5.5. SR 03-24-2003 - Laserfiche WebLink

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more equitable way to distribute the costs to those who benefit the most, while minimizing the demand on the city tax levy and statutory debt limitations. Special assessments are workable in some circumstances, but not all. First, special assessment proceedings are cumbersome. The city must present evidence to prove that the assessment does not exceed the benefit, and in many instances, the cost of the improvement does in fact exceed the benefit to the properties, so the amount assessed fails to cover the expense. Most cities are able to special assess only 25 percent to 50 percent of street reconstruction projects. Second, local officials often have strong reservations about special assessments since they may result in financial hardship for certain residents, particularly those living on fixed incomes. Unlike the general property tax, special assessments are not tax deductible, so affected property owners must bear the full cost. State Funding Sources In general, the state of Minnesota has three ways to provide funding to Minnesota cities to support local roads and bridges: 1) regular state general fund appropriations, 2) the Municipal State Aid program, and 3) state bonding. General Fund Appropriations The state has at times appropriated state general funds for specific local road and bridge programs or projects. As an example, the state provided "one-time" funds during the 2000 Legislative session to specific city streets ($6.2 million) and to local bridges ($39 million for both city and county bridge structures). It is fair, however, to characterize the state general fund appropriations to Minnesota cities as limited, even during healthy economic times. Municipal State Aid (MSA) The second way that Minnesota cities receive funding directly from the state is through the Municipal State Aid (MSA) program, which was first implemented in 1958. The MSA program is administered by the Mn/DOT State Aid for Local Transportation Group, and provides funding to support city roads and bridges in cities in which the population exceeds 5,000. In 2002, 130 cities qualified for MSA assistance. MSA provides funding support for 2,818 miles of roadway, which is about 15 percent of the total city street mileage statewide (including all Minnesota cities - MSA eligible large cities and the remaining small cities). If one considers only the mileage in the 130 MSA eligible cities, the program provides aid to support about 20 percent of those cities' total mileage. The MSA program provided $117 million to eligible cities in 2001. Cities that receive MSA may use the payment to support maintenance and construction on its eligible mileage by using any of the following options: · Use the current allocation tofinance currentprojects. Borrow against the city's future MSA allocation. This option, known as the General Fund Advance option, allows a city to borrow funds for improvements from the city's general fund, and with the approval of the Minnesota Department of Transportation, repay the loan with the city's annual MSA allocation over a period not to exceed the following five years. · Issue bonds that can be repaid with MSA funds. The city is limited to borrowing no more than the amount that will allows the annual debt service to be less than 50 percent of the city's most recent annual MSA construction allocation. · Use MSAfunds to fulfill costparticipation responsibilities associated with county or Mn/DOT projects. · Request funds from the state's "turnback" account. This option applies only in specific circumstances. Under state law, if Mn/DOT "turns back" a former Trunk Highway to a local