HomeMy WebLinkAbout04-27-2015 Council Work Session Packet
City Council Work Session
Monday, April 27, 2015, 5:00 p.m.
Orono City Council Chambers
AGENDA
1. Approval of Agenda
2. Street Funding Discussion (45 Minutes)
3. Sprint Lease Buyout Analysis (5 Minutes)
4. Development Connection Fees for Northern Utility Extension (15 Minutes)
5. Met Council Population/Housing Projections (10 Minutes)
6. City Administrator Verbal Report (10 Minutes)
7. Wellhead Protection Presentation (6:30 PM – 6:45 PM)
8. Future Work Session Topics (5 Minutes)
Upcoming Work Sessions
May 26, 2015
Council Goals
Street Funding Discussion, Continued
Work Session Topics or Requests
Annual:
Budget and Goals: part of June, all of July, August and October.
City Administrator & Police Chief update (3 times per year for 15 minutes)
Joint Planning Commission/Park/Council meeting for check-in/direction (done 11/5/14)
Additional topics:
Emerald Ash Borer (LL)
Sewer Connection Fees Policy (MG)
Jennifer Munt from the Met Council (LM)
Marina licensing (MG)
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Previous Work Session Topics
March 23, 2015
Marking City Lake Accesses / Fire Lanes
Temporary Signs
Whalen Access Letter (10 Minutes)
Zoning Code Amendment – Duplex Lot Splits
Special Event Permits (10 Minutes)
Social Host Ordinance
Public Safety Open House
February 23, 2015
Code Enforcement Discussion
Prosecuting Attorney
Wellhead Protection Ordinance
Public Input at City Council Meetings
Imaging Project
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MEMORANDUM
TO: CITY COUNCIL
FROM: ADAM T. EDWARDS, PE
SUBJECT: STREET FUNDING DISCUSSION
DATE: APRIL 27, 2014
______________________________________________________________________________
References:
A. City of Orono Pavement Management Plan, adopted October 27, 2014.
B. MN State Statue 429 – Special Assessments.
List of Exhibits:
A. Surrounding Community Survey Summary (Prepared by Jesse Sturve, PE; 2014).
B. Street Condition Summary, 2014 Pavement Management Plan.
C. Street Classification Map, 2014 Pavement Management Plan.
D. Street Section and Fund Balance Section of 2015 CIP (Adopted on December 8th, 2014).
1.Issue. Currently the City’s street rebuilding and maintenance requirements exceed funding. As an
example in 2015 only 27% of the crack and seal coating is budgeted and none of the mill and overlay and
rebuilding is budgeted in 2015. While the current balance in the Municipal State Aid (MSA) fund is
sufficient for this year’s planned work (Watertown Road), funding 100% of the work with MSA funds
will reduce available MSA funding for future projects.
Requirements versus Funding 2015
Activity Annual
Requirement
Per
Pavement
Management
Plan
2015
Requirement
per the
Capital
Improvement
Plan
2015 Budget Annual Fund
Allotments
(MSA,
PMF)
% of Capital
Improvement
Plan
Funded in the
2015 Budget
Crack and Seal Coat $253,396 $254,000 $69,0001 $0 27%
Mill &Overlay $324,625 $0 $0 $0 0%
Rebuild $729,955 $604,3212 $0 $0
MSA $824,2003 $0 $201,751 24%
TOTAL $1,307,976 $1,682,521 $69,000 $201,751 16%
1.Casco Point Road Crack and Sealcoat
2.Stubbs Bay Road, Balder Park Road
3.Watertown Road
4.Only a portion of the MSA funds are available as a portion is designated for debt payments.
2.Background. For some time the City of Orono has struggled as to how to come up with annual funds
to maintain its road/street infrastructure. Currently the City of Orono has approximately $69K allocated
for annual street maintenance and $0 for annual street reconstruction projects. The 2015 Budget does
include $65,800 for pavement maintenance which is sufficient for potholing, signs and winter
maintenance. The Pavement Management Fund (PMF) has $0 and there is $1.27M available through the
MSA Funds. The amounts budgeted and available are considerably less that the averages of $540,000 for
Page 3 of 49
Item 2
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
c.Assess Benefiting Properties. Special assessments are a method for cities to charge certain
properties for the cost of making local improvements that provide direct benefit the properties associated
with the project. Several issues should be considered when establishing an assessment policy. When
assessments are being levied the City is required to follow MN State Statute 429 (429). This process has
mandatory steps the City has to follow and the assessments cannot exceed the benefit to the adjacent
properties. It is not feasible for the City to assess 100% of a street projects cost as there is always a
portion of the project that benefits the wider community. The City must find a balance between assessing
the benefiting properties and paying for the improvements with taxes and fees. Based on the results from
the surrounding communities, it is typical to assess 20-66% of the total construction costs of the project
with the City paying the remaining amount. Assessments range between $3,000 and $20,000 per lot.
When assessments are in this range, most property owners can recognize the fact they are receiving a
benefit from the project. A secondary benefit to establishing an assessment policy is that it provides some
equity between residents who live on private residential roads and City owned residential roads.
Establishing a uniform policy that meets the needs and expectations of the community is essential to a
project’s success.
d.Franchise Fees. A franchise fee is a charge imposed by a city on utility providers who operate in
the public right-of-way. Minnesota Stature 216B.36 allows a city to impose these fees. The franchise fee
can be imposed on any utility company but typically involves the gas and electric utilities since there are
more subscribers because of their essential nature. The utility provider typically passes these charges on
to the residents. The franchise fee is an alternate source of revenue that is traditionally used towards a
city’s improvement projects. The franchise fee is a continuous source of revenue that can reduce the
financial burden caused by street construction projects and general taxes.
6.Courses of Actions (COA). The following courses of action represent combination of the funding
methods listed in the previous section.
a.Combination of General Fund (Tax Levy) and Special Assessments. The City would use
general funds to fund all street maintenance (Seal coating and Mill & Overlays) and then use a
combination of general funds and Assessments to fund street reconstructions. This COA results in an
increase in the tax levy and requires the City to develop an assessment policy for streets. The assessment
policy would establish assessment percentages based on road type. The table below proposes percentages
based on the relative benefit the reconstruction provides to the residents that abut the street and the greater
community. The percentage assessed for residential streets is higher than on collector streets as collector
streets provide greater benefit to the overall community while residential streets primarily benefit the
residents that live on them. Bonding could be used in a variation of the COA to provide reconstruction
funds.
Street Reconstruction Assessment Percentages per Street Type
Street type MSA % General Fund % Assessment %
Collector (MSA) 50 40 10
Collector 0 90 10
Low Volume (Residential) 0 30 70
Using the PMP maintenance funding requirements this COA would impact the tax levy as depicted
below. Note the assessments only reduce the Street Reconstruction amounts going to the general fund.
