Street project bid just over $5M, city proposes 50/50 assessment split

By Anna Jauhola
An official bid and a change in cost sharing has provided some Hallock residents with better news about special assessments tied to a proposed street project.
About 30 people attended a public hearing on Wednesday, March 26, where the city council and Moore Engineering presented the new figures. The low project bid from Spruce Valley Corporation, Middle River, came in at $5,115,662.10, which is around the estimates presented earlier in the process.
“We sent letters out based on a resolution we passed here a few weeks ago,” said Councilor Kevin Waller. “Those were based on a 60/40 split, meaning the assessees would pay 60% of the street cost and the city would pay 40%. Since we did that, and since the letters went out, we have elected to change things and do a 50/50 split.”
The entire project, as it sits, encompasses five sections of street – North Douglas Avenue, four blocks of Fourth Street South, one block of Third Street South, two and a half blocks of Fifth Street South and Holly Avenue. Total reconstruction of these streets include pavement and subgrade removal, replacing utilities, water, sanitary sewer and storm sewer, rebuilding subgrade and paving with asphalt, and new curb and gutter.
The total cost of the project is $5,915,662.10, which includes $800,000 for engineering fees, construction administration and legal administration. Originally, the estimated base cost was $5.63 million with $2.3 million to be assessed to affected property owners.
The city is entirely footing the bill for utilities replacement, which amounts to $2,038,436.94.
The remaining amount of $3,877,225.15 will be split evenly between the whole city tax base and the affected property owners. This portion is the cost of replacing the street itself and storm sewer.
With that $1,938,612.58 being assessed, the cost per linear foot dropped to $211.19. For example, a 50-foot lot will be assessed $10,559.50 over a 20 year period, plus interest.
Overall, the split on the whole project is 67.23% borne by the city, and 32.77% will be paid through assessments.
Waller said the bonding interest rate is also expected to change. The letters noted a 6% interest rate, but that will likely be between 4.5% and 5.5%.
Engineer Jon Pauna emphasized the property owners’ rights to file appeals under Minnesota Statute 429. He said anyone who wanted to reserve their right to file an appeal had to submit that in writing before the end of the hearing that evening. Several submitted written and signed notes.
“That reserves your right to move it forward with an appeal,” Pauna said, adding the 30-day appeal window begins once the council has approved the assessment roll. “If you like the answer you get by the end, then you don’t have to do anything.”
Resident Erick Gubbels asked whether the council had considered the market value increase of properties. He noted Statute 429 requires the assessed amount be measured against the property’s increased market value.
“I have a $900 lot that’s being assessed, under the new numbers, $8,000. That’s 10 times the value of the property. That’ll most likely be tough to defend in court. Is there any consideration for that by the city?” Gubbels asked. “I think according to 429, anything above the increased market values is injustice. It’s a violation of the 14th Amendment, according to all Minnesota documents.”
Pauna said this argument is why the state has the appeals process and that it’s ultimately up to the property owner to proceed with the process. Gubbels also noted that several cities in Minnesota are going away from special assessments because it’s difficult to prove any benefit of improvements to the properties assessed.
Pauna said while some cities are going away from assessments, several others continue to use them as a way to fund projects.
Resident Joe Nigg asked the council about its long-term vision and whether it has considered a capital improvements plan, specifically for budgeting, as many roads in Hallock are in terrible condition.
“My concern is these projects definitely need to be done, but if we take on too much as a city, we’re not able to continue going forward and fix the remainder of the streets,” Nigg said. “Then these properties hit with special assessments are going to be hit with a significant disadvantage market-wise than others in town.”
Waller said the city is looking at doing more street reconstruction in the future and the cost of everything will determine how big the projects will be. He said with this current project, the city was able to take on more of the cost because a couple of bonds have been paid off. Although a few, much smaller bonds, will also be paid off over the next few years, the council knows future street projects will likely be less encompassing.
The good news is, the USDA Rural Development changed its format for cities at the beginning of 2024, and Hallock is now eligible to apply for those grant and loan funds. However, that funding will not apply to this project and it takes at least two years to know whether the city would receive any funding. Any USDA funding the city applies for would only apply to future projects, not retroactively to this streets project.
“We have good bids in hand. If we stall now and wait two years, you’re going to burn up every dollar you thought you were saving and potentially worse,” Pauna said of the council’s decision to continue forward with the current project and funding mechanism.
One section of the project includes homes along Fifth Street being assessed for front street footage for a road that will be built behind those lots. This is just one section the council and Moore Engineering will look for possible changes at before the council meeting on Monday, April 7.
Resident Robert Carr asked whether the contractor guarantees the bid price, considering 25% tariffs being in place by the federal administration. Pauna said there is language in the contract that helps protect the city regarding issues totally out of anyone’s control, however movement on inflation likely wouldn’t be one of those issues.
The city’s next steps will be to award the bid, approve the assessment roll and lock in a percentage for the interest rate during the April 7 meeting. If that’s approved, and no one appeals, a rough substantial completion date would be mid-October. This is when the city would find out where the contractor intends to start with the project, as it is spread throughout the city. The contractor will provide access to each property throughout construction and Pauna encouraged everyone to contact him or the city with concerns about any portion of the project.
The next regular council meeting is on Monday, April 7 at 5:30 p.m. at Hallock City Hall.