Agenda and PacketAGENDA
CHANHASSEN CITY COUNCIL
MONDAY, AUGUST 20, 2018
CHANHASSEN CITY HALL, 7700 MARKET BOULEVARD
A.5:30 P.M. WORK SESSION
Note: Work sessions are open to the public.If the City Council does not complete the work
session items in the time allotted, the remaining items will be considered after the regular
agenda.
1.West Water Treatment Plant Tour
B.7:00 P.M. CALL TO ORDER
C.PUBLIC HEARINGS
1.Pavement Management Program Funding Discussion to add Franchise Fee
D.ADJOURNMENT
Members of the City Council and some staff members may gather at Houlihan's, 530 Pond Promenade in Chanhassen immediately
after the meeting for a purely social event. All members of the public are welcome.
CITY COUNCIL STAFF REPORT
Monday, August 20, 2018
Subject West Water Treatment Plant Tour
Section 5:30 P.M. WORK SESSION Item No: A.1.
Prepared By Kim Meuwissen, Office Manager File No:
SUMMARY
The City Council will tour the West Water Treatment Plant located at 2100 Lake Harrison Road. City Council and
staff to meet at the site at 5:30 p.m. A box lunch will be provided.
CITY COUNCIL STAFF REPORT
Monday, August 20, 2018
Subject Pavement Management Program Funding Discussion to add Franchise Fee
Section PUBLIC HEARINGS Item No: C.1.
Prepared By Greg Sticha, Finance Director and Paul
Oehme, Public Works Director/City
Engineer
File No:
ATTACHMENTS:
PowerPoint Presentation
Public Comments
1
2Agenda•Explain the Purpose and the Need for Additional Funding for Pavement Management•Discuss what a Franchise Fee is•Input from Audience on Proposed Franchise Fee and current assessment practice
Proposed Franchise FeePavement Management Program (PMP) “Our Goal is to implement changes in the funding of the Pavement Management Program (PMP) by maintaining a sustainable and consistent funding source for PMP Street and Trail projects.”3
City Streets•112 Miles of Streets to Maintain•Total Estimated Replacement ValueLargest Capital Asset $183,000,0004
Pedestrian Trail Miles•60 Miles of Asphalt Trails− 37 miles within Street Right‐of‐way− 23 miles in Parks and open spaces− $9,100,000 Replacement Value5
The Right Actionat the Right Time……Prolongs pavement lifeKeeps City’s infrastructure in good conditionMaintain or increases property valuesHave a cost effective program 6
PavementManagement Program•PMP Started in 1991•Every Street and Trail is surveyed once every 3 yearsoDocument distresses – Potholes, Cracks, rutting etc. •Data is entered into program to generate a Pavement Condition Index (PCI)oRating 100 = new street, 0 =gravel street•For Past 10 Years, City’s average PCI has been around 70oGenerally considered in overall good condition7
Street Maintenance Needs•Most streets where constructed in the 1980’s and 1990’s (≈60%)•These streets are now coming due for maintenance•PMP estimates PCI will be 44 in 20 years with current funding levels0%5%10%15%20%25%30%35%40%Pre 1970's 1970s 1980s 1990s 2000s 2010sPercent of Streets Constructed in Decade827 miles38 miles
9
Maintenance StrategiesFor Life Cycle Extension10Seal Coating≈$1.40/syMill & Overlay≈$13/syReconstruct≈$108/syReclamation≈$21/syPavement Condition Index (PCI)Pavement Condition Index (PCI)Pavement Age (Years)•Estimated Cost of Street Maintenance with Routine Maintenance over 60 Years $42.40/sy•Estimated Cost of Street Costs with no Routine Maintenance over 60 years $108/sy•About 2.5 times more expensive to not do Routine Maintenance
11Proposed 10 Year Local Street Plan
12Proposed 5 year Collect Road Improvement Plan
Funding Need •The City has been spending about $2.0M annually on road projectsAverage 2.6 miles of streets improved annually•To maintain a PCI of 70, funding will need to be increased•PMP estimates funding levels should increase to $3.3M to maintain the current pavement conditionAverage yearly street project length would increase to 4.1 miles13
How have we paid for improvements to date?A: Revolving Assessment Construction Fund•Started in 2006 with $6.7M in transfers from funds with surpluses (mostly from decertified TIF districts)•Has been used to pay for all local street improvements that are assessed to benefiting property owners (40%)•Total expenses per year on average have been about $2.0M•The city assessment practice is to assess 40% to benefitting property owners, which would account for roughly $800,000 of the $2.0M per year, leaving 1.2M in city costs to all property owners per year14
15•Interest earned on repaid assessment•Occasional surplus transfers from the city’s general fund and other surpluses from other funds have been used•Interest earned on the fund balance reserves maintained in the fund since inception•In 2015, an opportunity was available to use a decreased debt levy to help fund PMP. That reduced levy was about $400,000 and has been in place since (currently $384,000).How has the City paid for the remaining $1.2M of its share of the costs?
