Review Preliminary Assessments for Improvement Project #17-00, Sunwood Drive Reconstruction - 6:40 - 6:55 - 15 Minutes

Purpose:
The purpose of this case is to review the preliminary assessments currently proposed with Improvement Project #17-00, Sunwood Drive Reconstruction.

Background:
City Improvement Project 17-00 proposes to reconstruct the segment of Sunwood Drive between Ramsey Boulevard/County State Aid Highway (CSAH) 56 and Bunker Lake Boulevard /County Road 116 which is approximately 3,050 linear feet (0.58 miles) in length.  A map showing the scope of the proposed improvements is included as Figure 1 in Appendix A of the attached Feasibility Report.

A Public Hearing for this project is included on the regular City Council agenda this evening.  However, staff is recommending to postpone the hearing until February 28, 2017 to allow staff time to work with the owners of the 7 properties fronting this segment of Sunwood Drive who are proposed to be assessed for 25% of the eligible project costs.

Attached are copies of the City's adopted Special Assessments Policy and the Feasibility Report for Improvement Project #17-00 that was preliminarily accepted by Council on January 24th when the public hearing was called for.  Also attached are copies of a revised assessment map and revised assessment roll which differ from the map and roll included in the attached Feasibility Report.

Below is information copied from the public hearing case on the regular agenda which provides detail on estimated project costs and the use and calculation of special assessments to help pay for a portion of eligible project costs.  Staff will summarize this information during the work session and will request Council input to help finalize proposed preliminary assessments in advance of the public hearing, and for staff's use in discussing proposed assessments with assessable property owners before the hearing.

Estimated Costs
The engineer’s opinion of probable costs for completing the proposed improvements on Sunwood Drive as outlined in the Feasibility Report is $607,000.  Estimated costs include 23% indirect costs for administrative, engineering, finance and legal costs.  A summary of the engineer’s opinion of probable costs is included in Appendix B of the Feasibility Report.
 
Funding Sources
The improvements are proposed to be funded using a combination of Street Reconstruction and Overlay Program (SROP) bond funds, stormwater utility funds, and special assessments to benefiting properties.  The majority of the proposed improvements will be funded using SROP bond funds, which will be paid back over a 10 year term using the general fund.  This cost is estimated at $447,950 in the Feasibility Report.  Stormwater utility funds will pay for required storm sewer improvements estimated to cost $7,300.  Special assessments are proposed to fund 25% of eligible construction costs totaling $151,750 as per the City’s adopted Special Assessments Policy.  A total of 9 parcels have been identified as receiving special benefit from the improvements. These parcels are identified in the preliminary Assessment Map and Roll in Appendix C of the Feasibility Report.
 
Special Assessments
When special assessments are proposed to pay for all or a portion of the cost of an improvement, the objective is to choose an assessment method which will result in a reasonable, fair and equitable assessment that is uniform upon the same class of property within the assessed area.  Per the City’s adopted Special Assessments Policy, staff recommends using special assessments be pay for 25% of eligible improvement costs which totals $151,750.  This amount must then be distributed across the 9 parcels which staff has identified as benefiting properties. In doing so, it is important to recall that 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.
 
The Special Assessments Policy identifies three optional methods for assigning assessments.  The 9 identified benefiting properties are zoned industrial (E1 or E2). Only two assessment methods are recommended for assessing industrial parcels, these being the “adjusted front footage” and “area” methods.  Staff completed a cursory review of both methods as they would be applied in their current context within the policy which showed that the adjusted front footage method results in less variance between assessments ($9K - $40K), whereas applying the area method results in assessments that are more variable ($3K - $42K).  Based on the geometry of the assessable parcels, including significant differences in lot depth, staff recommends applying the area method so assessments are more equitable to the benefit received.
 
Staff then reviewed all assessable parcels to determine what appreciable differences existed between parcels that would impact the benefit received from the proposed improvements.  Staff determined there are two significant differences that should be accounted for when calculating assessments; whether a parcel has direct access onto an improved street, and whether the parcel abuts other City streets requiring future improvements whose costs will be assessed to the parcel. Staff therefore developed and applied the following adjustments to the area method of assessment.
 

• Properties abutting Sunwood Drive only with access onto Sunwood Drive are proposed to be assessed for 100% of their property area.
• Properties abutting Sunwood Drive and other City streets, with access onto Sunwood Drive, are proposed to be assessed for 75% of their property area.
• Properties abutting Sunwood Drive with no access onto Sunwood Drive are proposed to be assessed for 50% of their property area.

