By Anna Jauhola
A local contractor looking to develop the former Hallock Elementary School lot is asking the city to finance and construct a new public road, including utilities. This road will be at the expense of the taxpayers, should the city council approve it, but over time as lots or homes are sold the annual assessment would be reduced.
At a meeting on Monday, July 22, the Hallock Housing and Redevelopment Authority heard from Rodney Bakken, who owns Bakken Construction, who envisions a street ending in a cul-de-sac to be constructed entering the lot from South Elm Avenue. The project estimate, through preliminary design and bonding specs, is $326,730 for a 32-foot wide cul-de-sac and road.
There are numerous steps, however, in creating a new public street, said Angela Grafstrom, city administrator. The first step would be for Bakken to divide the old school lot into parcels.
“It’s plotted right now as one big unit,” Grafstrom said in the meeting. “The starting place is it has to have a survey first. That’s going to put you back $2,000 to $3,000 dollars. Then from that survey, they could divide out the property.”
During the meeting, Bakken asked whether the city could foot the cost of the survey to divide the lot into parcels.
Grafstrom said if the city council decides to move forward with the project, the city could possibly pay for the survey through Economic Development Authority (EDA) money. Grafstrom said she needs to reconfirm this information.
In 2018, when Bakken brought the idea of developing the lot and putting in a street, the city spent $1,280 for a preliminary street design and to acquire abatement scenarios regarding funding for the street, which came from the street fund. Grafstrom said the street design, through Moore Engineering, Inc., based in West Fargo, N.D., cost the city $845. When she spoke with Northland Securities, the city’s bond council, the cost to retain them was $435.
“As a part of this, we signed an agreement to use (Northland) to do the bonding work if the project proceeds,” Grafstrom said in an email.
Should the city council vote to construct this road, the project includes running a water main, storm sewer and sanitary sewer lines. And, because this would be a city street, the cost the city incurs will ultimately fall on all Hallock taxpayers in the form of assessments over a 10-year period.
Northland Securities provided three scenarios: Bakken and city sharing the costs equally; Bakken paying 70 percent and the city 30 percent; and the city paying 70 percent with Bakken paying 30 percent.
The project’s estimated total net debt service, with interest, would be $407,250. The annual bond repayment cost on a 10-year term would be $42,761, which includes a statutory debt service percentage.
Should a 50/50 cost share between the city and Bakken be made, the city would levy $21,381 annually against the tax base to repay the bonds over 10 years. Bakken would be assessed the same amount.
If Bakken agreed to pay 70 percent of the cost, the city would levy $12,828 against the tax base.
If the city agreed to pay 70 percent of the cost, the taxpayers would be assessed $29,933 annually.
Assessments are based individually on the market value of residential or commercial-industrial property.
According to the bond estimates from Northland Securities, a home with a market value of $150,000 would bay $66.88 extra in taxes per year if the city split the street cost evenly with Bakken. If the city shouldered 70 percent of the cost, that same homeowner would pay an extra $93.63 per year. If the city took on 30 percent of the cost, that homeowner would pay an extra $40.13 per year.
An owner with a commercial property valued at $250,000 would pay an additional $225.11 per year over that 10-year period if the city took on half the cost of the road; $315.15 per year if the city paid 70 percent; and $135.06 per year at 30 percent.
Should the project move forward and properties or houses within Bakken’s development sell, the taxes would lower as the city collects taxes on new properties.
“Since the project is going to be bonded and assessed, then we have to have public hearings, because we’re taxing everyone,” Grafstrom said.
Bakken said his target audience for these homes are retirees, which would open up more affordable housing for young families who want to buy homes. His ideal situation would be to sell at least two single-family homes in the $160,000 to $190,000 range to help fund the project.
“Things would really work out nicely if I can get two sold,” he said. “That also helps me pay the people to do the work.”
He hopes to build houses on all the lots, but if someone wanted to purchase a lot and hire a different contracter, he is not opposed to that. He’d build one house, put it up for sale when it’s three-quarters done and when it’s sold, then start on another house.
Grafstrom asked why Bakken wanted a cul-de-sac rather than building houses with driveways facing the existing streets.
“I want to keep curb appeal,” he said. “A cul-de-sac gives these people a community feel instead of driveways out to the street.”
To date, Bakken has not invested any money to advance the project and Grafstrom told him during the meeting that he would need to show his commitment to repay the portion decided upon.
“George (Hanson, city attorney) is saying we need to say somehow you’re bonded for that or have something to verify the city would get back whatever portion they abate you,” Grafstrom said during the meeting. “So that would be paid up front and then we’d get the money back in assessments.”
By Anna Jauhola