Purpose:
The purpose of this case is to review the latest draft Special Assessments Policy for City Improvement Projects, and to provide additional input to City Staff to allow Council adoption of the Policy in 2014.

Background:
On May 20^th the Public Works Committee directed Staff to develop a draft Special Assessments Policy to establish how special assessments will be levied against properties benefiting from various types of City improvements, including street reconstruction projects. As discussed at the time, even if special assessments are not used to fund street improvement projects it would be advantageous for the City to have an adopted Special Assessments Policy. The Committee also directed staff to research other cities special assessments policies to see how they address specific situations and apply special considerations in assessing property owners for public improvements.

On June 25^th the Charter Commission voted to amend Section 8.4.5 of the City Charter, increasing the percentage of property owners required to petition against Council initiated public improvements utilizing special assessments as a funding source from greater than 50% to 60% or more. While this action will make it slightly more difficult for the public to petition against Council initiated improvement projects, it will still not prevent property owners from petitioning against Council initiated public improvements utilizing special assessments as a funding source.

On August 14^th the Public Works Committee was asked to review the first draft of the Special Assessments Policy, which was developed using the model Special Assessments Policy prepared by Ehlers and Associates, Inc. available on the League of Minnesota Cities (LMC) web site. A copy of this model policy is attached for reference.  However, Chairperson Backous and Councilmember Kuzma were absent so Staff was directed to bring the draft Policy back at a later date for review by the full Committee.  However, the Committee members in attendance that evening provided several comments as follows.  Applicable MSA funds must first be applied to the City’s share of the project costs, no conflicts can exist between the Policy and the City Charter, and the Policy should provide as much flexibility as possible in considering existing property sizes, shapes, development status (developed vs. undeveloped), etc.  These comments were subsequently incorporated into the draft Policy.

On September 16^th the Public Works Committee again reviewed the draft Special Assessments Policy.  After considerable discussion, Staff was directed to revise the draft Policy to incorporate the Committee’s proposed assessment percentages, and to incorporate staff’s proposed recommendations on the use of the various assessment methods, then to bring the draft Policy directly to a City Council Work Session for review and input from the full Council.
 
On October 14^th the City Council reviewed the draft Special Assessments Policy during work session. At that time, additional comments were provided for incorporation into the draft policy, and additional information was requested for consideration at a future work session.  Attached is the latest draft of the Special Assessments Policy which addresses the comments received.by Council on October 14^th.  Text shown in red strikethrough format is proposed for deletion, while blue underlined text denotes language proposed by City staff, the Public Works Committee, and the City Council.

Tonight, Staff is seeking additional input from Council on the draft Special Assessments Policy, particularly on the special considerations listed in Section 6 and the proposed assessment percentages/rates in Section 10.
 
Currently, the special conditions in Section 6 require the City to cover required costs for subgrade excavation, rural to urban street conversions, and oversizing of City streets.  These special considerations are intended to reduce assessments for property owners for items that are unknown to them and/or outside of their control.  This is important to note in that special assessments levied at the minimum rate of 20% as required for assessment bonding can easily exceed $10,000 on larger benefiting properties more than one-quarter acre in area which comprises a majority of residential properties throughout the City.
 
Attached is a layout showing the higher density residential urban properties throughout the City (shaded properties) that would likely allow the use of a 25% assessment to reconstruct abutting City streets.  All other properties would likely be required to pay a maximum fee established annually by the City Council to ensure their assessment does not outweigh their benefit.  Staff currently recommends a maximum assessment amount of $7,000.
 
In recent years it has become more common for property owners to challenge their special assessments, especially when assessments exceed $7,000.  It may therefore be difficult to defend a residential property assessment in excess of $7,000 within the City of Ramsey if challenged.  Some cities now perform appraisals on one or more representative properties before projects are ordered to determine if the preliminary assessments can be defended, but this in turn increases project costs and assessment amounts.  Still other cities contract with appraisers to complete benefit appraisal consultations that consider sale and re-sale figures for properties recently assessed for similar improvement projects in similar cities to help determine actual benefit costs prior to ordering a project.  Jason Messner with Patchin Messner & Dodd will be in attendance to address any questions the Council may have regarding benefit appraisals and appraisal consultations.
 