The Real Need…… $3.3M not $2.0M16•The amount of streets needing significant improvements that were built in the 80’s & 90’s (see slide 7) is and will continue to increase•If the city goal is to maintain the current PCI at or near 70, $3.3M per year needs to be spent on annual improvements not the current amount of $2.0M, based on our PCI system projections•Increasing the spending to $3.3 without increasing the funding will cause the revolving assessment construction fund to be in a deficit by 2020
Discussions to this Point(How to achieve funding for the $3.3M) •City Council discussed extensively options for funding PMP in 2017─ Council Work Sessions1. June 12, 20172. August 28, 20173. September 11, 20174. September 25, 20175. October 9, 20176. November 27, 20177. December 11, 2017•Discussion Options have included:− Changing the percentage of assessments− Raising the Levy− Establishing a Franchise FeeMany Communities use Franchise Fees to Fund PMP•Based on these initial discussions, City Council asked staff to seek public comment on the possibility of implementing a Franchise Fee and look at all funding options17
What is a Franchise Fee?•Cities have statutory authority to have franchise agreements with each utility company (gas and electric) for maintaining city‐owned right‐of‐way•Within those agreements cities may charge the utility companies a fee for use of city right‐of‐way •Currently, the City of Chanhassen does not impose a Franchise Fee associated with those agreements18
Who has a Franchise Fee in Minnesotaand 7 County Metro Area?19Location Franchise Fee UseBrooklyn Center Capital Projects Fund‐ Street reconstruction fund Champlin Capital Projects Fund‐ Infrastructure ReplacementBloomingtonCapital Projects Fund ‐ Pavement Management& Bike TrailsEden Prairie Capital Projects Fund ‐ Pavement ManagementElk River Capital Projects Fund ‐ Pavement ManagementEdina Capital Projects Fund‐ Sidewalks and Bike TrailsGolden ValleyCapital Projects Fund ‐ street reconstruction fund for streetMinneapolis General Fund ‐G,E,& C for general use except PEG feesMinnetonkaCapital Projects Fund ‐ Burial of electric lines and street lightingNew Hope General Fund‐ Has had for 15 yearsPlymouth Capital Projects Fund ‐ Street reconstruction fundRichfieldCapital Projects Fund ‐ Overlay, sealcoating and removal of diseased trees. RogersCapital Projects Fund ‐ City’s Pavement Management ProgramSt. Louis ParkCapital Projects Fund ‐ City’s Pavement Management ProgramVictoria Capital Projects Fund – Undergrounding Power Lines
Why a Franchise Fee vs. a Property Tax Levy?20Property Tax LevyResidentialCommericial/OthersFranchise FeeResidentialCommericial/Others•A Franchise Fee offers more flexibility than a property tax which charges 83 cents of every dollar to residential properties. A Franchise Fee could be set to meet a funding goal.•The city is exploring the idea of funding all costs on a 50/50 basis between residential and commercial/other property owners, rather than 83/17 which is what a property tax levy would achieve.
