Infrastructure update: Where things stand
Eric MacGilvray, Infrastructure Committee Chair & Council President
As most of you know, in the near future the Village will need to replace its water lines, repair or replace its streets and curbs, and repair and upgrade its storm sewer system. The street base, water lines, and storm sewers are as old as the Village itself (1920s vintage), and the street surface and curbs date from the early 1980s. All are at or near the end of their expected useful life. The Infrastructure Committee was created by the Village Council in 2012 to make recommendations about this work to identify funding sources to help pay for it. The purpose of this article is to bring you up to date on our work so far and to lay out possible next steps.
Burgess and Niple, the engineering firm with whom the Village contracts for design work, has identified twelve options for how the necessary construction could be done, ranging in estimated cost from about $2.1M to $6.2M:
Complete removal and replacement of streets, curbs & gutters
Streets & curbs: $3,756,000
+ Water lines: $5,706,000
+ Storm sewers: $6,196,000
Replace curbs & gutters at higher elevation; mill & resurface streets
Streets & curbs: $2,909,000
+ Water lines: $4,859,000
+ Storm sewers: $5,349,000
Replace curbs & gutters at current elevation; mill & resurface streets
Streets & curbs: $2,472,000
+ Water lines: $4,422,000
+ Storm sewers: $4,912,000
Partial curb replacement; mill & resurface streets
Streets & curbs: $2,098,000
+ Water lines: $4,048,000
+ Storm sewers: $4,538,000
Council believes that it would be foolish to replace the street surface without doing the water line and storm sewer work at the same time, since those systems run under the streets and it would be wasteful to dig up a new street surface to repair or replace them later. There is also concern that the heavy equipment used for street resurfacing would place stress on the water lines and hasten their demise.
In other words, we're only considering the options under Storm Sewers.
The lower-cost options (options 3 & 4) involve leaving the original street base in place, milling the surface, and re-paving. Since the street surface is of variable and uncertain thickness, this would make earlier maintenance likely, and so might be more costly in the long run. These options also wouldn't fix the existing drainage problems. Option 4 has the additional disadvantage of leaving the gutters paved over and many roof drain outlets partially blocked.
Of the higher-cost options, option 2 would involve raising the curb elevation between 4 and 6 inches depending on the area. This would reduce the amount of milling that's necessary, making early maintenance less likely. It would also save us the $850K cost of replacing the street base. However, raising the curbs would require that many lots be re-graded within the Village rightof-way, which would affect landscaping and other elements within those areas. Many driveway aprons and approaches would also need to be reconstructed. Moreover, we would need to cut through the existing street base to replace the water lines, which could destabilize the pavement surface over time. Option 1, while more expensive, would be the "cleanest" approach and the least disruptive to residents.
Council is keeping options 1 and 2 both on the table for now.
With prudent planning and a bit of luck
we can put the Village on solid footing for
the next 50 years or more.
Eric MacGilvray, Infrastructure Committee Chair & Council President
The Communication Committee / Village Council has decided not to continue with regular publication of the Riverlea News. So please watch the website for your news and updates.
Download the Riverlea Quarterly [pdf]
External funding options
The Village has seen declining revenue over the last 5 years with the elimination of the Ohio estate tax and the steep reduction in the state's local government distribution. The Village used to collect about $30,000 annually on average from the estate tax, and about $15,000 more from the local government distribution than we do now. We've run a deficit in 3 of the last 4 years and are projected to run a deficit again this year. As a result our general fund balance has been declining.
We'll need to seek new revenue to do any substantial infrastructure work.
The most promising alternative for external funding is the Ohio Public Works Commission's State Capital Improvement Program (SCIP), which provides grants and zero-interest loans for infrastructure improvements. Our chances of success will of course depend on who we're competing against, but a preliminary look at how our application is likely to score puts us in the ballpark of recent successful applications. Our project would be on the high end of what SCIP typically awards, especially for a municipality of our size, and this may hurt our chances. However, the staff at the Mid-Ohio Regional Planning Commission (MORPC), which administers SCIP in Franklin County, have encouraged us to apply and don't seem to think that the amount that we would be requesting is prohibitively high. We're in a position to apply in multiple consecutive years if necessary.
SCIP provides grants for street, curb and storm sewer work only. This means that even if our application were successful the Village would need to borrow a minimum of about $2M (the cost of the water lines). Servicing that loan would come to about $65,000 per year over 30 years, which is about a third of the Village's current operating budget. We might ask for a smaller grant to improve our application's score, in which case the amount of the loan and the cost to the Village would be proportionally higher, up to a maximum of about $200,000 per year over 30 years. The application will require that we show an ability to service whatever loan amount we request.
We'll therefore need to have a new revenue source in place before we apply for external funding.
