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A LAYMAN’S GUIDE FOR ESTABLISHING A

UTILITY SPECIAL ASSESSMENTS DISTRICT

(USAD)

KPB 5.35 Special Assessments – Public Utilities

An Unofficial Guide

The following is meant to be a general outline of the steps that need to be taken to implement a Utility Special Assessment District (USAD).  It does not cover all aspects of the borough code or associated ordinances.  For more in depth detail, you may research Kenai Peninsula Borough Code of Ordinance Chapter 5.35 online through the Borough Clerk’s Office or contact the Special Assessment Coordinator at the Kenai Peninsula Borough Assessing Department.

  • KPB Assessing Dept:  907-714-2230 or 1-800-478-4441 ext 2230 (borough only)
  • Assembly / Clerk website go to: www.kpb.us/assembly-clerk

  • What is a USAD?

A Utility Special Assessment District (USAD) is a process which may be used to finance the extension of the main lines of service of public utilities which are regulated by the Regulatory Commission of Alaska, or of city-owned utilities to areas outside the boundaries of the city (see KPB 5.35.020.  Generally these relate to electric, natural gas, telephone, water, and wastewater systems.  The allocated cost will be assessed (charged) to each benefitted property by means of a special assessment lien (see KPB 5.35.150).  USAD’s are not available for the construction and financing of private hookups or for service connections running from the utility’s main line to private structures or facilities on the benefitted parcels (see KPB 5.35.020).

The owners of record of at least 60% of the total number of parcels subject to assessment within the proposed district, and at least 60% of the value of the property to be benefitted, must agree to share in the cost of the improvements of a USAD (see KPB 5.35.107(C)).  For this reason, it is advisable to informally talk to your neighbors to get a feeling if the majority of owners are willing to sign a petition for the improvement.  The project will not go forward without the required signature thresholds.

  • Who initiates a USAD?

Any property owner wishing to bring the utility to their respective property or neighborhood can initiate the process to implement a USAD.  The person (or persons) who initiate the project, referred to as the sponsor or sponsors, will coordinate the project on behalf of the property owners of the proposed district (see KPB 5.35.030(A)).  Being a sponsor is no easy task! The role will involve some organizational and communication skills.  Co-sponsors are permissible and even encouraged for larger districts.

  • How is a USAD initiated?

The best way to start defining the area of the district is for the sponsor to contact the utility company.  The utility company will have the information about where the utility currently exists and the feasibility of extending the service to the respective property or area.  An engineer’s estimate will be formally requested by the borough from the utility company after the district boundary has been approved by the mayor.  The term “district” means an area composed of individual parcels that are directly benefitted by the public improvement for which the special assessment is to be levied.

To formally initiate a USAD, the sponsor must submit an application and map (or detailed description of the proposed geographic area) to the KPB Assessing Department for the formation of a special assessment district (see KPB 5.35.030).  While there is no application deadline to start a USAD project, as this is a lengthy process which may take several months to obtain assembly approval prior to construction, and combined with the short Alaska construction season, it is recommended the sponsor submits the application and map no later than January of the year construction is desired.

Once the sponsor submits the application and map, the assessor and mayor will review the proposed district to determine all benefitted parcels are included in the district before contacting the utility for an estimate (see KPB 5.35.030(A)(4)).  In regards to special assessments, the term “benefitted” means an advantage gained from the improvement that is greater than that shared by the general public, such as increased property value and marketability, a special adaptability of the land, or a relief from some burden (e.g., lower energy costs) (see KPB 5.35.190).

  • Who will be assessed (charged)?

All the benefitted parcels within the district boundary will be charged an equal portion on a per parcel basis of the actual total costs for the improvement (see KPB 5.35.090).  These costs include, but are not limited to, design, engineering, administration costs, financing costs and interest, and all other costs resulting from the construction of the improvement, less any prepayments (see KPB 5.35.080 & KPB 1.26, Schedule of Rates, Charges and Fees).

