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Memo Sanitary Sewer - Doug Dahlberg ~ . CITY OF HOPKINS e MEMORANDUM DATE: January 13, 1995 TO: Mayor and ~~ECil FROM: Tom Harmenin~, ommunity Development Director SUBJECT: Sanitary Sewer--Doug Dahlberg 1. Purpose of Discussion During the last City Council meeting, Mr. Dahlberg raised certain questions regarding a City ordinance which requires him to pay charges associated with his recent hookup to the City's sanitary sewer system. As a result of Mr. Dahlberg's appearance, the Council requested that Staff investigate the matter further and return with responses to various questions which have been raised. This memo is intended to provide additional information for the City Council to assist it in resolving this matter. e II. Background Various details regarding the installation of the sanitary sewer system in Mr. Dahlberg's neighborhood and associated costs are as follows: . The sanitary sewer in question was installed in Monroe Avenue in 1959 with special assessments levied in 1960 to property owners who had hooked up to the system. . The original assessment paid by homeowners in the area, which did not include the Dahlberg property, was $637. This assessment was levied over time at six percent interest. . Section 705 of the City Code indicates that when a property hooks up to the City sewer system, they are required to pay the City the amount of the original assessment associated with the improvement, plus interest at the rate of seven percent for each year that the home was not hooked up to the system. . Mr. DaWberg's home was not hooked up to the City sewer system for 34 years. In 1992 the City adopted an ordinance which required homes with septic systems to hookup to the City's sewer system. The City was required to adopt this ordinance by the Metropolitan Waste Control Commission. . Based upon the seven percent interest rate as outlined in the City Code, Mr. Dahlberg's associated charge for hooking up to the system, not including other - routine sewer access charges, is $2,153.06. thOllOSb.sam Page 2 . The City Attorney has recommended that the City not use a seven percent interest . rate, but instead use six percent, due to the fact that this was the interest rate originally applied when the project was assessed. (See attached memo.) Based upon a six percent interest rate, Mr. Dahlberg's total charge would be $1,936.48. . Please note that in addition to the above mentioned charges, Mr. Dahlberg is also required to pay the City $975.50 as part of receiving the permit to connect to the City's system, This fee includes a $25 inspection fee, a $150 sewer connection charge, an $800 sewer availability charge, which goes to the Metropolitan Waste Control Commission, and a $ ,50 state surcharge fee. Please note that although Mr. Dahlberg has not yet paid this fee, neither has he disputed this amount. III. Response to Various Questions Q: What is the justification for adding interest for the past assessments and continuing that practice into the future? A: There are at least a couple of responses to justify the City's ordinance. These include: . Dahlberg's lot was and is benefited by having the sanitary sewer available for hookup, particularly ifhis own system had failed. . The City has been providing this benefit for 34 years and has carried the cost to . do so. Q: Which is more correct, six percent or seven percent interest on the assessment, and how was it justified? A: Although our City Code requires the use of a seven percent interest rate, our City Attorney has recommended we use six percent, as that was the original rate used when the project was assessed. (See attached memo.) Although we were unable to find anything in the 1959 minutes which explained the use of six percent, Staff expects this rate was used to cover the interest rate on the debt incurred, plus delinquencies and other costs, The City currently charges eight percent on assessments. Q: In what ways does the Dahlberg situation, and those that fall under the 1992 ordinance revision, differ from other lot splits or houses which have connected up to the sanitary sewer system? A: With respect to our ordinance, the only difference is that Dahlberg was required to hook up due to his use of a private septic system. In cases where lots are created through lot splits, the City has required hook-up to the City's system along with the payment of the applicable assessment. . thO l105b.sam ---- -- -- - - . Page 3 . Q: What is a pending assessment, and how does this situation differ from a pending assessment? A: Upon request, the City does assessment searches for prospective buyers, realtors, etc. The City will inform these individuals of a pending assessment on a property at such time the Council orders the preparation of plans and specs for an improvement project which effects the property being researched by a buyer. In the Dahlberg case, his property was not included in the project and, as a result, was not assessed. Thus no pending assessment was shown. Q: Why didn't the City, at the time the sewer was put in, require those original residents to either connect to the city sewer or pay the assessment when the property was sold? A: Staffhas no clear answer for this, nor do the Council minutes from 1959 provide an explanation. For whatever reason, the property in question was not included in the project. Perhaps the property owner of that time did not desire to be hooked up and the City