Memorandum 16-030 HART, HAWSP, and SAD Process

Memorandum 16-030

TO:                       Mayor Wythe and Homer City Council            

FROM:                 Katie Koester, City Manager

DATE:                  February 1, 2016

SUBJECT:         HART, HAWSP and the SAD Process

Special Assessment Districts and HART/HAWSP Worksession follow up

Answers to Questions asked at the HART Worksession:

a)    Does the value of a property increase when the road in front of it is paved?

Borough Assessor Muller responded “We do not automatically increase the land value when roads are paved. We look at the sales to tell us what the value difference is, if any. Alaska Statute requires that we be at market value as of January 1 of the taxable year. Any sales after the roads are paved will reflect what the market is willing to pay for the land on the newly paved roads. Hope this answers your question. Please contact me if I can be of further assistance.”

b)   What is the maintenance cost of Waddell Way extension?

Based on the 2015 budget; it costs the City approximately $16,000 per mile (or $3/foot) to maintain one mile of road.

The proposed Waddell Way Road Improvement project will create 1310 LF of new road (but it consists of a wider than normal road with sidewalks, bike lanes, and street lights).

Average cost to maintain                                      1310 lf x $3/LF = $4,000

Cost to maintain this new road                          1310 lf x $4/LF = $5,250

If half of this is labor; the other half materials – it could be argued that we should add $2,625 to our materials budget ($2,000 to Operating Supplies, $625 to Electricity) for next year to account for the added road miles and street lights. Sooner or later, when enough miles of road is added, additional equipment operators will be needed to maintain current levels of service.

Current HART and HAWSP Special Assessment District Process:

The public process for creating a SAD is laid out in Title 17, Improvement Districts. See the white paper titled Outline of Homer Special Assessment District Process. Beyond the rules for how a district is approved, HART and HAWSP are treated differently for how votes are counted and costs are allocated.

HART

Vote:  Each lot owner is given a vote that is weighted by assessed value

Cost: Lot owners are charged $17/foot for paving $30/foot gravel reconstruction. Fixed cost for lot owners, variable for City

Payment Schedule: 10 years

New assessment generated when lot subdivides: No

HAWSP

Vote 1: Each lot owner is given a vote that is weighted by assessed value

Cost: Every lot pays the same (75% of project cost)

Payment Schedule: 20 years

New assessment generated when lot subdivides: Yes

Why haven’t people been using the HART SAD program?

The last SAD constructed was the Crittenden/Webber Subdivision SAD (2013).

For the most part it was a gravel reconstruction and paving SAD (most lots were assessed $30/foot for gravel reconstruction and $17/foot for paving; for a total of $47/frontage foot).

Total Cost =                                   $664,310

Total Assessments =                  $122,832

% paid by property owners = 18%

This is the lowest property owner % that Public Works Director Meyer has seen. His understanding is that the original intention of the HARP/HART program was that the HART program would pay the majority of the cost (I’m not sure what that percentage was), but increasing construction costs over the years has lowered the percentage paid by property owners. This is a great deal, why is there not more utilization?

Many of the City lots are owned by seasonal residents who do not value as much year round good road/driving conditions. Some residents do not want their roads improved because poor road conditions necessitate slower driving which is favored in residential areas. The recent gas assessment also may discourage residents from additional investments in their local infrastructure.

The Clerk’s office has prepared a survey and sent it out to our last 3 road SADs (which all failed) asking questions to help Council. The overwhelming reason people did not choose to vote for the SAD was because it was too expensive. However, comments ranged from people not feeling like the improvements were necessary to a desire for other improvements. See summary of survey results.

How can the road improvement SAD process become more useful/relevant?

The current methodology allows the City to establish the cost to the property owner up front with no chance of a change.  If the methodology were revised to a percent of actual total cost, the final assessment can change (like the water/sewer assessments). The other advantage for the City is that the current methodology is based on frontage foot (which does not change when lots are subdivided); in water/sewer SADs the subdivision of a lot creates an administrative burden associated with collecting an additional assessment from the new lot. When every lot benefited pays the same, it introduces the issue of how does the new lot pay its fair share and how do lots that have already paid an assessment get reimbursed for their fair share of the additional assessment. One way to address that issue is for payment to be based on square footage.

An advantage to road assessments being a percentage of total cost might be that property owners would better understand what a good deal the program provides. Currently they are told they will pay so much per frontage foot without understanding what the real cost is and that the HART program is paying a majority of the cost.

Another advantage to assessments being based on percentage of total cost might be that assessments could cover things other than gravel and paving. Originally neighborhoods were very satisfied with upgraded gravel roads and stripe paving.  In the future, neighborhoods may want concrete curb and gutters, storm drains, sidewalks, street lighting, etc. (the cost of which may never have been included in the current per frontage foot fixed assessment amounts).

Keep in Mind

We have 3 road SADs in process right now. They would all proceed in the same manner as they were initiated, regardless if changes were made at this point. One of the SADs involves SVT land worth over 4 million dollars. This gives them the ability to kill or force the project.

Policy Questions on the Table:

Should the City look at standardization of how HART and HAWSP special assessment districts function (re: how costs are allocated, payment schedule, how votes are counted)?

Vote: (based on property value or not)

Cost: (percent of project cost? per foot, benefited area, everyone the same)

Payment Schedule:  (how many years)

New assessment generated when lot subdivides:

How could the City incorporate long term maintenance costs into the cost of a project (or should we)?

The original intent of HART was to lower maintenance costs by upgrading roads with paving. When HART is used for projects like new construction (of trails, roads, or sidewalks) the increased maintenance cost becomes an issue. To address this, for new construction projects Council could incorporate estimated maintenance costs for a period of time into the total project cost. This would require voter approval. If maintenance costs were incorporated, there would be less money for construction. Another option could be just reducing the percentage that goes to HART – the remainder would de facto go toward maintenance.

Should there be a sunset for creating new assessments with the subdivision of lots (HAWSP)?

Should the City amend the HART policy manual to specifically establish a process for other improvements such as sidewalks and/or street lights? (See Memorandum 15-193 from Public Works Director.)

What to do about deferred assessments? (See Memorandum 16-027 on Shellfish from Public Works Director Meyer.)

Enc:

Outline of Homer Special Assessment District Process

Memorandum 16-022 from Deputy City Clerk Summary of HART survey results

Sample subdivision maps

Memorandum 15-099 from EDC recommendation regarding SADs levy of assessments after

   subdivision

Memorandum 15-193 from Public Works Director on Sidewalks

Memorandum 16-027 from Public Works Director on Shellfish

HART Policy Manual

HAWSP Policy Manual