Road Projects Assessments - Why They Matter To You

It's That Time of Year

Our warmer than normal winter and the recent closing of the Lyndale bridge over Minnehaha Creek are reminders that orange cones and detour signs will soon be popping up like dandelions. Last year’s “Year of the Pothole” reminds us that the inconvenience of regular maintenance of our streets is necessary.

While most of us know the two seasons in Minnesota, winter and construction, few know how road projects are paid for until they are happening in front of our homes or businesses. If you own property on a road undergoing construction you will have to pay a special assessment in addition to your regular property taxes.

The Calculations

Each year the Minneapolis City Council establishes a "uniform rate" for different types of road projects; from the street resurfacing project happening in the Linden Hills neighborhood this summer, to a complete reconstruction on Nicollet and Lyndale Avenues starting this spring. Using uniform rates across all city road projects, regardless of property values, helps even out the cost to all property owners.

Assessment rates are not only categorized by the type of construction, but also depend on how the property is used: either residential or non-residential. You might hear people talk about a commercial rate but there is no such thing. Commercial property is in the category of non-residential, just like churches. And yes, churches, schools, and non-profit organizations pay assessments for road projects just like all property owners. Only government property is exempt.

The amount assessed is based on the square footage of the property. Larger properties typically pay more than smaller ones. Corner properties have the added burden of being assessed for more than one street, so the assessment for corner properties is based on an "influence area”. The influence area is typically one-quarter to one-half of a property compared to one with frontage solely on one street. 

You Pay, We all Pay

The special assessment we pay as property owners only covers a part of the project cost. Road projects are also funded by net debt bonds from the City of Minneapolis, municipal state aid (MSA) dollars from the State of Minnesota gas tax, and, and County sources if the project is a Hennepin County road, such as Lyndale or Penn Avenues. On the upcoming Nicollet Avenue road reconstruction project, the assessment to properties will cover less than 20% of the overall project costs. While property assessments may pay for a small portion of a road project, the financial impacts to residents and businesses owners can be a real hardship. 

Special assessments for road projects are added to your annual property tax bill the year following the completion of the project. Depending on the type of project, the special assessment you pay will be spread across five (5) to twenty (20) years with an interest rate pegged at the rate the bonds associated with the project were issued at. There are also provisions to pay off the balance during the payment period.

The Opportunity

We all understand the value of a community with well-maintained roads. The challenge for the City is education. Most people don’t know how road projects are financed until one is happening in front of their home or business. I have found this to be the case with the many residents and business owners that I have spoken to when doing outreach on the Nicollet and Lyndale road reconstruction projects for the Nicollet-East Harriet Business Association (NEHBA). 

There is an excellent opportunity here for neighborhood groups, business associations and other community organizations in cooperation with the City of Minneapolis to help educate all property owners on how road projects are funded in Minneapolis before they are faced with a special assessment. No one likes to pay more taxes to the government, but if we have to, being able to plan in advance can help.

 
Helpful links to assessment information:

City of Minneapolis - Uniform Assessment Rates for 2012

Diagram to calculate the influence area for corner properties