Agenda - Council Work Session - 08/27/2013

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companies monthly or quarterly invoice, along with a note stating that the fee is being imposed by the city as a means to fund our street improvement program. Franchise fees can therefore provide a dedicated, dependable, and secure funding stream for long -term street maintenance and reconstruction programs, and based on the results of a city of Ramsey survey completed in 2011, a majority of the residents who responded indicated they would prefer to make small monthly payments through a franchise fee versus being assessed large sums of money all at once. Other, lesser -used, funding options that can be considered by cities include borrowing against or leveraging revenues, including the use of toll charges and public - private partnerships (PPPs). 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. A general (special) tax levy could also be applied against all properties in the city. Using this approach, the city could determine how much revenue is needed to pay for our expected SMP shortfall then apply a tax over all properties in the city. Under this approach, the highest valued properties would end up paying the largest share of the costs, and any properties utilizing tax abatement or located in TIF Districts would not contribute to the program funding, nor would benefitting properties exempt from property taxes such as churches, schools and non - profits. The revenue collected would then be added as a line item labeled Street Maintenance Program or something similar. Attached as Figure 2 is a table listing several of the more common long -term street maintenance and reconstruction funding options being utilized by municipalities. Next to each option are listed the pros and cons commonly associated with each, both as related to taxpayers and the city. As demonstrated in the attached table, franchise fees appear to provide the greatest benefit with the least down -side for numerous reasons including their ability to provide a constant, dependable and renewable funding stream, and since provide a transparent funding source allowing taxpayers to better understand what they are paying and where it is going to. In addition, franchise fees can be collected from property renters as well as owners, and also from properties regardless of their tax status, which seems reasonable given such properties are often significant traffic generators. Chapter 25 from the League of Minnesota Cities Handbook is also attached which explains in more detail the available financing options for city improvements projects. In April, staff emailed a questionnaire to seven (7) other Anoka County cities asking for information on their current street maintenance and reconstruction program funding practices. Only 4 of the 7 cities responded. Their responses are listed below. • Blaine utilizes special assessments to help pay for overlay and street reconstruction projects, as well as bonding, general levy funds, and MSA funds. • Champlin utilizes special assessments to help pay for overlay and street reconstruction projects. They also use bonding, general levy funds, MSA funds, and franchise fees of $2.50 per month per each of 4 utilities, which are directed to their capital funds. • Elk River no longer uses special assessments since adopting franchise fees this spring for their electric and gas utilities. Their fees vary by property classification. They also use MSA funds as available. • Ham Lake - All funding for Ham Lake street rehabilitation projects are paid for from the Revolving Street Fund, which is an internal fund supported by the general tax levy. Ham Lake has not assessed benefitting parcels for rehabilitation projects for approximately 10 years. Our current Municipal State Aid (MSA) allocation for street maintenance on MSA routes is $443,377 per year, and our construction /reconstruction allocation is $576,844 per year. That said, all MSA fund allocations in the foreseeable future will need to be applied towards debt from previous projects so the allocations will not be available to be applied to new projects for many years to come. We therefore have an estimated $1.7 million annual shortfall for funding our SMP over the next 5 years, assuming of course that the Council continues to budget $500,000 annually through our general levy. The two most sustainable and likely long -term alternative funding options previously discussed include a general tax increase or implementation of a franchise fee. Both of these options, if implemented, would eliminate the need to specially assess costs directly to adjacent property owners using the 429 process. And while still widely used, special assessments have been contested by taxpayers more vigorously in recent years, resulting in significant project