6. SR 10-30-1995 - Laserfiche WebLink

Home Browse Search

East Elk River Trunk Sewer Page 2 October 30, 1995 ----------------------- • The assessment rate for the total project area and the rate for • Phase L • The timetable for the entire project and Phase I. Some additional specifics about the project that the Council may want to know before a public meeting is held include the following: The city subsidy amount for industrial properties (if any) and where these funds are coming from and how the subsidy is administered (i.e. prepayment). The amount of city "holding" costs, where these funds are coming from, and the likelihood that the city holding costs will affect the city tax levy. The amount of property in Green Acres in Phase I, when it is estimated that the Phase I Green Acre properties will come off the tax roll, how the Green Acres property in Phase I will affect the bond structure, and what is the likelihood of the Green Acres properties in Phase I requiring a city tax levy. Without a doubt, one of the biggest concerns of city staff with this project relates to the "holding" costs. For example, we may go the route of one • assessment rate for all properties. If this rate is $5500 per acre and the actual cost for Phase I is $7200 per acre and the assessment area in Phase I is 750 acres, then the city has $1.3 million plus interest in holding costs ($7,200 - $5,500 = $1,700 x 750 acres = $1.3 million). Using a "zoning" assessment method and not one rate, but having a project cost for Phase I of $5.5 million and only assessing out $4.2 million of these costs, would also give the city holding expenses of $1.3 million plus interest. The city knows that it will not recapture most of these holding expenses until the end of the last phase of the project when all of the assessments are paid. This could be 15-20 years in the future before all of the holding costs are recovered. The reason why the city will recover these holding costs at the end of the project is due to the fact that the actual project cost in the last phases will be less than the amount that the city assesses out. This assessment rate in the last phases will be the same (plus inflation) as what was used in the first phase. So, if the city has $1.3 million plus interest in "holding" costs for Phase I of the project, the main question is, where does this money come from? The city cannot get this money from the bond repayment plan as this approach is already planned to be used to cover the Green Acre properties. It is common to structure the bond repayment around anticipated assessment collections. Approximately 42 percent of the Phase I project is in Green Acres. This large • amount of Green Acres properties, combined with a two year interest free policy and a possible slight lack of demand for development, makes the rate