Adopt Resolution #19-236 Adopting Assessment Roll Certifying Assessments for Improvement Project #19-01, Ford Brook Estates Street Reconstructions

Purpose:
The purpose of this case is to conduct the required Assessment Hearing and adopt Resolution #19-236 adopting the final assessment roll certifying assessments for Improvement Project #19-01, Ford Brook Estates Street Reconstructions.

Background:
City Improvement Project #19-01, Ford Brook Estates Street Reconstructions, included the reconstruction 180th Lane and Krypton Street in the Ford Brook Estates neighborhood. Maps attached to this case show the general location and scope of the completed improvements.

Original Conditions
Krypton Street and 180th Lane were constructed in 1981 as rural sections with bituminous pavement at a width of 24 feet and measure approximately 860 feet (0.16 miles) in length. Both streets are generally centered within a 66-foot wide right-of-way. Attached is a street segments summary depicting the original conditions including curb type, PASER rating, maintenance history, and pavement section information obtained from ground penetrating radar.

The existing bituminous pavement section ranged between 1.2 and 6.4 inches thick, with a median thickness of 4.3 inches. The existing aggregate base section ranged between 2.4 and 6.8 inches thick, with a median thickness of 4.1 inches. Section thicknesses were obtained using Ground Penetrating Radar (GPR) analysis performed by Braun Intertec in 2017. The original pavement section was built on silty sand and lean clay subgrade materials. Clay subgrade is not good for pavement support, requiring subgrade corrections.

The City annually evaluates and rates the condition of pavement on all City streets using the Pavement Surface Evaluation and Rating (PASER) system. In the summer of 2018, the pavement of the above referenced street segments were rated with PASER ratings of 2 indicating that these streets require complete reconstruction.

The storm sewer system consisted of ditches along both sides of the streets within the right-of-way and drainage and utility easements. Storm runoff was generally carried in ditches to the ditch along TH 47 where it was directed north to Ford Brook.

Municipal utilities (sanitary sewer and watermain) do not serve this neighborhood.

Completed Improvements
The original bituminous pavement and aggregate base sections were removed and hauled off site.  Two-feet of unsuitable existing clay subgrade material was also removed and hauled off site. Geotextile fabric was placed on the bottom of the shaped and compacted subgrade, then drain tile was installed along the outer edges of the fabric.  Two-feet of compacted select granular borrow (sand) was then placed on top of the fabric and drain tile, and the drain tile was connected to a storm sewer structure allowing for positive drainage of the subgrade at low points. Four-inches of imported aggregate base was then placed and compacted on top of the select granular borrow, followed by 3½-inches of new bituminous pavement. The new pavement section provides a 7-ton pavement design, the City standard for residential streets.

Ditches were graded after the pavement section was complete and the necessary driveway culverts were replaced.  The culvert crossing 180th Lane was replaced, and a storm manhole was added to the middle of the culvert crossing so the drain tile could be connected to the storm sewer system.  A swale was also graded across the southeast corner of the property north of 180^th Lane and west of Truck Highway 47 to prevent runoff from the ditch from traversing across the property, which had no drainage easement.
 
Construction was substantially complete by mid-July. The proposed improvements are anticipated to have a serviceable life of 60 years, assuming proactive maintenance operations are performed on a regular basis over the life of the improvements.

Public Comment
Staff conducted a public information meeting for this project on Thursday, November 8, 2018, to present the proposed improvements, estimated costs, funding program, and preliminary project schedule to benefiting property owners, and to receive public input on the project. Property owners from 3 of 8 identified benefiting properties attended. None of the owners objected to the project. Most questions pertained to special assessments and the reasoning behind the School Districts request to expand the cul-de-sac.
 
The residents questioned why the School District asked the City to expand the cul-de-sac now, noting that they observed buses stopping on Highway 47 in other locations. The property owners did not formally object to expanding the cul-de-sac, they just didn’t understand why this request was now being made as the residents said they had asked the School District to pick students up and drop them off on the cul-de-sac years ago when there were many more children in the neighborhood, yet their request was denied.

