02-22-21 Special City Council MinutesSPECIAL OTSEGO CITY COUNCIL MEETING
OTSEGO PRAIRIE CENTER
MONDAY, FEBRUARY 22, 2021
6:00 PM
Call to Order.
Mayor Jessica Stockamp called the meeting to order at 6:01 PM.
Roll Call: Mayor Jessica Stockamp; Councilmembers: Jeff Dahl (*), Brittany Moores, and Tina
Goede. City Staff: City Administrator/Finance Director Adam Flaherty; City Planner Daniel Licht;
City Attorney Dave Kendall; City Engineers Ron Wagner and Brent Larson; and City Clerk Audra
Etzel. Councilmember Tom Darkenwald arrived at 6:12pm.
This meeting is preceding under MN State Statute 13D.021 allowing members to appear by
telephone or video conference due to the ongoing health pandemic and state of emergency. For
the record, the Mayor, Council members, and certain City staff were present in-person. Those
indicated with a (*) attended via video conference.
1. Pavement Management — Review and Discuss Funding Policy.
City Administrator/Finance Director Adam Flaherty said currently the City's policy for funding
street renewals is 50/50 between property taxes and special assessments. Each property
accessing the street is assessed equally. The City has been exploring options for Franchise
Fees. By adding franchise fees this is a third revenue source, how does the Council want to
address the assessment policy as a whole? The upcoming street projects are outside the
benefit requirement. Does Council wish to keep special assessments as part of the equation?
At a previous meeting Council asked staff to bring some financial projections. A spreadsheet
was prepared with projections for the next 10 years, looking at the bottom line everything is
healthy for those 10 years of projects with funding through taxes and franchise fees. If adding
franchise fees using current house count (no commercial, industrial type properties) at same
rate as Elk River and Rogers, it is a cost of about $8.00 per month to each residential utility
user. This estimate will increase funding significantly to $11 million. By removing assessments
from the equation funding is just under $9 million, still successfully funding the proposed
projects.
CM Dahl asked how long it would be before the City would see the revenues? Once franchise
fees are agreed upon what is the process? City Administrator/Finance Director Flaherty said
agreements need to be established with the utility companies, a public hearing would be
required, and the revenue stream could potentially begin in 2022.
Engineer's Wagner and Larson presented a 2021-2031 Street Renewal Summary Funding
Options spreadsheet. They took three different projects paid at 50/50 and an average lot in
rural (1 acre) and urban 75ft frontage, factoring in corners and parks. The property owner's
average responsibility for the three different types of projects:
• Overlay: Rural $2,323.48 / Urban $808.05
• Reclaim: Rural $3,767.15 / Urban $2,336.70
• Reconstruction: Rural $6,430.62 / Urban $3,348.53
Page 1 of 4
CM Darkenwald arrived at 6:12 PM.
City Administrator/Finance Director Flaherty presented the life cycle cost. Taking the average
median valued home for the street life cycle cost to the property owner:
• Model A Taxes & Assessments (current) $12,815 Total / $256 annually
• Model B Taxes, Assessments & Franchise Fees $17,615 / $352 annually
• Model C Taxes & Franchise Fees $10,474 / $209 annually
City Administrator/Finance Director Adam Flaherty explained Model A -- cash balances on hand
at the end of the year to pay the next years projects, not issuing debt. There is nothing wrong
with the current model being used, the current model does not allow for all projects to be
equitable.
CM Dahl asked if any interest is earned on special assessments. City Administrator/Finance
Director Flaherty stated the interest from special assessments is minimal.
CM Darkenwald said the principal is in getting something for the benefit.
Mayor Stockamp is concerned everyone is going to want to get their road done now.
Engineer Wagner added people do not look forward to the construction project (6-7 weeks of
construction), this is a nuisance.
City Administrator/Finance Director Flaherty suggested maybe addressing larger reconstruction
projects.
Attorney Kendall noted assessments are the only legal challenge. If exceeding the benefit, the
City would need to fund the difference. A lot of cities are dealing with this issue, reducing the
use of special assessments. Suggested being under 40%.
CM Goede likes model C, with no assessment
CM Moores likes Model B; property owner is seeing a benefit.
