05. Resolution 5538 - Resolution of Intent - Special Street Maintenance AssessmentCity of Kalispell
Post Office Box 1997 - Kalispell, Montana 59903
Telephone: (406) 758-7701 Fax: (406) 758-7758
REPORT TO: Mayor Fisher and Members of Council
FROM: Jane Howington, City Manager
SUBJECT: Special Street Maintenance Assessment
MEETING DATE: December 5, 2011
INTRODUCTION: The purpose of this legislation is to request council endorsement of an
alternative funding mechanism for Kalispell's special street maintenance district using a trip
generation methodology. This alternative will provide a more equitable distribution of street
maintenance costs to the users of our public infrastructure.
The information included in your packet provides a legal review of the current code authorizing
special street maintenance districts and the methodologies provided in said code. This review
includes a summary review of how the current distribution is imbalanced, a proposed alternative
methodology and a legal review of the guiding state statute.
As you review this information in preparation for Monday evening, the majority of the increased
funds are projected to be applied to capital needs of our transportation infrastructure. Capital is
defined as a good or service costing more than $5,000 and having a life longer than 5 years. By
definition, this means street repair projects such as reconstruction, milling or re -surfacing would
fall under capital projects as would major equipment replacement such as dump trucks, snow
plows, etc. This distinction is important to understand in our discussions as the city has often used
capital to define growth related projects in the past.
BACKGROUND: Currently Kalispell street maintenance costs are paid by owners of property
within the city. All other users who benefit from use of the Kalispell streets do not currently pay
into the system with the exception of the gas tax. The proposed change in assessments for street
maintenance aims to redistribute the cost burden to more equitably have all users of the
infrastructure pay their fair share. The proposed method would assess fees for vehicle trips and is
designed to reduce the burden on the property owners.
The current street maintenance district is defined by the corporate limits of the City of Kalispell.
This district would remain the same.
The street maintenance fund is responsible for maintaining local street infrastructure, sidewalks,
leaf collection, snow removal operations and capital needs of Kalispell's public ways. The current
method of funding requires assessments to be placed on property owners' tax bills for these costs.
As a commerce center and tourist destination point, Kalispell's public infrastructure supports
close to 80,000 to 100,000 people per day yet the entire funding burden is assumed by the 9,654
property owners in the city. The proposed method of assessment will provide a more equitable
funding solution and lift some of the burden off the property owners while at the same time
providing an increased revenue stream to more adequately address Kalispell's street infrastructure
and capital needs.
1. Base fee and ERU:
a. For a single family dwelling unit, the base fee will be $25.00 per unit.
b. For non-residential properties, the base assessment fee will be a multiple of the
single family dwelling unit based on square footage. The average square feet for a
residential dwelling unit is approximately 1,000 square feet. Therefore, using the
square footage, simply divide it by this average to get the equivalent residential
units (ERUs) and multiply by the base fee of $25.00.
2. Trip generation will be calculated based on commercial land uses as referenced in the ITE
manual. Trips in excess of that covered in the base fee (residents and employees) will be
assessed at a rate set by council with 100% assessment at $.09.
3. An appeal process will provide a waiver option for lots determined to be un-buildable
based on the city's zoning codes. The appeal process will also provide methodology for
businesses to request reconsideration to the ITE trip generation based on individual case
study.
4. In accordance with the implementation matrix for impact fees, implementation of the
proposed assessment may be completed in phases. For example, years 1-3 are assessed at
75% trip generation and year 4 is increased to 100%.
Respectively submitted,
V Jane Howington City Manager Manager
RESOLUTION TO EXPRESS THE INTENT OF TO
EXAMINE THE METHOD OF TO BE 1 BY THE CITY IN
FORUMTHE FUTURE BY CREATING A !PUBLIC DISCUSSION 1
DEVELOPING ! i OF i
NEEDSMEETS THE OF 1 IS IN THE BEST INTERESTSOF THE CITY
RESIDENTS.
