HomeMy WebLinkAbout15.B.4. Support Legislation to Provide Improved Funding Options for Street Improvements
IS.6.Y
CITY OF SHAKOPEE
Memorandum
TO: Mayor & City Council CONSENT
Mark McNeill, City Administrator
FROM: Bruce Loney, Public Works Director
SUBJECT: Consider Resolution Supporting Legislation to Provide Improved
Funding Options for City Street Improvements
DATE: April 15, 2003
INTRODUCTION:
Attached is Resolution No. 5881, a resolution supporting legislation to provide improved
funding options for City street improvements.
BACKGROUND:
The League of Minnesota Cities (LMC), City Engineers Association of Minn. (CEAM) and
the Minn. Public Works Assoc. (MPW A) collectively sponsored the preparation of a
reference report summarizing a compendium of "need-to-know" information regarding the
funding of local roads and bridges. This report, "Funding Street Construction and
Maintenance in Minnesota's Cities", was prepared by the Transportation Policy Institute
and has been distributed to City, County and State officials. The purpose of this report was
twofold: 1) It will serve as a resource for policy makers, city officials, citizens, the news
media and others in order to inform them on how the local transportation infrastructure is
currently financed; and 2) provide 7 specific recommendations that the Legislature can
consider in addressing these current funding challenges. This 50+ page document is an
excellent resource for those who are interested in learning more about how our
transportation infrastructure is financed on the local level and the related shortcomings that
local officials have to work with.
MUNICIPAL STATE AID STREET SYSTEM
Jurisdictional responsibilities of streets and highways between the various governmental
agencies (state, county and city) are closely related to their functional classification
(principal and minor arterials, major and minor collectors, and local access). The State
provides funding for their trunk highway system and assistance to the Counties and Cities
for the other higher classified streets via a constitutionally prorated distribution of the gas
tax (State - 62%, Counties - 29% and Cities - 9%), commonly referred to as the Municipal
State Aid (MSA) System. The City of Shakopee's share of this MSA gas tax allocation is
approximately $717,000 for 2003. However, this allocation can only be used on MSA
designated streets within the city, and the total number of miles of MSA streets cannot
exceed 20% of a city's total street mileage. Of the total 131.6 miles of local streets in
Shakopee, 23.6 miles are designated as MSA.
ISSUES:
Beyond the MSA street system, there are 108 miles of local city streets that have to be
constructed and maintained through either property taxes or special assessments. Also, Scott
County requires Shakopee to share in the cost of improvements for the 5 miles of County
Roads in our city.
Property Taxes: The City's 2003 General Fund levy includes approximately $100,000 for
the pavement preservation of streets. This revenue source is collected from all non tax-
exempt properties and is sensitive to any levy limitations that the State may impose and is
used for maintenance activities of streets such as seal coating and cracksealing.
Special Assessments: While most new local street construction is financed through special
assessments against the newly served properties, there are limited "benefited" properties
along most of the city's larger collector and arterial streets, similar to County roads. Also, it
is difficult and expensive to prove benefit to adjacent properties for local street
rehabilitation/maintenance projects (i.e. overlays, reconstructions).
The report contains seven recommendations for the Legislature to take into consideration in
helping local communities finance the construction and maintenance obligations of their
local streets. Four of those recommendations involve either increased funding from the State
or reallocation of existing revenue sources. In this extreme budget crisis, it is questionable
how far these will go. However, the other three (#2, 3 & 4) involve either enabling
legislation or redefining statutory language to assist local communities. These are
summarized as follows:
#2. Special Assessments
a.) Statutorily re-define benefit and/or the need to "prove" benefit through the very
expensive appraisal process to some threshold limitation (i.e. > 0.5% of Market Value,
$1,000, etc).
b.) Allow cities to "defer" street assessment for existing homeowners till time of
development as a connection charge similar to utilities, and
c.) Allow assessments to be tax deductible, instead of being treated as a capital improvement
to property.
