Loading...
HomeMy WebLinkAboutSP April 15, 1981 ~ 01 ANDOVER SP~CIAL CITY COUNCIL MEETING - APRIL 15, 1981 ~1I NUTES A Sperja1 ~~eting of th~ Andover City Council was called to order by Mayor Jerry Windschitl on April 15. 1981, 7:18 p.m., at the Andover City Hall, 1685 Crosstown Bou1evard NW for the purpose of interviewing app1ica~ts for appointment to the Park and Recreation Commission and for the discussion of the First Draft Proposal of the Trunk Sewer Assessment Policy. Councilmen present: Jacobson, Lachinski, Ortte1, Peach Counci 1men absent: None & PARK AND RECATION COMMISSION INTERVIEWS The Council interviewed the following applicants: Mrs. Gloyd Boyum Merlyn Prochniak John Wielgosz Jo Zi1hardt Each applicant was asked a series of questions alternately by the Councilmen, including why the applicant desired the position, what they would like to see accomplished in the City relative to parks andrecreation,is there anything that would put the appli- cant in conflict with the City of Andover business, how much time the applicant can spend on Park Board business, etc. After the interviews were completed, the Council discussed the qualifications of the various applicants and made the following appointments: MOTION by Ortte1, Seconded by Lachinski, that we appoint John Wie1gosz to a three- year term on the Park and Recreatim Commission. Motion carried unanimously. MOTION by Peach, Seconced by Jacobson, that Jo Zi1hardt be appointed to the Park and Recreation Commission for a three-year term. Motion carried unanimously. MOTION by Ortte1, Seconded by Lachinski, that Mer1yn Prochniak be appointed as an Alternate Member to the Park and Recreation Commission to fill the first seat that becomes vacated by any existing Park member through 1981. Motion carried unanimously. Recess at 8:25; reconvene at 8:34 p.m. FIRST DRAFT PROPOSAL OF THE TRUNK SEWER ASSESSMENT POLICY Others present: City Attorney, William G. Hawkins; Fiscal Consultant from Springsted, Inc., King Forness; TKDA Engineers, Dewey Kasma and Mark Schumacher; City Engineer, Larry Winner; and City Clerk, P. K. Lindquist. Discussion was on the preliminary document prepared by Springsted, Incorporated, First Draft Proposal, Trunk Sewer Assessment Policy, City of Andover, Minnesota. Mr. Forness gave a brief background of establishing a uniform assessment for recovering the cost of constructing the portion of the City's trunk sewers. He, along with the TKDA Engineers, also explained that the proposal is based on the assumption of two units per acre to establish an assessment or connection charge equivalent per unit to be used only in the 1975-1 and 1976-1 sanitary sewer project areas. That estimated $450 per-unit charge is the equivalent of an area assessment or $900 per acre which would be used for all unplatted areas, also based on ultimate development of two units per acre. It was noted that using the basis of ultimate development of two units per acre does not take into account the development of multiple units. The report deals strictly with single-family residential development, but it could be within the City's policy to make adjustments for commercial and multiple unit - -, Special City Council Meeting April 15, 1981 - Minutes Page 2 developments. If the Council agrees to the concept proposed, then it is simply a matter of adding a surcharge for multiple units and commercial, usually factored in. Mr. Forness explained that they had considered converting the assessment to the open areas in the 75/76 project areas to a per-acre assessment, but there is a problem in doing so on project work already completed, in that the City would have to be able to prove in court why it wasn't assessed on that basis at the time of the project. There is also a bookkeeping problem as well. Mayor Windschit1 suggested asking those property owners if they would pay the area assessment now rather than pay the per-lot connection charge once the land is developed, feeling that it would be a greater benefit to the property owner to pay the area assessment now. The Mayor's concern was that the City not over levy for those projects in the future. Mr. Forness explained they have taken the approach that if the $1,000 connection charge on the 75/76 projects is excessive, then it should be adjusted so that the City doesn't continue to overcharge from here on out. Then at some point when the money is accumulated and it is legal to do so, the excess originally paid by the property owners would be given back to them to make their payment equal. Mr. Forness then reviewed Exhibit I, the fourth column, Net Levy Required, which is the amount needed to service the two bond issues after making use of the prorated fund balances and applying the annual assessment