WHEREAS, pursuant to Ordinance No. 1475 and Resolution No. 5517 the City of Kalispell
assesses a tax on properties in the city based upon the parcel size to pay for the costs
of operating and maintaining the city street system; and
WHEREAS, city staff is recommending to the City Council that the revenue generated by the
current assessment model is not meeting the costs of operating and maintaining the
city street system into the future as at some point the city will need to address the
issue of growing deferred maintenance to the system; and
WHEREAS, Montana law permits the utilization of several models of assessment for street
maintenance that are not currently utilized by the city; and
WHEREAS, the City Council finds that it is in the best interests of the City and its residents to
further evaluate the needs of the city street system, to develop a financial master plan
for the operation and maintenance of the street system into the future and to further
examine the various statutory methods of assessment through public forums with the
goal of adopting a model of assessment consistent with statute that meets the needs
of the city and is in the best interests of the city residents.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
KALISPELL
l.. FOLLOWS:
SECTION I. The city staff is directed to take the following action:
a) To develop a master plan for the operation and maintenance of the city
street system that includes time frames and projected costs.
b) To bring the street maintenance master plan to the City Council for
consideration and approval.
c) To create a forum, through meetings and public workshops, for the public
to learn about the various assessment models and to provide feedback to
the city regarding the assessment models as well as the level of
maintenance of the street system desired by the taxpaying public.
d) Upon satisfactory completion of the above tasks, to bring any proposed
legislation before the public for hearing and then before the City Council
for final determination.
SECTION 11. This resolution is effective immediately and the City Manager is directed to
provide the City Council with regular updates of the progression of the
direction herein given.
F"ASSED AND APPROVED BY THE CITY COUNCIL AND SIGNED BY THE MAYOR OF
THE CITY OF KALISPELL, THIS 5TH DAY OF DECEMBER, 2011.
Tammi Fisher
Mayor
Theresa White
City Clerk
1;.
Charles A. Harball Office of City Attorney
City Attorney 201 First Avenue East
P.O. Box 1997
Kalispell, MT 59903-1997
l/11l'it',r,£11U
TO: Mayor Tammi Fisher
and Kalispell City Council
F Charles Harball, City Attorney
Tel 406.758.7709
Fax 406.758.7771
charball@kalispell.com
SUBJECT: Discussion of Possible Modifications to the Structure of Street
Maintenance Assessments
ET ATE: June 28, 2011— Council Workshop
ISSUE: There has been some discussion about the adequacy of the City's current
formula for assessing the costs of street maintenance. Generally speaking, there seems
to be consensus that the formula we currently use is found wanting in a couple of
aspects. First, it fails to raise the revenue necessary to pay the costs for adequate
maintenance and operations of the city's transportation system. Second, it fails to obtain
any contribution from the users of the city's transportation system that do not own
property in the city, leaving the city resident and property owner to bear all of the costs
of street maintenance.
,state law for assessment of the costs of street maintenance. Montana state law at MCA 7-
12-4422 gives the city the authority to assess the costs of street maintenance by five
different methods which may be used individually or in combination. The rationale and
analysis behind these methods is the effort to charge the property an assessment that is
proportional to the benefit that it (the owner) receives from the maintenance and
operations of the city transportation system.
1. The first method of assessment, and the method utilized by the city, is based upon
the area size of the property in proportion to the area of the entire district (the
City, less streets, alleys and public places). The assumption here is that the larger
the parcel, the more benefit received from street maintenance.
2. The second method of assessment is based upon the property's linear feet of
abutting street in proportion to the total linear feet of city streets. This
assumption is that a property receives more benefit from street maintenance when
its access to city streets is greater.
Street Maintenance Assessment Methods Memorandum
June 22, 2011
Page - 2
3. The third method of assessment is simply a flat fee assessed equally across the
properties assuming equal benefit from street maintenance is received by all of the
properties in the city.
4. The fourth method of assessment is based upon the taxable value of a property in
proportion to the total taxable value of property within the city. The assumption
here is that properties of higher value receive more benefit from street
maintenance than properties of lesser value.
5. The fifth method of assessment, and the most recent legislative alternative to be
provided, is essentially based upon reasonably estimated vehicle trips generated
for a property proportional to all vehicle trips generated throughout the city. This
method is based upon the assumption that a property that has many vehicles
traveling to and from the property receives more benefit from street maintenance
than a property that has fewer vehicles traveling to and from it.
It should be apparent that not one of these methods of assessment is a perfect
analysis of benefit received and costs shared fairly. Probably for this reason, local
governments are allowed to use a combination of these methods as is deemed
appropriate to reasonably spread the costs in an equitable manner that reflects the
proportion of benefits received from the maintenance and operation of the
transportation system.
Basic Proposal of Assessment. Given the permissible structure of analysis set forth
above, the staff has constructed a basic outline of an assessment methodology to
consider and for further discussion. It can be simply broken down as follows:
1. The current method of assessment utilized by the city is based solely upon the size
of the property with a cap on vacant land at 2 acres, on residential land at'/z acre
and with a distinction on commercial property based upon coverage of property by
improvements and impermeable surface. Staff is recommending that this method
of assessment may not be the best method of reasonably assessing the properties
based upon benefit received and should therefore be reconsidered.
