The Ramsey City Council may be scrapping special assessments in favor of franchise fees to help pay for road projects, but it wants citizen input.
The city will be hosting an open house from 6-9 p.m. Tuesday, Oct. 1 in the Lake Itasca room at the Ramsey Municipal Center, 7550 Sunwood Drive NW, and a public hearing at the Oct. 8 Ramsey City Council meeting that starts at 7 p.m.
An $8 fee would be charged to every CenterPoint Energy and Connexus Energy customer in Ramsey, so the total monthly cost to natural gas and electricity users would be $16. The soonest the council could vote on the proposal is Oct. 22 and if approved, there is a legally required 90-day notice period to the utility companies, so any billing changes could not be in place until around February, according to City Engineer Bruce Westby.
This is not the first time Ramsey has discussed franchise fees to address road maintenance. A 2011 citizen survey showed more support for franchise fees versus a property tax increase. Special assessments were the least popular by far with only about one in six of the 300 surveyed supporting this.
However, the issue was never resolved and Mayor Sarah Strommen said the council cannot continue to “kick the can down the road” because maintaining roads is a fundamental responsibility of the council.
“Although it can be a tough decision to figure out how to pay for it, that’s why we’re all here,” Strommen said. “I don’t expect seven uniform opinions on how to pay for it, but we all are in agreement that our roads need to be fixed. We owe that to our residents.”
The city could still utilize the general fund, general obligation bonds and state aid to pay for projects as it has historically done, but franchise fees would immediately replace special assessments if approved by the council, according to Westby.
Ramsey estimates it would collect approximately $1.7 million annually based on the current number of customers.
“Any way you talk about it, it’s a tax,” Councilmember John LeTourneau said. “Any way you talk about it, there has to be a commitment to road maintenance.”
Councilmember Jason Tossey calls franchise fees “a regressive tax” because everyone is charged the same whether they own a small or large business or a home on 20 acres or a half-acre.
“I do not think a senior citizen sitting at home on a fixed income should have to pay the same amount to fix their roads as someone who lives in a million dollar home,” Tossey said.
According to Tossey, the tax levy is the fairest way to address the roads because every resident pays the same tax rate.
Businesses do have higher tax rates though, said former Councilmember Jeff Wise, the owner of Wiser Choice Liquor.
“We’re already paying four times the amount of taxes as residential, being a business owner,” he said when asked about semis and delivery trucks to businesses having a greater impact on the roads.
“If you own a million dollar home or a $100,000 home you still have the same wear and tear no matter what car or truck you are driving,” Wise said.
But Wise would want franchise fees to be in lieu of special assessments and higher taxes and not used as another source to tax residents at a much higher rate, he said.
Those on the council who have expressed some support for the franchise fees believe there is little room to cut in the budget to substitute for the $1.7 million the city could receive through franchise fees.
“I agree Mr. Tossey that there are probably some things we could cut out of the budget, but I don’t think there is $1.7 million that we can cut out of the budget,” Councilmember Randy Backous said during the Sept. 10 council meeting.
Ramsey budgeted for $1,327,500 in road projects contracts this year, but the $500,000 it slated for the 2014 budget falls in line with the amounts in 2011 and 2012. The 2010 road maintenance contracts totaled $326,247, according to the city budget.
According to Westby, many of Ramsey’s 174.1 miles of city streets were constructed between 1976 and 1985. None of Ramsey’s roads have received an extensive reconstruction that includes tearing out a road and repairing any road base and drainage problems before putting a new road in.
Westby said a Ramsey city street could last 60 years before a reconstruction is necessary if it is properly maintained. He said a street should receive nine crack seals, six seal coats and two overlays before it is reconstructed within 60 years.
Using today’s dollars and assuming the same width of roads and no new curb and gutter, Westby estimated the city could need $2.2 million a year over the next five years for road maintenance.
Projecting it out 60 years, the city could need more than $4.4 million a year and again this does not factor in inflation, he said. This shows that not many of Ramsey’s roads need reconstruction in the near future, but there needs to be a consistent funding source set up to address reconstruction projects as they come up, Westby said.
The issue with relying on the tax levy is the amount can fluctuate greatly depending on the council in place, he said.
“We would have a dedicated funding source with a franchise fee,” Westby said.
Prior to 2013, 50 percent of total project costs for overlays were assessed to abutting property owners, while seal coat projects were assessed at a declining percentage from 50 percent in 2007 to 15 percent in 2012, according to Westby.
Every community has a different way to fund roads. For example, Andover does not assess for seal coats or overlays, but usually assesses 25 percent of city street projects to abutting property owners while the city covers the rest.
For example, a little more than half the property owners along the recently reconstructed South Coon Creek Drive in Andover face a $2,333,43 assessment, while others face a $6,603.21 assessment that must all be paid within 10 years.
Andover is charging those without city sewer and water more because they are generally on larger lots that could be see more home development in the future.
Councilmember Chris Riley said he has seen road assessments as high as $8,000 in other communities. If you were paying $192 a year, it would take just over 41 years to get to that amount.
Joe Field, chairperson of the Ramsey Charter Commission and a member of the Ramsey Planning Commission, was one of several candidates who in response to an ABC Newspapers 2012 primary election questionnaire said road maintenance is the greatest municipal concern.
Field opposes franchise fees because he said there would be no limit on what the council could impose through the utility companies. There are currently levy limits imposed by the state Legislature, but that is not always in place.
“Sixteen dollars (a month) sounds harmless, but once it’s opened up, what’s to prevent it from going to $30 or $50?” Field said.
Westby said the $8 per utility per month would be a flat rate over the five-year term of the franchise agreements with CenterPoint and Connexus.
Backous said, “It’s not a new tax revenue stream. It’s a different revenue stream.”
Eric Hagen is at [email protected]