Herald Journal - Enterprise Dispatch - Delano Herald Journal
Delano businesses learn about proposed assessment policy
Sept. 27, 2010
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By Ryan Gueningsman
Managing Editor

Delano business people learned more about the city’s proposed special assessment policy at the Delano Area Chamber of Commerce’s monthly meeting Sept. 16.

“There’s been a lot of print in the newspapers, but we’ve never heard how it affects business owners,” said Delano Area Chamber of Commerce President Joe Tipka. “It’s important to know how this will impact and affect us as years go on down the road.”

Delano City Administrator Phil Kern said for the last five to six months, the city’s proposed street assessment policy has been the “topic of much debate.”

Kern admitted the subject is a complex one, and said streets are one of Delano’s most significant assets, at a value of approximately $30 million. Street life expectancy is around 40 years, he added.

In 2003, and again in 2009, long-term plans for managing street infrastructure were looked at. Kern said this was done for two reasons – to get the most out of the investment, and also planning for replacement in an efficient manner.

“We have about 29.87 miles of streets in Delano, and a street typically costs about $1 million per mile to build,” Kern said.

Delano has some streets that are up to 60 years old, and are in need of replacement, he added.

“They are showing their wear and need repair,” he said. Several challenges are presented with doing street projects the way they have always been done. He said streets had been replaced as needed, costs were bonded, and the bond repayment was placed on the tax levy.

Kern said about $4 million worth of street work has been done in the last 15 years.

“The trend we’ve had the last 15 years doesn’t keep pace for 40 years,” he added.

He said with municipal debt limits in place, borrowing is limited to 3 percent of the market value. Presently, Delano is using approximately 30 percent. This is projected by 2024 to reach approximately 65 percent.

Four projects that are presently on the books include the fire station, city hall, Rockford Avenue/Tiger Drive, and Bridge Avenue/Highway 12.

Kern said the percentage of city revenue coming from property taxes is increasing, while other sources are decreasing.

“Our City of Delano budget is basically becoming dominated by the property tax system,” Kern said, adding that future changes in service/city needs will impact property taxes more directly.

This brings up the question of whether property value and classification is the most equitable way to allocate street costs.

Three options presented

Kern said there are three options to move forward with street repairs in the city.

The first is “status quo,” which means the city would continue to bond for projects and place payments on the tax levy. This would result in an approximate 2.1 percent property tax increase with each project (every three years). In this option, the city would deal with debt limit issues long-term.

A “pay upfront” option was also presented, of which Kern said the city would pay cash for reconstruction and raise its levy.

This would result in an approximate 10.1 percent property tax increase continued.

The third option is a combination assessment/property tax solution. This would assign a portion to assessments, and a portion to property tax. The city’s current proposed draft has an assessment of 50 percent for residential property and 70 percent for commercial property.

This results in a 0.8 percent increase in property taxes per project, Kern said.

The city’s 12-page proposal was developed on surveys done of other communities. Kern said about 75 percent of communities surveyed have an assessment policy of some fashion in place.

Mayer is at a 30 percent assessment, while Watertown assesses 80 percent, and Edina assesses 100 percent for some projects, Kern said.

The city has prepared the various options and presented them at a number of public hearings throughout the spring and summer months. Kern said, moving forward, the city council will continue to review comments and discuss modifications of options at an upcoming work session.

He added there will likely be a future public hearing on the issue in October or November.

The proposed policy can be found online at http://www.delano.mn.us/sitepages/pid838.php.

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