2. Staff would like to consider using more than one method of assessment based upon
the assumption that no one method works equitably across all property uses. For
instance, the residential use of property is fairly consistent in its demand upon the
transportation system. Size, street frontage and value of the property probably
have little to do with the level of benefit that the property receives from street
maintenance and it might be fair to say that all residences receive roughly the
same benefit. Therefore it is worth considering applying a flat rate of assessment
for all residential properties. (That is not to say that single family residences
shouldn't have a different flat rate from an apartment complex.)
Office of City Attorney
City of Kalispell
Street Maintenance Assessment Methods Memorandum
June 22, 2011
Page - 3
3. It may further be a reasonable gross calculation to make the same assumption
about many other commercial properties e.g. offices providing services. We can
intuitively presume that the benefit received by these properties is greater than a
property used as a residence because more vehicles travel to and from the property
across the city's transportation system. However, a flat fee, greater than the flat
fee assessed to the residential property, may well be appropriately applied.
4. Staff is suggesting that retail establishments customarily rely heavily upon the
city's transportation system. The city streets bring customers to and from the
property to transact business. Because of the necessity of these many face to face
transactions, properties used for retail businesses generally benefit the most from
street maintenance. The assessment method based upon reasonably estimated
vehicle trips may be the most appropriate approach to gauge the benefit that retail
properties receive from street maintenance.
A Closer Analysis of Property Trip Generation. The analysis that takes into account
traffic volume that is driven by particular property uses was scrutinized by the City in
the establishment of the transportation impact fee system. Traffic studies indicate and
can show that traffic patterns and volume are directly affected by property uses. A
method, therefore, that can reasonably establish a proportion of street usage to a
particular land use can be utilized to calculate a street assessment. This has been
generally accepted by the courts around the country that have examined it and it became
a part of Fontana street maintenance assessment law in 2005.
The most accurate method of determining the traffic volume produced by a particular
land use (e.g. a grocery store) is to conduct a traffic study for that use. However, the cost
of conducting a traffic study for each property is excessive and unwieldy in practice.
Manuals are published that compile and digest the many traffic studies conducted and
produce averages that may be used for any given use. This method does produce gross
estimates that are legally acceptable but must be tempered to allow the land owner to
obtain a more accurate number if desired. This is the method used by the City in its
transportation impact fee system. Another practical method and the method
recommended for consideration here by the staff, is to measure traffic generation based
upon transactions conducted at the property. It is suggested that this method be applied
to property used for retail sales because transactions are, in the course of retail business,
a matter of record and easily analyzed. We believe that this will provide a closer
estimate than the manual references and will more accurately reflect the actual revenue
cycles experienced by the businesses.
Office of City Attorney
City of Kalispell
Street Maintenance Assessment Methods Memorandum
June 22, 2011
Page - 4
Property Trip Generation Assessment in .Practice. Owners of property used for retail
purposes certainly want to know how this will look in practice. First and foremost it
should be understood that this is not a tax upon the consumer but rather an assessment
against the property. The assessment would be billed on the property tax statement
issued by the county and paid twice yearly just as the assessments are currently billed
and paid. Nor is this a tax against the retail business but rather attaches to the real
property on which the business is located.
Given these facts, further questions will be raised regarding if and how the landowner
recaptures the assessment costs from the business or the consumers. A very brief
answer is that it may be recaptured in the same fashion as the other property taxes are
currently being recaptured.
The transaction rules between the landowner and the tenant business owner is governed
by the terms of the lease agreement between them. A standard triple net lease requires
the tenant business owner to pay the value of the property taxes to the landlord as a part
of the lease costs. The street maintenance assessments are a property tax and will
continue to be a property tax subject to the terms of the lease.
When a consumer makes a transaction to purchase goods, the price that he pays for those
goods is based, at least partially, upon the various costs the retailer must pay to provide
those goods. Included within those costs are its lease costs and/or property taxes. The
retailer may choose to embed the street maintenance assessment costs into the price of
the goods in any fashion it chooses. One choice would be to simply place a transaction fee
on every transaction receipt. Or, if this seems unreasonable on small ticket items to
concentrate the charges on the higher cost goods. The City does not have the authority
in this situation to dictate to the retailer how it charges for its products.
The City staff would appreciate any input offered by landowners and retailers to assist
further in this analysis. It is not the intent to overburden either party with unfair
assessments or unwieldy processes. Suggestions and comments from the public will be
extremely valuable in coming to a final methodology.
Respectfully submitted,
Charles Harball, City Attorney
Office of City Attorney
City of Kalispell
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