3 Page 5 of 49
Tax Levy Impacts with Partial Assessments for Street Reconstruction
Type of Street
Work
Annual
Cost
($)
Levy
Increase
(%)
Tax Rate
Increase
(Percentage
Points)
Tax
Impact
on
$250K
Home
Tax
Impact
on
$546K
Home
(Median)
Tax
Impact
on $1M
Home
Tax
Impact
on $2M
Home
Seal Coat $253,396 5.31% .93 $22 $46 $105 $221
Mill &
Overlay
$324,625 6.8% 1.19 $28 $59 $134 $283
Total
Maintenance
$578,021 12.11% 2.12 $49 $105 $239 $504
Reconstruction $403,251* 8.45% 1.48 $34 $73 $167 $352
Grand Total $981,272 20.56% 3.61 $84 $178 $406 $856
*This amount is based CIP total annual reconstruction requirement less the amounts provided by assessments and MSA funds assuming
typical years distribution of reconstruction per road type (33% low volume, 37 % collector and 30% MSA collector).
Below are examples of using this COA for 2015’s proposed reconstruction projects using a per unit
assessment with the percentages proposed above. (Note these examples use CIP costs which are planning costs not
fully developed estimates)
Baldur Park Road. (Note this does not account for the FEMA funds received for this road.)
Total
Construction
Cost
City’s Portion of
Project
(30%)
Project Cost To
be Assessed
(70%)
Number of
Residences
Cost per House
$221,961 $66,588 $155,373 18 $8,632
Stubbs Bay Road south from Watertown Road.
Total
Construction
Cost
City’s Portion of
Project
(90%)
Project Cost To
be Assessed
(10%)
Number of
Residences
Cost per House
$382,360 $38,236 $38,236 5 $7,647
Watertown Road between Old Crystal Bay and Stubbs Bay Roads .
Total
Construction
Cost
Project Cost to
be Paid w/
MSA funds
(50%)
City’s
Portion of
Project
(40%)
Project Cost
To be
Assessed
(10%)
Number of
Residences
Cost per
House
$824,200 $412,100 $329,680 $82,420 26 $3,170
(1) Advantages. Provides reliable stream of funding to maintain the City’s streets. Provides a
level of cost vs. benefit equity. Limits increases to the general tax levy.
(2) Disadvantages. Raises the tax levy. Introduces assessments which can be contentious.
b.Combination of General Fund, Assessments and Franchise Fees. This COA is the same as
COA A except that franchise fees would be introduced to pay for a street seal coating. The Franchise fee
would result in a $5-10 monthly increase in residential electric and gas bills.
4 Page 6 of 49
Tax Levy Impacts w/ Assessments for Reconstruction & Franchise Fees for Seal Coating
Type of Street
Work
Annual
Cost
($)
Levy
Increase
(%)
Tax Rate
Increase
(Percentage
Points)
Tax
Impact
on
$250K
Home
Tax
Impact
on
$546K
Home
(Median)
Tax
Impact
on $1M
Home
Tax
Impact
on $2M
Home
Seal Coat* $0 0% 0 0 $0 $0 $0
Mill &
Overlay
$324,625 6.8% 1.19 $28 $59 $134 $283
Total
Maintenance
$324,625 6.8% 1.19 $28 $59 $134 $283
Reconstruction $403,251 8.45% 1.48 $34 $73 $167 $352
Grand Total $727,876 15.25% 2.67 $62 $132 $301 $635
*Paid for with the franchise fees.
(1) Advantages. Provides reliable stream of funding to maintain the City’s streets. Provides
some level of cost vs. benefit equity. Limits increases to the general tax levy.
(2) Disadvantages. Raises the tax level. Introduces assessments which can be contentious.
Franchise fees add an additional bureaucracy to the City’s revenue streams. Uses a utility to indirectly tax
residents.
c.General Fund Only. This COA would see the City funding all street maintenance and
reconstruction.
Tax Levy Impacts using the General Fund Only for all Street Maintenance & Reconstruction
Type of
Street
Work
Annual
Cost
($)
Levy
Increase
(%)
Tax Rate
Increase
(Percentage
Points)
Tax
Impact
on
$250K
Home
Tax
Impact on
$546K
Home
(Median)
Tax
Impact
on $1M
Home
Tax
Impact
on $2M
Home
Seal Coat $253,396 5.31% .93 $22 $46 $105 $221
Mill &
Overlay
$324,625 6.8% 1.19 $28 $59 $134 $283
Reconstruct $729,955 15.30% 2.68 $62 $133 $302 $637
Total 1,307,976 27.41% 4.81 $112 $238 $541 $1141
(1) Advantages. Provides reliable stream of funding to maintain the city’s streets.
(2) Disadvantages. Retains cost benefit inequities for taxpayers. Increased General Tax Levy.
7.Summary. Each COA offers advantages and disadvantages. COAs A & B would both introduce
assessments which provide some equity between private and public residential street residents and reduce
the tax levy amount. However assessment can be controversial and is a process that would be required
for each road project. Franchise fees do offer an alternative source of revenue but do also introduce
additional bureaucracy into the City revenue process and can be controversial as they are often viewed as
a hidden form of taxation.
5 Page 7 of 49
Summary Tax Levy Impacts by COA Comparison
COA Annual
Cost
($)
Levy
Increase
(%)
Tax Rate
Increase
(Percentage
Points)
Tax
Impact
on $250K
Home
Tax
Impact on
$546K
Home
(Median)
Tax
Impact
on $1M
Home
Tax
Impact
on $2M
Home
A. $981,272 20.56% 3.61 $84 $178 $406 $856
B. $727,876 15.25% 2.67 $62 $132 $301 $635
C. $1,307,976 27.41% 4.81 $112 $238 $541 $1141
Note: all three COAs result in Orono still having the lowest tax rate in the area.
8.Recommendations. I recommend that Orono develop a method / policy for funding both road
reconstruction and maintenance in time to be included in the 2016 budget process. The method must
include a dependable source of resourcing in order to allow for predictability and advanced planning.
Request:
Discussion and direction on how to provide reliable funding for the City’s streets as part of the 2016 and
beyond budget processes.
6 Page 8 of 49
General Fund Allotment (Tax Levy)
This method includes utilizing a portion of the annual tax levy for street reconstruction or maintenance.
This method allows staff to set up yearly budgets based on a known amount. The two main benefits of
this method are it allows staff to plan multiple years out based on the yearly budget and it does not further
burden residents with assessments.
If the program is set up properly, a street reconstruction and maintenance plan outlines roads to be
addressed multiple years out. Typically communities will have a 5 year street plan which is re-evaluated
on a continuous basis. If proper maintenance on roadways is followed, it will extend the life of roadways
and reduce the life cycle cost of roads.
If a plan is in place, staff can respond to residential requests about when their roadway is going to be
addressed. I currently get about one or two inquires from residents per month regarding when their
roadway is going to be addressed.
Benefits of this process include:
•Establishes a reliable, annual funding source that is included into the City budget on a yearly
basis.
•Distributes cost over entire tax base and provides a smaller yearly cost rather than a onetime large
assessment.
•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.
Drawbacks of this process include:
•Increased tax levy and property taxes in community.
•Program does not include maintenance and reconstruction costs of private roadways.
