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Home My WebLink About09-222JUNE 9, 2009 09 -222 ORDINANCE FIRST READING (CARRIED LOST LAID OVER WITHDRAWN ) PURPOSE: SET INTEREST RATE FOR SPECIAL ASSESSMENT PAYMENT PLANS INITIATED BY: FINANCE DEPARTMENT A GENERAL ORDINANCE OF THE CITY OF OSHKOSH REPEALING AND RECREATING SECTIONS 25- 84(B), 25- 84.6(B), 25- 85(B), 25- 85.6(B), 25 -86, 25 -89 AND 25 -90 ALL PERTAINING TO THE INTEREST RATE FOR SPECIAL ASSESSMENT PAYMENT PLANS The Common Council of the City of Oshkosh does ordain as follows: SECTION 1. That 25 -84.6 (B) of the Oshkosh Municipal Code pertaining to interest to be charged on special assessments is hereby repealed and recreated to read as follows: SECTION 25 -84.6 FIVE YEAR INSTALLMENT PLAN (B) First installment shall include one -fifth (1/5) portion of the principal of the assessment together with interest thereto at the rate of six (6) per cent per year from the date of acceptance by the City of such public improvement to the succeeding December 31, providing such acceptance was prior to November of such year, otherwise the interest shall accrue to the next succeeding tax roll. Each subsequent installment shall include a like portion of the principal and one (1) year's interest upon the unpaid portion of such assessment. The City Clerk shall maintain a schedule of all five (5) year installment assessment plans and the payments made thereon. SECTION 2. That 25 -85(B) of the Oshkosh Municipal Code pertaining to interest to be charged on special assessments is hereby repealed and recreated to read as follows: SECTION 25 -85 TEN YEAR INSTALLMENT PLAN (B) First installment shall include one -tenth (1/10) portion of the principal of the assessment together with interest thereto at the rate of six (6) per cent per year from the date of acceptance by the City of such public improvement to the succeeding December 31, providing such acceptance was prior to JUNE 9, 2009 09 -222 ORDINANCE FIRST READING CONT'D November of such year, otherwise the interest shall accrue to the next succeeding tax roll. Each subsequent installment shall include a like portion of the principal and one (1) year's interest upon the unpaid portion of such assessment. The City Clerk shall maintain a schedule of all ten (10) year installment assessment plans and the payments made thereon. SECTION 3. That 25 -85.6 (B) of the Oshkosh Municipal Code pertaining to interest to be charged on special assessments is hereby repealed and recreated to read as follows: SECTION 25 -85.6 FIFTEEN YEAR INSTALLMENT PLAN (B) First installment shall include one - fifteenth (1/15) portion of the principal of the assessment together with interest thereto at the rate of six (6) per cent per year from the date of acceptance by the City of such public improvement to the succeeding December 31, providing such acceptance was prior to November of such year, otherwise the interest shall accrue to the next succeeding tax roll. Each subsequent installment shall include a like portion of the principal and one (1) year's interest upon the unpaid portion of such assessment. The City Clerk shall maintain a schedule of all fifteen (15) year installment assessment plans and the payments made thereon. SECTION 4. That 25 -86 of the Oshkosh Municipal Code pertaining to interest to be charged on special assessments is hereby repealed and recreated to read as follows: SECTION 5. That 25 -89(B) of the Oshkosh Municipal Code pertaining to interest to be charged on special assessments is hereby repealed and recreated to read as follows: SECTION 25 -89 PAYMENT OF HOOK -ON CHARGES (B) Such charge may be prorated upon request of the property owner as though it were originally under the ten (10) year assessment plan: One -tenth (1/10) of the charge shall be paid for each year after the original assessment to a total of ten (10) and the balance paid annually in one -tenth (1/10) installments with interest at the rate of six (6) per cent per year. SECTION 6. That 25 -90 of the Oshkosh Municipal Code pertaining to interest to be charged on special assessments is hereby repealed and recreated to read as follows: JUNE 9, 2009 09 -222 ORDINANCE FIRST READING CONT'D SECTION 25 -90 SPECIAL ASSESSMENTS - DEFERRED PAYMENT The Common Council