Special Assessments Taskforce - August 28, 2018 Minutes
The first meeting of the Special Assessment Taskforce was held in the City Commission Room at Fargo City Hall at 7:30 o'clock a.m., Tuesday, August 28, 2018.
Present: Jim Bullis, Kent Busek, Darrell Christianson, Gloria Palm Conner, John Cosgriff, Don Dabbert Jr., Bernie Dardis (ex-officio), Kristy Fremstad, Tony Gehrig (ex-officio), Tony Grindberg (Chair), Curtis Goroski, Kevin Hanson, Jeff Volk, Bill Worth.
Commissioner Tony Grindberg presiding.
Commissioner Grindberg welcomed the Taskforce and asked the members to introduce themselves and share their interest in the topic of special assessments.
Bill Worth, homeowner, said his interest began two and a half years ago when he saw the physical and economic affects associated with Improvement District No. BR-16-F and its related specials.
Jeff Volk said he represents the Fargo Moorhead West Fargo Chamber of Commerce. He is a West Fargo resident; however, his firm, Moore Engineering, has helped many cities, water districts, etc., deal with specials and he has concerns on impacts statewide.
Kevin Hanson, Director of Lending at Gate City Bank, said in the lending industry he sees the impact of special assessments in affordability for real estate purchases and to new and existing buyers. He said he has concerns about the effects on those with fixed incomes.
Curt Goroski, an industrial engineer, said he became interested when he attended a City Commission meeting where the Taskforce was proposed. He said he feels he could provide pros and cons and there are issues with fairness to be addressed.
Kristy Fremstad, small business owner, said she sees impacts caused by arterial assessments and for commercial property. She said there are different assessments when comparing small to large.
Jim Bullis, attorney and developer, said his interest is in how special assessments impact green field development and his clients. He said this is a good opportunity to explore alternatives and help homeowners get the most bang for their buck.
Ken Busek, CPA, said he sees a great impact on his client base, particularly in the area of commercial development and real estate.
Darrell Christianson, retiree, said his main concern is making sure the changes do not have an adverse effect on the senior population.
Gloria Palm Connor, Fargo-Moorhead Area Association of Realtors, said her concerns are about consumer end costs and how specials affect first time homebuyers getting into the market.
John Cosgriff, Incubator Manager at NDSU Research and Technology Park and former City Commissioner, said he served on a similar Taskforce 15 years ago. He said care must be taken regarding impacts and, while this is a difficult undertaking, he hopes it can be done right.
Don Dabbert Jr., Home Builders Association, said he has concerns with impacts to developers and first time homebuyers. The gap is widening and becoming out of reach for some, he said, and he would like to see how to allocate some of the costs. He said the pace of the costs is increasing greater than incomes.
Bernie Dardis, West Fargo Mayor, said he appreciates being able to participate as an ex-officio member of the Taskforce. West Fargo is faced with many of the same issues with specials putting pressure on the schools, community and the taxpayer.
Commissioner Tony Gehrig said the system is not working any more. He said he hopes the outcome of the Taskforce will be two or three options outlining impacts so decisions can be made.
SCOPE OF WORK:
Commissioner Grindberg said some of the language being operated under has existed for hundreds of years and he showed an original book containing the 1886 Century Code. He said each member has a binder containing documents including the scope of work, recommendations from the 2003 Taskforce, copies of the press release of proposed State support from oil proceeds to benefit municipalities/cities plus background information.
Commissioner Grindberg said the goal is to complete work by December. He said at the September 6th meeting there will be presentations by attorney John Shockley and Blake Crosby from the League of Cities who will give views and background information on specials. He said Commissioner Gehrig leaves September 10th until mid-October for training. There could be a community forum or two, maybe mid-November, for discussion and all options are on the table, he said. It is important to make a solid effort, he said, and have a report by December of what the residents in Fargo think. He said the report could come to the 2019 Legislature. An upside is the fiscal condition of the state and the proposal to use oil revenues for infrastructure, he said.
CITY OF FARGO INFRASTRUCTURE POLICY:
Special Assessments Coordinator Dan Eberhardt introduced Special Assessment Commission members in the audience - Steve Bladholm and Daniel Dunn,
and Special Assessments Manager Doug Durgin. He shared history on special assessments, which, he said, are based on prescribed benefits, with goals being longevity, consistency and uniformity. Special assessments have been in existence since the 1880s and are governed by ND Century Code and mandated to be approved by the City Commission’s funding policy. There were adjustments made to the policy in 1990, 1999, 2006, 2008 and 2013, he said. In 2003, he said, a Taskforce recommended changes that were implemented such as narrow right-of-way and paving sections and reducing fees and the bond interest markup. In 2016, caps were removed for reconstruction of local infrastructure and replaced with a percentage excluding arterials, and moved to a 50/50 split based on front footage, he said; however, the 2013 policy was reinstated in 2018. He said every parcel is assessed for one north/south arterial and one east/west arterial and local costs. Historically reconstruction capped costs were based on new construction costs and benefit, he said, is calculated on front foot (35’ offset), square foot or a combination of both.
