04-27-2015 Council Work Session Packet

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maintenance and $947,000 for reconstruction budgeted for in our surrounding communities (see Exhibit A). More importantly the recourses available are significantly below the amount required to properly maintain the city’s streets. In the past, the City has funded street reconstruction projects through the sale of bonds and has applied leftover general fund amounts towards street maintenance projects. This has resulted in the disproportionally large number of streets in disrepair requiring significant work (See Exhibit B) and the inability for the Staff to plan for and execute a maintenance plan to protect and extend the life of these valuable assets. a.Pavement Planning. The City developed a Pavement Management Report (PMR in 2006 (updated in 2011) that provided a summary of the condition and rehabilitation recommendation for all of Orono’s roadways. The PMR did not provide any recommendation for prioritizing any of the roads and did not lay out any sort of funding plan to cover the costs. In October 2014 the City adopted a Pavement Management Plan (PMP) which does provide prioritization of road maintenance as well as a description of funding sources. The PMP is used to inform the City’s Capital Improvement Plan (CIP) which does provide specific priorities specific roads to receive maintenance or reconstruction out to 5 years and identifies a funding requirement in general categories out to 20 years. The 2015-29 (CIP) adopted on December 8, 2014, plans for annual expenditures for street seal coating of $254,000 and annual expenditures for mill & overlay and reconstruction of ~$1,400,000 beginning in 2015 (see Exhibit D). b.Staffing and Action to Date. In the Fall of 2013, the City Council directed Staff to develop options for funding annual street reconstruction and maintenance. In response, the City Engineer conducted a study to include querying surrounding communities about how they provide funding for annual street maintenance and reconstruction. In March of 2014, he presented options to the City Council. Council requested staff to analyze funding options against several scenarios. The scenarios were then presented at the May 27, 2014 working session. The Council directed Staff to bring back more information on franchise fees and to present an option for road maintenance in the 2015 General Fund Budget. In August 2014, council directed staff to add $30K to the roads maintenance budget for 2015. On October 27, 2014 the council adopted the PMP. 5.Funding Options. There are four main methods available to address annual street reconstruction and maintenance. Many municipalities use a combination of two or more of the strategies. Each method or combination of methods has positive and negative aspects associated with them. An analysis prepared by the previous City Engineer of the methods is provided at Exhibit A. In addition to the four options below, some funding could be redirected from existing funding sources; however there are not any existing funding streams that would provide full and predictable street funding. a.General Fund Allotment (Tax Levy). This method includes utilizing a portion of the annual tax levy for street reconstruction or maintenance. The City would establish an annual amount as part of the budget/levy process. Any excess revenues for a particular year would be transferred to the PMF and used for years where the requirement exceeded the annual revenue. While most taxpayers do not want their taxes to increase, most residents do expect that the City is setting its tax rate and structuring its fees at the level that is necessary to own, operate, maintain, and improve its infrastructure. This method allows staff to set up yearly budgets based on a known amount. b.Bonding. This method requires the City to issue annual bonds to cover the costs of street reconstruction or maintenance. The overall cost of the project does increase due to the interest paid on the bond. Because of the costs to issue bonds, this method is beneficial if the City is implementing an aggressive street reconstruction program where annual budgets would not be sufficient to cover annual costs or the City wants to undertake an unusually large project and spread the costs over a number of years. The annual budget does then need to be increased to cover the yearly bond payments. This can help reduce the annual tax levy variability and provides the City with a known yearly payback amount. 2 Page 4 of 49