CM Dahl is leaning towards Model C. Also agrees with CM Darkenwald, on the fence with Model
B. Costs money to go through the special assessment process.
Mayor Stockamp is leaning towards Model B, but only on total reconstruction. Have option to
lower the taxes and Franchise Fees are a sound number. Sees value in paying some portion.
Mayor Stockamp at 6:53 PM motioned to continue this special meeting following the
7 PM City Council meeting, seconded by CM Moores. Voice Roll Call: In favor;
Goede, Stockamp, Darkenwald, Moores and Dahl. Against: none. Motion carried 5-0.
Mayor Stockamp motioned to reopen this special meeting at 9:17 PM, seconded by
CM Moores. Voice Roll Call: In favor; Goede, Stockamp, Darkenwald, Moores and
Dahl. Against: none. Motion carried 5-0.
Page 2 of 4
Engineer Wagner used the upcoming projects to give examples. The next two projects would
be considered reconstruction projects. He could come up with different percentages. Heritage
Hill is taking out asphalt, adding concrete, curb and gutter. Walesch Estates also an upcoming
project would also be considered a reconstruction project.
Mayor Stockamp asked reconstruction, Heritage Hills, Welch Estates, what else will be
reconstruction? Reviewed the CIP spreadsheet.
City Administrator/Finance Director Flaherty said for comparison, Mississippi shores would not
have been an assessment if only looking at reconstruction project. Heritage Hills would be
because of the scope of work. Where is the threshold - 50% is too much on some projects,
where some would be within the benefit.
Council further considered putting a cap on assessment, say 20%, this would be unique. A
fixed rate does not meet statute.
Engineer Wagner said a reconstruction is 50 years, overlay of road 30 years if the road does not
need work. Surface of the road reconstruct, can't keep building up without adding the width.
Also, consider utilities will eventually need to be improved. Anytime you widen the road, except
in urban & replace water and sewer, storm sewer at the same time, along with the sidewalk.
Engineer Wagner said should last 50 years. Road 20-30 years with maintenance 30-35. Sewer
lines and water mains with maintenance should be 50 years, likely to stretch to 75 years.
Planner Licht added the utility assessment policy is separate.
Engineer Wagner noted 2000 streets will be coming due in 2030. The City is seeing significant
growth. Review of the CIP is stretched out to bend the curve and stretch the projects out in
the lull, so they are not all within the same year. PCI levels have not yet affected some street —
clay vs. sand. Many streets were put in the same time.
CM Darkenwald suggested 20% up to $1,000 for special assessments. CM Goede likes the
percentage with a cap.
City Administrator/Finance Director Flaherty noted a hearing is still required for any special
assessment amount. Should see levy stabilize and lower possibly with franchise fees.
Residents are still paying for the project through taxes and franchise fees. Consider comparing
$96 per year over 30 years vs. 10 years traditional assessment.
Engineer Wagner asked if it is worth going through the 429 assessment hearing for the smaller
amounts, with the costs associated with an assessment hearing.
Planner Licht added there is the financial issue to fund, political issue for Council to sit through
the hearing — residents paying taxes and franchise fees, why am I getting an assessment.
Mayor Stockamp asked what happens to foreclosures, does the city still get their franchise fees?
Planner Licht said Franchise Fee is on the utility company, they just pass onto the customer.
Planner Licht added the City is going away from rural lots because of the costs. Engineer
Wagner said more urban lots as the city grows. Looking ahead 40 years, the City will be about
90% urban.
Page 3 of 4
Recap of proposed policy:
Overlay — no assessment
Reclaim — 20% or cap at $1,000
Reconstruction — 20% or cap at $1,000
Need to see projection with the proposed cash flow model. Adam will bring back numbers with
projections. Add to upcoming special meeting already scheduled.
2. Adjourn.
CM Darkenwald motioned to adjourn at 10:06 PM, seconded by CM Goede.
Voice Roll Call: In favor; Goede, Stockamp, Darkenwald, Moores and Dahl. Against:
none. Motion carried 5-0.
Mayor Jessica Stockamp
ATTEST: L Lj�- �-L
Audra Etzel, City Clerk"
Page 4 of 4