City Engineer Brenda Derrig said if comparing the 2013 and 2016 policies, it is nice for reconstruction assessments to have capped costs that allows homeowners to have a better idea of costs. She said new development has always been 100% assessed with no contribution from the city, so that did not change. She outlined new development and reconstruction project sequences and timelines, stating that a new request for development starts with PWPEC (Public Works Projects Evaluation Committee) and then the Engineering Department begins design work. After that, she said, it goes to the City Commission with a legal description for the assessment district, an engineering report and the bid item list, and again it goes to the City Commission to call for advertisement for bids, either in 15 or 30 days. Tabulations of bids go to the City Commission to award, she said, and the City provides oversight during the construction phase until final inspection and acceptance.
Mr. Eberhardt said once the City Commission approves a project assessment district, the benefiting area cannot be expanded without requesting recreation of the district. He said the first step shows the grid, the property owners are not noted and then it gets broken down to apply benefits. The protest period is 30 days, he said, after which it comes back for tabulation, then a percentage for engineering fees is added, averaging 22%.
DISCUSSION, Q & A:
In response to a question from Mr. Hanson asked how roads are assessed, Mr. Eberhardt said there is a narrow scope, what abuts pavement with arterials being typically halfway to the next arterial, bound by where the start and finish are.
Commissioner Gehrig said it is subjective, that is what the residents may not like. There is a policy in place but it certainly could be assessed in different ways, he said.
Ms. Derrig said there are State statutes and infrastructure policies and funding is determined by the City.
In response to a question from Mayor Dardis about resident notification, Mr. Eberhardt said property owners are notified by personal letters that include estimates.
Mr. Goroski said using old State codes that date back to the 1800s to define benefits is perhaps something that needs to be looked at.
Mr. Eberhardt said nothing has really changed over the years. Once a project is final and certified, the Special Assessment Committee looks at each project, he said
Taxpayers are notified of special assessment hearings and when/where they can appear to protest if they feel their assessment is not correct, he said.
Mr. Volk said he would like to know when the decisions are made, who makes them and what are local decisions and what are not. He said the special assessment statue is a unique tool economically and he is concerned if the direction is to kill specials.
Commissioner Gehrig said he hopes this group comes up with options, things such
as – “here’s what it looks like with option a, b, c today versus what it could look like tomorrow” and “if specials are gone, this is the affect; or at 80/20 split, it looks like this,” etc.
Commissioner Grindberg said there is some rationale in separating redevelopment from green fields.
Ms. Derrig said green field projects come as a request from the developer so there are typically no protests. For rehab work, she said, there is an infrastructure Capital Improvement Plan and anything dealing with paving always has a protest option.
Mr. Cosgriff said when he was first on the Commission and Bruce Furness was Mayor in the 1990s, everyone was so proud to have found funding to begin rehab of infrastructure; however, a conversation with Former City of Fargo Director of Engineering Mark Bittner indicated it would take 100 years to rehab the entire city. He said there is a need to look at reconstruction versus new. Citizens get upset over reconstruction, he said, but the system only works if all ends work together.
In response to a question from Mr. Dardis about whether this discussion differs from that in 2003, Mr. Cosgriff said this is remarkably similar; however, costs are escalating now. He said then there was an assumption that specials were created for a more competitive developer landscape.
In response to a question from Commissioner Gehrig about the approval process for green field, Ms. Derrig said the proposal is brought to PWPEC, then Engineering starts the plans and it comes before the City Commission to create a district.
Commissioner Gehrig said the average citizen does not know about that, especially if the item is placed on the Consent Agenda and usually not discussed.
Mr. Volk said the perception is there is debate when Planning approves a plat but it is difficult then to say it is not going to be developed.
Mr. Eberhardt said it all starts with annexation, either at the request of the developer or the City, it then goes through the planning process and the City Commission approves the plat, which starts the ball rolling. At the end of the whole process, it comes back to the City Commission, he said, and each phase touches multiple departments and staff.
