#5 Discussion and possible action on Council request to review method of sidewalk financing
CITY MANAGER’S MEMORANDUM
August 8, 2012
TO: Council President Voskuil and City Council
FROM: Eric J. Levitt
SUBJECT: Discussion and possible action on Council request to review method of
sidewalk financing
Request
Council members Liebert and Farrell have requested that the City Council evaluate the
method of financing sidewalks.
Recommendation
The City Manager has a general recommendation that any changes that the Council
wants to take be in conjunction with the 2013 Budget and begin with the 2013 sidewalk
program.
st
On the Task Forces’ 1 recommendation of an 18 month notice period, the impact
would be that the 2013 program would not move forward or that the 18 month notice
period could not begin until 2014. In addition, specific contract prices and assessments
would not be available until closer to the construction.
ndrd
On the Task Forces’ 2 and 3 recommendations, the impact would be to move the
costs from the abutting property owners paying the cost to the general tax payer paying
the costs.
Only 35% of the funding for the staff in the Engineering department comes from the
General Fund operating budget. The remainder (65%) is charged directly against
specific projects such as the construction of new streets, sidewalk construction, the
installation of utilities, and landfill construction and closure and development projects.I
If the change was made so administrative costs were paid by the general tax payers
and not be placed on the sidewalk assessment to the individual affected property
owners then either the City would need to reduce other general fund costs, apply the
administrative costs to the general capital account which would impact the tax rate, or
reduce staffing capacity for sidewalks and capital projects.
Also, the third recommendation would increase the tax levy by moving the debt service
from the special assessment account to the General Fund. However, overall if the City
applied the ordered repairs to the General borrowing, all property owners who had
sidewalks equally benefit over time.
I have no feasible recommendation on the fourth recommendation of the Task Force.
Motion
I move to direct staff to bring back a proposal that meets the following parameters,
___________________.
Summary
The City Council appointed Sidewalk Task Force has been meeting since May of 2012
and previously brought forward recommendations on the installation of sidewalk in the
2012 program. One area that the Task Force has discussed in a few meetings was the
method of financing of sidewalks in the City of Janesville. Sidewalks can be installed in
two ways currently.
The first way to install sidewalk is for an individual to hire a contractor and pay
the contractor to install the sidewalk. Since we currently do not have a permit
fee, the cost to the homeowner is the cost of the contract with the private
contractor.
The second way to install the sidewalk is to have it installed through the City
contract. If this approach is taken by a property owner, the individual is assessed
for their linear foot proportion of the cost of construction, the engineering design
cost, administrative costs associated with the sidewalk program and interest
costs. By choosing this method a property owner can pay the cost over a 5 year
period of time.
Various members of the Sidewalk Task Force had concerns with the method used to
finance and believed that it may be inequitable as well as a cause to some of the
conflict over sidewalks. By consensus, the committee provided four recommendations
outlined below.
Sidewalk Task Forces’ Recommendation on Financing
The Task Force discussed financing options for sidewalk financing. The committee
agreed to provide series of approaches to the City Council for consideration:
1. Notice to the affected property owners shall be provided 18 months in advance of
the sidewalk program.
2. Administrative costs shall be paid by the general tax payers and not be placed on
the sidewalk assessment to the individual affected property owners.
3. All ordered repairs of existing sidewalks shall be placed on the general tax roll.
4. The installation all new sidewalks shall be placed on the general tax roll if the
issue of past inequity can be mitigated.
Attachments:
Letter from Task Force Committee Member
Attached Spreadsheet from Committee Member
Attached Spreadsheet provided by Accounting
Esteemed council members
I am a member of the Sidewalk committee that you appointed to take the time consuming step
of rationalizing the current sidewalk program. It has taken us an extraordinary amount of time
to sort through the variables associated with the wants and the needs for sidewalks. I believe
that the committee is performing well.
Given the detail we have been asked to review, we find that your time frames are aggressive,
but realistic deadlines are helpful.
The purpose of my communication is to share with you some of my thoughts regarding a by-
product of our duties. That by-product is the financing of sidewalk installation.
I have attached a chart that contains information provided to me by Manager Levitt.
It shows that the city generates a positive cash flow through the sidewalk program.
You do that through adding engineering department overhead to the cost of the contract to
install sidewalks; through borrowing, in two of the last three years, more money than is
required to pay off the cost of the sidewalk contract; and through the difference between the
interest charged the property owner and the cost of city borrowing.
So what?
When you decide to cover the operating costs of any city department you have 7 avenues for
funding:
1)State revenue sharing
2)Federal revenue sharing
3)County revenue sharing
4)Grants
5)User fees
6)Fines and penalties
7)Taxes
When you ask the adjoining property owner to cover the cost of city overhead in addition to
the cost of providing the city with a sidewalk on city property, it is an additional tax.
It is a tax which may be avoided by hiring a contractor other than the city to install the
sidewalk. However, some folks choose to have the city do the installation. Of those who
choose to have the city oversee the installation, many choose the 5 year plan because they do
not have the cash necessary to cover the expense immediately. There couldn’t be a more
regressive tax. First the city decides it wants sidewalks on its property (if the sidewalk
committee does its job, for legitimate community reasons), then it engineers them, then it asks
abutting property owners to fund their installation. For those who choose to have the city do
it, an additional fee is added. That fee is the engineering cost for the whole project.
Borrowing money to finance a capital project makes perfect sense. Borrowing money to fund
operational costs is another matter. It is a red flag for future fiscal problems.
Last year the borrowing was prudent, as was the reduction of interest rates charged to the
taxpayer. I hope these were intentional instead of accidental.
Another area that needs daylight shined on it is the “funded” sidewalk program. Are the
collected funds placed in an escrow account? What were the cost projections when the
assessment was made? How accurate have the projections been? Is the cost of funded
sidewalks when installed greater or less than projected? If less, how is the difference funded?
If more, is the excess used to reduce the cost of non-funded sidewalks?
As you begin reviewing the budget for next year, I ask you to question your comfort level with
these dynamics.
Former and current council members on the committee have indicated that historically the
financing of sidewalks has been a major complaint.
Please solve it to remove it as a source of contention.
Thank you
Bob Yeomans
2943 Timber Lane
Janesville
New Sidewalks 07/13/12
ConstructionAssessed AssessedAssessed
City of Janesville2009Rate per LF2010Rate per LF2011Rate per LF
Contract Cost$ 358,591.00$ 77,806.00$ 422,446.00
Collected Revenue$ 403,762.00$ 24.70$ 132,239.00$ 24.60$ 482,870.00$ 25.43
Cash flow to City$ 45,171.00$ 3.49 $ 54,433.00$ 15.57$ 60,424.003.18
Amount borrowed $ 415,000.00$ 240,000.00$ 390,000.00
1) to cover construction costs$ 358,591.00$ 77,806.00$ 390,000.00
2) to cover city operational costs$ 56,409.00$ 162,194.00$ -
If I am reading this correctly, my statement at the second meeting that the sidewalks are cash flow positive to the city
is correct.
My next Question is about the general obligation bond.
I Noticed that the amount borrowed is greater than both the direct and cost accounting amounts allocated to sidewalks.
Is that a long term obligation or is it paid back as cash comes in from the project?