 
These adjustments are relatively similar to adjustments found in other cities assessment policies which adjust assessment calculations to allow industrial properties with multiple accesses and/or frontages to be assessed between 150% and 200% for improvements completed to all abutting streets. Based on the proposed percentages above, B&F Fastener Supply will pay assessments for 150% of their property area for mill and overlay and reconstruction improvements on Sunwood Drive and Jaspar Street, both of which they directly abut and have access onto.  Vision Ease will pay assessments based on 200% of their property area for improvements made to Sunwood Drive, 143rd Avenue, and Jaspar Street since they abut all three and have access onto Sunwood Drive and 143rd Avenue (75% each), but no access onto Jaspar Street (50%).  Lastly, Altron, Inc. and the small City parcel on the east end of Sunwood Drive are both proposed to be assessed for 50% of their property areas since neither has direct access onto Sunwood Drive.  This analysis strictly considers existing conditions.  If a property that is assessed for 50% of the property area based on not having access onto an improved street requests an access onto an improved street in the future, the assessment amount they forgiven could be collected through the permitting process.  Staff will consider available methods to capture such funds, and will report our findings and recommendations to Council at an upcoming work session.  The Special Assessments Policy can then be amended to include such language, as well as to address any assessment calculation adjustments approved by Council.
 
A revised assessment map and assessment roll are attached which reflect the proposed property area percentage adjustments outlined above.  In addition, the property area for (Anderson Dahlen) was corrected to include all of their property.  The assessment map and roll in the draft Feasibility Report accepted by Council on January 24^th inadvertently omitted a significant portion of their benefiting property area because the parcel data in the City’s GIS system that was used to create the assessment map and roll for the Feasibility Report had not yet been updated with the new parcel data based on the recent replat associated with their current building expansion project.
 
All costs for this project are eligible for special assessments since the street is proposed to be reconstructed at its existing width, which meets current State Aid standards, and since the existing and proposed pavement sections both meet 10-ton design standards and are therefore equivalent sections.
 
Staff recommends ordering a benefit appraisal consultation report for this project to verify that the proposed assessment amounts will not exceed the amount of benefit to any assessable properties. If the report concludes that the benefit to any property is less than the proposed assessment, Staff will propose to lower the assessment accordingly at the Assessment Hearing scheduled for October 10, 2017.  However, if the benefit appraisal consultation report finds that the benefit exceeds the proposed assessment for any property, Staff will propose to adopt the final assessment using the assessment preliminarily proposed within the Feasibility Report.  Attached to this case in a copy of the City’s Special Assessments Policy adopted in December 2014 and amended January 2015.  Based on input received from the frim that conducts our benefit appraisal consultations at the time the policy was developed, language was included in Section 6.10, “Benefit Appraisals”, stating “As a general rule, benefit appraisal consultations may be ordered when the proposed assessment exceeds $5,000 for a standard city street reconstruction project on a residential lot, or $20,000 per acre for commercial or industrial property.”  Since none of the proposed assessments comes close to approaching $20,000 per acre, Staff is confident the benefit appraisal consultation report will find that the proposed assessments are defendable.
 
Public Input
At the time this case was published, Staff had met with owners of 5 of the 7 identified assessable properties. Below is a very general summary of comments received from these property owners.
 

• Altron, Inc. – Does not generally oppose the proposed improvements or their proposed assessment based on the revised assessment roll, but supports postponing the public hearing to allow more time to review their proposed assessment with City staff before the public hearing.
• B & F Fastener Supply – Does not generally oppose the proposed improvements or their proposed assessment based on the revised assessment roll, and they do not plan to attend the public hearing.
• Class C Components – Does not generally oppose the proposed improvements but supports postponing the public hearing to allow more time to review their proposed assessment with City staff before the public hearing.
• Connexus Energy – Does not generally oppose the proposed improvements but supports postponing the public hearing to allow more time to review their proposed assessment internally and with City staff before the public hearing.  However, they question whether adjustments should be made to assessments based on whether a property is developed or undeveloped; in general they are asking whether their assessment should be reduced since it is an undeveloped parcel.
• In’Tech, Industries – Does not generally oppose the proposed improvements or their proposed assessment based on the revised assessment roll, and does not object to postponing the public hearing.

 
Staff was unable to meet with owners of the Anderson Dahlen and Vision Ease parcels before this case was published.  If Staff meets with one or both of these property owners before the Council meeting, results of the meeting(s) will be presented to Council in summary format.
 
Based upon the short amount of time that assessable property owners have had to consider the project and their proposed assessments, and considering that three of the assessable property owners requested or support postponing the public hearing to allow more time to discuss their assessments with City staff, staff recommends postponing the public hearing until February 28, 2017.  This should allow staff enough time to make any necessary adjustments to the assessment map and roll based on specific Council direction, and to share new information with the assessable property owners.  However, a two week delay should not negatively impact bids or prevent the project from being completed in 2017.

 
 

Staff estimates this case will take 15 minutes or less to present and receive Council input.

Presentation by City Engineer Westby.

Council direction is requested to allow staff to finalize proposed preliminary assessments for Improvement Project #17-00.  This will allow Staff to discuss the proposed assessments with assessable property owners in advance of the public hearing that staff will request be postponed until February 28, 2017.