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Item 3.
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| City Council Regular | |
| Date: | 08/08/2022 |
| Title: | Public Hearing and Resolution Setting Annual Street Maintenance District Assessments for Fiscal Year 2023 |
| Presented by: | Jennifer Duray |
| Department: | Public Works |
| Presentation: | Yes |
| Legal Review | Yes |
RECOMMENDATION
Staff recommends that the City Council conduct a public hearing and approve the proposed resolution setting annual street maintenance district assessments for FY23.
BACKGROUND (Consistency with Adopted Plans and Policies, if applicable)
Street Maintenance District (SMD) assessments are set annually by resolution. There are currently two SMDs in Billings. SMD 1 encompasses primarily the downtown area. SMD 2 is the entire City. Properties in SMD 1 are also in SMD 2.
Staff is proposing to eliminate the arterial construction fee by increasing the SMD 2 fee, resulting in one assessment for street maintenance and improvements. Arterial construction fees utilize different methodologies than SMDs utilize in that arterial construction fees use zoning with different rates per zone, a vacant rate, and a residential square footage cap. Therefore, the impact of combining the two assessments may vary greatly on each property. Staff presented information and various scenarios at the July 18, 2022 Council work session. The general direction from Council was to assess SMDs based on assessable area and have a similar revenue distribution for classes of properties as we do currently, including vacant properties. Scenario 2, that was presented during the work session, was the first choice of the majority of Council Members. Staff recalculated scenario 2 to align with the overarching goal of achieving a similar revenue distribution to the current revenue distribution. The proposed rates result in the following revenue distribution:
The existing rates for road funding are not adequate to provide for the operation and maintenance and capital investment necessary to continue providing service at the current level. The proposed increase is 4.7% for SMD 1 and 3.5% for SMD 2 which is well below inflationary levels. Thus, there will be a loss of purchasing power and accordingly, a decrease in service levels will be necessary, The attached resolution specifies the proposed rates for FY23. The presentation and more comprehensive rate impacts on various properties will be provided prior to the Council meeting.
Staff is proposing to eliminate the arterial construction fee by increasing the SMD 2 fee, resulting in one assessment for street maintenance and improvements. Arterial construction fees utilize different methodologies than SMDs utilize in that arterial construction fees use zoning with different rates per zone, a vacant rate, and a residential square footage cap. Therefore, the impact of combining the two assessments may vary greatly on each property. Staff presented information and various scenarios at the July 18, 2022 Council work session. The general direction from Council was to assess SMDs based on assessable area and have a similar revenue distribution for classes of properties as we do currently, including vacant properties. Scenario 2, that was presented during the work session, was the first choice of the majority of Council Members. Staff recalculated scenario 2 to align with the overarching goal of achieving a similar revenue distribution to the current revenue distribution. The proposed rates result in the following revenue distribution:
| Property Type | Current FY22 | Proposed FY23 |
|---|---|---|
| Residential | 46% | 48% |
| Commercial | 46% | 45% |
| Vacant | 8% | 7% |
The existing rates for road funding are not adequate to provide for the operation and maintenance and capital investment necessary to continue providing service at the current level. The proposed increase is 4.7% for SMD 1 and 3.5% for SMD 2 which is well below inflationary levels. Thus, there will be a loss of purchasing power and accordingly, a decrease in service levels will be necessary, The attached resolution specifies the proposed rates for FY23. The presentation and more comprehensive rate impacts on various properties will be provided prior to the Council meeting.
ALTERNATIVES
City Council must hold a public hearing and then may:
- Approve the recommended resolution,
- Approve an amended resolution, or:
- Not approve the resolution. If Council does not approve a resolution, the City will not be in compliance with state statutes that specify that City Council must adopt a resolution assessing costs no later than the second Monday in August.
FISCAL EFFECTS
Arterial construction fees will not be assessed for FY23. The overall combined arterial and street maintenance district 2 revenues will increase by $478,000 or 3.5%. The proposed rates will increase an average 9,691 square foot residential lot by $6.31 from a combined $183.59 for arterial and SMD 2 assessments to $189.90 per year. SMD 1 revenues will increase by $15,000 or 4.7%.