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c.Assess Benefiting Properties. Special assessments are a method for cities to charge certain <br />properties for the cost of making local improvements that provide direct benefit the properties associated <br />with the project. Several issues should be considered when establishing an assessment policy. When <br />assessments are being levied the City is required to follow MN State Statute 429 (429). This process has <br />mandatory steps the City has to follow and the assessments cannot exceed the benefit to the adjacent <br />properties. It is not feasible for the City to assess 100% of a street projects cost as there is always a <br />portion of the project that benefits the wider community. The City must find a balance between assessing <br />the benefiting properties and paying for the improvements with taxes and fees. Based on the results from <br />the surrounding communities, it is typical to assess 20-66% of the total construction costs of the project <br />with the City paying the remaining amount. Assessments range between $3,000 and $20,000 per lot. <br />When assessments are in this range, most property owners can recognize the fact they are receiving a <br />benefit from the project. A secondary benefit to establishing an assessment policy is that it provides some <br />equity between residents who live on private residential roads and City owned residential roads. <br />Establishing a uniform policy that meets the needs and expectations of the community is essential to a <br />project’s success. <br />d.Franchise Fees. A franchise fee is a charge imposed by a city on utility providers who operate in <br />the public right-of-way. Minnesota Stature 216B.36 allows a city to impose these fees. The franchise fee <br />can be imposed on any utility company but typically involves the gas and electric utilities since there are <br />more subscribers because of their essential nature. The utility provider typically passes these charges on <br />to the residents. The franchise fee is an alternate source of revenue that is traditionally used towards a <br />city’s improvement projects. The franchise fee is a continuous source of revenue that can reduce the <br />financial burden caused by street construction projects and general taxes. <br />6.Courses of Actions (COA). The following courses of action represent combination of the funding <br />methods listed in the previous section. <br />a.Combination of General Fund (Tax Levy) and Special Assessments. The City would use <br />general funds to fund all street maintenance (Seal coating and Mill & Overlays) and then use a <br />combination of general funds and Assessments to fund street reconstructions. This COA results in an <br />increase in the tax levy and requires the City to develop an assessment policy for streets. The assessment <br />policy would establish assessment percentages based on road type. The table below proposes percentages <br />based on the relative benefit the reconstruction provides to the residents that abut the street and the greater <br />community. The percentage assessed for residential streets is higher than on collector streets as collector <br />streets provide greater benefit to the overall community while residential streets primarily benefit the <br />residents that live on them. Bonding could be used in a variation of the COA to provide reconstruction <br />funds. <br />Street Reconstruction Assessment Percentages per Street Type <br />Street type MSA % General Fund % Assessment % <br />Collector (MSA) 50 40 10 <br />Collector 0 90 10 <br />Low Volume (Residential) 0 30 70 <br />Using the PMP maintenance funding requirements this COA would impact the tax levy as depicted <br />below. Note the assessments only reduce the Street Reconstruction amounts going to the general fund. <br />3 Page 5 of 49