The draft Policy includes numerous revisions to reference and ensure compliance with our City Charter requirements.  The City Attorney is also reviewing the draft Policy to ensure it has the proper legal form and that it conforms to our Charter assessment requirements per Chapter 8 of the Charter, which is attached for reference.

During the October 14^th Council work session, more information on previous assessments was requested.  Property owners in the City of Ramsey were primarily previously assessed for sealcoat and overlay projects.  However, a few assessments have been levied for street reconstruction projects and for upgrading gravel roads to paved roads.  Typically, assessments for such projects in the City of Ramsey have ranged from;

• Street Sealcoats – 0% to 50% of project costs assessed.  Assessments were generally up to $500 for residential and $2,000 for commercial/industrial properties.
• Street Overlays – 50% of project costs assessed.  Assessments were generally up to $2,000 for residential and $7,000 for commercial/industrial properties.
• Street Reconstructions – Staff was still researching this information at the time this case was published.  This information will either be republished in an updated case before the work session, or the information will be presented at the work session.
• Gravel Road to Paved Road Upgrades – Staff was still researching this information at the time this case was published.  This information will either be republished in an updated case before the work session, or the information will be presented at the work session.
• Sidewalk Reconstruction – 0% of project costs were previously assessed, though the current draft Policy calls for a 25% assessment rate.

 
Appendix B, which was developed as an attachment to a January 19, 2010 Public Works Committee case, is also attached for reference.  This lists previous Street Maintenance Program assessment practices, including effective dates.
 
Council also asked where the four-fifths majority vote reference in Section 3.3 originated.  This language comes directly from State statute 429.031.
 
Council also requested that Staff review the language in Section 6.4 regarding interest rates.  This language has been revised with input from Finance Director Lund.
 
Provisions for City utility assessments remain in the draft Policy because the City Charter does not preclude assessing for utility improvements if a property owner requests service. Language addressing credits for connecting to City sewer and water with reconstruction projects has also been added.  Staff welcomes Council input on this language, particularly whether it should remain in the Policy or be removed and addressed at a later date.

Attached are copies of assessment policies from the cities of Andover, Blaine and Champlin which contain many of the considerations included in the attached draft Policy for Ramsey. Assessment policies from numerous other cities were also obtained and are available upon request. Attached for reference is a tabulation of pertinent information from numerous other cities assessment policies.

Also attached is the Special Assessments Guide developed and distributed by the LMC. This guide defines special assessments, discusses a cities authority to levy assessments for certain improvements and the process that must be followed, and provides other relevant information and web site links that can assist in completing the final draft of the City of Ramsey’s Special Assessment Policy.

As previously discussed, Staff plans to finalize the Garnet Street/168^th Avenue Feasibility Report once the draft Special Assessments Policy is adopted.  The Garnet Street project is included in the CIP for 2015 construction, therefore final plans and specifications should be approved for bidding no later than March 24, 2015.
 
The Andrie Street/164^th Lane Feasibility Report will be finalized at a later date as this project is included in the CIP for 2016 construction, which will work nicely with Elk River’s proposed reconstruction of Jarvis Street in 2015.

The draft Special Assessments Policy is being developed in-house as part of Staff's normal duties.  The City Attorney is reviewing the draft Policy as to legal form and to ensure it conforms with all applicable City Charter provisions related to assessments.  Costs for the City Attorney to review the Policy will be paid from the general budget.

City Engineer Westby will present the case.  City Administrator Ulrich, Finance Director Lund, and City Attorney Langel will be available to provide additional information and respond to questions as needed.

Jason Messner with Patchin Messner & Dodd will be in attendance to address any questions the Council may have regarding benefit appraisals and appraisal consultations.

Staff requests Council direction to allow the draft Special Assessments Policy to be adopted in 2014.  This will allow Staff to complete the Garnet Street Reconstruction Feasibility Report and present it to Council for approval on January 13, 2015, which in turn will allow plans and specifications to be approved and bid on March 24, 2015.