One property owner attended the Public Hearing on November 2018 again questioned why the School District wanted to enlarge the cul-de-sac. Staff has contacted the School District numerous times since and has received the same answer each time. The School District confirms that buses will not be allowed to stop in dedicated turn lanes on Highway 47 and will need to turn onto 180^th Lane to pick up and drop off kids starting this fall, and will therefore need the cul-de-sac expanded so buses can turn around.

Per City Council direction, the cul-de-sac was expanded to accommodate the School District’s request.  Per the City’s Special Assessments Policy, costs to expand streets are ineligible for assessments so the costs to expand the cul-de-sac will be paid in full by the City.
 
Staff met with numerous property owners during construction to coordinate construction of various improvements adjacent to or otherwise affecting the use of their properties.
 
At the time this case was prepared, two benefiting property owners had inquired about their ability to defer assessments, though neither requested a deferral form, and one of these property owners stated they might submit a letter before or during the public hearing requesting forgiveness of their assessment in exchange for an easement.  If this request is made at the hearing, Staff will be prepared to provide more details to Council and to respond as needed.  If any formal comments or objections are received after this case is published, Staff will share this new information with Council prior to the Public Hearing.

Notice for this Assessment Hearing was published in the City’s official newspaper, the Anoka Union Herald, on Friday, September 20, 2019.  Assessment Hearing Notices were also mailed to all benefiting property owners as required by Minnesota Statute Chapter 429.  A copy of Statute 429 is attached to this case, as is a copy of the Notice mailed to benefiting property owners.
 
Anoka County requires that assessments be certified to the County Auditor by November 15, 2019 for collection on 2020 taxes.  Property owners must therefore prepay their special assessments in full by November 15, 2019 to avoid paying interest.

Observations:
Construction of this project is substantially complete.  Only punch list work remains, which will be completed next spring or summer.  As is standard practice on street reconstruction projects, the City will not issue final payment to the contractor until the following year to allow punch list work to be completed during next year’s growing season.  Most property owner concerns are related to grading and turf establishment so final payment is withheld until the following summer or fall so such concerns can be addressed.
 
Staff has received several complaints and concerns from property owners related to the ditch grading, each of which will be addressed in detail next spring.  A letter was mailed to property owners recently explaining this so they understand the City will be out on site again next spring to address their concerns before closing the project out.
 
Alternatives:
Alternative #1 – Adopt Resolution #19-236 adopting the final assessment roll certifying assessments for Improvement Project #19-01, Ford Brook Estates Street Reconstructions.

Alternative #2 – Deny adoption of Resolution #19-236 at this time.

Project Costs
On May 14, 2019, the City Council accepted bids and awarded a construction contract to Asphalt Surface Technologies (ASTECH) of Saint Cloud, Minnesota, per their low bid of $262,503.25.  This bid included $249,901.55 for the base bid, plus $12,601.70 for the alternate bid to expand the cul-de-sac to allow school buses to pick students up in the cul-de-sac instead of on Highway 47.
 
Street reconstruction project costs include construction costs plus 23% indirect costs for administrative (6%), engineering (15%), finance (1%), and legal (1%) costs.  After adding 23% to the contractor’s construction bid, the contracted project cost is $322,879.00.
 
The engineer’s project cost estimate based on final plans was $248,137.19 therefore the contracted project cost was $78,833.72, or 30.1 percent, higher than the engineer’s estimate of project costs.
 
When preparing engineer’s estimates, Staff uses unit bid prices from recent projects, then adjusts the unit prices for inflation based on the latest available information. The intent is for the engineer’s estimate to fall within the middle of bids received, which has been the norm in recent years.  However, bids received this year were significantly higher than the engineer’s estimates.  Bid prices for this project were significantly higher for mobilization ($18,000), bituminous pavement ($12,867), and concrete work ($8,262).  Other cities also experienced higher bid prices this year, particularly on bituminous and concrete pay items.
 