income. It had been intended that new connections would come in sufficient numbers each year to be able to cancel the levy; however, the new connections are not coming in at that rate. In 1976 there were 8 connections; 1977, 28; in 1978, 17; and in 1979, 4 connections. The interest figured is at the same rate as the City is paying on the two bond issues, respectively. Mr. Forness stated he is not willing to speculate as to what interest rates are going to be available to the City over the next 20 years. However, the figures shown do include the actual interest received to date, shown as part of the fund balance. Councilman Lachinski and Mayor Windschit1 expressed the opinion that using the bond issue interest rate is impractical and that the projections are then unrealistic because the interest actually received is greater than the bond issue interest rates. Mr. Forness stated he would use any interest rate the Council directs, but he would not be willing to make that speculation because of the vo1ati le market today. Councilman Lachinski felt that the reason for the debt service levies in the past was because insufficient funds were coming in to pay back the bonding for the aerial mapping. He felt that is a separate issue and should not be reflected in the figures for this . purpose. Mr. Forness stated there is a levy necessary to support the portion of the debt incurred for the aerial survey and mapping. Ms. Lindquist also explained the bookkeeping for those bonds for the 1975-1, 1976-1, and the aerial mapping, noting that the aerial mapping portion is kept separate. Discussion continued on the interest rate received for the prorated fund balances, with some on the Council arguing that a higher rate than the bond issue rate should be used, especially in light of today's high interest rate market, and that using a higher rate of return, combined with new construction, would result in sufficient funds to be able to cancel the debt service levy requirements for the remaining years. There was the concern of ending up with an enormous fund balance when the bonds are retired. Mr. Forness stated that at any point the City can actuaria11y run a balance in the account at a given rate of interest which matches the requirement, the City can comfortably. say there is no longer any need for a levy to meet the debt service obligations. Mr. Forness explained that the figures arrived at for the area and unit assessments were based on 1980 dollars, and he felt it would get unnecessarily cumbersome to back the $450 unit assessment down to what it would have been in 1975 and 1976. They are suggesting that not be done nor to take into account a refund to those residents based Special City Council Meeting April 15, 1981 - Minutes Page 3 on indexing of the $1,000 paid four years ago. Mr. Schumacher also explained that the $900 per-acre assessment figure represents the amount to be sufficient to construct the remainder of the trunk sewer line for the urban service area plus provide for the $550 refund to those in the 75/76 projects who originally paid the $1,000 connection fee. Mr. Forness continued that the $900 per-acre assessment represents approxi- mately $600 for the new construction, which would escalate on an annual basis based on Engineering News Record Index. The balance, $300, would be used for the refunds and represents the new area's cost of the trunk line. That would escalate at 5 percent, because it then equates to the connection charges to be used for the undeveloped areas in the 75/76 project areas. When Mayor Windschit1 challenged the reason for the escalation of the $300, Mr. Kasma argued that the City is carrying those assessments for the undeveloped land in those sewer porjects and paying the 5 percent for them. Discussion was then on the mechanics of giving the refunds to those residents in the sewer projects who paid the $1,000 connection fee. It was Mr. Forness' and Mr. Kasma's opinion that the money collected at this time, including the additional $300 per acre specifically levied for the refunds, must be applied to the debt service and has to accumulate in a fund. Mayor Windschit1 felt that with the development of the Good Value property and the property east of the creek, enough funds would be collected to issue a refund in a relatively short period of time. Mr. Forness explained that at the time the City sells the bonds, it pledges that the assessment income, connection charge income, tax levies, and interest earned in support. of that bond issue will go into the debt redemption account, and it can't be used for any other purpose than to make bond payments until there is enough in the fund balance to make the remainder of the bond payments. Mayor Windschit1 then suggested that