Annual Bonding
This method requires the City to issue annual bonds to cover the costs of street reconstruction or
maintenance. Because of the costs to issue bonds, this method is beneficial if the City is implementing an
aggressive street reconstruction / maintenance 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 can be reduced to cover the yearly bond payments rather than the large cost of a
project. This can help reduce the annual tax levy increase and provides the City with a known yearly
payback amount.
The City of Mound utilized this method for an aggressive plan which started in 2003. They had a 10 year
plan to reconstruct all residential roadways then a 4 year plan to reconstruct all Minnesota State Aid
(MSA) roads after. Mound utilized an annual bonding program to cover these costs.
Benefits of this process include:
•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.
7 Page 9 of 49
•Allows staff to provide residents with timelines and order as to when improvements are going to
take place.
•Provides the City a known yearly payback process.
•Allows the City to do large scale projects that normal yearly budgets would not allow for.
•Distributes cost over entire tax base and provides a smaller yearly cost rather than a onetime large
assessment.
Drawbacks of this process include:
•Bond issuance costs increase the price of the project.
•Interest costs increase the total cost of the project.
•Require increases in the tax levy to account for yearly payback costs.
•Program does not include maintenance and reconstruction costs of private roadways.
Assess Benefitting Properties
This method assesses properties adjacent to the proposed improvement. When assessments are being
levied the City is required to follow MN State Statute 429 (429) (see Exhibit C). This process has
mandatory steps the City has to follow and the assessments cannot exceed the benefit to the adjacent
properties. Of the 14 communities who responded to the survey, 50% (7 Cities) utilize assessments for
street reconstruction and 29% (4 Cities) utilize assessments for mill and overlay (maintenance) projects.
Based on the results from the surrounding communities, it is typical to assess 20-66% of the total
construction costs of the project with the City paying the remaining amount. Assessments are typically
combined with a General Fund Allotment or Bonding to make up the additional 34% - 75% of
construction costs that aren’t covered by assessments.
One of the main drawbacks of this process is residents generally do not like large assessments. Based on
my past experiences, these results in long, contentious public hearings and often require a lot of staff time
to work through the process.
Benefits of this process include:
•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.
•Allows the City to do large scale projects that normal yearly budgets would not allow for.
•Allows residents to spread the costs of their assessment over a 10-15 year period.
•Benefiting properties are paying for a portion of project costs.
Drawbacks of this process include:
•The assessments can be fairly significant ($2,000 - $20,000) depending on the project scope and
number of assessable properties.
•City still has to account significant project costs in yearly budget which may require tax levy
increases or bonding.
•Public Hearings and Assessment hearings can become very hostile and difficult.
•Assessments cannot exceed the benefit to adjacent properties.
Franchise Fees
8 Page 10 of 49
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
Community Survey Summary 2014
City Pop.
Road Length
(miles)
Special
Assess
(Y/N)?
If "Y", what
%?
If "N",
funding
source?
Annual Budget
($)
Special
Assess
(Y/N)?
If "Y", what
%?
If "N",
funding
source?
Annual
Budget ($)Comments
Deephaven 3,718 34 N CIP $0-$250,000 N CIP $0-$250,000
Depends on what other items are needed to be funded
from the CIP Fund. Some years the budget for street
reconstruction / maintenance is $0 if we have new plow
trucks or bridge work. Other years it can be as high as
$250,000
Elk River 23,273 148 N
Franchise
Fees
$4,000,000
every other
year N
Franchise
Fees $350,000
Long Lake 1,803 9 Y
varies -
based on
increased
market
value $45,000 N
General
Fund $169,000
The annual budget for street maintenance includes
personnel costs.
Medina 5,045 57.81 Y
20% Rural
50% Urban Bonding
Varies 2014-
$1,000,000
2015=$844,000
2016=$539,000
Y -Mill
and
Overlay
20% Rural
50% Urban
General
Budget $220,000
Minnetonka 51,123 250 N Tax Levy
$4,000,000 -
$5,000,000 No Tax Levy $1,500,000
Minnetonka
Beach 551 N No Bonds
varies by
need
Minnetrista 6,681 67.22 Y 50%
Working to
finalize a
Pavement
Management
Plan to identify
needs
Y -Mill
and
Overlay 50%$315,000
Assessment rate has varied based on appraisals and rural
areas with larger lots and significant wetlands have been
as small as 5%.
Mound 9,238 40 Y
2/3 of the
assessable
costs Bonds $3,500,000
Y -Mill
and
Overlay
2/3 of
assessable
costs $926,355
Maintenance budget includes salaries and benefits of
workers
Orono 7,720 48 N Bonds N
Tax Levy -
annual
maintenance
items $53,000
Plymouth 72,928 300 Y 40%$350,000
Y -Mill
and
Overlay
40% M/O
$1000 per
lot for edge
mill and
overlay $3,000,000
Plymouth just enacted franchise fees in 2014. They
anticipate collecting $2,000,000 which will be used to pay
back bonds on two very large projects.
Shorewood 7,468 50 N
General
Fund
Transfer $700,000 N
General
fund
transfer $340,000
$140,000 to seal coat 1/5 of City each year and $200,000
in overlay each year.
Tonka Bay 1,510 9 N N
Annual Tax
Levy $65,000
Victoria 7,805 39.4 Y 50%CIP
$1,200,000 -
$1,900,000 N
General Tax
Levy $230,000
$80,000-$100,000 for seal coat / crack filling and $150,000
into the long term street maintenance fund.
Wayzata 3,777 26 Y
Tax Levy
and liquor
sales $500,000 N Tax Levy $300,000
14,474
77
50%
$947,857
29%
$542,383
Street Reconstruction Street Maintenance
Average Population =
Avg. Length of Road
(miles) =
Avg. Yearly Street
Reconstruction Budget1 =
1 - only numbers provided were used and all ranges were averaged (i.e. varies by need was assigned a "0" value). The total was diveded by the total number of communities who responded (14).
2 - All 4 Communities that Assess for Street Maintenance, only assess for Mill and Overlay Projects and not for Seal Coating Projects
Percent of Communities
that Assesses for Street
Reconstruction =
Percent of Communities
that Assess for Street
Maintenance2 =
Avg. Yearly Maintenance
Budget1 =
Page 1 Page 12 of 49
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Legend I
Page 14 of 49
P
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4
9
MEMORANDUM
To: Mayor and City Council
From: Ron Olson, Finance Director
Date: April 27, 2015
Subject: Antenna Leases
In February Councilmeber Walsh requested that cell tower leases be added to a work session agenda. Staff investigated the option of selling our Antenna leases to a third party. The main advantage gained by selling the tower leases would be immediate access to a lump sum of capital. Using the recent offer provided by Wireless Capital Partners as an example, if we sold the rights to our recently signed Sprint Lease we would receive $480,000.
