Sanitary Sewer Asses. AssitanceCITY OF DUBUQUE, IOWA
MEMORANDUM
February 17, 2000
TO:
The Honorable Mayor and City Council Members
FROM:
Michael C. Van Milligen, City Manager
SUBJECT:
Special Assessment Repayment Interest Rates
Based on concerns about the impact of assessable sewer projects on low and
moderate income individuals, the City Council directed that staff review the interest
rates charged on the unpaid balance of assessments.
Currently, the City charges the maximum rate allowed by state law, 9%.
Consequently, most people pay the full amount of the assessment when it is due,
instead of paying over ten years.
The most significant potential financial impact of reduction in interest charged for
special assessment is not the reduction in special assessment interest revenue, but
the possibility that many more property owners may choose to pay assessments
over time rather than in a lump sum. If a large number of property owners begin
paying assessments over time, the City would need to fund assessment projects by
some other method, such as special assessment bonds or general obligation bonds.
Special assessment bonds have fallen out of favor with the market due to greater
repayment risk and have higher interest rates and issue costs, leaving general
obligation bonds as the better funding alternative. Since assessment funding
requirements vary greatly with projects and completion dates can be difficult to
predict, the City would need to estimate the funding needs and issue bonds to
cover several assessment projects. The FY 2000 budget includes $659,000 in
project assessments and the five-year CIP includes $3,216,115 in assessments. If
a large portion of these assessments were paid over time, a new source of funding
would be required for the assessable portion of these projects.
As opposed to lowering the interest rate, staff is recommending an assistance
program to help low and moderate income residents pay their sewer assessments.
This is the identical program that is now used in the street program.
The Honorable Mayor and City Council Members
Special Assessment Repayment
Interest Rates
Page 2
The assistance program would use an assistance formula based upon a graduated
income scale. Assistance would be available from 20% to 100% of the sanitary
sewer assessment, based upon the number of persons in the household and the
income level.
I concur with the recommendation and respectfully request Mayor and City Council
approval.
Michael C. Van 'Milligen
MCVM/dd
Attachment
cc:
Barry Lindahl, Corporation Counsel
Tim Moerman, Assistant City Manager
Duane Pitcher, Finance Director
CITY OF DUBUQUE, IOWA
MEMORANDUM
January 12, 2000
TO: Michael Van Milligen, City Manager
FROM: Duane Pitcher, Finance Director
SUBJECT: Special Assessment Repayment Interest Rates
INTRODUCTION
The City interest rate for repayment of special assessments was discussed as part of the sanitary
sewer extension project for Florence, Villa, and Mountain Lane. The City Council requested that
City staff provide information on the financial affects oflowering the interest charged for paying
special assessments.
BACKGROUND
The City of Dubuque sets an interest rate for repayment of special assessments through the
County; this rate has been set at the rate for special assessments established by the State
Treasurer, currently 9.0%. The rate set by the State Treasurer is the maximum rate that can be
charged for repayment of special assessments per Chapter 74A.4 of the Code of Iowa.
Prior to local option sales tax, the City regularly issued special assessment bonds to fund the
property owner portion of street projects funded by assessment. The use of local option sales tax
had two positive effects on the funding of special assessment projects; the assessment amounts
were greatly reduced, and a larger number of property owners began paying their assessments in a
lump sum rather than over time. This has eliminated the need to issue bonds to fund the property
owner portion of special assessment projects. In addition to reducing assessments through local
option sales tax, the City has an existing street assessment assistance program that allows lower
income homeowners to receive up to a 100% reduction in their assessment. A similar program
does not exist for sewer assessments. A program is in place to provide assistance to low and
moderate income residents for sanitary sewer connections to existing lines.
DISCUSSION
The most significant potential financial impact of reduction in interest charged for special
assessment is not the reduction in special assessment interest revenue, but the possibility that
many more property owners may choose to pay assessments over time rather than in a lump sum.
If a large numbers of property owners begin paying assessments over time, the City would need to
fund assessment projects by some other method such as special assessment bonds or general
obligation bonds. Special assessment bonds have fallen out offavor with the market due to
greater repayment risk and have higher interest rates and issue costs, leaving general obligation
bonds as the better funding alternative. Since assessment funding requirements vary greatly with
projects and completion dates can be difficult to predict, the City would need to estimate the
funding needs and issue bonds to cover several assessment projects. The FY 2000 budget
includes $695,000 in project assessments and the five-year CIP includes $3,216,115 in
assessments. Ifa large portion of these assessments were paid over time, a new source of funding
would be required for the assessable portion of these projects.