#3. Transportation Utility This enabling legislation would allow cities the option to pass an
ordinance allowing them to charge roadway users based on their volume and/or
classification of vehicle. Heavy commercial vehicles and greater volumes accelerate a
street's natural deterioration and require greater and more expensive design components and
repairs. This Utility would also provide for otherwise tax-exempt properties to participate in
the maintenance costs of the streets they use without spreading the burden to the general
property tax payers. User fees are currently allowed for all types of utilities (sewer, water,
and storm drainage), but not for transportation.
#4. Impact Fees This one is very familiar to Eagan as our situation was the basis for a
Supreme Court Ruling that declared that the current State Statutes do not authorize local
municipalities to collect "impact" fees with building permits (Eagan's Road Unit Charge).
For growing communities, this is a very beneficial tool to collect revenue to finance those
greater arterial and collector system's construction and expansion costs.
LOCAL SUPPORT:
These three recommendations have a very good likelihood of Legislative approval this
session if sufficient support can be provided by local officials. Our local legislator,
Representative Mike Beard, has been a sponsor of the local transportation utility fund. It
would be very helpful if the Council could provide some direction or indication of its
support so that staff and our Legislators could respond accordingly during this session.
Copies of the Executive Summary and Recommendations are attached for the Council's
benefit. Copies of the entire report can be made available upon request.
ALTERNATIVES:
1. Adopt Resolution No. 5881, a resolution supporting legislation to provide improved
funding options for City street improvements.
2. Deny Resolution No. 5881.
3. Table for more information.
RECOMMENDATION:
Staff recommends Alternative No.1, to support additional funding options for City street
improvements. Even if the City adopts this resolution and legislation is adopted, the City
does not have to implement the fund option.
ACTION REQUESTED:
Offer Resolution No. 5881, A Resolution Supporting Legislation to Provide Improved
Funding Options for City Street Improvements and move its adoption.
~~fir
BL/pmp
MEM5881
..
..
.
.
. Executive Summary
,.
. Introduction
The purpose of this report is to assemble in one place much of the "need-to-know" information on
. municipal road and bridge funding in Minnesota's 854 cities. This report builds off of the
.. outstanding work done by Mn/DOT and others in their efforts to inform policy makers and citizens of
. the state who are interested in gaining a better understanding of the workings of road and bridge
. infrastructure investment in Minnesota. Our intent in preparing this report is twofold: First, the
report can serve as a resource for policy makers, city officials, citizens, the news media and others in
. order to inform the discussion on city road and bridge infrastructure, and the way it is currently
. fmanced. Second, the report proposes seven specific recommendations that the Legislature can
. consider to address the funding challenges identified in the report.
. Section 1: What does the city road and bridge system look like?
. ~ According to the most recent infonnation from the Minnesota Department of Transportation
. (MnlDOT), Minnesota has over 135,000 miles of roadway in the state. About 14 percent of
that total, equal to more than 19,000 miles is owned and operated by Minnesota's 854 cities.
. ~ This report distinguishes roadway mileage in Minnesota cities on the basis of two variables:
. funding source and city size. The report separately discusses the resulting three categories of
. city roads: 1) locally funded in cities under 5,000 population (1,703 miles, nine percent of
. total city mileage), 2) locally funded in cities over 5,000 (14,072 miles, 76 percent), and 3)
state funded in cities over 5,000 (2,818 miles, 15 percent).
. );> Minnesota cities are responsible for a total of 1,247 bridges representing 6.4 percent of the
. total bridges in the state.
. Section 2: How is the system funded?
. ~ Minnesota's cities finance their road and bridge infrastructure through a variety oflocal, state
II and federal resources. The emphasis in this report will be on local and state funding sources,
. since the intended audience of this report is state and local officials.
I) ~ The majority of funding for city streets, even among cities eligible to receive state aid, comes
primarily from local resources: property taxes, special assessments, and bonding.
. ~ The most significant state source of funding is the Municipal State Aid program which is
.' available only to cities over 5,000 in population and only supports 20 percent of those cities'
.' total mileage. MSA funding since 1988 (the last state gas tax increase) has failed to keep up
with inflation.