In exchange for this payment, the City would give up the cash flow from Sprint for 30 years. The current Sprint lease is for a five year period with up to three additional five year extensions for a total of 20 years. Under the terms of the lease, the City would collect $1,091,176 if the lease continues for the entire 20 year period. In order to collect $480,000 (break even) the lease needs to be in effect for 11.5 years. Based on our previous experiences with tower leases, staff expects the lease to be continued. Attachment 1 summarizes expected collections and provides a simple time value of money calculation for your review. As indicated the present value of the anticipated lease collections is $930,370. This is significantly more than the $480,000 that we would receive with the Wireless Capital Partners offer.
In staff’s opinion, it makes sense to maintain the rights to collect the annual rent from Sprint for this lease. As indicated in the attached email from Wireless Capital LLC, if the City does not need the lump sum payment, it would make sense to keep the lease. The revenue from the tower leases is currently needed by the water fund to offset annual operating losses. Loss of the revenue may require an increase in water rates to keep the fund healthy.
If the Council is interested in pursuing this, staff can begin working on an RFP for the sale of the tower leases.
Page 17 of 49
Item 3
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Page 21 of 49
MEMORANDUM
TO: CITY COUNCIL
FROM: ADAM T. EDWARDS, PE
SUBJECT: NORTHERN UTILITITIES EXPANSION FUNDING
DATE: APRIL 27, 2014
______________________________________________________________________________
References:
2008 -2013 Community Management Plan
2014 Orono Fee Schedule
List of Exhibits:
A. Water Extension Estimated Costs and Fees
B. Water Extension Map
C. Sewer Extension Map
1.Situation. Developers have begun to show interest in developing properties along the western
portion of CSAH 112. The Community Management Plan (CMP) calls for these areas to be serviced with
municipal water and sanitary sewer. Currently water and sewer service only extends westward to the
corner of Old Crystal bay Road and CSAH 112. Two policy issues need to be resolved prior to the
extension of utilities along the CSAH 112 Corridor.
2.Issue 1: Cost Distribution Methodology. How should the city distribute the cost of the utility
expansion to the properties served? A rough order of magnitude example for the water system expansion
is at exhibits A and B.
a.Option 1A. Use the maximum # of units of each development area to calculate a cost for each
development area. With this option properties pay proportionally based on their development potential.
b.Option 1B. Use Option 1A but divide up pipeline projects to better associate specific portions of
a project with the benefiting property. With this option properties that are downstream on waterlines or
upstream on sanitary sewer pay proportionally more. This method has been used by the city in the past
for Sanitary sewer Improvements (Exhibit C)
c.Option 1C. Require each property to pay for the cost to run the respective utility across their
frontage. This option is often used in utility project that are built out sequentially and when the usage and
frontages are relatively uniform throughout the project area. Neither of these conditions exist for this
project area.
3.Issue 2: Funding Mechanism. How should the projects be funded? This question is especially
pertinent in this case as it is likely that the east and west ends of the expansion area will develop first with
the middle section not developing for years or decades.
a.Option 2A. This option would have the City fund the projects and then charge the developers for
their portion as each development occurs. This option is the simplest to administer but will result in the
City paying for sections of the project that may not be reimbursed for many years.
Page 22 of 49
Item 4
b.Option 2B. This option would require the first developer to pay for the entire project and then the
city and future developers reimbursing them a portion of the cost later as other developments occur.
This option is more complex and quite possible may make development of some parcels cost prohibitive,
but it does not put the funding burden on the city.
4.Recommendation. I recommend Options 1B and 2A. They are the most equitable and simplest
means for paying for these projects.
5.Proposed Way Forward. Upon receipt of Council guidance, City Staff will develop a detailed plan
for Water and Sewer Expansions along CSAH 112 to including a cost distribution plan and funding plan
for council approval.
Request: Discussion and direction on how to proceed on utility expansions along CSAH 112.
2 Page 23 of 49
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WAYZATA BLVD
0 EXISTING UNITS
50 TOTAL MAXIMUM UNITS
ORONO IND. PARK
54 EXISTING UNITS
115 TOTAL MAXIMUM UNITS
ORONO SCHOOLS
86 EXISTING UNITS
86 TOTAL MAXIMUM UNITS
ORONO MIDDLE SCHOOL
27 EXISTING UNITS
27 TOTAL MAXIMUM UNITS
ORONO SCHOOL ANNEX
2 EXISTING UNITS
2 TOTAL MAXIMUM UNITS
CITY OFFICE COMPLEX
12 EXISTING UNITS
15 TOTAL MAXIMUM UNITS
KELLEY PKWY 2
0 EXISTING UNITS
12 TOTAL MAXIMUM
UNITS
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OLD WAYZATA BLVD
CSAH 6
KELLE
Y
P
K
W
Y
Orono Existing & Total Maximum Water Units
LAKE CLASSEN, NE
6 EXISTING UNITS
17 TOTAL MAXIMUM UNITS
HWY 12 CORRIDOR
292 EXISTING UNITS
479 TOTAL MAXIMUM UNITS
2000
Map Date : April 27, 2015
KELLEY PKWY DENTAL
5 EXISTING UNITS
5 TOTAL MAXIMUM UNITS
ORONO SCHOOLS ICE RINK
12 EXISTING UNITS
12 TOTAL MAXIMUM UNITS
Upsize
8" To 12"
12"
EXTENSION
NEW
WELL
DUMAS ORCHARD
0 EXISTING UNITS
170 TOTAL MAXIMUM UNITS
JAMES PROPERTY
0 EXISTING UNITS
110 TOTAL MAXIMUM UNITS
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WAYZATA BLVD
0 EXISTING UNITS
50 TOTAL MAXIMUM UNITS
(TO C)
DUMAS ORCHARD
0 EXISTING UNITS
170 TOTAL MAXIMUM UNITS
(TO C)ORONO IND. PARK
54 EXISTING UNITS
115 TOTAL MAXIMUM UNITS
(TO C)
ORONO SCHOOLS
86 EXISTING UNITS
86 TOTAL MAXIMUM UNITS
(TO B)
ORONO MIDDLE SCHOOL
27 EXISTING UNITS
27 TOTAL MAXIMUM UNITS
(TO B)
ORONO SCHOOL ANNEX
2 EXISTING UNITS
2 TOTAL MAXIMUM UNITS
(TO B)
CITY OFFICE COMPLEX
12 EXISTING UNITS
15 TOTAL MAXIMUM UNITS
(TO B)
KELLEY PKWY 2
0 EXISTING UNITS
12 TOTAL MAXIMUM
UNITS (TO B)
MCES METER
STATION M431
PIPE A
MEDINA OUTLET
POINT OF
INTERCONNECTION
NO. 1, MH 17
MH 12 MH 8
0 1000
Scale Feet
CSAH 6
CSAH 112
OL
D
C
R
Y
S
T
A
L
B
A
Y
R
D
WI
L
L
O
W
D
R
KELLER RD
CSAH 112
MEDINA
LIFT
STATION
OLD WAYZATA BLVD
CSAH 6
KELLE
Y
P
K
W
Y
Orono Existing & Total Maximum Sewer Units
LAKE CLASSEN, NE
6 EXISTING UNITS
17 TOTAL MAXIMUM UNITS
(TO B)
HWY 12 CORRIDOR
292 EXISTING UNITS
479 TOTAL MAXIMUM UNITS
(TO D)
PIPE B
PIPE C
PIPE D
2000
Map Date : April 27, 2015
KELLEY PKWY DENTAL
5 EXISTING UNITS
5 TOTAL MAXIMUM UNITS
(TO B)
ORONO SCHOOLS ICE RINK
12 EXISTING UNITS
12 TOTAL MAXIMUM UNITS
(TO B)
JAMES PROPERTY
0 EXISTING UNITS
110 TOTAL MAXIMUM UNITS
(TO C)
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Item 5
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Page 34 of 49
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Item 7
Page 41 of 49
Page 42 of 49
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MEMORANDUM
TO: CITY COUNCIL
FROM: ADAM T. EDWARDS, PE
SUBJECT: STREET FUNDING DISCUSSION
DATE: APRIL 27, 2014
______________________________________________________________________________
References:
A. City of Orono Pavement Management Plan, adopted October 27, 2014.
B. MN State Statue 429 – Special Assessments.
List of Exhibits:
A. Surrounding Community Survey Summary (Prepared by Jesse Sturve, PE; 2014).
B. Street Condition Summary, 2014 Pavement Management Plan.
C. Street Classification Map, 2014 Pavement Management Plan.
D. Street Section and Fund Balance Section of 2015 CIP (Adopted on December 8th, 2014).
1. Issue. Currently the City’s street rebuilding and maintenance requirements exceed funding. As an
example in 2015 only 27% of the crack and seal coating is budgeted and none of the mill and overlay and
rebuilding is budgeted in 2015. While the current balance in the Municipal State Aid (MSA) fund is
sufficient for this year’s planned work (Watertown Road), funding 100% of the work with MSA funds
will reduce available MSA funding for future projects.
Requirements versus Funding 2015
Activity Annual
Requirement
Per
Pavement
Management
Plan
2015
Requirement
per the
Capital
Improvement
Plan
2015 Budget Annual Fund
Allotments
(MSA,
PMF)
% of Capital
Improvement
Plan
Funded in the
2015 Budget
Crack and Seal Coat $253,396 $254,000 $69,0001 $0 27%
Mill &Overlay $324,625 $0 $0 $0 0%
Rebuild $729,955 $604,3212 $0 $0
MSA $824,2003 $0 $201,751 24%
TOTAL $1,307,976 $1,682,521 $69,000 $201,751 16%
1. Casco Point Road Crack and Sealcoat
2. Stubbs Bay Road, Balder Park Road
3. Watertown Road
4. Only a portion of the MSA funds are available as a portion is designated for debt payments.
2. Background. For some time the City of Orono has struggled as to how to come up with annual funds
to maintain its road/street infrastructure. Currently the City of Orono has approximately $69K allocated
for annual street maintenance and $0 for annual street reconstruction projects. The 2015 Budget does
include $65,800 for pavement maintenance which is sufficient for potholing, signs and winter
maintenance. The Pavement Management Fund (PMF) has $0 and there is $1.27M available through the
MSA Funds. The amounts budgeted and available are considerably less that the averages of $540,000 for
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
c. Assess Benefiting Properties. Special assessments are a method for cities to charge certain
properties for the cost of making local improvements that provide direct benefit the properties associated
with the project. Several issues should be considered when establishing an assessment policy. When
assessments are being levied the City is required to follow MN State Statute 429 (429). This process has
mandatory steps the City has to follow and the assessments cannot exceed the benefit to the adjacent
properties. It is not feasible for the City to assess 100% of a street projects cost as there is always a
portion of the project that benefits the wider community. The City must find a balance between assessing
the benefiting properties and paying for the improvements with taxes and fees. Based on the results from
the surrounding communities, it is typical to assess 20-66% of the total construction costs of the project
with the City paying the remaining amount. Assessments range between $3,000 and $20,000 per lot.
When assessments are in this range, most property owners can recognize the fact they are receiving a
benefit from the project. A secondary benefit to establishing an assessment policy is that it provides some
equity between residents who live on private residential roads and City owned residential roads.
Establishing a uniform policy that meets the needs and expectations of the community is essential to a
project’s success.
d. Franchise Fees. A franchise fee is a charge imposed by a city on utility providers who operate in
the public right-of-way. Minnesota Stature 216B.36 allows a city to impose these fees. The franchise fee
can be imposed on any utility company but typically involves the gas and electric utilities since there are
more subscribers because of their essential nature. The utility provider typically passes these charges on
to the residents. The franchise fee is an alternate source of revenue that is traditionally used towards a
city’s improvement projects. The franchise fee is a continuous source of revenue that can reduce the
financial burden caused by street construction projects and general taxes.
6. Courses of Actions (COA). The following courses of action represent combination of the funding
methods listed in the previous section.
a. Combination of General Fund (Tax Levy) and Special Assessments. The City would use
general funds to fund all street maintenance (Seal coating and Mill & Overlays) and then use a
combination of general funds and Assessments to fund street reconstructions. This COA results in an
increase in the tax levy and requires the City to develop an assessment policy for streets. The assessment
policy would establish assessment percentages based on road type. The table below proposes percentages
based on the relative benefit the reconstruction provides to the residents that abut the street and the greater
community. The percentage assessed for residential streets is higher than on collector streets as collector
streets provide greater benefit to the overall community while residential streets primarily benefit the
residents that live on them. Bonding could be used in a variation of the COA to provide reconstruction
funds.
Street Reconstruction Assessment Percentages per Street Type
Street type MSA % General Fund % Assessment %
Collector (MSA) 50 40 10
Collector 0 90 10
Low Volume (Residential) 0 30 70
Using the PMP maintenance funding requirements this COA would impact the tax levy as depicted
below. Note the assessments only reduce the Street Reconstruction amounts going to the general fund.
3
Tax Levy Impacts with Partial Assessments for Street Reconstruction
Type of Street
Work
Annual
Cost
($)
Levy
Increase
(%)
Tax Rate
Increase
(Percentage
Points)
Tax
Impact
on
$250K
Home
Tax
Impact
on
$546K
Home
(Median)
Tax
Impact
on $1M
Home
Tax
Impact
on $2M
Home
Seal Coat $253,396 5.31% .93 $22 $46 $105 $221
Mill &
Overlay
$324,625 6.8% 1.19 $28 $59 $134 $283
Total
Maintenance
$578,021 12.11% 2.12 $49 $105 $239 $504
Reconstruction $403,251* 8.45% 1.48 $34 $73 $167 $352
Grand Total $981,272 20.56% 3.61 $84 $178 $406 $856
*This amount is based CIP total annual reconstruction requirement less the amounts provided by assessments and MSA funds assuming
typical years distribution of reconstruction per road type (33% low volume, 37 % collector and 30% MSA collector).
Below are examples of using this COA for 2015’s proposed reconstruction projects using a per unit
assessment with the percentages proposed above. (Note these examples use CIP costs which are planning costs not
fully developed estimates)
Baldur Park Road. (Note this does not account for the FEMA funds received for this road.)