Why a Franchise Fee?•Collects from all users of streets; Tax‐exempt properties who currently do not pay for PMP would now be contributing to PMP•If city levied for all of PMP, the average home ($350,000) would see an increase in their city portion of their property tax bill of between $200‐$220 or more if the assessment practice was discontinued. A Franchise Fee based on a 50/50 split would amount to around $100/year or $120 on a residential property and $360/year on a Medium sized Commercial Meter (Current Bill of $3,000/month).21050100150200250Levy Only Franchise Fee OnlyWhat would a residential property pay?Levy OnlyFranchise Fee Only
What would the Franchise Fee need to be in order to generate the $2.3M mentioned on the previous slide?•To achieve the total funding split of 50/50 between residential and commercial/other property owners, the residential Franchise Fee would need to be $4‐$6 per month per utility $100‐$14422
Schedule•Neighborhood Meetings:February 8, 2018, 6‐7:30 PM, Chanhassen LibraryApril 10, 2018, 6‐7:30 PM, Chanhassen LibraryJuly 24, 2018, 6‐7:30 PM, Chanhassen LibraryAugust 20, 2018, 7:00 PM with City Council, Council Chambers23
Frequently Asked QuestionsIs a Franchise Fee a Tax?A Franchise Fee has the same attributes and impact as a tax. The state statutes surrounding the collection of a Franchise Fee set the language for what the collection of the funds are called on the utility bills.24
Frequently Asked QuestionsWhy should a resident pay the same per month as a commercial business more frontage to streets and heavier more damaging vehicles? If a funding goal of 50/50 between residential property owners and commercial/other property owners is used, the result would be a Franchise Fee of $4‐$6 per month for each utility for residential and a $10‐$280 per month for each utility for commercial accounts.25
Frequently Asked QuestionsWill the Franchise Fee Increase over time?We have projected the current pavement conditions along with the projected funding from this Franchise Fee and confident that there will be no increase in the Franchise Fee for the next 12‐15 years. 26
Frequently Asked QuestionsCan the Franchise Fee be used for other purposes?While the statutes allow for the use of Franchise Fee revenues for other funding purposes, City Council’s intention is to use it solely for the Pavement Management Program. Whether a Franchise Fee or Property Tax Levy is chosen to fund the PMP program, there is no authority for a current city council to bind future city council’s on use of either funding source.27
Frequently Asked QuestionsAre there other options to pay for roads such as a sales tax, wheelage tax or Utility Fee similar to the city’s water & sewer funds?1. Wheelage Tax – Not allowed per state law for cities2. Street Recon Utility Fee – Not Allowed per state law3. Sales Tax – Allowed per state law but needs legislative approval. Currently special sales taxes have only been approved by the legislature for Stadiums, Park & Recreation amenities, convention center’s and community center’s. 28
All the variables that impact what a Franchise Fee or Property Tax Levy would need to be in order to fund streets at $3.3M per year:291. Is it the goal of the council to maintain a PCI of at or near 70?2. Will the assessment practice continue and if the answer is yes will it remain at a 60/40 cost share as in the past?3. If the assessment practice is discontinued will there be some consideration of rebate for those recently assessed?4. How long does the city council want to keep the revolving assessment construction fund with an estimated positive fund balance before re‐evaluating the revenue streams?5. What is the goal of the city council to fund the total cost of all street improvements between commercial and residential properties (50/50 or some other ratio)?6. Will the current levy of $384,000 remain in place for street improvements or does a reduced or larger levy want to be considered?7. There are a number of other staff estimates that are used to calculate any Franchise Fee or Levy for the PMP: Current special assessment interest rate of 5.75%, 2% interest earned in the revolving assessment construction fund, 3% increase in construction costs.
Pro’s & Con’s of Maintaining Assessment Practice:30Advantages for keeping the current assessment practice :•Diversified revenue streams for funding roads.•Consistent and equitable with previous projects•If a rebate program were to be considered it could result in some equity and administrative challenges.Advantages for eliminating the current assessment practice:•Creates a better working relationship between the city and residents on new projects•Administratively less time consuming and more efficient process.•Elimination of a perceived double taxation.
What feedback are we looking for this evening?311. Should the city continue the current assessment practice and should it remain at a 60/40 split? 2. What funding source/sources should be used to fund the remaining portions of the PMP program? Franchise Fee, Property Tax Levy, Assessments.3. If a Franchise Fee is the funding source chosen does a 50/50 cost split between commercial and residential properties seem appropriate or should it be some other ratio?
