Purpose:
The purpose of this case is to consider adopting Resolution #14-12-251 adopting a Special Assessments Policy for City Improvement Projects.

Background:
Attached is a draft Special Assessments Policy that, if implemented, will help offset some of the costs needed to reconstruct the 176-plus miles of existing City streets that are in need of being reconstructed.  Without a Franchise Fee or some other means of funding the long-term street reconstruction program, staff was directed to develop the attached draft Special Assessments Policy.
 
Below is a chronology of the process that was followed to develop the attached draft Special Assessments Policy.
 
May 20^th - Public Works Committee directs City Staff to develop a Special Assessments Policy to establish the City’s process for levying special assessments against properties benefiting from Improvement Projects including street reconstruction projects.  As was also discussed, even if special assessments are not utilized to fund street improvement projects, it would be advantageous for the City to have an adopted Special Assessments Policy.
 
June 25^th - Charter Commission amends Section 8.4.5 of the City Charter by increasing the percentage of property owners required to petition against City Council initiated public improvements utilizing special assessments as a funding source from greater than 50% to at least 60%. While this action will make it slightly more difficult for property owners to petition against Council initiated improvements utilizing special assessments for partial funding, it still will not prevent petitions from occurring.
 
August 14^th - Public Works Committee reviews the first draft of the Special Assessments Policy, which was developed using the model Special Assessments Policy by Ehlers and Associates, Inc. as posted on the League of Minnesota Cities (LMC) web site.  A copy of this model policy is attached for reference.  Since two voting members were absent, Staff was directed to bring the draft Policy back for review again at a later date.  The Committee did however provide several comments including that all applicable MSA funds must first be applied to the City’s share of the project costs, that no conflicts can exist between the Policy and the City Charter, and that the Policy should provide as much flexibility as possible in considering existing property sizes, shapes, development status (developed vs. undeveloped), etc. when levying assessments.
 
September 16^th - Public Works Committee reviews the draft Special Assessments Policy and directs Staff to revise the draft Policy incorporating proposed assessment percentages and by using Staff’s proposed recommendations for assessment methods.  Staff was then directed to bring the draft Policy to a future City Council Work Session for review and input from the full Council.
 
October 14^th - City Council reviews the draft Special Assessments Policy at work session and provides additional comments for incorporation into the draft policy for consideration at a future work session.
 
November 18^th - City Council reviews the draft Special Assessments Policy at work session and provides additional comments for incorporation into the draft policy based on input from City Attorney Langel and Mr. Jason Messner of Patchin, Messner and Dodd, a firm specializing in real estate appraisals.  Based on their input, Staff was directed to provide Policy language allowing Council to order appraisal consultations on improvement projects as needed to help verify that the amount of the special assessments will not exceed the benefit to the property.   As discussed, typical fees for special benefit consultations range from $5,000 to $7,000 depending on the type and scope of the public improvement project.
 
Attached is a clean copy of the final draft of the Special Assessments Policy addressing all comments received from the Public Works Committee and City Council.  A track changes version of the attached Policy will be available at the meeting for review if needed.

No notification was required for this case.

Observations:
It is important to note that the attached draft Special Assessments Policy complies fully with our City Charter requirements related to special assessments.  The City Attorney has reviewed the draft Policy to ensure it has both the proper legal form and that it conforms to the special assessment requirements outlined in Chapter 8 of the City Charter, which is attached for reference.

Section 6 of the attached draft Policy addresses the three special conditions that the City Council felt would be appropriate for the City to cover all costs for to prevent property owners from paying special assessments on improvements they could not possibly foresee.  The three conditions include subgrade corrections to replace unsuitable underlying soils, converting rural streets to urban streets by filling in ditches and adding curb and gutter and storm sewer, and oversizing existing City streets by either widening or increasing the load carrying capacity of the pavement section.
 
Section 10 of the draft Policy addresses the fact that special assessments levied against medium to higher density single-family properties roughly one-third acre or smaller will likely not exceed the benefit to the property if assessed 25% of project costs.  However, if 25% of project costs are levied against lower density single-family properties greater than one-third acre or so the assessments may exceed the benefit to the property.  And as the property area increases, so do the chances that a special assessment of 25% of the project costs will exceed the benefit to the property since there are fewer properties to spread project costs across.  Therefore, allowing for the use of benefit appraisals and appraisal consultations is important considering that a majority of single-family residential properties in Ramsey are lower density.
 
Since the first street reconstruction projects will occur in areas with lower density single-family properties, staff will be recommending the use of benefit appraisal consultations with these projects.  Attached is a figure showing the higher density residential urban properties throughout Ramsey (see shaded properties) that will likely allow the use of 25% assessments when reconstructing abutting City streets.  All other properties will likely not realize enough benefit to allow for the use of 25% assessments and will therefore require benefit appraisal consultations as approved by Council.
 
When developing the draft Policy, special assessment policies from numerous other cities were obtained and reviewed.  These cities included Andover, Blaine and Champlin, among others.  Attached is a tabulation of some of the more pertinent assessment information gathered from other cities 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 to be followed, and provides other relevant information and web site links used to assist in completing the attached draft Policy.

The language in Section 3 referencing a four-fifths majority vote comes directly from State statute 429.031 and therefore cannot be revised.
 
Provisions for City utility assessments are included in the draft Policy since Ramsey’s 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 is also included in the draft Policy.
 
Finally, Staff plans to finalize the Garnet Street/168^th Avenue Feasibility Report for presentation to Council on January 13, 2015. The Garnet Street project is included in the CIP for 2015 construction so plans and specifications must be approved for bidding in the spring of 2015, which will be tight considering assessment procedures must be followed.
 
Alternatives:
Alternative #1 - Adopt Resolution #14-12-250 adopting the draft Special Assessments Policy as attached.  Staff supports this alternative.

Alternative #2 - Adopt Resolution #14-12-250 adopting the draft Special Assessments Policy with minor revisions as follows; __________.  Staff will support this alternative as long as the Special Assessments Policy can be adopted on January 13, 2015.
 
Alternative #3 - Deny adoption of Resolution #14-12-250 at this time.  Staff does not support this alternative since it will delay delivery of a 2015 street reconstruction project.

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

Staff recommends adopting Resolution #14-12-250 adopting the draft Special Assessments Policy.  This will allow Staff to complete the Garnet Street Reconstruction Feasibility Report and present it to Council for approval on January 13, 2015, with approvals for plans and specifications and bidding to be requested in the spring of 2015.