City of Red Lodge—Proposed Special Improvement District April 12, 2018 Great West Engineering Dorsey & Whitney LLP 1
Existing Conditions Existing pavement experiencing: block cracking, large transverse cracking, alligator cracking, and complete deterioration. 2
Proposed Improvements 3
Anticipated Construction and Engineering Costs 4
Design and Bidding: 2 months Construction: 60-day contract Design and Construction Schedule 5
What is a special improvement district (SID)? • SIDs are financing mechanisms, used to finance improvements with special local benefits to certain properties • Typically: • A city creates an SID, including properties benefiting from the project within the district • The costs of financing the project will then be spread across all properties within the district • The city sells SID bonds and uses the proceeds to pay for the improvements and to fund a deposit to the city’s SID revolving fund and, as appropriate, a district reserve account • The city levies special assessments against all properties within the district, and uses the special assessment monies to pay debt service on the SID bonds 6
What is the process to create SIDs? • First, the municipality adopts a resolution of intention and calls a public hearing The resolution must describe the boundaries of the proposed district, the general character of the improvements to be • made, an approximate maximum estimate of the cost of the improvements, and the assessment methodology • Second, the municipality: Publishes notice of passage of the resolution of intention (must be published twice, with at least 6 days between • publications), and On the first publication date, mails notice to all owners of real property within the proposed district • • There is a 15-day protest period starting on the date that notice was mailed and first published • Finally, the municipality holds a public hearing and, if insufficient protests are received and the municipality elects to create the district, the city council adopts a resolution creating the district • If the district is created, the municipality is authorized to cause special assessments to be spread across the benefited properties in the district in accordance with the assessment methodology to repay the SID bonds • Special assessments are payable in semiannual installments of principal and interest over the term of the SID bonds • Special assessments typically bear interest at a rate equal to one-half of one percent (50 basis points) above the average annual interest rate on the outstanding SID bonds • Special assessments can be repaid in full with interest through the next interest payment date 7
How does the protest right work? • Property owners can protest any time within 15 days after the date of mailing and first publication of notice by the municipality • Protests must be: • Written • Identify the property owned by the protestor • Be signed by all owners of the property • Protests must be delivered to the city clerk not later than 5 p.m. on the last day of the protest period • If protests are made by the owners of property in the district to be assessed for more than 50% of the cost of the proposed work, the city cannot proceed to create the SID at that time 8
Tentative Schedule for Creating the SID • April 24: City Council adopts resolution of intention to create district and calls public hearing • May 3: Mailing and first publication of notice (starts 15-day protest period) • May 10: Second publication of notice • May 18: Protest period ends at 5 p.m. • May 22: City Council holds public hearing, passes upon all protests and, if protests are insufficient, adopts the resolution creating the district 9
Estimated Maximum Project Budget Construction/Engineering Costs 1 $ 938,700.00 Miscellaneous Costs 50,000.00 Costs of Issuance 125,000.00 District Reserve Account 61,900.00 Deposit to Revolving Fund 61,900.00 Rounding 500.00 Total Estimated Principal Amount of SID Bonds $1,238,000.00 City Administration Costs 2 61,900.00 TOTAL ESTIMATED PROJECT COST $1,299,900.00 1 From engineer’s opinion of probable costs. 2 Represents an amount to be contributed by the City and not assessed against property owners. 10
Spreading of Assessments—Residential and Commercial • Properties will be assessed, for each project component, on an equal amount basis, depending on whether the property is “residential” or “commercial” • 663 residential lots, tracts, parcels and units • 8 commercial lots, tracts, parcels and units—all attributable to the Golf Course/Country Club • Based on trip generation data, the Golf Course/Country Club (as a whole) generates approximately 12x more trips than an average residential lot, tract, parcel or unit • Each Golf Course/Country Club parcel—and any other commercial properties developed in the District in the future—will be treated as the equivalent of 1.5 residential lots, tracts, parcels or units (8 x 1.5 = 12 residential equivalent assessments) • Total 675 residential equivalent assessments in the District (663 + 12 = 675) 11
Spreading of Assessments—Scrub Seal Component and Chip Seal Component • Total project consists of 2 components: • Scrub seal component • On streets in the “South” • 37% of the overall costs of the bond-financed project, or $458,060 • Chip seal component • On all streets in the District • 63% of the overall costs of the bond-financed project, or $779,940 • The sum of the scrub seal component and the chip seal component equals all project costs to be assessed against properties in the District ($1,238,000) • Costs of the chip seal component to be spread across all 675 properties in the District • Costs of the scrub seal component will be spread: • 20% across 208 properties in the “North” • 80% across 467 properties in the “South” 12
Residential Equivalent Assessment – “North” $1,595.91 Total Principal Amount of Assessment Per Lot, Tract, Parcel or Unit • Sum of (1) costs of the chip seal component and (2) 20% of the costs of the scrub seal component • Costs of the chip seal component spread across all properties in the District: • $779,940/675 = $1,155.47 • 20% of the costs of the scrub seal component across all 208 properties in the “North”: • 20% of scrub seal component is $458,060 x 0.20 = $91,612 • $91,612/208= $440.44 • $1,155.47 + $440.44 = $1,595.91 • Special assessments would be spread in semiannual installments of principal and interest over the term of the SID bonds (for example, 15 or 20 years); the above dollar amount per lot, parcel, tract, or unit is total principal only. • The interest rate on special assessments is (at least) 50 basis points (one-half of one percent) above the average annual interest rate on the outstanding SID bonds. 13
Residential Equivalent Assessment – “South” $1,940.16 Total Principal Amount of Assessment Per Lot, Tract, Parcel or Unit • Sum of (1) the costs of the chip seal component and (2) 80% of the costs of the scrub seal component • Costs of the chip seal component spread across all properties in the District: • $779,940/675 = $1,155.47 • 80% of the costs of the scrub seal component spread across all 467 properties in the “South” • 80% of scrub seal component is $458,060 x 0.80=$366,448 • $366,448/467= $784.69 • $1,155.47 + $784.69 = $1,940.16 • Special assessments would be spread in semiannual installments of principal and interest over the term of the SID bonds (for example, 15 or 20 years); the above dollar amount per lot, parcel, tract, or unit is total principal only. • The interest rate on special assessments is (at least) 50 basis points (one-half of one percent) above the average annual interest rate on the outstanding SID bonds. Note that all Golf Course/Country Club properties are considered to be in the “South” 14
Questions? 15
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