Agenda - Council Work Session - 07/09/2013

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combinations of street widths for both urban (curb and gutter and storm sewer) and rural (no curb and gutter with ditches) streets, and by revising pavement section costs for each typical section based on the presence of either clay or sand subgrade sections as determined using known soils data. However, staff recently updated the existing streets database, which contains design information for each street section throughout the city, to ensure the database information is as accurate as possible. By utilizing this database staff can more accurately estimate costs for maintaining and reconstructing each city street section throughout the city, rather than by assigning each street section to the closest typical section design to estimate an average cost per mile to maintain and reconstruct each street segment. Staff also plans to estimate costs for adding sidewalks, pathways and other pedestrian accommodations along applicable street sections based on the city's current sidewalk and pathway policy for new street construction projects. These costs will also be presented to Council in conjunction with the updated estimated costs for the long-term street maintenance and reconstruction program. Staff also proposes to develop draft language for a policy aimed to address the current lack of direction related to the inclusion or omission of sidewalks and pathways in association with street reconstruction projects. This current lack of direction was briefly discussed by staff during the Public Works Committee meeting on Tuesday, May 22nd. This draft language could then be reviewed by the Public Works Committee prior to requesting Council action on the policy. Financing Options — Numerous financing options are available to municipalities to provide funding for long-term street maintenance and reconstruction programs. Over the years, traditional financing options for such projects have included annual budgeting through the general levy, purchasing General Obligation (GO) bonds on a project by project basis, applying funds from our annual Municipal State Aid allotment, and applying special assessments as allowed for under Minnesota Statute Chapter 429. Each option has certain limitations and drawbacks which is making them less and less effective as a means for providing long-term funding. Many cities are therefore exploring new financing options for funding long-term street maintenance and reconstruction programs. One such financing option that is rapidly gaining traction is the use of franchise fees, which is essentially a tax applied to private utilities that benefit financially from using the public right-of-way to conduct their business. And although this tax is typically passed along to the customer, franchise fees provide a dedicated, dependable, and secure funding stream for long-term street maintenance and reconstruction programs, and taxpayers generally tend to prefer making small payments on a regular basis versus being assessed thousands of dollars all at once. Other financing options being considered by cities on a more frequent basis include borrowing against or leveraging revenues, including the use of toll charges and public -private partnerships (PPPs). And a number of State Statutes have been adopted in recent years with the intent of allowing cities to use such financing options due to their ability to provide more stable, long-term funding sources. Attached is a table listing the more common long-term street maintenance and reconstruction financing options being explored by municipalities. Next to each option are listed the pros and cons commonly associated with each. Also attached is chapter 25 from the League of Minnesota Cities Handbook which explains available financing options for city improvements projects. Several slides prepared by Paul Donna with Northland Securities which explain some of the funding options in more detail are also attached. As demonstrated in the attached table, franchise fees provide the greatest benefit for numerous reasons including their ability to provide a constant, dependable and renewable funding stream, and the fact that they provide a highly transparent funding source allowing taxpayers to better understand the cost they are paying in relation to the benefits received. In addition, fees are collected from property renters as well as owners, and fees are collected from properties regardless of tax status. Special assessments, while still widely used, have been contested by taxpayers more vigorously in recent years, resulting in significant project delays and/or cancellations which negatively impacts long-term street maintenance and reconstruction programs.