There are three options available to the Village to raise revenue on this scale: an assessment, a property tax levy, and a municipal income tax. Over the next year or so Council will decide which of these options, or which combination of them, to pursue.
An assessment on property owners
can be imposed by a vote of Council. In
order to service a $2M loan the average
assessment would need to be about
$8,700 per property ($2M/230), or about
$290 per year over 30 years ($8,700/30).
At $6M the average assessment would
need to be about $26,000 per property,
or about $870 per year over 30 years.
Actual assessment amounts would of
course be higher or lower depending
on the property. The standard method
of calculating assessments for a project
of this nature is by curb frontage, with
corner lots paying for only one side of
their frontage. An independent appeals
board would adjudicate any objections
from property owners about the amount
of their assessment.
Property owners could choose to pay
their assessment as a lump sum up
front or to spread it out over the life of
the project, in this case 30 years. Since
we're applying for a zero-interest loan
there would be no additional cost for
choosing the latter option. However
many mortgage programs (e.g. FNMA
and FHLMC) treat an assessment as an
encumbrance on the property, meaning
that if the property were sold the balance
of the assessment would need to be paid
off in full. This would complicate home
sales and potentially depress property
values. The Village itself would be
responsible for the costs of intersections
and for 2% of the overall cost of the
project, which would place a burden on
the already strained Village budget.
It's therefore unlikely that Council will decide to impose an assessment.
Property tax levy
A property tax increase in the necessary amount can be placed on the ballot for voter approval. This wouldn't create an encumbrance on properties as an assessment would, and the levy could cover 100% of the cost of the project. Each mil of additional property tax would bring in about $25,000 from all properties taken together based on current valuations.
A property tax levy would therefore need to be between 2.7 and 8 mils to finance a loan of between $2M and $6M over 30 years.
The average cost for each property would be roughly as stated in the discussion of assessments above, except that the cost for each property will be based on property value, not curb frontage. The risk of going this route is that the levy might not pass, as happened in Riverlea in 2007. Council does not feel that we are in a position to delay this work much longer.
Municipal income tax
Council can impose a municipal income tax of up to 1%. Any higher rate would need to be placed on the ballot for voter approval. The income tax could be designed in one of two ways. On the one hand, the Village could allow residents to claim a reciprocal tax credit against any tax that they pay to another municipality. In that case only residents who work in Riverlea, or who work in a municipality with a lower tax rate than the one that the Village imposes, would be subject to the tax. This is how Worthington, Columbus, and most other Franklin County municipalities handle their income tax. On the other hand, the Village could choose not to provide a reciprocal tax credit, in which case all residents who earn eligible income would be subject to the tax no matter what other municipal income tax they pay.
It's hard to estimate how much revenue an income tax would generate if we provide a reciprocal tax credit, since we don't know how many residents would be subject to it or how much they earn. During the annexation proceedings in 2011 the City of Worthington estimated that Riverlea would generate about $75,000 of additional revenue per year at their 2.5% tax rate, discounted for reciprocity. This suggests that a tax rate of nearly 7% would be necessary to finance a $6M loan, which would of course be burdensome to the few residents who would be asked to pay it.
The advantage of a non-reciprocal income tax is that the rate could be much lower since it would be applied to all residents with earned income. The revenue stream would also be more stable since it would be spread over a larger base. This approach could be considered more fair, since all residents will benefit from the infrastructure improvements. An estimate prepared by the Ohio Department of Taxation (ODT) suggests that the Village would bring in about $60,000 per year for each .25% of income tax if there were no reciprocal tax credit.
This suggests that an income tax of between .3% and .9% would be needed to finance a loan of between $2M and $6M over 30 years. This can be considered the leading alternative to a property tax levy
Estimated tax rate to service...
Property tax levy
$2M loan (low end) --> 2.7 mils
Income tax without reciprocal credit
$6M loan (high end) --> 8 mils
$2M loan (low end) --> 0.3%
Income tax with reciprocal credit *
$6M loan (high end) --> 0.9%
$2M loan (low end) --> 2.25%
$6M loan (high end) --> 6.75%
* would only apply to residents who work in the Village, or who work in a municipality with a lower income tax rate, in which case the difference would be paid to Riverlea.
Council is unanimous in thinking that the Village can't put off addressing its infrastructure needs for much longer. Every year we run the risk of a system failure, and thus of being forced to make emergency repairs on short notice at high cost. Having said that, we haven't made any final decisions either about the nature of the work to be done or how it will be paid for. We're eager to hear from residents on both of these issues, and will be planning at least one public forum to take your questions and get your input. Please stay tuned for that, and as always please feel to contact me or one of the other Village officials if you have any questions in the meantime.