32
Comments
Since every property on Fox Path was assessed for street repairs last year, I do
not want to be charged a franchise fee for the next 20 years (I have lived here 26
years). How will you 'prove' this exemption for me and my Fox Path neighbors on
our bill? Or would you please reimburse us?e-comment
I was at the meeting last night (2/8/2018) about the Franchise Fee. I am still
digesting and thinking about this all, since this is news to me, but in general, I am
not overly opposed to it as long as your plan is as the preliminary information
shows: $4-$6 per utility for gas and electric and that you make sure the utilities
pass on the full amount to the city, and that you make sure the utilities do not
charge consumers any extra "handling" fees, and that commercial also pay - the
50% of the total, AND as long as you figure out a way to give those of us that have
recently been assessed a break - maybe a 10 year break from the time we were
first assessed for our street work! I understand it isn't easy to make it fair for all,
but there are enough people that have been talking about this fee long enough
(at least that is what we heard) that you should have already come up with or be
able to come up with a way to make it work. In fact, I think you should have been
able to provide some options of what you are thinking to make this fair. This
concern is known to you and shouldn't be new to you.e-comment
We have already been assessed for our street to be paved (even though there
was nothing wrong with our street). We couldn't afford to pay the bill in full at
the time so we are still paying for it. Now, we're going to have to chip in to pay
for everyone else's roads too? That is not fair. We should get our money back for
our road so that everyone chips in to get ours done too.We moved from
Hennepin to Carver to save money on taxes. Our taxes have gone up significantly
since we built our house in Chanhassen. Significantly! And now you're doing this.
Guaranteed we will be selling our house in the next year or two. We just can't
keep up. e-comment
Hoping that the city takes into account the amount of money we have already
paid in assessments on our home over the past 5 years with our recent
neighborhood street overhaul. We are not necessarily against this program for
future. However it is horrendously unfair to add a franchise fee now that we have
had to carry that high cost burden and will likely not see major repairs in the near
future. There must be a way to exempt certain areas for a certain amount of
time. e-comment
I am unable to attend the Neighborhood meeting on 4/10 to discuss the franchise
fee proposal to fund the City of Chanhassen Pavement Management Program. I
agree with the proposal as it appears to be a fair, equitable manner to assess the
citizens of Chanhassen for street repairs. However, for those neighborhoods that
have within the past year(s) paid for road repairs, I strongly encourage the
Council to consider waiving the franchise fee for 3-5 years. My neighborhood was
assessed $1,766 (a significant amount of money) for a pavement project in the
Summer/Fall of 2017.e-comment
I am not in favor of this if it increases the costs of residents. And it doesn’t seem
to be an equitable split. I would also like to see one more meeting be scheduled
for this topic as I’m not able to attend tonight’s meeting. Thanks!e-comment
Why is are just two of the utilities that use the City Right of Way being
considered? Shouldn't all utilities incur a franchise fee? I t would seem that the
two utilities chosen to incur the fee could start a legal suit against the City for just
choosing them. Cable TV, phone lines and fiber optic lines sometimes cause more
disruption and damage to the roadways and right of ways than the two utilities
chosen. Also it would spread the franchise fee across the City more equitably,
those properties within the city that do not have the utility service s would not be
charged and those that do would be charged. This equality can only occur if all
utilities are treated equally within the City Right of Way.
Also it doesn't seem clear to me what costs the franchise fees would cover?
Would it be just new construction of roadways? Would it include overlays? Would
it include paths or bike-ways? Sewer and water assessments if not used by
property owner?
