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z 7 z 3 3 3 3 1 a a 3 1 • 1 Available Funding Sources General Obligation Improvement Bonds Repaid By Special Assessments (Minnesota Statutes Chapter 429,01 - 429.31) Springsted 13 Special assessments are charges a city levies against benefited real property for local improvements. They provide a comparatively just and equitable means of financing capital improvements while minimizing the demand on the City's property tax levy and statutory debt limitations. Examples of public improvements that cities may finance through special assessment levies are: street and sidewalk improvements; storm and sanitary sewer systems; steam heating mains; street lighting systems; waterworks systems; parks and playgrounds; and recreational facilities. Additional public improvements include: street trees; dikes and other flood control works; retaining and area walls, including highway noise barriers; malls, plazas, or courtyards; district heating systems; fire protection systems; gas and electric distribution facilities; and parking lots. General Obligation Improvement Bonds are used in conjunction with special assessments to fund improvement projects. The City can issue General Obligation Improvement Bonds without a statute- required referendum provided that at least 20% of the City's share of the project costs are paid for with special assessments. In practice, the City issues bonds to finance the entire project. The bonds are repaid from special assessments received from benefiting properties and from other available sources including property tax levies. Special assessments apply only to real property. In theory, special assessments are more equitable than property taxes because they are only levied against properties that receive some direct benefit from the improvements. The advantages of special assessments include: • Special assessments are a means of raising money outside general city tax sources • Special assessments provide a means of levying charges for public services against property otherwise exempt from taxation • Special assessments are charged to the property owner for the benefit received The disadvantages of special assessments are the difficulty and the cost of administration and the subjective difficulty of relating assessment charges to the special benefits received. The statute provides that the amount assessed against a benefiting property cannot exceed the amount of the special benefit the property receives as a result of the improvement. The special benefit is defined as the corresponding increase in the market value of the property resulting from the improvement. This requires that administrative procedures be carefully followed and that the amount of special benefit received by the properties assessed can be established in order to avoid court litigation. The City of Lino Lakes currently uses special assessments as a financial tool. This includes both special assessments for improvement projects and special assessments that are negotiated prior to the development of public - 182 - City of Lino Lakes - Pavement Management Plan Financing Report