There was some discussion at the meeting comparing home equity loans to repaying special
assessments over time. Currently some home equity loans available at rates less than the 9.0% set
by the City for special assessments. Home equity loans tend to be floating rate loans based on the
prime rate while the special assessments have a fixed rate over the term of 10 years. Home equity
loans offer much more flexibility on terms of the loan and prepayment. The differences in interest
rates the City charges and advantages and disadvantages of type ofloans will be irrelevant to
some low and moderate income residents who do not have the resources to pay for the
assessment regardless of the loan terms. For these residents, a program that reduces the
assessment amount will best address the issues discussed during the City Council meeting.
ACTION
For your review and discussion with the Honorable Mayor and City Council. After our meetings
with engineering and budget staff, we determined that the best method to provide meaningful
assessment assistance would be through a program similar to the street assessment assistance
program which lowers the assessment amount based on income. My recommendation is that the
City establish an assessment assistance program for sewer assessments similar to the existing
program for street assessments. I further recommend that we maintain the special assessment rate
at the maximum rate set by the State Treasurer. If the decision is made to provide a lower rate, I
recommend that the rate be set at a standard spread to the maximum rate set by the State
Treasurer, possibly 1.0% to 1.5% under the maximum rate.
cc:
Pauline Joyce, Administrative Services Manager
Mike Koch, City Engineer
Gus Psihoyos, Assistant City Engineer
Jerry Hird, City Treasurer
CITY OF DUBUQUE, IOWA
MEMORANDUM
February 3, 2000
TO:
Michael C. Van Milligen, City Manager
FROM:
Gus Psihoyos, Assistant City Engineer
SUBJECT:
Sanitary Sewer Special Assessment, Financial Assistance Funding
Opportunity
INTRODUCTION
The purpose of this memo is to recommend a program that could potentially provide
for financial assistance to fund sanitary sewer assessments for low to moderate
income owner-occupied properties.
This program would be implemented as part of the City Council's request that City
staff provide for a mechanism to reduce special assessments for unusually expensive
sewer extensions such as the Florence, Villa and Mountain Lane project that currently
is under construction.
BACKGROUND
The City already has a couple of programs that provide financial assistance for private
sanitary sewer lateral connections from the public main to the home. Those programs
include "Assistance to Low/Moderate Income Residents for Connection Charges" and
"Sewer Lateral Connection Assistance Program". (See attached CIP Excerpts).
This program would go a step further than the existing programs by reducing costs for
special assessments on sewer extension projects, some of which can be extremely
expensive due to difficult laying conditions and terrain. The City currently has a similar
program in place to help defray costs for special assessments to low and moderate
income owner-occupied properties for street program assessments. This new program
would help defray costs for sanitary sewer assessments based upon financial need.
The funding program would use an assistance formula based upon a graduated income
scale (see attached summary of recommended income levels), The City would pay for
the assessment cost greater than the maximum rates contained in the funding chart
and would not increase the assessments on other properties if this policy is adopted
as proposed,
Assistance would be available from 20 percent to 1 00 percent of the sanitary sewer
assessment, based upon the number of persons in the household and income level.
The City funding for this program would come from balances in the assistance
programs for "Sewer Connections Assistance for Low to Moderate Income Residents"
and the "Sewer Lateral Connection Assistance Program",
Attached you will find a copy of information which would be sent to property owners
along with final special assessment notices on sanitary sewer projects as they are
completed and the assessments are levied,
GP/ka
cc:
Michael A, Koch, Public Works Director
Pauline Joyce, Administrative Services Manager
INFORMATION FOR PROPERTY OWNERS REGARDING
FINANCIAL ASSISTANCE ON SEWER ASSESSMENTS
FOR LOW AND MODERATE INCOME FAMILIES
Enclosed are application forms for financial assistance which is available from the City of
Dubuque to defray a portion or all of special assessments for the (Project Name) Sanitary Sewer
Construction Project,
Applications must be received by
,2000.
The financial assistance is available for owner-occupied residential properties with low and
moderate income families, Qualifying families are eligible to receive between 20% and 100%
of the amount of sanitary sewer special assessment (depending upon income level).