Would it take away all potential assessments from property owners?e-comment
Regarding the franchise fee, I wanted to share my comments. I fully understand
the need to introduce the fee -- in particular when so many of the cities around
us already have it. Being one of several homeowners that just paid a special
assessment for work on the roads in our neighborhood, my preference would
lean strongly towards the combination option of keeping the 40% assessment in
place and then having a franchise fee at the lower end of the scale. This to me
seems the most fair to all. Those of us who just paid the assessment will really see
very little benefit from a full franchise fee since our roads won't need major
repairs for years. I also like the shift from the 83/17 sharing between
residential/commercial to a 50/50 scenario. Businesses have a lot more cars
coming and going, using our roads, whether it's employees or customers
compared to a single homeowner. Thanks for the informational mtgs and here's
hoping for a fair solution for all!e-comment
I am writing to support the franchise fee concept. It seems like a more equitable
approach to fund the roads which are used by all. I've had neighbors live here for
10 years, move out, and the new owner hit with a $10,000 bill. That seems really
unfair. I do hope that the fees are somewhat progressive (homes that use less
electricity are charged less fees, or some other similar mechanism), so that the
fee is not too regressive. There does seem to be a correlation between more
expensive homes and electricity/gas usage. I like the idea of a mechanism that is
not so individually burdensome, that will likely be less controversial once
implemented, and is likely to provide a more reliable source of funding.e-comment
I commend you for keeping your patience, for doing all you could to
professionally answer questions as best you can, especially when the final
decision is not in your hands. I'm sure you're glad that was the last of those
mtgs! e-comment
I believe I would support the Franchise Fee, however I wonder if there has been
any thought given to the "wear and tear" to our roads from the garbage and
recycling trucks. On our street, Hummingbird Road, there are at least four
different garbage companies providing service to our neighborhood. This creates
at least 8 weekly trips of garbage and recycling trucks on our road. If the City of
Chanhassen would contract with a single (or multiple providers having
designated zones of the city), this would significantly reduce the wear and tear to
our road over time. I know this is a practice utilized by a number of Twin City area
cities.e-comment
One of the highest volume commercial users of our city streets is garbage
haulers. We have more than 3 companies that come through the neighborhood
weekly. Can we consider options such as: Franchise fee on garbage haulers or
consulidation to one city contract for garbage pick up? e-comment
This really is a tax. The city is structuring this as a fee so the residents aren't able
to vote on this. I don't approve of this process. A fee is a tax...reminds of the
Pawlenty way of governing, call it something else because folks don't want to pay
more taxes. What relationship do gas and electric consumption have to do with
roads and trails? If you need more $$ for trails and roads, tax for it. Don't
penalize our usage of gas and electric to pay for trails and roads. Theoretically,
How would the fee be collected from folks that might be "off grid"? Powered by
Propane, solar or wind? e-comment
A few years ago when I was notified of the major street project proposed for
Minnewashta Manor, I was surprised to find out Chanhassen did not have a
franchise fee program already in place like surrounding cities. I was also
extremely surprised when I received my assessment information. I have lived in
the same home in Chanhassen for 28 years and plan to retire there. I do not have
the funds available to outright pay $8,000 therefore it will be assessed to my
property taxes with interest. I will not refinance my home to pay for this which
would cause me to lose my low interest rate and take on additional fees. I would
be happy to pay a franchise fee and hope the city moves forward with this to
maintain PMP projects and keep Chanhassen’s streets and trails in good
condition. I do not want to see another homeowner faced with my situation
having such a large assessment placed on their property taxes which will take
years to pay – well into my retirement budget. If the franchise fee moves
forward, I would like the city to include current projects that are underway such
as the Minnewashta Manor PMP project. Thank you.e-comment
To Whom It Concerns: On behalf of the Mission Hills Garden Homes Association,
which represents 56 homeowners, we want to make sure the City takes into
consideration when creating the proposed Franchise Fee, that our association
owns and does all maintenance of the streets in our developement. Each
homeowner pays monthly dues to our association to maintain our streets and
curbs, the City of Chanhassen does not provide that service to us. We plow our
own snow, fill road cracks, resurface the asphalt, and maintain the curb and
gutters. It would be greatly appreciate if someone from the City of Chanhassen
could get back to us on how our homeowners will be impacted (if at all) by the
