Roadwork costs take a toll on Minneapolis property owners

A large garden shop in southwest Minneapolis was facing a double whammy.

Not only did Wagner's have to close for several months last year during repairs on Penn Avenue S., but the city hit the family-owned business with a $194,813 bill to pay for its part of the street work from W. 54th Street to Hwy. 62.

Though the business appealed to lower the fee, it was still substantial. "I think if anyone actually really knew what we spent, it would be, 'whoa,' " said manager Julie Wagner.

As Minneapolis pushes to repair more old, crumbling roads, it is charging millions of dollars to people who own property on them, from a major golf course off Lake Calhoun to homeowners in Near North and Linden Hills to sprawling hospitals and colleges. Even churches and nonprofits foot their share of the bill.

Special assessments for roadwork have surged in Minneapolis over the last three years, jumping 50 percent to $11.7 million in 2013. About half that came from the southwest, where residents have long complained about high taxes.

The extra roadwork dates to a city decision in 2008 to do less time-consuming, expensive street reconstruction. Instead, the city said, it would improve more roads by increasing its street resurfacing: a simple, cheaper alternative that would extend the life of a road by a decade.

That meant that special assessments totaling $2.3 million in 2007, before the new approach, jumped to triple that in many of the years since then, peaking last year.

Minneapolis expects to assess property owners another $6.4 million this year as it plans roadwork that includes the southwest edge of Lake Nokomis, Lowry Hill East and the area east of Theodore Wirth Parkway in Willard Hay. Reconstruction will continue along Penn Avenue. S., from W. 50th to 54th Streets, and other resurfacing projects will span along 4th Avenue. S. by the Convention Center and streets by the junction of Interstate 94 and Interstate 394 near Loring Park.

"The street conditions have improved from this resurfacing but it has resulted in more assessments because we've covered a lot more miles," said Heidi Hamilton, deputy director of Public Works.

State aid and property taxes are not enough to pay for needed repairs, according to the city, and federal funds will not cover Minneapolis' 600 miles of residential roads.

Better roads would have prevented the explosion of potholes that motorists saw this winter since the craters can't form unless moisture seeps into cracks in the asphalt. But some question whether special assessments are the best way to help pay for them, as construction costs rise and the housing market and economy are not as strong as they once were.

Anne Finn, a lobbyist for the League of Minnesota Cities, said street assessments have become less popular throughout the state, in part because residents and property owners dislike them. "It really comes with a sting," she said.

Well-maintained roads also matter as Minneapolis faces a development boom and is trying to bring in more people and jobs.

"Cities that are trying to attract businesses to invest, they really have to have good transportation infrastructure to go along with that," Finn said.

The league wrote a letter to Gov. Mark Dayton and legislative leaders this month noting that fiscal constraints caused the poor condition of roads throughout Minnesota, and that the main funding sources for repairing streets, including special assessments, have limitations.

Council Member Linea Palmisano, who represents southwest Minneapolis, said she is open to other ways of paying for roadwork.

"It is something that could deserve a very serious study in the future," she said. " … Assessments are hard in general. This is the way we do them currently, but I can see other models that might work better."

"The streets are failing faster than we can repair them," said assistant St. Paul engineer Dan Haak. "It's a huge concern."

Property owners in some cities are waging fights over assessments with mixed ­success.

In February, Ramsey County Judge Lezlie Ott Marek ruled in favor of the city of Maplewood after a group of residents challenged the constitutionality of street assessments of $5,000 and $5,800. She wrote in a decision that the increase in home value that would be brought by the project met or exceeded the assessments.

Last year, Rochester lowered assessments for several homeowners after their lawyer threatened to sue the city, claiming that the fees did not correspond to an increase in home values. And Edina changed its policy in 2012 after complaints about fees as high as $22,000, giving property owners longer to pay, cutting interest rates in half, and assuming the cost of sidewalks, trails and lighting connected to the street projects.

In Minneapolis, the city agreed to reduce Wagner's assessment in February to $107,000 following an appeal. Owners of six other properties appealed in the last three years, and wound up reducing their fee in four of those cases. In February, council members approved a reduction of a $312,930 assessment against Minnetonka Moccasins to nearly half. One appeal brought by Riverland Ag Corp. to contest a $144,195 assessment is still open.

"I was not going to be getting back six-and-a-half thousand dollars in value for the work that was done," he said. Binenstock also questioned why property owners on heavily traveled Penn Avenue were assessed far more than those on quieter streets nearby.

Size figures into how properties are assessed and commercial buildings are charged more than residential ones. The city inspects pavement condition of streets every three years and develops a list of capital projects based on their age and quality.

One benefit of using special assessments is that the city can collect money from entities that are typically exempt from paying property taxes. In the last three years, the city's public school system forked over more than anyone else, $633,455, while churches paid $341,237.

Nonprofit Project for Pride in Living faced more than $200,000 in assessments recently. But CFO Jack Katzmark admitted that the roads around its job training facility in southeast Minneapolis needed the work — even though the initial bill made him say "uh-oh."

"They were necessary improvements, believe me," he said. "Those streets were in very poor shape."