may by resolution direct the City Treasurer to pay all, or any portion of special assessments or special charges extended upon the current or next tax roll against property owned by and upon which reside, worthy, indigent persons, in accordance with the provisions of Wis. Stat. Sec. 74.77 with an interest rate of six (6) per cent per year. Applications for deferment of payment shall be upon a form provided by the City Clerk verified by applicant, and the information contained therein shall be treated a confidential, privileged information. Each application shall be considered by the Board of Public Works, which shall make its recommendation thereon to the Common Council. All of the provisions of Wis. Stat. Sec. 74.77 shall be applicable to such deferred charges and assessments. SECTION 7. This ordinance shall be in full force and effect from and after its passage and publication. SECTION 8. Publication Notice. Please take notice that the City of Oshkosh enacted ordinance #09 -XXX SET INTEREST RATE FOR SPECIAL ASSESSMENT PAYMENT PLANS, on June 23, 2009. The ordinance reduces the interest rate charged on deferred special assessments to six (6) percent per year. The full text of the ordinance may be obtained at the Office of the City Clerk, 215 Church Avenue and through the City's website at www.ci.oshkosh.wi.us Clerk's phone 920/236-5011. City of Oshkosh Finance Department 215 Church Ave., PO Box 1130 Oshkosh, WI 54903 -1130 (920) 236 -5080 (920) 236 -5039 FAX OfHKQIH ON THE WATER MEMORANDUM TO: Honorable Mayor and Members of the Common Council FROM: Peggy Steeno, Finance Director DATE: June 3, 2009 RE: Interest Rate for Special Assessment Payment Plans BACKGROUND The City is allowed by law to determine the interest rate it charges on special assessment payment plans. As such, the current rate currently authorized by the Municipal Code is 8 %. This rate has been in effect since Council Resolution 99 -386 was passed on September 28, 1999. Prior to this approval, the rate was established at 10 %. ANALYSIS Below are the results of a municipal survey that was completed to see where other communities are in regard to this issue: Community Interest Rate City of Appleton 9% City of Fond du Lac 6% City of Green Bay 6.75 %* City of Eau Claire 6% City of Oshkosh 8% * Note: The City of Green Bay increased their rate in 2009 to 6.75% from the 2008 rate of 6.5% due to the economy. Regarding the local interest rate of 8 %, it has been the past practice of the City to set the rate at a level that does not create competition with local banks. It is has not been the desire or intention of the City to enter into competition with financing institutions taking away their potential business. Rather, the City has offered the financing as an alternative means of financing. A common `rule of thumb' method used to arrive at the interest rate for special assessment payment plans is to select a rate that is 2% over the borrowed funds rate. In reviewing interest rates associated with recent City borrowings, the average interest rate is 4 %. This indicates that it would be prudent to lower the interest rate for special assessment payment plans to 6 %. This method acknowledges market conditions, acknowledges current borrowings that pay for the assessable projects, covers some of the administrative costs to carry the payment plans, and somewhat recognizes current lending rates. FISCAL IMPACT The impact of lowering the interest rate on deferred special assessments is that the City will receive lower revenues associated with the interest payments over the life of the special assessment payment plans. The exact amount of the impact will depend on the amount of projects certified in each year, the size of the assessments, and the term of the payment plan. A rough estimate of the impact, based on recent years' interest payments is approximately $54,000 less in revenues per year. RECOMMENDATION Staff recommends that Council lower the interest rate for special assessment payment plans to 6% for projects that are certified in 2009 and beyond. In addition, staff recommends reviewing the rate annually to ensure a prudent level is maintained. Respectfully Submitted, / W-t q- 1 0-ewo Peggy Steeno Finance Director Approved: Mark Rohloff City Manager