HomeMy WebLinkAbout1.D Assessment Policy
MEMORANDUM
DATE: AgendaItem 1.D
April 20, 2009
TO:
Mayor and City Council
FROM:
Ron Moorse, City Administrator
Sue Iverson, Finance Director
SUBJECT: Street Improvement Project Assessment Policy
Background
The Council has had general discussions regarding the review of the City’s street improvement
assessment policy, in light of the current PMP project, and in light of assessment options used in
other cities. This memo provides information regarding two assessment options in comparison to
the City’s current assessment policy. The current policy and options are as follows:
Current policy: Assess 50% of the street improvement costs
Option 1: Assess 20% of the street improvement costs*
Option 2: Assess 0% of the street improvement costs*
*For Options 1 and 2, the reduction in the amount of assessment revenue would be offset by an
increase in the amount of tax levy revenue.
Evaluation of Options
Tax Levy Impact
The key impact of the assessment policy options is the increase in the tax levy required to fund
the street improvement projects. The attached charts show the impact of options 1 and 2 in
relation to the 2009 PMP project, and in relation to the PMP projects proposed in the 5 year
Capital improvement Plan (CIP). While the chart related to the 2009 PMP project
shows the need for a $353,000 tax levy increase to offset the reduced assessment revenue, the 5
year chart shows the need for a $ 233,000 tax levy increase, due to the plan not including a
large street improvement project in every year.
4/17/2009
Page 2
Levy Limits
Because levy limits currently restrict the City’s ability to increase the levy, Options 1 and 2 are
not currently feasible, unless the reduced assessment revenue was offset by revenue from the sale
of bonds; since a levy for debt service on bonds is outside of levy limits.
Pros:
A. Reduces or eliminates the amount of special assessments on property owners in the
neighborhoods of the PMP projects (Rather than having special assessments in the amount
of $7,000 or more, which have annual payments of about $1,000 per year, they would have
assessments of $2,800 or zero. The property values in the 2009 PMP neighborhood range
from $182,600 to $971,600. The proportion of the assessment amount to the property value
will vary in the same way as the property values vary.
B.Special assessments are not deductible from Federal income taxes. Property taxes are
deductible.
Cons:
A. All property owners would pay an additional annual levy amount. For the average valued
home, the levy would be approximately $50 under option 1 and $83 under option 2.
B.Some neighborhoods have already been assessed for a PMP project, and are currently
repaying the assessment amount. They may believe the additional tax levy under options 1
and 2 is overly burdensome on top of their current assessment.
Street Utility
The State Legislature is currently considering legislation that would allow the creation of a Street
Utility for the funding of street improvement projects. The street utility would operate as a water
or sewer utility, in that a fee would be charged to generate revenue to fund street projects. The
street utility would provide an alternative to a levy increase as a method of offsetting the revenue
reduction resulting from reduced assessment revenues. There are two benefits to a street utility.
One is that it would enable the City to provide an alternative funding source despite levy limits.
The other is that it would enable the City to define the area that would be within the district.
This would allow those neighborhoods that are currently paying assessments for street projects to
be excluded from the district (i.e. until the term of the assessment is complete). The
disadvantage of a street utility is that the utility fees are not tax deductible.
Council Direction Requested
:
Provide direction regarding whether the Council is interested in pursuing alternatives to the
current assessment policy.