Long-Term Street Maintenance Program Background Presentation

The City of Ramsey maintains over 174 miles of city streets. City staff has been rating and evaluating the pavement condition of all city streets for many years using the Pavement Surface Evaluation and Rating (PASER) system.  Attached is a map showing the PASER ratings of all city streets.  Currently, about 23.5% of city streets have a PASER rating between 0 and 6, whereas 76.5% are rated between 7 and 10.  While the majority of city streets currently have a PASER rating of 7 or greater, which is identified as one of the city’s Strategic Initiatives in the recently adopted Strategic Action Plan, the PASER ratings on many of our city streets will decrease fairly rapidly over the coming years unless a long-term street maintenance program (SMP) is soon developed and implemented.  This is because more than 45% of city streets were constructed in the 10 year period between 1976 and 1985, meaning these streets have been in service for almost 30 to 40 years.  And since most of these streets have not received regular maintenance during their life, they will likely be nearing the end of their useful lives over the next decade or so.  A long-term street maintenance program must therefore be implemented as soon as possible to allow these streets to be better maintained in the future to prolong their lives as much as possible, thereby avoiding the need to reconstruct 45% of all city streets within the next decade or so, resulting in a huge financial burden on the city.
 
The City has been discussing the adoption of a long-term Street Maintenance Program (SMP) for many years.  Attached is the City Council case from March 19, 2013 which outlines work completed by staff in 2009 pertaining to the implementation of a long-term SMP.  In 2009 staff estimated that an annual cost of $3,200,000 would be needed to fund a long-term SMP based on maintaining a PASER system rating of 7 or better on all 142 miles of non-Municipal State Aid System (MSAS) city streets (it was assumed at the time that any funds needed to maintain the city’s 36 miles of MSAS streets would be taken from the city’s annual MSAS allocation).  Staff’s estimated costs accounted for all costs required to maintain all non-MSA city streets assuming a 40 year useable design life which required 4 crackseal and sealcoat projects, 1 overlay project, and 1 reconstruction project to be completed.  Initial construction costs were not factored in.  This yielded an estimated total cost of $9,588,203 for maintaining all non-MSAS streets over a 5 year period from 2011 to 2015, equating to an annual cost of $1,917,640.60.  Staff also estimated costs for maintaining the same streets for a 10 year period from 2011 to 2020 which totaled $72,401,106 and equated to an annual cost of $7,240,110.60.
 
In 2013 the City Council directed staff to re-evaluate the estimated costs for implementing a long-term street maintenance program.  Staff first examined the previously assumed 40 year design life of city streets.  Recent studies have concluded that streets which are constructed over well-drained subgrade soils, such as the sands found in the Anoka sand plain which Ramsey is located in, and which receive regularly scheduled maintenance, can reasonably be expected to have useful lives of 60 years or so.  Therefore, staff determined that if the City was able to annually dedicate the necessary funds to properly maintain all city streets, it should be reasonable to expect the city streets in Ramsey to last for 60 years between reconstructions.  To properly maintain all city streets, staff developed the following street maintenance program.  All streets should be crack sealed 3 years after initial construction, all overlays, and following reconstruction.  Concurrent crack sealing and seal coating operations should be applied in years 6, 13, 26, 33, 46, and 53.  Overlay and edge milling operations should be applied in years 20 and 40.  Then, in approximately year 60, either a reclaim and repave project or a full reconstruction project should occur, after which the street maintenance cycle would start all over again.
 
Staff then updated the city streets database, which contains detailed design information for all street segments throughout the city, to ensure the new estimated costs would be as accurate as possible by making sure all street segments throughout the city were accounted for, and that each segment was updated to reflect the most current maintenance work completed on that segment.  Then, the street maintenance program treatments recommended above were applied to each street segment, and average unit bid prices from street maintenance projects completed in 2013 in Ramsey and nearby cities were applied to each treatment on each segment to determine the new estimated costs for the long-term SMP.
 
It should also be noted that during the July 9^th City Council work session, Council directed staff to assume that all streets will be maintained and reconstructed “as is” with no changes to the roadway design or type, and that no costs should be included for additional sidewalks or pathways along reconstructed streets when estimating long-term SMP costs.
 