Total
Construction
Cost
City’s Portion of
Project
(30%)
Project Cost To
be Assessed
(70%)
Number of
Residences
Cost per House
$221,961 $66,588 $155,373 18 $8,632
Stubbs Bay Road south from Watertown Road.
Total
Construction
Cost
City’s Portion of
Project
(90%)
Project Cost To
be Assessed
(10%)
Number of
Residences
Cost per House
$382,360 $38,236 $38,236 5 $7,647
Watertown Road between Old Crystal Bay and Stubbs Bay Roads .
Total
Construction
Cost
Project Cost to
be Paid w/
MSA funds
(50%)
City’s
Portion of
Project
(40%)
Project Cost
To be
Assessed
(10%)
Number of
Residences
Cost per
House
$824,200 $412,100 $329,680 $82,420 26 $3,170
(1) Advantages. Provides reliable stream of funding to maintain the City’s streets. Provides a
level of cost vs. benefit equity. Limits increases to the general tax levy.
(2) Disadvantages. Raises the tax levy. Introduces assessments which can be contentious.
b. Combination of General Fund, Assessments and Franchise Fees. This COA is the same as
COA A except that franchise fees would be introduced to pay for a street seal coating. The Franchise fee
would result in a $5-10 monthly increase in residential electric and gas bills.
4
Tax Levy Impacts w/ Assessments for Reconstruction & Franchise Fees for Seal Coating
Type of Street
Work
Annual
Cost
($)
Levy
Increase
(%)
Tax Rate
Increase
(Percentage
Points)
Tax
Impact
on
$250K
Home
Tax
Impact
on
$546K
Home
(Median)
Tax
Impact
on $1M
Home
Tax
Impact
on $2M
Home
Seal Coat* $0 0% 0 0 $0 $0 $0
Mill &
Overlay
$324,625 6.8% 1.19 $28 $59 $134 $283
Total
Maintenance
$324,625 6.8% 1.19 $28 $59 $134 $283
Reconstruction $403,251 8.45% 1.48 $34 $73 $167 $352
Grand Total $727,876 15.25% 2.67 $62 $132 $301 $635
* Paid for with the franchise fees.
(1) Advantages. Provides reliable stream of funding to maintain the City’s streets. Provides
some level of cost vs. benefit equity. Limits increases to the general tax levy.
(2) Disadvantages. Raises the tax level. Introduces assessments which can be contentious.
Franchise fees add an additional bureaucracy to the City’s revenue streams. Uses a utility to indirectly tax
residents.
c. General Fund Only. This COA would see the City funding all street maintenance and
reconstruction.
Tax Levy Impacts using the General Fund Only for all Street Maintenance & Reconstruction
Type of
Street
Work
Annual
Cost
($)
Levy
Increase
(%)
Tax Rate
Increase
(Percentage
Points)
Tax
Impact
on
$250K
Home
Tax
Impact on
$546K
Home
(Median)
Tax
Impact
on $1M
Home
Tax
Impact
on $2M
Home
Seal Coat $253,396 5.31% .93 $22 $46 $105 $221
Mill &
Overlay
$324,625 6.8% 1.19 $28 $59 $134 $283
Reconstruct $729,955 15.30% 2.68 $62 $133 $302 $637
Total 1,307,976 27.41% 4.81 $112 $238 $541 $1141
(1) Advantages. Provides reliable stream of funding to maintain the city’s streets.
(2) Disadvantages. Retains cost benefit inequities for taxpayers. Increased General Tax Levy.
7. Summary. Each COA offers advantages and disadvantages. COAs A & B would both introduce
assessments which provide some equity between private and public residential street residents and reduce
the tax levy amount. However assessment can be controversial and is a process that would be required
for each road project. Franchise fees do offer an alternative source of revenue but do also introduce
additional bureaucracy into the City revenue process and can be controversial as they are often viewed as
a hidden form of taxation.
5
Summary Tax Levy Impacts by COA Comparison
COA Annual
Cost
($)
Levy
Increase
(%)
Tax Rate
Increase
(Percentage
Points)
Tax
Impact
on $250K
Home
Tax
Impact on
$546K
Home
(Median)
Tax
Impact
on $1M
Home
Tax
Impact
on $2M
Home
A. $981,272 20.56% 3.61 $84 $178 $406 $856
B. $727,876 15.25% 2.67 $62 $132 $301 $635
C. $1,307,976 27.41% 4.81 $112 $238 $541 $1141
Note: all three COAs result in Orono still having the lowest tax rate in the area.
8. Recommendations. I recommend that Orono develop a method / policy for funding both road
reconstruction and maintenance in time to be included in the 2016 budget process. The method must
include a dependable source of resourcing in order to allow for predictability and advanced planning.
Request:
Discussion and direction on how to provide reliable funding for the City’s streets as part of the 2016 and
beyond budget processes.
6
General Fund Allotment (Tax Levy)
This method includes utilizing a portion of the annual tax levy for street reconstruction or maintenance.
This method allows staff to set up yearly budgets based on a known amount. The two main benefits of
this method are it allows staff to plan multiple years out based on the yearly budget and it does not further
burden residents with assessments.
If the program is set up properly, a street reconstruction and maintenance plan outlines roads to be
addressed multiple years out. Typically communities will have a 5 year street plan which is re-evaluated
on a continuous basis. If proper maintenance on roadways is followed, it will extend the life of roadways
and reduce the life cycle cost of roads.
If a plan is in place, staff can respond to residential requests about when their roadway is going to be
addressed. I currently get about one or two inquires from residents per month regarding when their
roadway is going to be addressed.
Benefits of this process include:
• Establishes a reliable, annual funding source that is included into the City budget on a yearly
basis.
• Distributes cost over entire tax base and provides a smaller yearly cost rather than a onetime large
assessment.
• 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.
Drawbacks of this process include:
• Increased tax levy and property taxes in community.
• Program does not include maintenance and reconstruction costs of private roadways.
Annual Bonding
This method requires the City to issue annual bonds to cover the costs of street reconstruction or
maintenance. Because of the costs to issue bonds, this method is beneficial if the City is implementing an
aggressive street reconstruction / maintenance 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 can be reduced to cover the yearly bond payments rather than the large cost of a
project. This can help reduce the annual tax levy increase and provides the City with a known yearly
payback amount.
The City of Mound utilized this method for an aggressive plan which started in 2003. They had a 10 year
plan to reconstruct all residential roadways then a 4 year plan to reconstruct all Minnesota State Aid
(MSA) roads after. Mound utilized an annual bonding program to cover these costs.
Benefits of this process include:
• 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.
7
• Allows staff to provide residents with timelines and order as to when improvements are going to
take place.
• Provides the City a known yearly payback process.
• Allows the City to do large scale projects that normal yearly budgets would not allow for.
• Distributes cost over entire tax base and provides a smaller yearly cost rather than a onetime large
assessment.
Drawbacks of this process include:
• Bond issuance costs increase the price of the project.
• Interest costs increase the total cost of the project.
• Require increases in the tax levy to account for yearly payback costs.
