. Mr. Hartley proceeded to review Table I of the package he prepared which shows debt service calculations for a $2,815,000 bond sale, existing and proposed tax increment debt, existing and projected tax increment revenues; in each year there is projected a substantial surplus of cash after all debt service. Option A would use the current policy for assessing public improvements, but subsidizes the amount of those assessments by 60% of the standard assessment. To retain incentive to pay early and not substantially penalize those that defer, Option A proposes that the City pays for the interest costs for the property owner deferring his assessment for up to ten years. A similar benefit can be extended to the property owner who wants to pay the assessment right away by reducing the assessment by 57.21%; the net present value for each payment schedule for each of the case is equal. Therefore, in order to treat each property owner similarly, Option A includes a graduated plan that maintains similar net present value regardless of whether the property owner starts to pay his assessment in 1987 or in 1997. Option B is that State Statute 444 permits cities to make investments in utility systems and recover their costs through connection charges. The city would be in the business of developing utility systems and responsible for setting reasonable rates for the service. With Option B, property owners don't have to hook up to the services until they need the services. As far as cost, the impact to the property owner may not change but the relationship between the provider of utilities and the potential customer is one of a willingness rather than the strong hand of government. Mr. Goodrich stated that the city could be criticized as circumventing special assessments by using Chapter 444 and going into the utility business. Mr. Goodrich cited a case where a property owner in Maplewood appealed a $4000 assessment and the courts agreed that the assessment was inappropriate. Maplewood then used Chapter 444 to construct utilities and levied a connection charge in the same amount. The property owner then brought suit against the city and the courts determined that the connection charge was valid on the basis that is was not a tax but rather a charge for services. Mr. Goodrich that there is one section of the charter that says when less than 80% of an improvement is specially assessed, it is subject to the petition process. If 50% of the registered voters petition against the project, it would be ceased. There could also be intiative against the project brought about by a petition of 10% of the registered voters. Mr. Hartley stated that with Option B, the connection charge would approximately equal what the assessment would have been if the project were specially assessed. The debt could be retired with tax increment revenue and as the city receives connection charges, those funds can be utilized to make more services available. Statute provides that the connection charge can be spread over a period not to exceed 30 years. Mr. Hartley stated that after taking Ramsey's characteristics into consideration and the fact that tax Sp Council/il-18-86 Page 3 of 7