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HomeMy WebLinkAbout080706 Work Session 16200 Eagle Creek Avenue S.E. Prior Lake, MN 55372-1714 INTEROFFICE MEMORANDUM DATE: City Council Ralph Teschner, Finance Director CSAH 21 Corridor Improvement Financing Options August 4, 2006 TO: FROM: RE: CSAH 21 Financin'l Ootions: Introduction In 2007 the City and Scott County have a cooperative improvement project scheduled to upgrade the intersection of Fish Point Road and CSAH 21. Included in the corridor improvements are safety-related medians, turn lanes and signalization. Also the City will be installing trunk utilities and a frontage road. This project has been identified in the recently Council approved 2007-2011 CIP (capital improvement program). The entire project cost is estimated to be $5,450,000 of which the City's obligation will be approximately $1,750,000 with the remaining cost to be paid for by Scott County. Of our share, municipal state aid and enterprise funds will be utilized to fund approximately 59% and the remaining $720,000 will need to be financed with city bonds. The following three bond options are available for the City to pay for this .P.9!!!9..'! of the CSAH 21 corridor improvements: Option # 1 I County Financing.. The City could request Scott County to consider bonding for the City's portion of the roadway improvements and incorporate the financing into the cooperative construction agreement. Scott County would have to approve this request. Minnesota statutes allow for another governmental entity to bond on behalf of a city as long as the debt obligation is lel!allv oermitted bv law. Recently Scott County did agree to finance the City's non-utility improvement costs associated with CSAH 82 on an "annual appropriation basis" as opposed to issuing bonds for Prior Lake's share. There is a difference between the two. The reason is because municipalities cannot issue bonds for street widening or the addition of curbs unless it is assessing a minimum of 20% of the cost. The difference under the annual appropriation method is that each year the City Council must appropriate its portion and could walk away from paying its share at any point in time in the future, while a bond agreement actually binds the City to repay its pro-rata share of debt for the entire length of the County bonds. It may not be reasonable to ask the County to upfront the financing each year on these type of cooperative projects because of overall debt limitations that could affect their bond rating. Also from a procedural standpoint, the City would have to follow all of the required steps i.e., feasibility study, public hearings etc. as if we were issuing the bonds and technically our bond portion would be disclosed in the city's financial statements for purposes of debt calculation as required by law. www.cityofpriorlake.com HIMEMOICSAH21CORRIDORFINANCING.DOC Phone 952.447.4230 / Fax 952.447.4245 Option #2 I City 429 Improvement Bonds . Minnesota Statute 429 authorizes municipalities to issue bonds for the purpose of street improvements such as our annual street reconstruction projects as long as the city assesses a minimum of 20% of the total improvement costs. Our current policy calls for 40% to be assessed and 60% to be paid by the general tax levy. For the most part the City has assessed all of its city initiated improvement projects either on a unit or front footage basis for abutting properties. The only exception to this abutting property principle was when the City charged an area-wide unit assessment for the bridge improvements to Martinson Island. In Staff's opinion, the City could assess an area-wide unit assessment for the intersection improvements since it provides primary access to the Deerfleld neighborhood and the immediate geographic area from a benefit standpoint could be readily identified. Also from a public support standpoint the City has already received a petition from the Deerfleld neighborhood requesting these improvements. Engineering has determined an area-wide unit assessment of $800-$1000 could be charged based upon the City's standard cost participation basis of 40%. It would represent a relatively small assessment amount that would be proposed to be assessed over a term of 5 years. It would appear highly unlikely that any properties would appeal their assessment since a required appraisal alone would exceed the entire special assessment much less incurred legal fees. The City would be required to hold a public hearing on the proposed improvements which would provide feedback to the Council on the extent of public neighborhood support. Option #3 Street Reconstruction Bonds In 2002, a new subdivision 3(b) was added to Minnesota Statutes, Section 475.58 authorizing municipalities to issue bonds without an election under street reconstruction programs. The 2003 Legislature clarified that street reconstruction bonds may be issued for utility replacement and relocation and other activities incidental to street reconstruction, but does not include costs associated with widening a street or adding curbs and gutters where none previously existed. No election or assessments are required. Bonds issued under Minnesota Statutes, Section 475.58 Subdivision 3(b) for street reconstruction are exempt from referendum requirements, if the bonds are issued under a 5-year reconstruction plan. There is no requirement to specially assess 20% of project costs to avoid an election as there is with improvement bonds issued under Minnesota Statutes, Chapter 429. To qualify for the referendum exemption, the City must simply approve a formal five year Street Reconstruction Plan that includes a description for streets to be reconstructed over the next 5 years and the estimated costs. However the bond issuance is subject to a reverse referendum whereby a petition is received within 30 days of the public hearing signed by 5% of the votes cast in the last municipal election. While this financing alternative appears to be the most appealing it does not take into account the fact that 100% of the bonded debt would need to be spread over all c~.!y taxpayers. H:IMEMOICSAH 21 CORRIDOR FINANCING.DOC I Conclusion The purpose of the workshop is to help council members; 1. Be aware of funding mechanisms available to finance the 2007 improvements. 2. Identify the pros and cons of each funding type. 3. Based upon the feedback received, the staff can determine the next procedural step to take so that the 2007 Fish Point/CSAH 21 project can proceed as scheduled. H:\MEMOICSAH 21 CORRIDOR FINANCING.DOC /' ./ Last Updated August 2006 City of Prior Lake Public Works Department G:\County\CSAH_21\21-Fish Point intersectlon\ 21-FishPoint GIS\21_fishpoinUight.apr J ~ T ./ ~~ ./ / ~~ :7. / / / ~ / AFFECTED PROPERTIES: 172 SINGLE FAMILY UNITS _ 462 TOWNHOME UNITS 7 COMMERCIAL UNITS