proposed Franchise Fee. Thank you, e-comment
I wanted to say thank you for a very informative meeting. I thought you covered
all the details thoroughly. I found it a extremely disappointing that several
attendees were so belligerent -- if they'd been listening closely I believe their
questions had been answered. Or if they had arrived on time rather than after
the presentation, they wouldn't have had the questions they asked. I was the
one that left shortly after you broke out to do individual questions -- I had the
info I needed and really had no patience for the angry and childish behaviors of
the others in the room.e-mail
The biggest unaddressed issue was "I was just assessed and I am supposed to pay
a franchise fee". The only answer given was "We haven't discussed it with the
Council". You shouldn't even be having this meeting until that issue has been
adequately and fairly determined. It's way to easy for the Council to vote 3-2 and
say "It's a few people, too bad, we're changing the rules".comment card
Bad idea. Misrepresent tax property. Carver County citizens should have the right
to vote on this.comment card
When is upgrade/repairs planned for Bluff Creek Drive?comment card
Because I live on a private street and have to pay for any and all repairs and
improvements, I am hoping that the final arrangement would include some
assessment to the homeowners on the street; how the rest is paid is not really an
issue with me. Thanks for your work on this!comment card
Thank you for holding the meeting. For what it is worth, a franchise fee gets my
vote.comment card
Can you provide more detail on the remedy options that you are proposing for
homeowners that have been assessed in the past couple of years? I'm assuming it
will be a significant amount of time before streets are redone in my
neighborhood.comment card
*AGAINST - I just paid you $2,500 so I would like to be exempt for a fair period fo
time. *TAX ME!! Do not add a fee. Fee is taxation without representation.
Utilities and City will profit. I will have no vote unless it is a tax. I am OK with a
tax.comment card
Since we paid over $6,000 in assessment 4 years ago for our neighborhood roads,
wondering what will be done to make the new fees fair for us. Hopefully there
will be some type of rebate or a non-charge for a certain number of years for us.
This could be stipulated that when the house is sold the fees start up for the new
owners. Being retired, we paid the assessment in full to not have to pay the
interest. This makes us seem silly for doing that.comment card
I very much agree with the Franchise Fee Program but………???????comment card
Our street improvements were completed approx. 5 years ago (and not in a
satisfactory manner but that is a different discussion) for which we have already
been assessed. As those imporvements were long awaited (40+ years) obviously
our neighborhood will not benefit from franchise fee assessments probably ever
again. Furthermore, any further assessments should be waived to homeowners in
our situation or previously assessed/paid fees rebated.comment card
1) I have not (so far) heard a valid reson for franchise fees. I think it's far better
for residents to pay assessments after the work is completed rather than hoping
our "prepayments" will be used strictly for street improvements.
2) If franchise fees are implemented, there should be a "sliding scale" rebate of
fees such that households: a. That were recently (e.g. within 15 years) get full to
decreasing rebates. b. That have upcoming improvements (e.g. within 15 years)
get charged franchise fees plus full to decreasing special assessments. comment card
SUGGESTION - For those households that have recently paid an assessment, a
window of franchise fee exemption should be instituted. "Recently" could mean
20-25 years. If a utility exemption is not feasibile then perhaps a rebate would be
more prudent. The rebate/exemption would be effective for 20-25 years from the
time of the previously paid assessment afterwhich time the current franchise fee
would be applicible.comment card
From what I have learned so far the franchise fee seems like a very good idea.comment card
We understand need. Presentation was very helpful in explaining value of
franchise fee vs. property tax levy. Franchise fee sounds like the best plan so that
commercial businesses are fairly charged as well. As a (very recently) assessed
homeowner, we feel you should refund 100% of our assessment and then we are
comfortable with receiving the new franchise fee. Would need to create a tiered
refund plan going back X years. 1) Also need to impost road fees for all these
garbage contractors that are up and down these streets five days a week. 2) Need
to assess developers for new roads and this fee as well.comment card
Well run meeting. Very clear and informative. Question about life cycle; we often
hear "garbage trucks are bad." Is this a significant impact on roads? And would
the city consider taking over a single-provider contract to minimize the multiple
garbage trucks? Second, obviouslyI'm concerned about having paid assessments
on two properties. The franchise fee isn't going to kill us but it would seem there
could be some way for the city to develop a graduated transition into the fee for
those of us who recently have been assessed. A formula of some sort of partial
waiver or rebate would be nice.comment card