The Northfield City Council is in the beginning stages of evaluating whether to continue with special assessments, a practice utilized every year for city street reconstruction projects.
On Tuesday during a study session, consultant Doug Green said the current trend in cities to help fund street reconstruction projects are franchise fees, which are paid by all property within cities that utilize streets, including tax-exempt land. It is seen as diversifying the city’s revenue sources, potentially reducing its reliance on property taxes, local government aid and assessments.
Perceived disadvantages to the plan are that the taxed amount would be the same for all residential homes, regardless of the property or utility use. Franchise fees, like property taxes, are seen as potentially making cities less desirable. They can be implemented in a possible flat fee format, a percentage of consumption used by each utility account, percent of revenue or a hybrid of a flat fee and a percent of use or revenue rate.
Special assessments are a common tool to fund and finance infrastructure improvements. They ensure all properties, including tax-exempt parcels, pay for the improvements, thereby reducing the overall property tax rate.
Some perceived disadvantages include that the special assessment process is complex, long and expensive. The League of Minnesota Cities guide to special assessments is more than 100 pages. There is believed to be no perfect method for assessing property, and multiple deferral options can make revenue projections difficult.
There was an estimated $1.4 million in outstanding special assessment revenue as of Dec. 31 in Northfield. The city’s annual assessment revenue is approximately $500,000.
Replacing special assessment revenue with a property tax levy would result in a 5 percent levy increase. Special assessments are not used for street projects in Minnetonka, and completely fund such projects in Edina.
On Thursday, Mayor Rhonda Pownell said there is a lot of work for the council to do before it makes a decision on the future of special assessments.
“That was the first time that the City Council had an opportunity to really receive some information, and that presentation was the first of a two-part series,” she said. “We’ve not had the opportunity to really discuss that in totality as a City Council.”
To Pownell, the possibility of shifting away from special assessments for street reconstruction projects could allow the city to take better care of its roads, possibly instituting a less complicated, time-consuming ways of paying for projects.
“I’ve heard from a lot of people the potholes are unbearable throughout our community and our roads could be better cared for,” she said.
“Special assessments are really a part of our road construction projects every year, so our city staff are doing work through that special assessment process every single year. So the amount of time and energy and efficiencies that could be discovered if one of these other ways to bring in some financial resources to fund our streets is better, it could be good.”