Market value assessment chosen, bond election discussed

SEELEY LAKE – The Seeley Lake Sewer District Board voted to stick with a market value excluding improvements method for spreading the cost of the annual District operating budget at a Special Board meeting Aug. 3. Then they set the assessments at a hearing Aug. 6. The Board held another special meeting following the hearing, where they voted to continue seeking information regarding a bond election that could change how the District pays for the proposed sewer system.

At the Aug. 3 special meeting Manager Jean Curtiss presented the Board with the values of protesting properties that had been received by the deadline earlier that day. Sixty-one properties totaling $66,362.13 of the assessment had protested. Just over $107,000 is needed to protest to bar the District from moving forward using the market value.

Under this method most lakefront properties would pay from $1,500 to $1,600 per year while most non-lakeside residential properties would pay $100 to $200. The assessment for commercial properties along the highway ranged from $300 to $500.

Vice President Beth Hutchinson said she was prepared to make a motion to change methods because she felt it was unfair to the lakefront properties due to the extraordinary increase in their assessment. She also felt businesses were being under charged in part because they can usually deduct the amount from their income whereas residents usually can not.

Curtiss said she felt the Board should keep the method because the public was told this would be the method unless enough people protested. By not protesting, the larger percentage of the public approved it and they would expect the Board to approve it.

A lakefront landowner in attendance said the method was very unbalanced because all the properties in the District were effectively getting the same service only some would pay 10 times as much. She said she didn’t think the protest method was fair because there weren’t enough lakefront owners to meet the requirement for a valid protest and the assessment was so cheap for the rest of town that they wouldn’t protest.

Another lakefront landowner added that the state law says the assessments should be spread based on benefit. He felt the District would have a real hard time showing that some properties were receiving 15 times more benefit than others.

Curtiss said that the section of state law referenced was more about when the system was constructed. She said the Board was following the law on this assessment. The landowner replied that he reads it differently but that even if something is legal that doesn’t make it ethical.

Curtiss explained that if the Board chose another method and that method was successfully protested then the District would miss the deadline to get on the tax rolls this year. This would mean the District would not be able to collect its operating revenue.

Director Pat Goodover questioned if the Board would be representing the majority of the District if they switched methods being that the majority didn’t protest. He said he would not support a new method because of the possibility that the District would be unfunded for the year.

“We were all in agreement that there was no good [assessment] method. We just had to pick one,” said Goodover.

Hutchinson made a motion to switch methods to a previously proposed method where residential and commercial properties were charged a flat rate based on their use and vacant property paid based on their size.

Goodover argued that on the agenda it said the Board would consider a different method if the protest was successful but it wasn’t. He felt they shouldn’t be changing it, as the public was not properly notified of this action.

The motion to change assessment methods failed with Hutchinson voting for and President Tom Morris, and Directors Walt Hill, Jason Gilpin and Goodover voting against it.

At the hearing to hear protests and set assessments on Aug. 6, the Board again took public comment on the market value assessment method. Curtiss reported that just one more protest was received. It was dated before the deadline but received after and wouldn’t have put it over the threshold to be a successful protest.

Goodover moved to adopt the resolution setting the assessments using the market value method. The motion passed with Goodover, Hill and Morris voting for it and Hutchinson and Gilpin voting against it.

The Board had a special meeting immediately following the assessment hearing to discuss the option of changing how construction loans of nearly $6 million would be borrowed and repaid.

Currently the District has authorization to move forward with the financing using special assessments following a notice and protest that was held late in 2017. While this financing is approved there is still a funding gap that needs to be filled.

Curtiss explained that if the Board chooses to change to a general obligation or revenue bond then they would lose the ability to finance the project using the currently approved special assessment. If the bond election failed then the project would stall as there would be no way to repay the loans. She noted that if the Board doesn’t support using the special assessment option then the project probably isn’t going to move forward either.

General obligation bonds can be spread a different way using the market value of properties including their improvements instead of the equal assessment method currently approved.

Hill questioned why the District couldn’t reserve the ability to use the special assessments if the bond election failed.

The District’s Bond Council Dan Semmens explained that since Morris and Gilpin were elected by a wide margin in May he has been trying to figure out a path forward for the project where the Board could reach a consensus. Morris, Gilpin and Hutchinson have all publicly stated that they support putting the project to the voters for an election. Another issue Semmens saw is that the special assessments do not address affordability for low income residents.

Semmens feels that a bond election could help solve both those issues but he said it confuses the election if it is run as an alternative. If a bond election were held with the special assessments as a backup then if the bond election failed voters would be in effect approving the special assessments.

“I have never done an election where it’s kind of a negative [vote] is affirming something else,” said Semmens.

Because of this, Semmens said he think it is possible to hold a bond election and keep the special assessment funding option on the table.

There are some advantages of general obligation bonds such as not needing a deficiency fund to cover delinquent tax payments. That would save the project a couple hundred thousand dollars and help close the gap in funding. The bond could also be adjusted to fill in the remaining gap.

By using the market value, Semmens said lower income properties would pay a lower rate and therefore help solve some of the affordability issues.

If the Board chooses to go forward with changing to a general obligation bond the election would most likely happen early next year so the project could be put out to bid in the spring.

Hill said he didn’t think this was a road the Board should go down due to the risk in losing funding. He said if the voters in the District wanted an election on whether to do the project or not they could use the referendum process but that the Board has already made the decision to move the project forward.

Morris said he would like to see the voters get the opportunity to have a say in the project and this would do that.

While some on the Board remain skeptical, they voted unanimously to proceed with gathering more information on moving forward with a bond election.