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Project has its supporters

By Staff | Mar 20, 2009

Rugby city officials listened to over an hour of public comment relating to the planned citywide street improvement project and the establishment of a special assessment district to pay a large portion of it.

However, unlike the first protest hearing held last fall, a good number of the comments this time were pro-project and pro-city council.

About 60 people packed the Otter Tail Power Company community meeting room for the March 16 protest hearing, a third of them addressed comments to city and project officials.

The percentage of protests based on total square footage of property within the city equaled just 13.78 percent – slightly higher than the 9.88 percent during the first protest hearing, but still well short of the 50 percent needed to legally protest out the project.

Public comments

Several who spoke took the opportunity to commend the council for dealing with a difficult issue in a professional manner over the past several months while fielding questions and listening to the concerns of those opposed to doing a large project.

“I’d just like to say I trust your judgment,” said Rob Hovland. “We didn’t elect your critics; we elected you.”

Hovland pointed out that some who raised concerns about this project did so in an appropriate and mature manner. However, others didn’t, and they’re the same people who tend to be critical of many things in Rugby.

Jeff Miller thanked city officials for spending a great deal of time listening to residents. Those visits were often during the business day, taking time away from their jobs.

John McClintock also commended the council for the work they have done in planning this street project for the better part of a year – a project that is sorely needed.

“Here’s an opportunity for the whole community to involve itself and pitch in,” McClintock said. “That’s what a community is about. It’s not about us vs. them. It’s a community. We need this project. My street needs help, and there are other areas of the city that need help.”

McClintock added no one is happy about paying more taxes, but he speculates waiting any longer will only increase the costs.

Fr. Tom Graner asked when the city last held a citywide assessment project for street repairs. It was the mid-1990s, so it’s been a while since property owners were asked to see an increase for specials. Graner also pointed out that the local property tax share for public school funding will be declining in two years. As a result, that break will help offset the costs of paying for the street repairs.

Despite the fact a majority of property owners did not protest the street work, some still believed the cost of the project, now figured at about $4.3 million, was excessive, and would put a tremendous burden on property owners.

Randy Malo, business owner and resident, said the specials will be hard for him to swallow, yet it’s other residents who will likely have a more challenging time paying the additional taxes. Malo knows street work is needed but wondered if the council could hold off doing a comprehensive project for a year or two and possibly wait for a more favorable bid.

Malo pointed out that some on the council, including Terry Wentz, Ward Four councilman, were disappointed bids were not lower for this project.

Wentz agreed he wasn’t pleased with how the bids came in, expecting contractors to be a little more “hungry for work.” However, after looking at the bids more closely, he saw that the three highest bids were between 15 and 20 percent more than the engineer’s estimates, while the low bidder was very near the engineer’s estimate. Wentz wondered if waiting would only see those costs increase in a year or two. And the city has already invested much in terms of engineering fees.

Roger Grimsley, project engineer with Advanced Engineering, Grand Forks, acknowledged that the federal government’s stimulus funding package, which included several million dollars for infrastructure work, likely affected the number of bidders and prices. Since the Department of Transportation (DOT) knew ahead of time that federal stimulus money was likely going to be allocated to the state, the DOT was able to move up several large paving projects. As a result, many contractors turned their attention to bidding those projects.

Grimsley said it’s projected more stimulus money will come into the state next year as well, which could also make it difficult to get low or competitive bids, since there will be additional state road work.

Malo said with that in mind, why not wait for two years, when that stimulus money is no longer available, and then bid the project when contractors won’t have as much work to choose from? In the meantime, repairs could be made on those streets in the poorest condition.

Wentz said the city of Bottineau was posed with that issue several years ago when planning a citywide street project. Public outcry forced the council to take a piecemeal approach. To date, the work is still not completed, Wentz said, and the costs ended up nearly doubling. Waiting may not be the wisest decision.

Rob Bollinger said the high cost of the project is going to cause a considerable effect on the local economy, about $36,000 a month for 15 years (the length of the planned assessment period). And that means residents will have less spendable income to put back into the community. “The drain on the economy is going to be subtantial,” Bollinger said. “It’s not money going to local business. It’s not multiplied back into the economy.”

While many at this hearing may be able to pay the specials, there are many who will struggle to do so, said John Ford.

He talked to a number of residents, many elderly, who live on fixed incomes, who simply can’t afford the proposed special assessment rates. This project will put them in a hard position, whether to pay their taxes or pay for food and medication.

Ford added the issue isn’t whether to fix the streets, but doing so in a fiscally responsible manner that won’t put such a burden on residents.

Deidre Godycki said if a majority of property owners in one area (street) of the assessment district protested out the project, then repairs in that particular area would not be completed, and hence, no assessment fees to those property owners. Monte Schneibel, Ward Four councilman, questioned what defines “an area” of the project.

