What is a Pavement Management Program (PMP)?

The City of Rogers street system is one of the most valuable and costly assets owned by the City. Extending the life of this asset through regular maintenance will provide the lowest possible cost to the City and its taxpayers. A pavement management program uses actual condition data to estimate the best time to complete maintenance activities. It is proven that extending the life of streets through regular maintenance will lower the overall cost of the street investment. The majority of Rogers’ streets were constructed within a ten year period during a time of rapid development. Those streets are now reaching an age and condition where planned maintenance activities are necessary in order to extend their life and lower the overall replacement cost. This program estimates the cost of those maintenance activities that can be used for budgeting purposes.

How long will the Pavement Management Program be in place?

The Pavement Management Program represents a continuous and ongoing approach to maintaining streets, identifying a number of streets every one to two years to keep the overall condition of all City streets at an acceptable level while spreading out the cost of maintenance over a longer period of time. Utility franchise fees have been chosen as the long term funding option for the City and are not anticipated to be eliminated. The PMP will be reviewed annually by the City Council during the regular budgeting process.

Why hasn’t the City saved money for the Pavement Management Program?

Because of the age of most City streets, significant reconstruction activities have not been necessary to this point throughout the vast majority of the City.  Without franchise fees in place, a large share of any road reconstruction/mill and overlay costs would have been funded through direct assessments to benefitting properties on those roadways.  The Pavement Management Plan estimates the cost of this program at $1,082,000 for each of the next 20 years and a higher amount for the 20 year period following.  The City has funded small maintenance projects over the past few years with a very modest capital fund established since 2013 through the annual tax levy.  The City Council approved franchise fees as the funding plan that will provide a stable revenue source that is equitable for all users and eliminates the need for special assessments against properties for road reconstruction/mill and overlay.

I thought my property taxes were for street improvements. Why would you add more fees for the same thing?

The City’s annual property tax levy includes dollars for routine maintenance and snow removal. Because the vast majority of City streets have not needed significant improvement (full reconstruction or mill/overlay) due to the age of the streets and the rapid development that occurred in Rogers during a short period of time, the City has not needed to levy significant tax dollars for pavement management in the past. Note that since 2013, the City has established a small capital sinking fund through the annual tax levy that has paid for a limited number of minor street maintenance projects but would not provide sufficient revenue to fund the PMP.

Recent increases in the annual City tax levy have accounted for inflationary pressures on existing service levels along with accommodating the growth of the City both residentially and commercially but have not included a permanent dedicated funding source for the PMP.

That situation has changed due to the age of our roadway system and needs to be addressed by developing a process to fund the PMP. The City is in a fortunate position of being able to implement franchise fees to fund the program in a more equitable and cost-effective manner, without having to address the previously used method of assessments.

Note that while the tax levy (total property taxes collected by the City across all taxpayers) has increased over the past several years, the tax rate (essentially the amount collected as a percent of market value/capacity from individual taxpayers) has stayed very flat, offset by growth.  In fact, the City’s share of property taxes on the median valued home in Rogers is actually lower in 2015 than it was in 2008.  The revenue needed to fund the Pavement Management Program must come from new sources other than the current property tax levy.  The vast majority of cities rely on special assessments to benefitting property taxes – typically several thousand dollars for a residential property – at the time of the improvement, which is the method that the City had used minimally in the past and would otherwise need to continue if not for franchise fees.

The City Council approved franchise fees as the funding mechanism at the August 25, 2015 City Council Meeting to begin in January 2016.

Are franchise fees just another tax?

While not technically considered a “tax,” this is a new dedicated revenue source for the City which would be collected from utility users in Rogers, and it could be said that it has nearly the same effect as a tax. However, it is not levied in the way that a property tax is levied, given that that franchise fees are not tied to the value of a property. Thus all single family homes will pay the same amount toward the PMP assuming they have both gas and electric services. Specifically, franchise fees are a method of collecting funds from utility companies who use City rights of way. These funds are typically passed directly through to all businesses/residents that use the street system.

What will the franchise fee funds be used for?

The franchise fees will be set aside in a dedicated fund and will be used solely for expenditures related to the PMP, utility relocation, or other street rehabilitation activities. Paving a gravel road or betterment of a road (i.e., addition of curb and gutter) will be handled with the current practice of 100% assessments to property owners.

What is the City’s authority to charge a franchise fee?

Minnesota State Statutes allow for a city to impose a fee on a utility company for its use of publicly owned right-of-way (MN Statute 216.36).

How much will I be charged?

Beginning in January 2016, residents will be charged $5.00 on their electric bill and $4.00 on their gas bill every month. Commercial/Industrial properties will be charged based on the below schedule. You need to call your utility company to find out your classification. The noted rates have been developed to generate $1,082,000 annually for each of the next 20 years.
            
Electric:

-Small Commercial/Industrial - Non Demand $7.00

-Small Commercial/Industrial - Demand $45.00

-Large Commercial/Industrial - $210.00

Gas:

-Commercial, Small Volume A - $7.00

-Commercial/Industrial, Small Volume B - $20.00

-Commercial/Industrial, Small Volume C - $70.00

-Commercial/Industrial, Small Volume Duel Fuel A and B - $148.00

-Commercial/Industrial, Large Volume Duel Fuel - $800.00

I live in an apartment or town home. Will I be charged a franchise fee?

Yes, the fees are charged by electric and gas meter and you will pay the standard residential fee. The fee pays for your use and maintenance of the public City streets.

I have multiple bills or two or more meters on my property. Do I have to pay the fee more than once?

The franchise fee is an account-based fee on each premise and not a meter-based fee.  If you have multiple meters on the same bill, you will be charged only for the largest meter.  If you have specific questions on your bill and meters you will need to contact the utility company directly.

I live on a private street.  Will the money I pay be used for maintenance of private streets?  If not, why would I pay it?

Private streets typically are intentionally constructed by developers to a standard that is less than the standard City street.  Because these streets are not constructed to City standards, the City does not accept them as public streets and does not contribute toward their maintenance.  However, the City is investigating a method to participate in the maintenance of the private streets under the franchise fee program.  It is possible that the City may be able to contribute to a surface treatment as long as the private street meets minimum design standards.  This has not yet been determined and there are other details that would need to be addressed as part of the overall management plan.  Note that the PMP pays for the street in front of your home/business, but also pays for the collector streets that connect all parts of the City, toward which all properties need to contribute.

How often will the City review the franchise fee for consideration of changing the fee?

The City is planning to review the fee itself every five years to determine the need to adjust.  It is not anticipated that the fee will need to be changed in the near term.

Why doesn’t the City charge a fee to each property for street maintenance?  Why go through a third party for collection?

State law does not allow the City to charge a direct fee for maintenance of our system (i.e., a street utility fee). State law does allow for the collection of a franchise fee from utility service providers for their use of the right-of-way. Thus the fee will be charged to the utility companies and then dedicated to maintain the City street system.

What if I am currently being assessed for a maintenance project right now?

The City does have a few projects that are currently being assessed for maintenance activities.  Those property owners paying a current assessment for projects related to maintenance activities may be eligible to receive an annual rebate of the franchise fees paid that year. Rebates will be paid annually and offered through the end of the adopted assessment term.  Rental properties, which also qualify for rebates, would need to be in the name of the property owner, not a tenant.  To qualify for the rebate, the property owner needs to present the rebate form and copies of their gas and electric bills.  The property owner would then be refunded the amount paid toward the franchise fee for the year.