• Program does not include maintenance and reconstruction costs of private roadways.
Assess Benefitting Properties
This method assesses properties adjacent to the proposed improvement. When assessments are being
levied the City is required to follow MN State Statute 429 (429) (see Exhibit C). This process has
mandatory steps the City has to follow and the assessments cannot exceed the benefit to the adjacent
properties. Of the 14 communities who responded to the survey, 50% (7 Cities) utilize assessments for
street reconstruction and 29% (4 Cities) utilize assessments for mill and overlay (maintenance) projects.
Based on the results from the surrounding communities, it is typical to assess 20-66% of the total
construction costs of the project with the City paying the remaining amount. Assessments are typically
combined with a General Fund Allotment or Bonding to make up the additional 34% - 75% of
construction costs that aren’t covered by assessments.
One of the main drawbacks of this process is residents generally do not like large assessments. Based on
my past experiences, these results in long, contentious public hearings and often require a lot of staff time
to work through the process.
Benefits of this process include:
• 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.
• Allows the City to do large scale projects that normal yearly budgets would not allow for.
• Allows residents to spread the costs of their assessment over a 10-15 year period.
• Benefiting properties are paying for a portion of project costs.
Drawbacks of this process include:
• The assessments can be fairly significant ($2,000 - $20,000) depending on the project scope and
number of assessable properties.
• City still has to account significant project costs in yearly budget which may require tax levy
increases or bonding.
• Public Hearings and Assessment hearings can become very hostile and difficult.
• Assessments cannot exceed the benefit to adjacent properties.
Franchise Fees
8
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
Community Survey Summary 2014
City Pop.
Road Length
(miles)
Special
Assess
(Y/N)?
If "Y", what
%?
If "N",
funding
source?
Annual Budget
($)
Special
Assess
(Y/N)?
If "Y", what
%?
If "N",
funding
source?
Annual
Budget ($)Comments
Deephaven 3,718 34 N CIP $0-$250,000 N CIP $0-$250,000
Depends on what other items are needed to be funded
from the CIP Fund. Some years the budget for street
reconstruction / maintenance is $0 if we have new plow
trucks or bridge work. Other years it can be as high as
$250,000
Elk River 23,273 148 N
Franchise
Fees
$4,000,000
every other
year N
Franchise
Fees $350,000
Long Lake 1,803 9 Y
varies -
based on
increased
market
value $45,000 N
General
Fund $169,000
The annual budget for street maintenance includes
personnel costs.
Medina 5,045 57.81 Y
20% Rural
50% Urban Bonding
Varies 2014-
$1,000,000
2015=$844,000
2016=$539,000
Y -Mill
and
Overlay
20% Rural
50% Urban
General
Budget $220,000
Minnetonka 51,123 250 N Tax Levy
$4,000,000 -
$5,000,000 No Tax Levy $1,500,000
Minnetonka
Beach 551 N No Bonds
varies by
need
Minnetrista 6,681 67.22 Y 50%
Working to
finalize a
Pavement
Management
Plan to identify
needs
Y -Mill
and
Overlay 50%$315,000
Assessment rate has varied based on appraisals and rural
areas with larger lots and significant wetlands have been
as small as 5%.
Mound 9,238 40 Y
2/3 of the
assessable
costs Bonds $3,500,000
Y -Mill
and
Overlay
2/3 of
assessable
costs $926,355
Maintenance budget includes salaries and benefits of
workers
Orono 7,720 48 N Bonds N
Tax Levy -
annual
maintenance
items $53,000
Plymouth 72,928 300 Y 40%$350,000
Y -Mill
and
Overlay
40% M/O
$1000 per
lot for edge
mill and
overlay $3,000,000
Plymouth just enacted franchise fees in 2014. They
anticipate collecting $2,000,000 which will be used to pay
back bonds on two very large projects.
Shorewood 7,468 50 N
General
Fund
Transfer $700,000 N
General
fund
transfer $340,000
$140,000 to seal coat 1/5 of City each year and $200,000
in overlay each year.
Tonka Bay 1,510 9 N N
Annual Tax
Levy $65,000
Victoria 7,805 39.4 Y 50%CIP
$1,200,000 -
$1,900,000 N
General Tax
Levy $230,000
$80,000-$100,000 for seal coat / crack filling and $150,000
into the long term street maintenance fund.
Wayzata 3,777 26 Y
Tax Levy
and liquor
sales $500,000 N Tax Levy $300,000
14,474
77
50%
$947,857
29%
$542,383
Street Reconstruction Street Maintenance
Average Population =
Avg. Length of Road
(miles) =
Avg. Yearly Street
Reconstruction Budget1 =
1 - only numbers provided were used and all ranges were averaged (i.e. varies by need was assigned a "0" value). The total was diveded by the total number of communities who responded (14).
2 - All 4 Communities that Assess for Street Maintenance, only assess for Mill and Overlay Projects and not for Seal Coating Projects
Percent of Communities
that Assesses for Street
Reconstruction =
Percent of Communities
that Assess for Street
Maintenance2 =
Avg. Yearly Maintenance
Budget1 =
Page 1
SHORELINE DR CO RD 15
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WAYZATA BLVD W
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Source: MnDNR, MnDOT, ESRI
MSA
Collector
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Other
City Limits
Road Types
Pavement Managment Map November, 2014
Legend I
MEMORANDUM
To: Mayor and City Council From: Ron Olson, Finance Director Date: April 27, 2015 Subject: Antenna Leases In February Councilmeber Walsh requested that cell tower leases be added to a work session agenda. Staff investigated the option of selling our Antenna leases to a third party. The main advantage gained by selling the tower leases would be immediate access to a lump sum of capital. Using the recent offer provided by Wireless Capital Partners as an example, if we sold the rights to our recently signed Sprint Lease we would receive $480,000. In exchange for this payment, the City would give up the cash flow from Sprint for 30 years. The current Sprint lease is for a five year period with up to three additional five year extensions for a total of 20 years. Under the terms of the lease, the City would collect $1,091,176 if the lease continues for the entire 20 year period. In order to collect $480,000 (break even) the lease needs to be in effect for 11.5 years. Based on our previous experiences with tower leases, staff expects the lease to be continued. Attachment 1 summarizes expected collections and provides a simple time value of money calculation for your review. As indicated the present value of the anticipated lease collections is $930,370. This is significantly more than the $480,000 that we would receive with the Wireless Capital Partners offer. In staff’s opinion, it makes sense to maintain the rights to collect the annual rent from Sprint for this lease. As indicated in the attached email from Wireless Capital LLC, if the City does not need the lump sum payment, it would make sense to keep the lease. The revenue from the tower leases is currently needed by the water fund to offset annual operating losses. Loss of the revenue may require an increase in water rates to keep the fund healthy. If the Council is interested in pursuing this, staff can begin working on an RFP for the sale of the tower leases.