. );> Cities derive only a very small proportion of their total funding from federal sources.
.
. Section 3: Why are existing funding sources insufficient?
. );> This section details a number of the most important demographic trends that are important to
transportation system planners and elected officials as they consider options to address the
. current and future demands on roads and bridges in the state's 854 cities.
. 1. Traffic velumes are increasing.
. 2. Growth in city population and new housing is steadily increasing, placing greater demands
on city and residential street systems.
. 3. Truck movement is also increasing significantly.
I 4. City road and bridge infrastructure is aging.
.
.
I 1
..
.~-_..,._.~
Section 4: Findings and Policy Options
Sections 1 through 3 of this report discuss general information on the current city road and bridge
infrastructure, current funding mechanisms, and future funding challenges. This background
information is critical to understanding the broad trends and policies that affect city policy makers as
they strive to maintain and improve their transportation infrastructure while providing the best
possible value to the taxpayer.
In this section of the report, we attempt to identify and describe a handful of key findings that policy
makers should be mindful of as they consider various transportation funding policy options,
particularly as they relate to Minnesota city roads and bridges owned and maintained by Minnesota
cities. The options presented in this section were the outcome of collaborative effort on the part of
city staff and elected officials representing all of Minnesota's cities.
A. All City Systems
Findings:
#A-l: Maintenance costs increase as road systems age.
#A-2: Cities have implemented a variety of strategies to address the maintenance funding
gap.
#A-3: Cities have become more reliant on property taxes and special assessments.
#A-4: City bridges are in needs of repairs.
#A-5: Cities are often required to contribute to Mn/DOT and county road/County State
Aid Highway projects located within city limits.
Policy Options:
1. Provide funding for a "Local Road Improvement Program".
2. Provide cities greater flexibility to generate revenues through special assessments.
3. Provide cities with additional local taxing authority, including the authority to
I establish a "Transportation Utility".
i 4. Enact legislation authorizing cities to establish "Impact Fees".
B. Locally Funded City Streets - Cities Under 5,000
Findings:
#B-l: Most small cities are not spending enough on roadway capital improvements to
maintain a 50 year life cycle.
#B-2: Most small cities don't have a regular, annual road budget.
#B-3: Small cities are heavily reliant on locally generated revenues.
#B-4: On the whole, small cities don't receive significant resources from other local units
of government for "shared" projects.
Policy Options:
1. Provide funding for a "Local Road Improvement Program".
2. Allocate a portion ofthe existing 5% special fund to cities under 5,000 population.
....3. Allocate a portion of the Motor Vehicle Sales Tax revenues to a special fund for
, cities under 5,000 population.
11
I
.
.
.
1\1
. C. Locally Funded City Streets - Cities Over 5,000
.. Findings:
#C-l: Most large cities are not spending enough on roadway capital improvements to
. maintain a 50 year life cycle.
.. #C-2: The funding gap in MSA eligible cities is more severe on the locally funded roads
. than on the state funded MSA system.
. Policy Options:
.. 1. Provide funding for a "Local Road Improvement Program".
III 2. Provide cities greater flexibility to generate revenues through special
III assessments.
3. Provide cities with additional local taxing authority, including the authority to
III establish a "Transportation Utility".
III 4. Enact legislation authorizing cities to establish "Impact Fees",
III D. State Funded Streets - Cities Over 5,000
" Findings:
.. #D-I: The MSA system has grown much more rapidly since its inception 40 years ago
.. than the state owned system or the county owned system over the same timeframe,
.. yet the funding distribution has remained the same.
#D-2: Current MSA funding levels do not cover the full costs of improving these cities'
.. MSA street systems.
.. #D-3: MSA systems are being funded at a level that will result in a 53-year life cycle.
'" Policy Options:
'" 1. Increase the level of funding to the Municipal State Aid program.
'"
lit Section 5: Recommendations
~ This section of the report provides greater detail on the seven policy
..
options identified in Section 4.
..
