The City of Prior Lake recently sent notice of a proposed private street utility surcharge to city residents who live on private streets. The proposed $40 surcharge would be included in residents’ bi-monthly utility bill and be used to create a funding source to cover the cost of replacing a private street.
The city is responsible for the replacement of public utilities such as water and sewer that lie under private streets, but the maintenance of the streets is up to private property owners or Homeowners’ Associations.
“The city council has been discussing this topic for well over 2.5 years and the challenge that the city faces is that there are approximately 10.5 miles of private streets throughout the city and within those streets are public utilities — sewer and water — that the city is responsible for the ownership maintenance and ultimate replacement of those public utilities,” said Andy Brotzler, Prior Lake Public Works Director and City Engineer. “Based on the age of some of the utilities in certain areas the city is going to be faced in the near future with the need to replace those public utilities within some of the private streets throughout the city.”
According to a Private Street Utility Surcharge FAQ sheet provided by the city, public sewer and water utilities have an expected 50 to 60-year useful life.
The surcharge fee was determined based on the cost to replace the city’s 10.5 miles of private streets, which is $20 million. The total divided by the 1,670 properties affected is roughly $12,000 per residence, leaving the annualized cost per property over 50 years at $240 to be paid annually. If adopted, residents will be charged the $40 fee six times a year.
“Already today when the city does a project that includes the replacement of sewer and water the city does not assess for those costs,” Brotzler said. “The cost associated with replacing sewer and water is built into the utility rates that the city currently charges property owners in the city. It’s this gap with the need to identify a funding source for covering the costs of the private roads that will need to be replaced concurrently, is where the city and city council have arrived at the private street utility surcharge.”
Funds collected from the surcharge will be used specifically for the replacement of private streets and not co-mingled with general tax levy dollars, the FAQ sheet states.
“The revenue from those fees will be tracked and accounted for and maintained as a line item in the utility funds as a dedicated funding source,” Brotzler said.
Though some private streets may be relatively new, the city’s plan to collect a surcharge will help “to avoid a large, unplanned expenditure when the city needs to replace the water or sewer beneath you street,” the FAQ sheet states.
City Manager Jason Wedel said the situation is not unique to Prior Lake.
“There are many cities that have this same issue and in fact when we started looking at this, we reached out to a number of surrounding communities in the metro area and asked them, ‘well, how do you address replacing these private streets when you do sewer and water?’” Wedel said. “The answer we continually got back was, ‘We haven’t figured that out yet, so Prior Lake if you come up with a solution we’d love to hear it because we’re dealing with the same issue.’”
As infrastructure built in the 1970s and 1980s begins to reach the end of its life-span, the need for a funding mechanism will be an issue faced by many communities, he added.
An example of a private road discussed by Prior Lake city officials that may need to be replaced in the near future is Inguadona Street, Wedel said.
Concerns have been raised by residents who are members of Homeowners Associations as they pay association fees for the care and maintenance of their private roads.
When developers choose to build private streets they aren’t required to follow city road specifications, which allows them to build more homes in the area and lower the overall initial cost of the homes. Because private streets don’t follow city specifications they aren’t maintained by the city and HOA dues are collected to cover that cost, Wedel explained.
After talking with area HOA’s over the last several weeks, Wedel found that some associations are building up a fund to cover the future replacement of private streets while others are not including such a fee in their association dues.
“If there happens to be an HOA that’s collecting dues and reserving funds for eventual reconstruction of their streets that’s awesome,” he said. “The vast majority of HOA’s that we’ve talked to don’t do that.”
In the instances where homeowners are paying dues to cover street replacement, the city would ask the association to reduce their monthly dues and essentially shift the fee from the HOA dues to city utility bills.
“The intent is not for folks to have to pay twice,” Wedel said. “...We purposely gave ourselves multiple months to try and work through some of this because we want it to be fair and equitable and we want to work with homeowners so they’re not being doubled up.”
Residents will be able to state their opinion on the proposed surcharge and gather more information at the public hearing that will be held as part of the Dec. 7 Prior Lake City Council meeting at 7 p.m.
The Private Street Utility Surcharge FAQ sheet can be found on cityofpriorlake.com.