In response to a question from Mr. Goroski questioning if a development happens adjacent to a current landowner, such as a road between, does the landowner ends
up picking up costs and how is that a benefit, Mr. Eberhardt said there might not be a benefit today; however, it is there if the person chooses to benefit from it.
Ms. Derrig said Mr. Eberhardt looks at a benefit of infrastructure and the funding that goes with it. She said there are infrastructure and deferral policies, which are tools that help.
Mr. Bullis said he would like to correct the talk about where the decision starts. He said he feels a decision is made long before a plat is turned in, driven by City policy to put a road in. From a new development standpoint, those numbers are getting so big and can only be moved around to so many spots, he said. Policy decisions are at the Commission level, he said, and Fargo is hitting a cap on what homeowners can afford. He would like to talk about what is being acquired and if there is some way to limit costs. He said the people who pay with the dollars need to be mindful.
In response to a question from Mr. Hanson on whether real estate taxes are set aside for assessments, Finance Director Kent Costin said there are no property tax dollars set aside to defray assessment costs.
Ms. Connor said Fargo is one of few cities special assessing this way and people new to the community have a hard time understanding the process. This is an opportunity to take a deep dive into costs, both green field costs for new construction, which differs from rehab costs, and engineering/ administrative costs, she said.
Mr. Eberhardt said by statute, a developer can take on the costs of specials and one developer has done that.
Mr. Dardis said if things continue to be addressed the same, the conclusions will be the same. He said there is new technology and new materials so engineering could address those elements and figure out how to take some costs out using things like pipe sizing or using different materials to drive costs down.
Mr. Dabbert said special assessments are a catch phrase; it is a financing district where costs are spread out. There needs to be discussions looking at how to not improve to four or five lanes where no one lives, he said, due to the fact it is too expensive. Those requiring improvements to plan for future growth perhaps should cost share the real cost, he said. It is hard to explain engineering and inspections fees up to 22%; he said he would like to see cost savings there.
In response to Mr. Worth asking if someone in the mix looks at costs, Mr. Dardis said in West Fargo, design engineers are the lead and their expertise is relied on. He said a broader approach is needed across the state to see if there are things to drive the costs down. Engineering standards used have been developed over the years; however, there may be the possibility for changes such as a concrete curb does not need to be the height that has been used for years, he said.
Ms. Derrig said there was a reduction in asphalt thickness after the 2003 study and engineers look at innovative ways to make things as economical as possible.
In response to a question from Ms. Connor on why new construction fee percentages are higher than rehab, Ms. Derrig said reconstruction has City funding set at a lower rate than new development. She said if fees are more than actual, funds go to the general fund. She said more engineering is needed for new development than reconstruction where much of the infrastructure is existing. There is not a three-year CIP (Capital Improvement Plan) outlook right now, she said. There are many areas that need to be improved, especially the replacements of water mains, she said. Where there is cast iron pipe, only two miles can be done a year, meaning it I will take 20 years to replace it all, she said. Downtown projects are more expensive to do, she said, and other issues may push the priorities, such as when 4th Street needed to have a certifiable levy.
In response to a question from Ms. Fremstad on who determines amenities in redevelopment, Ms. Derrig said amenities are not seen in residential, it is mostly downtown. Along NP, she said, impression concrete was used due to it being lower maintenance and trees downtown need engineered soils and proper drainage due to impervious surfaces. General water main replacement in front of residences is 50-50, she said, or half special assessed and half water funds from sales tax. Currently state rehab funds go to Public Works for maintenance; therefore, sales tax is used for reconstruction; different things come from different buckets, she said.
Mr. Dardis said if the City is going to assess, then in the end does not know whether the fee schedule is too high or too low, developers will find it unpalatable. He said funding needs to be tracked and a cost analysis is needed due to the fact that if payments that are not needed, taxpayers are not seeing transparency. He said if the City is charging taxpayers too much, that has to stop.
Mr. Grindberg said an upcoming agenda item could include a presentation on cost centers and fees.
Ms. Connor said a city has to fund itself and discussion needs to be on whether costs are being distributed correctly or are green field or taxpayers being overburdened.
Mr. Cosgriff said developers have the option to pay specials on their own and every homeowner has the option to roll them into their mortgage. It is all taxpayer money and how it is sliced makes a big difference, he said. Some communities have sold their infrastructure to private parties and leased it back, he said and there can be creative solutions.
Mr. Grindberg said minutes will be emailed to the group along with an agenda for the next meeting, which will be Thursday, September 6th at 7:30 a.m. in the City Commission Room.
The time at adjournment 9:00 o’clock a.m.