.. Conclusion
III ~ The state should provide assistance to cities to address their current and
future funding shortfall by granting greater local revenue raising authority
'II and by providing cities with additional tools to allow them to meet their
'II specific needs.
.. ~ The sponsors of this report are also hopeful that the findings identified
.... herein will encourage state and local policy makers to examine and
.... consider capital investment policies, such as a statewide pavement
I) management plan, that would make the most efficient use of scarce
. resources as the demands on the road and bridge network increase in the
future.
It
tJ
III
..
..
111
..
..
CITIES THAT HAVE PASSED RESOLUTIONS SUPPORTING IMPROVED FUNDING
OPTIONS FOR CITY STREET CONSTRUCTION AND MAINTENANCE
March 20, 2003
Akeley
Annandale Hartland Pipestone
Argyle Hastings Proctor
Arlington Hewitt Richmond
Aurora Hoffinan Rosemount
Austin Holdingford Rushford
Barnsville Inver Grove Hts Sanborn
Barrett Jackson Sandstone
Battle Lake Keewatin Sebeka
Beardsley Kimball Shafer
Beaver Bay La Prairie Silver Bay
Bellingham Lake City Spring Lake Park
Bemidji Lakefield St. Michael
Benson Lakeville St. Paul Park
Braham Laporte South St. Paul
Brooklyn Center Little Falls Strandquist
Buhl Luverne Tamarack
Bumsville Lynd Taunton
Chaska Mahtomedi Twin Valley
Chisholm Maple Grove Vergas
Cokato Maple Plain Waldorf
Comfrey Mayer Walters
Currie Milan Wanamingo
Delano Minneota Waseca
Eagan Mounds View Waverly
East Bethel Mountain Iron Welcome
Edina Murdock Westbrook
Elk River New Market Woodbury
Elmore North Branch Wykoff
Emily Ogilvie Zumbro Falls
Eveleth Okabena
Fergus Falls Olivia
Forada Oronoco
Fountain Ortonville
Garrison Osakis
Granite Falls Osseo
Hanley Falls Pequot Lakes
RESOLUTION NO. 5881
A RESOLUTION SUPPORTING LEGISLATION TO PROVIDE IMPROVED
FUNDING OPTIONS FOR CITY STREET IMPROVEMENTS
WHEREAS, Minnesota contains over 135,000 miles of roadway, and over
19,000 miles-or 14 percent--are owned and maintained by Minnesota's 853 cities; and
WHEREAS, city streets are a separate but integral piece of the network of roads
supporting movement of people and goods; and
WHEREAS, existing funding mechanisms, such as Municipal State Aid (MSA),
property taxes, special assessments and bonding, have limited applications, leaving cities
under-equipped to address growing needs.
WHEREAS, maintenance costs increase as road systems age, and no city-large or
small-is spending enough on roadway capital improvements to maintain a 50-year
lifecycle; and
WHEREAS, the Council of the City of Shakopee finds it is difficult to develop
adequate funding systems to support the City's needed street improvement and
maintenance programs while complying with existing State statutes; and
WHEREAS, the League of Minnesota Cities, the Minnesota Public Works
Association and the City Engineers Association of Minnesota, have jointly sponsored the
development of a report entitled Funding Street Construction and Maintenance in
Minnesota's Cities wherein (1) the street systems ofthe cities within the State are
inventoried; (2) the existing funding systems are detailed and evaluated; and (3)
recommendations are made; and
WHEREAS, cities need flexible policies and greater resources in order to meet
growing demands for street improvements and maintenance.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE
CITY OF SHAKO PEE that this Council concurs with the findings of the above
referenced report, and fully supports the recommendations contained in that report; and
BE IT FURTHER RESOLVED BY THE COUNCIL OF THE CITY OF
SHAKO PEE that this Council supports the adoption of legislation that would provide
cities with the policy options they need to address current and future challenges in
providing adequate street improvement and maintenance programs.
Adopted in session of the City Council ofthe City of
Shakopee, Minnesota, held this day of ,2003.
Mayor of the City of Shakopee
ATTEST:
City Clerk