MEMORANDUM 04-09(S)

To: Walt Wrede, City Manager

From: Carey Meyer, Public Works Director

Date: January 6, 2003

Subject: East End Road Improvements

Water/Sewer Main Extensions

Assessments on Benefited Properties

As part of the ADOT East End Road Improvements, the City has been coordinating the extension of water and sewer mains out to Kachemak Drive. The cost of installing these facilities as the road is being constructed will be far less expensive than after the road is constructed.

According to ADOT officials, these water and sewer improvements will be installed this summer. It is time to decide formally how the cost of these improvements will be spread across the benefited properties.

Attached are maps showing the location of the proposed water and sewer extensions and the property benefited by each facility.

The Council has several options to consider in establishing a reimbursement method:

1) the Council can approve the creation of a “deferred assessment” on each benefited property

2) the Council can create a LID (with no City contribution)

3) the Council can create a LID (with 25%/75% cost share)

4) the Council can us a combination of the above options

There are several complicating factors associated with the project:

1) Many of the properties on the north side of East End Road are in Kachemak City. The City has agreed to provide sewer service to this area outside the City limits (per signed Agreement), but no water has been extended into this community. The Council has established that utility service shall not be extended outside the City limits.

2) The City Council cannot create a LID nor assess property outside the City limits.

3) The size of the properties varies greatly. Spreading costs equally across all lot owners (as the Council has approved in the past) may not be as fair for this commercially zoned area.

4) Deferred assessments have to be paid in full at the time service is requested. No financing from the City is available. There is no up front cost to benefited property owners, but a lump sum payment is normally due in the future. LID’s provide a way for owners to pay off assessments over a long period of time. The City has obtained 2.5% financing for this project, but unless the council wants to act unilaterally, a majority of property owners would have to support the LID formation.

(Note: Kachemak City has agreed to collect costs from those properties in Kachemak City benefited by the sewer improvements)

Sewer Assessment Calculations

East End Road Improvements - Sewer Main Extension
Per Lot Cost Calculations
Engineering/Management Cost		$ 146,635.88
Construction Cost		$ 242,950.00
Administrative Costs (5%)		$ 24,839.29
Estimated Cost of Project		$ 414,425.17

Contingency 10%		$ 41,442.52
Total Estimated Project Cost		$ 455,867.69

Cost Per Parcel, 14 Total		$ 27,628.35

Cost for Kachemak City properties (2/3 of north side)		$ 151,955.90

Cost for City properties (south side, 11 Parcels)		$ 303,911.79

Water Assessment Calculations

East End Road Improvements - Water Main Extension
Per Lot Cost Calculations
Engineering/Const. Management Cost		$ 211,337.95
Construction Cost		$ 350,150.00
Administrative Costs		$ 28,074.40
Estimated Cost of Project		$ 589,562.35

Contingency 10%		$ 58,956.24
Total Estimated Project Cost		$ 648,518.58

Cost Per Parcel, 31 Total		$ 20,919.95

Cost for Kachemak City properties (15 Parcels)		$ 313,799.31

Cost for City properties (16 Parcels)		$ 334,719.27

Recommendations:

Sewer

The City of Homer works with Kachemak City to collect costs from benefited Kachemak City properties (estimated to be $151,955.90). The City would invoice Kackemak City upon completion of the project. Payment due within 90 days.

The City of Homer creates a sewer LID containing all benefited properties within the City limits and contributes 25% of the cost of the sewer project. The remaining 75%. (total cost estimated is $303,911.79; 75% = $227,933.84; would be assessed against each of 11 parcels = $20,721..25). The assessments could be paid off over twenty years, at 2.5% interest.

Water

The City of Homer work with Kachemak City in the future to recoup cost to benefited Kachemak City property when water service is provide. (total cost estimated is $313,799.31; deferred assessment to each of 15 parcels = $20,919.95)

The City of Homer creates a water LID containing all benefited properties within the City limits and contributes 25% of the cost of the water project. The remaining 75%. (total cost estimated is $334,719.27; 75% = $251,039.45 would be assessed against each of 16 parcels = $15,689.97)

The City should support the creation of a water and a sewer LID (25%/75% split) for those properties within the City limits to provide property owners with long term financing of these costs. If an LID cannot be created, the City will have to place 100% deferred assessments on benefited properties, which would be due and payable in full upon request to connect.

As an example, if a sewer LID can be created, the $20,721.25 sewer assessment would result in a $1,330 per year payment over 20 years. If a water LID can be created, the $15,689.97 water assessment would result in a $1,010 per year payment. These amounts are based on a 2.5 % loan.

If 100% deferred sewer assessments are placed on the properties, it would result in a $27,628.33 assessment. If 100% deferred water assessments are the placed on properties, it would result in a $20,919.95 assessment.

The City should initiate the circulation of a petition to create the above mentioned LID’s. The petition should be accompanied by a letter explaining the reasons for the LID and the implications of the decisions being made.