Local Road Funding

 The purpose of this case is to update the Council with more information and research on local road funding.  On June 11, information was discussed with the City Council and, after discussion, additional information is provided.

• A revised calculation to demonstrate that the franchise fees collected would be in line with road maintenance needs.  Based upon this calculation, the franchise fee is proposed at $6 per utility per month.  A comparison of that fee to similar revenue collected via property tax is included.
• Attached is draft ordinance for discussion.   If the ordinance is introduced, it could be modified as necessary based upon public discussion prior to final adoption.
• More information is below in regard to a local road funding study requested by the Charter Commission. The Charter Commission has asked for additional research regarding the use of franchise fees in Minnesota and other cold climate states for road maintenance. The University of Minnesota has submitted a proposal to consider the research in which the Charter Commission has expressed an interest. A summary of that study is below/

Local Road Funding Study
Preliminary methodology: 
Survey a list of 25 cities, selected at random (at least half outside the state of Minnesota) regarding how they manage local road funding and maintenance.  A in depth investigation would be done on six cities.  These six case studies would compare and contrast 2 for each type of funding mechanism--assessments, franchise fees and property tax.  Survey results from the larger group of 25 cities would be combined into a matrix, and identify whether they use the property tax method, assessment method, franchise fees method, or alternative sources, or a combination of methods.
The franchise fee information would include a ratio comparison of each city’s fee to that city's assessed tax levy on an average market valued residential property in that city (for example, average market valued residential property is $220,000.  Tax levy for city is $1000 annually on $220k value.  Franchise fee imposed is $5 monthly or $60 annually.  $60/$1000 = 6%).   
 
Research to include what other cities comparable in size and weather conditions are doing for road maintenance, repair and reconstruction (note: weather correlates to similar salt use/freeze-thaw conditions).  Explore a range of solutions, not just focused on franchise fees as the solution. 
Other information:
·         Name of City (group by Metro and Non-metro, include a few from other cold weather states) 
·         Size of City: square miles/acres and population
·         Miles of city roads maintained
 
Specific to Franchise Fees:
·         What is the franchise fee dollar amount for single family residential? Commercial?
·         How long has a franchise fee been in place?
·         Does the fee have a dedicated use (e.g., road maintenance, parks, etc.)
·         When was the last time the fee was raised?
·         How often is the fee revised?
·         Does the fee have a sunset provision? (i.e., does the fee automatically expire if the Council does not renew it)
·         Does the fee have a cap on how much is collected (either individual or aggregate)?
 
Cost/timeline of Study
The University of Minnesota provided the following options for completing the study:
Course matches: Standard RCP match with 1–2 courses or individual students doing a directed study for credit in fall 2019 and/or spring 2020. We think this may be a somewhat difficult project to match with a course, so there would be no guarantee of success (though you would pay nothing unless we succeed in finding an appropriate match). We might have better luck finding 1–2 individual students willing to do the project as an independent study. Cost: $5,000. 
 
Resilient Communities Fellow Team: This would be modeled on the Economic Development Fellows (EDF) program that worked with Patrick Brama on the business incubator project during our RCP partnership. One graduate student would be recruited and paid to lead a team of other *volunteer* graduate students to work on the project for no credit in the fall of 2019. Sarah Tschida or I would meet with the team lead weekly to ensure the project stays on track. Although we could more or less guarantee a match if we can recruit a team of interested students, all of the students besides the paid team lead would be working on the project for experience only, so they would have less invested in the project than students enrolled in a course and earning a grade for credit. Cost: $6,500
 
Graduate Research Assistant: The best guarantee of a match with a suitable student is to advertise this as a research position for the fall, and hire a graduate student to complete the project for pay. We would post the position internally at the U of MN on a student employment website, help you to set up interviews with applicants that you are interested in considering for the position, and then hire (through the U of MN) the student you ultimately select. You or another staff person would need to directly supervise the student, though they would not need to work onsite in Ramsey (unless you want them to or the project necessitates this). CURA has other programs that operate on this model quite successfully, but both the cost and the time commitment involved in supervising the work are greater than with the other options. Cost: $9,000. 
 
Attached are the following documents:
 

• Summary of revenue generated against project costs
• Project costs summary
• Total revenue generated using rates of $5-$8
• $6 Franchise Fee vs Property Tax
• Special Assessments Possible Reimbursement
• Elk River Rebate Payback schedule

 
 
 

 

N/A

Kurt Ulrich

Action based upon discussion. Possible outcomes include the need for additional research, consensus to bring specific action to the Council for consideration, or to bring back to a future Council work session.