04-27-2015 Council Work Session Packet

Home Browse Search

This is a relatively new method Cities have been using to help fund annual street reconstruction or maintenance. Of the communities surveyed, only two Cities have implemented franchise fees as a way of funding street reconstruction and maintenance (Elk River and Plymouth). This process involves charging gas and electric companies for use of the City’s right of way (ROW). These fees are typically charged as a premise (one charge per property) or meter based fee and are issued on a monthly or quarterly basis. The utility companies typically pass on the fees to the consumers on their monthly / quarterly bills. Benefits of this process include: •Provides a fairly stable method of annual funds for street reconstruction or maintenance projects. •Allows staff to establish and implement a street reconstruction and maintenance program that provides a timeline when roadways are going to be addressed in the future. •Allows staff to provide residents with timelines and order as to when improvements are going to take place. •Assists in funding a reconstruction / maintenance program. The tax levy doesn’t have to fund the entire amount. Drawbacks of this process include: •Utility companies pass on this fee to the consumers. •By itself, it typically doesn’t entirely fund a street reconstruction / maintenance program. •The implementation process can be difficult and there may be large public opinion against implementing a Franchise Fee. Street Improvement Districts Street Improvement Districts is a concept that has been working its way through the state legislature. If passed by the State, it would allow Cities to create an improvement district or multiple districts throughout the City and properties within this district would contribute funds that can be used for street maintenance projects within the district. These fees would be paid by residents within each district along with their utility bills. Attached is a draft memo prepared by Mayor McMillan outlining a potential way this could be applied to Orono (see Exhibit G). Benefits of this process include: •Provides an annual source of maintenance funds (up to 20 yrs). •Benefitting properties contribute to maintenance costs of the road without large, one time assessments. •A traditional assessment only affects the property at the time of assessment. With this funding model, all property owners contribute to road maintenance regardless of when they own the property. Drawbacks of this process include: •It is an additional fee to property owners. •This funding model has not been approved by the State of Minnesota and cannot be used until passed into law. Depending on the size of the fee applied, this may still not cover all street maintenance 9 Page 11 of 49