Agenda - Council Work Session - 06/25/2019

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CC Work Session 2. 3. Meeting Date: 06/25/2019 Information Title: Local Road Funding Purpose/Background: The purpose of this case is to update the Council with more information and research on local road funding. On June 11, information was discussed with the City Council and, after discussion, additional information is provided. • A revised calculation to demonstrate that the franchise fees collected would be in line with road maintenance needs. Based upon this calculation, the franchise fee is proposed at $6 per utility per month. A comparison of that fee to similar revenue collected via property tax is included. • Attached is draft ordinancefor discussion. If the ordinance is introduced, it could be modified as necessary based upon public discussion prior to final adoption. • More information is below in regard to a local road funding study requested by the Charter Commission. The Charter Commission has asked for additional research regarding the use of franchise fees in Minnesota and other cold climate states for road maintenance. The University of Minnesota has submitted a proposal to consider the research in which the Charter Commission has expressed an interest. A summary of that study is below/ Local Road Funding Study Preliminary methodology: Survey a list of 25 cities, selected at random (at least half outside the state of Minnesota) regarding how they manage local road funding and maintenance. A in depth investigation would be done on six cities. These six case studies would compare and contrast 2 for each type of funding mechanism --assessments, franchise fees and property tax. Survey results from the larger group of 25 cities would be combined into a matrix, and identify whether they use the property tax method, assessment method, franchise fees method, or alternative sources, or a combination of methods. The franchise fee information would include a ratio comparison of each city's fee to that city's assessed tax levy on an average market valued residential property in that city (for example, average market valued residential property is $220,000. Tax levy for city is $1000 annually on $220k value. Franchise fee imposed is $5 monthly or $60 annually. $60/$1000 = 6%). Research to include what other cities comparable in size and weather conditions are doing for road maintenance, repair and reconstruction (note: weather correlates to similar salt use/freeze-thaw conditions). Explore a range of solutions, not just focused on franchise fees as the solution. Other information: • Name of City (group by Metro and Non -metro, include a few from other cold weather states) • Size of City: square miles/acres and population • Miles of city roads maintained Specific to Franchise Fees: • What is the franchise fee dollar amount for single family residential? Commercial? • How long has a franchise fee been in place? • Does the fee have a dedicated use (e.g., road maintenance, parks, etc.) • When was the last time the fee was raised? • How often is the fee revised? • Does the fee have a sunset provision? (i.e., does the fee automatically expire if the Council does not renew it) • Does the fee have a cap on how much is collected (either individual or aggregate)?