The entire city makes up the assessment district, and it’s not divided into streets or sections to determine protest percentages.

Ford said curb and gutter replacement, however, is not a cost that can be spread throughout the assessment district. It can only be assessed to the benefited property owners. City officials believe that is also how special assessment statute is written.

Ralph Bertsch said the assessments are too high and questioned the fairness in determining how the specials will be figured by the assessment commission, more specifically in regard to corner lots. Others also wondered how corner lots will be assessed.

Mark Butz, city attorney, said that’s not an issue for the council to decide, but for the assessment commission.

In previous projects, however, the commission has assessed only the front of property, and not the side.

Neil Lotvedt speculated that the low protest percentage means the project will go forward, but he wondered about the bonding rates and whether the city could refigure the project over a 10-year period, opposed to a 15-year period, to get a lower interest rate on bonds. And perhaps increase the monthly infrastructure fee on water bills to cover those funds not collected over the additional five years.

Mike Manstrom, municipal financial advisor, said he didn’t believe there would be any difficulty in finding bond buyers for the project and figured the interest would range between four and five percent.

Ford and Godycki questioned just how much debt the city is allowed to sustain with this size project and spread to taxpayers. It’s their understanding any request for bonds can’t extend past the allowable debt threshold based on the value of city property. Manstrom said there is no debt limit in regard to special assessments sale of bonds. However, Ford said current state statute, which they cited, didn’t specify that assessment bonds are exempt. After the meeting, Ford said he was still not given a straight answer in regard to the debt issue and was going to contact the city’s bond agent, Steven Vogelpohl, for clarification.

James Day asked what happens if after street repairs are made, it’s discovered a water line needs to be repaired or replaced underneath the street. Grimsley said that’s what contingency funds built into the project are for – unforeseen costs. This project has about $300,000 in contingencies.

Grimsley said it’s not common for all of those dollars to be spent in a project, and it’s likely some will be left over, to reduce the price tag.

Funding other than assessments

Rugby Mayor Dale Niewoehner said the city has researched every possible funding source to counter the need for special assessments, and the council has approved setting aside $500,000 in built-up infrastructure maintenance funds toward the project and indicated more infrastructure funds will be set aside in future years.

Some wondered if the city has looked into other means to raise funds, including an additional one cent sales tax. Larry Vetsch asked if the council has given that more consideration. Vetsch said many residents are driving out of town to shop anyway, paying high sales taxes in Minot, so what difference is there if Rugby increases its rate?

However, many business owners are opposed to adding another one percent sales tax. One of them, Rob St. Michel, said it’s not the local residents that will be most turned off by the additional sales tax, but rather those from surrounding areas. St. Michel said his business is trying to attract shoppers from surrounding communities, like Harvey, Leeds and Belcourt, to come to town. Increasing the sales tax will give them another reason not to shop in Rugby.

St. Michel added he believes the council is making a responsible decision regarding going ahead with this project, adding some have businesses of their own. They are putting themselves in a difficult position, serving the community on the council, and also owning and operating a business.

Another possibility was reconfiguring the current one cent sales tax collection, which now gives 75 percent to the Rugby Area Job Development Authority and 25 percent to the city’s infrastructure fund. A proposal is to change it to a 50-50 split. That action could be taken by the city council, but Butz’s understanding is that it would mean amending the current sales tax ordinance.

Following the hearing, the council voted unanimously to adopt a resolution determining there was an insufficient percentage of protests.

Bill Hartl, Ward Three councilman, said the council’s action, however, does not give approval to the project. The council still must decide whether to approve the contractor’s bid.

The base bid of $3.1 million by Bituminous Paving, Ortonville, Minn. only includes construction costs. Adding in contingencies and engineer fees raises that total to $4.38 million. At this time that doesn’t include any of the alternate work, such as curb and gutter replacement and some specific drainage repairs to three other streets in the southeastern area of town. The planned project encompasses the entire city, but it’s likely not all streets will receive repairs, whether it’s a seal coat, mill and overlay or more extensive reconstruction. Some streets which recently were paved, including 6th St. S.E., will be taken out of the project.

What’s next?

The council will have to decide how many alternate bids they want to include in the proposed project and ultimately make the determination of whether to award the low bid supplied by Bituminuous Paving. So far, one alternate bid has been accepted.

The city has up to 60 days after the bid opening (March 2) to award a contractor.

If the bid is awarded, the council would then call for the special assessment commission to review the project zone and determine assessment fees based on benefit to property. Property owners will get a chance to come before that commission in the future to discuss their assessment.

Raw calculations by engineers have put the monthly special assessment fee for a 50-foot frontage lot at $10.30 for seal coat work; and $24.54 for a mill and overlay. Of course, those rates would be higher if total square footage is used in stead of foot-frontage.

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