Letter to the Editor: Limited options for street improvements

To the Editor:
In his recent letter to the editor, William J. Delaney suggested that street improvement costs, at least for the busier streets, be spread among all property tax payers in the city so that large special assessments against property owners along the improved street could be avoided.
Under Iowa law, the only way to spread the cost of improving a specific street to all property owners would be through a general obligation debt levy. This is something a city can do without the requirement of a referendum.  The mechanics of such a debt levy is that a levy rate per $1,000 of taxable value is set in an amount that will produce the desired revenue.  That levy rate is then applied to all taxable property in the city. The result is that homeowners and businesses with higher taxable value would pay the lion’s share of the street cost, regardless of whether a particular property owner ever uses the street in question. This can legally be done but it becomes a policy decision as to whether it is appropriate.
However, even if the city council decided it wanted to improve streets through such a general obligation debt levy, the city would not get very far. In order to raise the money up front for construction costs the city would have to sell general obligation (GO) bonds. The Iowa constitution imposes a limit on how much GO debt a city can incur (5% of the taxable value of all property in the city).
Because of existing GO obligations, the city would only be able to undertake two or three street projects similar to the ones done in recent years before the city exhausted its debt capacity. That would leave the city with no borrowing ability to deal with emergencies and other possible needs.
When the city imposes special assessments, the city can sell special assessment bonds. These bonds do not count against the city’s constitutional debt limit.
The purpose of this letter is not to give support to the initial proposal made for the reconstruction of Third Avenue SW. I do not give policy advice to city officials. I merely want the tax payers to understand the city’s options for financing such street work are very limited. If anyone would like to learn more about the city’s legal options, I encourage you to give me a call or drop by my office.

Jim Garrett
Waukon City Attorney