Persons in Household
Financial Assistance Available
Maximum Gross Income
for 20% Funding
Maximum Gross Income
for 100% Funding
1
2
3
4
5
6
7
8 or more
24,080
27,520
30,960
34,400
37,120
39,920
42,640
45,440
12,040
13,760
15,480
17,200
18,560
19,960
21,320
22,720
Gross income shall include:
1,
Interest, wages, and other taxable earnings documented by the 1999 Federal Income Tax
return and supporting W-2's.
Workers' compensation payments.
Child support received.
Annual social security benefits (unless subject to tax and reported on tax returns) as
documented on Form SSA-1 099,
Earned Income Tax Credit.
Pension Income,
2.
3.
4.
5.
6,
If you were not required to file a Federal Tax form, verification of income must be submitted,
Gross income must be reported on a household basis,
Enclosed are the following documents which can be utilized to complete an application for
financial assistance.
1,
2,
3,
Application for financial assistance.
Social Security verification request form.
Proposed special assessment amount,
Contact the City Engineering Division at 589-4270 to obtain further information relating to this
financial assistance program,
On or about (Mailing Date), you should also receive a mailing from the City Clerk relating to the
remaining portion of your payment and due dates of any special assessment.
DEPARTMENT: PROGRAM: PROJECT TITLE: PROGRAM: 3 TOTAL
Public Works Facilities and Sewer Lateral Connection DEPTIACT: 55900 COST:
Engineering Division Environment Assistance prorgram FD/CIP NO: 310-341 Annual
Program
EXP. PRIOR ESTIMATED BEYOND
TO FYOO FYOO PROJECT BUDGET 2000-01 2001-02 2002-03 2003-04 2004-05 2005
A. EXPENDITURE ITEMS
Design and Engineering
Land and RO,w.
$25,000 Construction $25,000 $25,000 $25,000 $25,000 $25,000
Other
$25,000 TOTAL $25,000 $25,000 $25,000 $25,000 $25,000
B. PROJECT FINANCING
$25000 Sanitary Sewer Constr Fd $25000 $25000 $25000 $25000 $25000
$25,000 TOTAL $25,000 $25,000 $25,000 $25,000 $25,000
PROJECT DESCRIPTION
As of January 31, 1996, 129 residents within 200 feet of the City's sanitary sewer system were not connected, City Ordinance requires that all
properties within 200 feet of public mains connect to sanitary sewer and City staff will be requiring these connections through a phased program
over the next seven years.
JUSTIFICATION
The City Council has adopted a policy limiting homeowner financial participation for these private connections to the City main. This was due to the
increasing concern of the affected property owners that the cost of these connections were causing a financial hardship. The City Council has set a
limit of fifteen percent of the value of the property to be a reasonable participation for these property owners. This program will allow the City to
compensate the owner up to an additional ten percent of the value of the property to assist in defraying these costs.
RELATIONSHIP TO OTHER PROJECTS
This project implements the Comprehensive Plan's Infrastructure Element: Goals 2,1 and 11.7; Environmental Quality Element: Goals 4.7 and 5.4;
and City Fiscal Element: Goal 5.4.
DEPARTMENT: PROGRAM: PROJECT TITLE: PROGRAM: 3 TOTAL
Public Works Facilities and Sewer Connections - Assistance DEPT/ACT: 55901 COST:
Engineering Division Environment to Low/Moderate Income Residents FD/CIP NO: 010-512 Annual
for Connection Charges Program
EXP, PRIOR ESTIMATED BEYOND
TO FY 00 FYOO PROJECT BUDGET 2000-01 2001-02 2002-03 2003-04 2004-05 2005
A, EXPENDITURE ITEMS
Design and Engineering
Land and R.OW.
Construction
$25000 Other $25000 $25 OOp $25000 $25000 $25000
$25,000 TOTAL $25,000 $25,000 $25,000 $25,000 $25,000
B, PROJECT FINANCING
$25000 General Fund $25000 $25000 $25000 $25000 $25000
$25,000 TOTAL $25,000 $25,000 $25,000 $25,000 $25,000
PROJECT DESCRIPTION
The project provides additional assistance to low and moderate income residents who are required to hook-up to City sewer if their properties are
within 200 feet of public mains. This program is in the second year of a seven year phase-in plan for implementation.
JUSTIFICATION
Although Community Development Block Grant funds provide approximately $10,000 per year for this type of assistance, the need is greater than
available resources and sanitary sewer funding is recommended to augment the block grant program.
RELATIONSHIP TO OTHER PROJECTS
This project implements the Comprehensive Plan's Infrastructure Element: Goals 2.1 and 11.7; and Housing Element: Goals 4.1, 4.3, and 5.1.