the sewer user charges be cancelled or reduced for those 75/76 projects until such time as they got back enough money to make every- one equal, and to proport, onately increase the sewer user charge for the rest of the projects. Otherwise it will be 10 to 15 years before any refund could be given. Another suggestion was to require a surcharge on the sewer user charge for a determined number of years to those in the new project areas and to eliminate the $300 in the per- acre assessment charge. Or require the developer to pay the $300 directly to the City to in turn be reimbursed to the original project areas. Attorney Hawkins stated as a general rule, those originally paying the $1,000 connection charge are not entitled to interest on the money that would be refunded until such time as the court orders judgement, and then it accrues interest at that point. A lengthy discussion continued as to ideas for refunding a portion of the connection charges to those original project areas with many ideas presented and discussed as to why or why not they are feasible. Mr. Forness then diagramed how the refunds could be realized before the end of the bonding period, assuming that the interest earned will be higher than the bond issue. He agreed that the fund must be monitored every year, looking at the interest earned, and when it can be actuaria11y shown there is enough in the fund to service the balance of that debt, it is put in an escrow account to payoff the bond. The fund can then continue to build until $389,400 more is collected which is the amount needed for refunds. Discussion was on an alternative to Mr. Forness' diagram, in that the additional $300 collected could be assigned as a "connection charge" and not be used toward the debt service of the bond. Some Counci1members felt that if the fund balances are run using a higher interest rate, the fund could stand on its own even without any further connection charges. Mr. Forness stated that with what was earned the past few years, it has not made the issue sound; but he could rerun the figures using a different interest rate, whatever figure the Council chooses to use. It wa~ determined that the/àgB~aJervice payment for the aerial mapping is $7,884 a year to retire the $106,000 bond. The Council asked that that not be included in the figures Special City Council Meeting April 15, 1981 - Minutes Page 4 for the sanitary sewer projects. It was also suggested that the figures be rerun two more times for the debt service for the 1975-1 and 1976-1 projects, done at the interest rates of 12 and 10 percent. It was also suggested that some figure be used to show the number of homes built in these areas yearly; however, no specific figure was agreed upon. Mr. Forness stated that the rerunning of the numbers is not a major operation, but it could have an effect of changing all the figures -- the proposed refund, the per- unit charge, etc. Council also questioned whether the approximately 400 acres being calculated as the remaining undeveloped land in the 75/76 project areas is the correct number. It was also suggested some factor be included for multiple unit development, and there was some discussion as to how that could be determined. Councilman Lachinski felt that not only the per-acre and per-unit assessment be determined, but that in addition a connection charge be levied as well. Mr. Forness suggested that an additional unit charge be established for multiple units and commercial development which can be used for sewer maintenance, but it would not be used to offset the bond. He didn't feel it was feasible to speculate on a number to use for multiple and commercial development. But if the policy was established to area assess the $600 per acre for the construction cost and have the $300 as a connection charge, it might be possible to put the connection charge in a fund to be used for the refund to the original project area. Discussion was also on whether the connection charge from developers would be payable along with the $600 assessment, over a shorter priod of time as dictated by a develop- ment contract, or at the time a building permit is issued. It was then suggested that it be treated as being assessed at $900 for the purposes of rerunning the figures, $600 for construction costs and $300 for refund as originally proposed. The issue will be discussed again once the figures are rerun using those suggestions made this evening. The question of costs for the Draft Proposal from Springsted and TKDA is to be discussed at the next Council meeting. MOTION by Jacobson, Seconded by Ortte1, to adjourn. Motion carried unanimously. Meeting adjourned at 10:40 p.m. Respectfully submitted,~._ ~"'\\\~ ~~<~ Marc 11a A. Peach Recording Secretary