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Memo #85-22 <br />page 1 of 2 <br />TO: Mark Bernhardson, City Administrator <br />FROM: Tom Kuehn, Finance Director <br />DATE: May 24, 1985 <br />SUBJECT: Alternatives Available for Collection of Special <br />Assessments <br />During the discussions of the Crystal Bay area sanitary sewer <br />project an alternative collection method has been suggested as a <br />means of easing the burden on those properties assessed for the <br />improvement. The alternative suggested would be "equal payment <br />amounts annually" over the 15 year collection period (alternative <br />A). This method works like a mortgage type payment in that the <br />total payment for principal plus interest does not fluctuate - <br />(the principal paid increases to offset the decrease in interest <br />charges each year). <br />The "equal annual amount" type of payment (alternative A) is in <br />contrast to the "equal principal plus current year interest" type <br />of payment (alternative B), which is the normal method of <br />collection used for special assessments. The alternative B <br />method of collection provides for the principal to be collected <br />in equal annual installments. To the annual principal amount is <br />added one years' interest on the unpaid principal balance. The <br />alternative B method of collection results in the total paymen-: <br />being reduced each year as the interest charges decrease. <br />For the homeowner assessed, Alternative A has the advantage of <br />being easy to budget for. However, it does result in higher <br />interest charges over alternative B. <br />I have checked with Hennepin County regarding both methods of <br />special assessment collection. There are several reasons we <br />should not consider using alternative A. <br />Hennepin County computer system cannot reflect the <br />breakdown in the annual payments between principal and <br />interest but will show the total payment as principal on <br />the individual tax statement each year. <br />Hennepin County cannot/will not modify the computer <br />program to accomodate alternative A. If they <br />would/could the cost to Orono is unknown. Hotel The <br />City of Minnestrista is the only city in Hennepin County <br />to have ever used alternative A. They have only used it <br />once because of the problems it created. <br />The alternative A method would necessitate the creation <br />of a seperate schedule by the city engineer or fiscal <br />consultant in order to be able to calculate prepayment <br />of outstanding principal balances during the period <br />covered (15 years)• This special schedule should not <br />