Adopt Resolution #17-11-298 Approving Municipal State Aid Maintenance Allocation Reduction

Purpose:
The purpose of this case is to adopt Resolution #17-11-298 approving a reduction in the City of Ramsey’s Municipal State Aid maintenance allocation from 35% to 25% of the City’s total State Aid allocation.
 
Background:
Municipal State Aid Cities, of which Ramsey is one, receive annual State Aid allocations for both construction and maintenance activities.  In 2017, the City of Ramsey’s total State Aid allocations were $1,199,156, of which $717,811 was allocated for construction and $481,345 was allocated for maintenance activities.  Attached for reference is the City of Ramsey’s 2017 Notice of Annual Distribution for Ramsey.
 
According to State Aid rules (SA Operational Rule 8820.14 subpart 3) a city can request a maintenance allocation based on one of the following four options:

1. $1,500 per improved mile.
2. 25% of the total allocation.
3. 35% of the total allocation.
4. A lump sum dollar amount, which is greater than $1,500 per Improved Mile, but not more than 35%.

 
If a city has never submitted a request, its maintenance allocation is set at the minimum of $1,500 per improved mile, plus bond interest.
 
A Maintenance Expenditure Report must be completed by a MSA City if:

1. The City’s maintenance request (not including bond interest) is greater than 25% of its total allocation (construction + maintenance allocation).
2. The City’s lump sum request (not including bond interest) is greater than 25% of its total allocation (construction + maintenance allocation).

 
Therefore, if a City requests more than 25% as a maintenance allocation a Maintenance Expenditure Report must be completed and filed with State Aid every year.  In 2007, the City of Ramsey requested its maintenance allocation be increased from 25% to 35%.  As a result, Engineering Staff has been completing and filing Maintenance Expenditure Reports every year since, which consumes many hours of Staff’s time, with no benefit to offset these costs.
 
To prevent the need to complete and file Maintenance Expenditure Reports every year, Staff is requesting Council approval to reduce the City’s maintenance allocation from 35% to 25%.  This would reduce the City’s 2018 maintenance allocation to roughly $300,000 which would not impact the City’s annual street maintenance activities/program. Each year, $140,000 of the City’s total State Aid allocation is placed in the General Fund to pay for annual street maintenance activities, while the remainder of the City’s total State Aid allocation is placed into the State Aid Fund.
 
Requests to adjust State Aid maintenance allocations are due to MnDOT by December 15, 2017.  A City Council resolution must accompany the request.

No notifications are required.

Observations:
This action will NOT reduce the City’s total allocation amount.  Instead, it will reduce the amount allocated to maintenance activities by 10%, and increase the amount allocated to construction activities by 10%, resulting in the same total allocation amount.
 
In addition, the City’s annual street maintenance activities will not be reduced due to this request as the resulting annual maintenance allocation will be approximately $300,000, and $140,000 is currently budgeted annually to cover this work.
 
Alternatives:
Alternative #1 – Motion to adopt Resolution #17-11-298 approving a reduction in the City of Ramsey’s Municipal State Aid maintenance allocation from 35% to 25% of the City’s total State Aid allocation.

There is no cost to prepare and submit the request.  Staff will complete this work in-house.

Staff recommends Alternative #1.

Motion to adopt Resolution #17-11-298 approving a reduction in the City of Ramsey’s Municipal State Aid maintenance allocation from 35% to 25% of the City’s total State Aid allocation.