Based on the design assumptions noted above, and the use of 2013 average unit bid prices from local projects, staff updated the estimated costs for funding the city’s long-term SMP for all 174+ miles of city streets as follows:

• For the 60 year period from 2014 through 2073, the total estimated cost is $262,077,338 and the annual estimated cost is $4,367,956.
• For the 10 year period from 2014 through 2023, the total estimated cost is $25,247,367 and the annual estimated cost is $2,524,737.
• For the 5 year period from 2014 through 2018, the total estimated cost is $11,011,879 and the annual estimated cost is $2,202,376.

 
The 2014 budget includes $500,000 for SMP projects.  Based on the 5 year estimated costs presented above, and assuming $500,000 can be budgeted for SMP projects over the subsequent 4 years, the city is facing an estimated $1.7 million shortfall for funding SMP projects over the next 5 years.  Therefore, existing funding sources will need to increase substantially or new funding sources will need to be implemented to fund the SMP.  If neither of these occurs, the city will not be able to maintain its streets to the desired PASER ratings and the streets will degrade more rapidly over time.
 
Of the existing 174+ miles of city streets, about 32 miles are designated as Municipal State Aid System (MSAS) streets which generate revenue via annual construction and maintenance allocations through the Minnesota Department of Transportation (MnDOT) State-Aid office.  In 2013, the city received MSAS allocations of $576,844 for construction and $443,377 for maintenance of MSAS streets, totaling $1,020,221.  The remaining 142 miles of streets are non-MSAS streets and generate no revenue.  Most of our annual MSAS revenues are currently being used to pay back debt from previous projects, and will be for several years to come.  As such, MSAS funds are not a viable funding option for SMP projects in the near future.
 
Any funding source utilized to fund long-term SMP projects should be reliably dedicated for this purpose.  Numerous funding options are currently available to cities to fund their street maintenance projects such as annual budgeting through the general levy, purchasing General Obligation (GO) bonds on a project-by-project basis, applying funds from annual MSAS allocations as available, and applying special assessments as allowed under Minnesota Statute Chapter 429.  However, all of these funding sources are becoming less and less reliable over time.  And when considering the increased costs associated with the addition of annual street reconstruction projects, the use of special assessments will likely be received less favorably in the future.  In the past, the city has typically assessed 50% of project costs for overlay projects, and has at times assessed for sealcoat projects as well.  However, those assessments typically ranged from several hundred to several thousand dollars.  If 50% of street reconstruction projects costs were to be assessed, residential property owners would be facing assessments in excess of ten thousand dollars.

Many cities are therefore exploring alternative funding options for long-term SMP projects. Such options include grant funding, franchise fees, and special legislation when available.  Of these options, only franchise fees can currently provide the reliable, dedicated funding source needed to fund a long-term SMP.  Franchise fees, which could also be called franchise taxes, are simply fees imposed upon private energy utilities that benefit from using public right-of-ways to conduct their business.  This fee, or tax, is then typically passed along to the consumer.  And as is noted in the March 19, 2013 Council case, a survey completed by the City in 2011 shows a majority of the residents who responded would prefer to pay for street maintenance projects via franchise fees over property taxes or special assessments.
 
The City Council has made it very clear that before they would consider adopting franchise fee ordinances, the following terms must be met.  The use of special assessments must be eliminated on all SMP projects as long as franchise fees are place, all franchise fee ordinances must have a 5 year sunset term, all franchise fee revenues must be dedicated specifically to SMP projects, and a rebate program must be implemented to prevent property owners from paying franchise fees on top of any current assessments levied under previous SMP projects.
 
Special assessments have also been contested by taxpayers more vigorously in recent years, resulting in significant project delays and/or cancellations which negatively impact the effectiveness of long-term SMP projects.  And due to the existing language in our Charter, the City of Ramsey faces particular hardships in applying special assessments due to the ability of taxpayers to more easily petition against SMP projects.
 
Additional information will be provided during the workshop on how other cities in Minnesota are funding their long-term SMP’s.  In addition, a summary of how other cities, both Charter and non-Charter, are restricting the use of franchise fees within their cities.

15 minutes

Not applicable

City Engineer Bruce Westby will present the background information on the long-term street maintenance program.

City Administrator Kurt Ulrich and Finance Director Diana Lund will lead the discussion on funding alternatives.

The desired outcome of this workshop is for the Charter Commission and the City Council to arrive at a mutually agreeable solution for restricting the use of franchise fees via City Charter amendment or the use of more restrictive language within the franchise fee ordinances.