MEMORANDUM
TO: CITY COUNCIL
FROM: ADAM T. EDWARDS, PE
SUBJECT: NORTHERN UTILITITIES EXPANSION FUNDING
DATE: APRIL 27, 2014
______________________________________________________________________________
References:
2008 -2013 Community Management Plan
2014 Orono Fee Schedule
List of Exhibits:
A. Water Extension Estimated Costs and Fees
B. Water Extension Map
C. Sewer Extension Map
1. Situation. Developers have begun to show interest in developing properties along the western
portion of CSAH 112. The Community Management Plan (CMP) calls for these areas to be serviced with
municipal water and sanitary sewer. Currently water and sewer service only extends westward to the
corner of Old Crystal bay Road and CSAH 112. Two policy issues need to be resolved prior to the
extension of utilities along the CSAH 112 Corridor.
2. Issue 1: Cost Distribution Methodology. How should the city distribute the cost of the utility
expansion to the properties served? A rough order of magnitude example for the water system expansion
is at exhibits A and B.
a. Option 1A. Use the maximum # of units of each development area to calculate a cost for each
development area. With this option properties pay proportionally based on their development potential.
b. Option 1B. Use Option 1A but divide up pipeline projects to better associate specific portions of
a project with the benefiting property. With this option properties that are downstream on waterlines or
upstream on sanitary sewer pay proportionally more. This method has been used by the city in the past
for Sanitary sewer Improvements (Exhibit C)
c. Option 1C. Require each property to pay for the cost to run the respective utility across their
frontage. This option is often used in utility project that are built out sequentially and when the usage and
frontages are relatively uniform throughout the project area. Neither of these conditions exist for this
project area.
3. Issue 2: Funding Mechanism. How should the projects be funded? This question is especially
pertinent in this case as it is likely that the east and west ends of the expansion area will develop first with
the middle section not developing for years or decades.
a. Option 2A. This option would have the City fund the projects and then charge the developers for
their portion as each development occurs. This option is the simplest to administer but will result in the
City paying for sections of the project that may not be reimbursed for many years.
b. Option 2B. This option would require the first developer to pay for the entire project and then the
city and future developers reimbursing them a portion of the cost later as other developments occur.
This option is more complex and quite possible may make development of some parcels cost prohibitive,
but it does not put the funding burden on the city.
4. Recommendation. I recommend Options 1B and 2A. They are the most equitable and simplest
means for paying for these projects.
5. Proposed Way Forward. Upon receipt of Council guidance, City Staff will develop a detailed plan
for Water and Sewer Expansions along CSAH 112 to including a cost distribution plan and funding plan
for council approval.
Request: Discussion and direction on how to proceed on utility expansions along CSAH 112.
2
WAYZATA BLVD
0 EXISTING UNITS
50 TOTAL MAXIMUM UNITS
ORONO IND. PARK
54 EXISTING UNITS
115 TOTAL MAXIMUM UNITS
ORONO SCHOOLS
86 EXISTING UNITS
86 TOTAL MAXIMUM UNITS
ORONO MIDDLE SCHOOL
27 EXISTING UNITS
27 TOTAL MAXIMUM UNITS
ORONO SCHOOL ANNEX
2 EXISTING UNITS
2 TOTAL MAXIMUM UNITS
CITY OFFICE COMPLEX
12 EXISTING UNITS
15 TOTAL MAXIMUM UNITS
KELLEY PKWY 2
0 EXISTING UNITS
12 TOTAL MAXIMUM
UNITS
0 1000
Scale Feet
CSAH 6
CSAH 112
OL
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C
R
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A
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B
A
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WI
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CSAH 112
OLD WAYZATA BLVD
CSAH 6
KELLE
Y
P
K
W
Y
Orono Existing & Total Maximum Water Units
LAKE CLASSEN, NE
6 EXISTING UNITS
17 TOTAL MAXIMUM UNITS
HWY 12 CORRIDOR
292 EXISTING UNITS
479 TOTAL MAXIMUM UNITS
2000
Map Date : April 27, 2015
KELLEY PKWY DENTAL
5 EXISTING UNITS
5 TOTAL MAXIMUM UNITS
ORONO SCHOOLS ICE RINK
12 EXISTING UNITS
12 TOTAL MAXIMUM UNITS
Upsize
8" To 12"
12"
EXTENSION
NEW
WELL
DUMAS ORCHARD
0 EXISTING UNITS
170 TOTAL MAXIMUM UNITS
JAMES PROPERTY
0 EXISTING UNITS
110 TOTAL MAXIMUM UNITS
WAYZATA BLVD
0 EXISTING UNITS
50 TOTAL MAXIMUM UNITS
(TO C)
DUMAS ORCHARD
0 EXISTING UNITS
170 TOTAL MAXIMUM UNITS
(TO C)ORONO IND. PARK
54 EXISTING UNITS
115 TOTAL MAXIMUM UNITS
(TO C)
ORONO SCHOOLS
86 EXISTING UNITS
86 TOTAL MAXIMUM UNITS
(TO B)
ORONO MIDDLE SCHOOL
27 EXISTING UNITS
27 TOTAL MAXIMUM UNITS
(TO B)
ORONO SCHOOL ANNEX
2 EXISTING UNITS
2 TOTAL MAXIMUM UNITS
(TO B)
CITY OFFICE COMPLEX
12 EXISTING UNITS
15 TOTAL MAXIMUM UNITS
(TO B)
KELLEY PKWY 2
0 EXISTING UNITS
12 TOTAL MAXIMUM
UNITS (TO B)
MCES METER
STATION M431
PIPE A
MEDINA OUTLET
POINT OF
INTERCONNECTION
NO. 1, MH 17
MH 12 MH 8
0 1000
Scale Feet
CSAH 6
CSAH 112
OL
D
C
R
Y
S
T
A
L
B
A
Y
R
D
WI
L
L
O
W
D
R
KELLER RD
CSAH 112
MEDINA
LIFT
STATION
OLD WAYZATA BLVD
CSAH 6
KELLE
Y
P
K
W
Y
Orono Existing & Total Maximum Sewer Units
LAKE CLASSEN, NE
6 EXISTING UNITS
17 TOTAL MAXIMUM UNITS
(TO B)
HWY 12 CORRIDOR
292 EXISTING UNITS
479 TOTAL MAXIMUM UNITS
(TO D)
PIPE B
PIPE C
PIPE D
2000
Map Date : April 27, 2015
KELLEY PKWY DENTAL
5 EXISTING UNITS
5 TOTAL MAXIMUM UNITS
(TO B)
ORONO SCHOOLS ICE RINK
12 EXISTING UNITS
12 TOTAL MAXIMUM UNITS
(TO B)
JAMES PROPERTY
0 EXISTING UNITS
110 TOTAL MAXIMUM UNITS
(TO C)
MEMORANDUM
TO: ORONO CITY COUNCIL
FROM: JESSICA LOFTUS, CITY ADMINISTRATOR
SUBJECT: WELLHEAD PROTECTION PRESENTATION
DATE: APRIL 27, 2015
At the April 13th City Council meeting, Joe Stephens from a well drillers association,
requested an opportunity to present information regarding the wellhead protection
ordinance that was approved on 2/9/15. A copy of his PowerPoint is attached for
your reference.