Arterial construction fee assessments are set annually by resolution.  The rate schedule for arterial fee assessments is based on zoning and square footage to reflect the relative average impact on arterial roads.  The existing rates are not adequate to provide for the capital investment necessary to continue providing service at the current level.  Two options to increase rates were presented and discussed at the Council Work Session on May 24, 2016.  The first option increases the assessments by 2.3% to keep up with the inflationary costs of construction.  The second option increases the assessments by 25% to bring the annual arterial assessment revenue up to the level required to fund the construction of approximately one mile of arterial roadway annually.  At the June 6, 2016 Council Work Session, Council requested three additional options for 10%, 15%, and 20% increases.

The attached resolution specifies the proposed rates with a 2.3% increase.  Alternate resolutions are also attached showing the rates with a 10%, 15%, 20%, and 25% increase.  An arterial fee comparison is also attached which shows the impact on rates for various properties under each option, as well as the revenues generated  for each option.  The arterial construction assessment requires two-thirds (2/3) of all Council members present and voting to pass an increase in assessments.

The Council must hold a public hearing and then may

• approve the recommended resolution
• approve an alternate resolution; or 
• not approve the recommended or any of the alternate resolutions.  If Council does not approve a resolution, an amended resolution to establish arterial construction fee assessments will need to be considered at a future City Council meeting to establish rates for fiscal year 2017.

An average 10,000 square foot residential lot currently pays $45.50 per year.  The adjusted fee increases to an average 10,000 square foot residential lot and the annual increase in revenues for FY 2017 under the various options is shown below: 

% Increase	Adjusted Fee	$ Increase	Annual Increase in Revenues
2.3%	$46.56	$1.06	$84,870
10%	$50.02	$4.52	$369,000
15%	$52.32	$6.82	$553,500
20%	$54.62	$9.12	$738,000
25%	$56.94	$11.44	$922,500

Staff recommends that the City Council conduct a public hearing and approve the proposed resolution setting arterial construction fee assessment rates for FY 2017.