obliged this request. Q: Have individuals similar to the Dahlberg case made any payments toward the sanitary sewer system via taxes towards bonds or other payments, and what . benefit has the sewer provided to that property? A: In terms of the Monroe Avenue sewer installation, the Council minutes indicate that the City was not going to contribute to the cost of the installation through property taxes. This approach is not uncommon when streets and utilities are initially installed and seemed to be the policy the City used in other cases. In terms ofthe benefit the installation of the sanitary sewer had for the property, Staff's response would relate to the tlinsurance benefits" it provided. For example, if the septic system on the Dahlberg property had failed, the City's system was readily available for service to the property. Q: If the Council were to grant some form of relief to Mr. Dahlberg, what optional forms are there? For example, the four individuals who a..e affected by the 1992 ordinance could theoretically be considered to be a different case, since they were mandated to connect, whereas others were given an option. How many properties have or would be affected by going back the 16 years, such as the Dahlberg case, to exempt them from interest on those assessments? e thOl105b.sam - - . Page 4 A: Options in terms of providing relief to Dahlberg could include: . . Forgive interest charges for period oftime prior to Dahlberg owning the property (1960-1978: at 6% = $688; at 7% = $803), . Forgive two years of interest between 1992-1994 due to the fact Dahlberg was mandated to hook up during this time (6% = $76; 7% = $89). Staffhas discussed the ability to compile information to determine how many property owners may have been in a similar situation as Dahlberg relative to buying their home while not knowing the potential cost of hooking up to the system. Without extensive Staff time being spent, with the possibility that the results may still be hit-and-miss, it is difficult for Staff to answer this question. Thus, staff has no answer at this time. Staff is aware of connection charges which were applied to future homeowners of recent lot splits. For example, for a home recently built in Bel1grove, due to a new lot being created, the principal and interest charge for hooking up to the sewer system was $6,137 (approximately $3,500 in interest charges). This property owner was not given the option to put in a septic system, but was mandated to hook up to the City's system. Alternatives . 1. Require Dahlberg to pay the charges pursuant to our current ordinance. 2. Require Dahlberg to pay the charges pursuant to our current ordinance, but at the six percent rate ($217 savings). Staff should also be directed to commence an amendment to the City Code to allow for the lower rate. 3. Require Dahlberg to pay the charges pursuant to our ordinance (at 6% rate), but forgive two years of interest for period of time between 1992 and 1994. This was the period during which Dahlberg was required to hook up. 4. Forgive the interest charges for the period Dahlberg did not own the property (18 years = $688 at 6%), Staff would recommend Alternative 2 and suggests Alternative 4 would be appropriate to include as well. . thOl105b,sam ~ , . . . Hopkins City Code (Rev. 8/92) 705.01 Section 705 . Sanitarv sewer svstem 705.01- Tan : license required. No person may tap or make any perforation or opening of any kind in a sanitary sewer pipe, or make connection to a sanitary sewer main or building sewer in the city, without firs t having obtained the licenses and permits and paid the fees required by this code. 705.03. Sewer connection. Subdivision 1. Permit. No public sewer shall be tapped or connection made thereto. from any lot, piece or parcel of land without first securing a wri tten permit to do so from the building official upon proper written application therefore and paying the required fees. (Amended Ord. #92-710) Subd. 2. Application for permit. Applications shall be made upon forms to be provided therefor by the city and require the following information: (a) exact legal description of premises for which sewer connection is applied, including plat and parcel number; (b) address of premises; (c) name and address of plumber or other contractor; . . (d) name and address of owner of premises; (e) date of opening and installation of connection; (f) general description of type and method of connection to be used or made; and (g) such other pertinent information as the builqing official may require. Subd. 3. Charges. The following charges shall accompany the application: (a) the charges set by Council resolution; (b) if, for the parcel described in such application, the city has not been reimbursed or otherwise secured for said parcel's proportionate beneficial share of the special benefit and total cost of the. construction and installation of the public sewers within the project district or area in or from which the parcel is to be served, the applicant shall pay an additional sum equal to that proportionate share of such special benefit and cost which said parcel. bears to such entire area or district and which was specially assessed or charged for said public improvement, plus interest on said sum at the rate of seven percent per annum from the date or dates of the original construction or installation of such pub lic improvements to the date of the e issuance of the connection permits. (Amended Ord. #92 -710) ~." " ..