ST. CLOUD — After years of complaints from residents and squabbles among council members about the way the city assesses property owners for street projects, city staff here are proposing changes they say will ensure residents are not charged more than state law allows.
For the last decade, St. Cloud has assessed property owners based on how many feet of their property touch the street being improved. Minnesota case law has deemed this so-called "front footage" method valid because it is a fair approximation of the market value increase.
But some residents argued that method resulted in exorbitant — and often inequitable — assessments to pay for road projects.
The new proposed policy, which the City Council will consider at a meeting this fall, says an independent appraiser will look at the entire project area and give a range of estimated market value increases for the properties. The city would use this "special benefits report" to make sure the bill they are sending residents is less than the top end of the appraiser's range.
"While it's not an appraisal, the report can function as a test of reasonableness for the proposed assessments," said city attorney Renee Courtney at a September council meeting on the topic. "It provides guidance on market benefit for the entire project."
The council started discussing changes to the city's assessment policy in May after some members questioned whether the city's policy was equitable and transparent.
St. Cloud resident Kevin Carpenter, who has worked to get the city to amend its policy, took the city to court a few years ago after receiving a $14,000 assessment for a neighborhood project that resurfaced the road and replaced underground utilities. The city then had the property appraised by a third party and agreed to reduce the bill to $4,000.
But Carpenter continued to raise concerns about the unfairness of the policy for those who don't have the time or wherewithal to take the city to court. His neighbor who lives in a $100,000 house, for example, was assessed $6,300. Yet after the court case, Carpenter — who lives in a $330,000 historic house — ended up paying less than she did for the same project.
Carpenter said this week he appreciates council members who want to stop overcharging homeowners for road projects but said he's worried the special benefits reports will be too arbitrary.
"The fact that the city is aware that there's a problem — it's a start," Carpenter said Tuesday. "But this notion that you really can realistically say that houses in a neighborhood like ours go up in value at all because of one of these projects — I mean, they just don't. It's a myth."
State law says a city can't assess someone for more than their property value increases due to project improvements. But the law is vague, leading every city to have unique policies.
"It's definitely complex. The law does not provide a lot of framework," said Tracy Hodel, public services director for St. Cloud.
Despite the state law, many cities do not consider market value at the front-end of a project due to the hefty cost to appraise each property. But in the past few years, a number of cities — including Rochester, Duluth and Edina — have changed the way they pay for road projects.
Rochester pays for simple road resurfacing projects through a tax levy instead of assessment, and larger projects are assessed based on people's property values, which staff say results in lower assessments than if they had used the front-footage method.
In Duluth, the city no longer assesses for annual street projects, but does assess the full cost of building new streets or paving gravel streets. And Edina is gradually transitioning from funding road projects with assessments to property taxes.
Hodel said she's not sure if the city will end up paying a higher share of project costs with the new policy, which could indicate the city's previous assessments were too high.
St. Cloud Mayor Dave Kleis said it's hard to put an exact dollar benefit on a project.
"That's always been the challenge," he said. "You could get 10 different appraisers and have 10 different values."
Kleis is also advocating that the city start assessing for smaller resurfacing projects, which are currently paid for using property taxes.
"Right now the city pays 100% of that, which means 80% of the properties in St. Cloud pay that [through property taxes]," he said, noting about 20% of properties in the city are nonprofits that don't pay property taxes. "It's just more fair and equitable if the folks in the area who are getting a road pay at least a portion of that."
City staff estimate they'd be able to complete about 25% more resurfacing projects each year if residents, businesses and nonprofits were assessed for a portion of project costs.
Kleis said he thinks people would be willing to pay for a portion of street resurfacing projects, especially because respondents in the most recent city survey said their No. 1 priority was road conditions. The issue dethroned public safety as the top priority for the first time since the survey was first conducted in 2012.
"It's the highest demand," he said. "Our survey shows that and that's why we're bringing this forward."