Agenda - Council Work Session - 11/19/2013 - Joint CC & Charter

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segments throughout the city were accounted for, and that each segment was updated to reflect the most current maintenance work completed on that segment. Then, the street maintenance program treatments recommended above were applied to each street segment, and average unit bid prices from street maintenance projects completed in 2013 in Ramsey and nearby cities were applied to each treatment on each segment to determine the new estimated costs for the long -term SMP. It should also be noted that during the July 9th City Council work session, Council directed staff to assume that all streets will be maintained and reconstructed "as is" with no changes to the roadway design or type, and that no costs should be included for additional sidewalks or pathways along reconstructed streets when estimating long -term SMP costs. Based on the design assumptions noted above, and the use of 2013 average unit bid prices from local projects, staff updated the estimated costs for funding the city's long -term SMP for all 174+ miles of city streets as follows: • For the 60 year period from 2014 through 2073, the total estimated cost is $262,077,338 and the annual estimated cost is $4,367,956. • For the 10 year period from 2014 through 2023, the total estimated cost is $25,247,367 and the annual estimated cost is $2,524,737. • For the 5 year period from 2014 through 2018, the total estimated cost is $11,011,879 and the annual estimated cost is $2,202,376. The 2014 budget includes $500,000 for SMP projects. Based on the 5 year estimated costs presented above, and assuming $500,000 can be budgeted for SMP projects over the subsequent 4 years, the city is facing an estimated $1.7 million shortfall for funding SMP projects over the next 5 years. Therefore, existing funding sources will need to increase substantially or new funding sources will need to be implemented to fund the SMP. If neither of these occurs, the city will not be able to maintain its streets to the desired PASER ratings and the streets will degrade more rapidly over time. Of the existing 174+ miles of city streets, about 32 miles are designated as Municipal State Aid System (MSAS) streets which generate revenue via annual construction and maintenance allocations through the Minnesota Department of Transportation (MnDOT) State -Aid office. In 2013, the city received MSAS allocations of $576,844 for construction and $443,377 for maintenance of MSAS streets, totaling $1,020,221. The remaining 142 miles of streets are non -MSAS streets and generate no revenue. Most of our annual MSAS revenues are currently being used to pay back debt from previous projects, and will be for several years to come. As such, MSAS funds are not a viable funding option for SMP projects in the near future. Any funding source utilized to fund long -term SMP projects should be reliably dedicated for this purpose. Numerous funding options are currently available to cities to fund their street maintenance projects such as annual budgeting through the general levy, purchasing General Obligation (GO) bonds on a project -by- project basis, applying funds from annual MSAS allocations as available, and applying special assessments as allowed under Minnesota Statute Chapter 429. However, all of these funding sources are becoming less and less reliable over time. And when considering the increased costs associated with the addition of annual street reconstruction projects, the use of special assessments will likely be received less favorably in the future. In the past, the city has typically assessed 50% of project costs for overlay projects, and has at times assessed for sealcoat projects as well. However, those assessments typically ranged from several hundred to several thousand dollars. If 50% of street reconstruction projects costs were to be assessed, residential property owners would be facing assessments in excess of ten thousand dollars. Many cities are therefore exploring alternative funding options for long -term SMP projects. Such options include grant funding, franchise fees, and special legislation when available. Of these options, only franchise fees can currently provide the reliable, dedicated funding source needed to fund a long -term SMP. Franchise fees, which could also be called franchise taxes, are simply fees imposed upon private energy utilities that benefit from using public right -of -ways to conduct their business. This fee, or tax, is then typically passed along to the consumer. And as is noted in the March 19, 2013 Council case, a survey completed by the City in 2011 shows a majority of the residents who responded would prefer to pay for street maintenance projects via franchise fees over property taxes