Staff worked with the contractor to calculate final construction costs for this project, which were used to calculate final project costs to determine final assessments.
 
Final construction costs are $263,341.85 and final project costs are $323,910.48. This means final project costs were 30.54% greater than the engineer’s estimate of project costs.  Per Council direction from September 10th, staff increased the preliminary assessment amount of $3,919.90 by 30.54% to arrive at final assessments of $5,116.90 per benefiting property.  This amount was included in the Assessment Hearing Notice published in the Anoka Union Herald, and was included in the Assessment Hearing Notices mailed to all benefiting property owners.
 
Funding Sources
Funding sources for this project include a combination of unexpended pavement management program funds, special assessments to benefiting properties, and stormwater utility funds.
 
Unexpended pavement management program funds
These funds include unspent 2013 budgeted pavement management project funds, plus 5-years of bond premiums and interest earnings.
 
Special Assessments
The City’s Special Assessments Policy (attached) calls for special assessments to pay for up to 25% of eligible street reconstruction improvement costs. Special assessments are calculated using methods resulting in reasonable and equitable distribution of assessments that are uniform upon the same class of properties within the assessable area. The test for determining the validity of a special assessment is whether the improvement for which the assessment was levied has increased the market value of the property against which the assessment was levied in at least the amount of the assessment.
 
Eight (8) benefiting properties receive special benefit from the improvements and are proposed to be assessed for eligible project costs. Eligible project costs include all costs except those related to subgrade corrections, widening or strengthening of pavement, and public utility improvements.  The City is therefore funding 100% of project costs related to the subgrade corrections and expansion of the cul-de-sac per the alternate bid.
 
The City of Ramsey’s Special Assessments Policy identifies three optional methods for calculating assessments; Adjusted Front Footage, Area, and Per Lot.  All recent residential street reconstruction projects used the Per Lot method to calculate assessments so Staff again applied the Per Lot method to calculate final assessments for this project.
 
Over the last four years, special benefit consultation reports have been prepared for each street reconstruction project, and the results of the reports were used to defend final assessment amounts.  Special benefit consultation reports were not prepared this year since each report costs around $6,500 and this year’s projects are similar enough to other projects that the results from those reports can be directly applied to this project.  For this project, the Jarvis Street Reconstruction project report is most applicable, and the range of special benefits identified within that report fell between $7,500 and $8,500.

On November 13, 2018, the City Council adopted a preliminary assessment amount of $3,919.90 per benefiting property.  Based on final project costs, final assessments for benefiting parcels would exceed $6,600 using 25-percent of eligible project costs per the Special Assessments Policy.  Over the last four years, final assessments have been relatively close to adopted preliminary assessments.  Considering the significance of this year’s project cost differential, the City Council directed Staff to calculate final assessments by increasing the adopted preliminary assessment amount of $3,919.90 per benefiting property by the percentage difference between final project costs and the engineer’s estimate of project costs, which equals $5,116.90.  This amount equals 12.64% of total project costs based on eight property assessments.
 
It is important to note that State Statute 429.091 Subd. 3 states “An election shall be required for bonds if less than 20 percent of the cost of the improvement to the municipality is to be assessed against benefited property.”  Since the City did not specifically bond for this project and is instead paying for all unassessed costs with funds in its accounts from various sources, the 20% election requirement does not apply.  The statutory election requirement concerns projects that are directly funded with bonds sold for those projects.  Therefore, since no obligations were issued by the City for this project, the minimum 20% assessment requirement does not apply.  The City Attorney has confirmed this is a non-issue.

Staff recommends Alternative #1.

Adopt Resolution #19-236 adopting the final assessment roll certifying assessments for Improvement Project #19-01, Ford Brook Estates Street Reconstructions.