The assembly may assess any real property or interest in real property that is determined to benefit by the improvement.  Benefitted parcels may also include property which is otherwise for any reason exempt from taxation by law, such as property owned by the State, Borough, or a non-profit organization (see KPB 5.35.070(A)).  Those within the boundary who oppose the project will also be assessed as their parcels will still be benefitted by the improvements.

Similar to a bank loan, an “assessment” constitutes a lien on the real property, and as such, is enforceable through a foreclosure process in the same manner as for non-payment of property taxes (see KPB 5.35.160(C)).  The lien will remain on the parcel until the debt has been paid in full.

  • What is provided in the special assessment?

The special assessment will only cover the actual cost for the utility company to extend the main lines of services for the utility sought, plus KPB administration costs based on the most current KPB Schedule of Rates, Charges and Fees.   USADs provide financing for the extension of the utility’s main line ONLY, and is not available for private hookups or service connections from the main line to private structures.  Property owners must contact the utility company directly concerning any additional costs for service lines, meters, and hookups (see KPB 5.35.107(A)).

  • When do the special assessments have to be paid?

Once the project has been completed, the actual cost of the public improvement will be assessed to each benefitted parcel and payable in the manner provided by the ordinance levying the special assessment roll pursuant to KPB 5.35.150.  This cost can be paid in full, or in ten (10) annual installments with interest on the unpaid amount of the assessment. Annual installment payments will include principal plus accrued interest.  The interest rate charged is the prime rate plus two percent as of the date the ordinance confirming the assessment roll is enacted by the assembly (see KPB 5.10.040(A)(13) Investment of Moneys).

  • What are the restrictions to forming a USAD?

A USAD may not be formed if it violates any of the following restrictions per KPB 5.35.070:

±Lien Limit: In no case may a property be assessed an amount in excess of 50% of the currant fair market value (assessed value) of the property.  If a parcel’s estimated amount of the assessment lien exceeds the 50% lien limit, the estimated amount of the assessment against the parcel may be reduced by the amount of a prepayment of assessments.

Example: $7,000 Assessed Value with a $3,800 Allocated Cost

  1. Assessed Value x 50% Lien Limit = Max. Assmnt:                                    $7,000 x 50%   =  $3,500
  2. Estimated Cost – Max. Assmnt = Prepayment:                                   $3,800 – $3,500   =      $300

±Delinquent Taxes: A special assessment district may not be formed if parcels in the proposed district that will bear more than 10% of the cost of the estimated costs of the improvement are subject to unpaid, past-due borough real property taxes.

ü  Any required prepayments of assessments which exceed the lien limits or any payments of past-due property taxes must be received no later than close of business at least 15 days prior to the date the assembly will act on the resolution to form the district and proceed with the improvement.  Prepayments of assessments (only) are refundable if the assembly does not approve the resolution.

±One-owner Property: A special assessment district may not be formed if one (1) owner owns more than 40% of the total number of parcels to be benefitted.

The legal description of parcels within the proposed district as of the date of the mayor’s approval of the petition report (administrative review) will be used to determine assessment.  “No subdivision, reversion of acreage, or lot line adjustment will be recognized for USAD assessment purposes after the mayor's approval of the petition report.”  Any action to replat parcels within the proposed district must be completed and recorded before the date the mayor approves the petition report (see 5.35.030(E)(4)). 

  • Can a property be ‘excluded’ from a USAD district?

A district property owner may submit a comment, including an objection to their parcel’s inclusion in the proposed USAD district, within 45 days of the date the assessing department mails the notice of the administrative review of the petition report.  The date the comment is received by the assessing department will determine if the comment was received timely.  Comments may be submitted via mail, by hand delivery, by fax or email (see KPB 5.35.030(E)(5)).

Pursuant to KPB 5.35.105(B): the mayor may exclude any real property from a USAD district which is not directly benefitted by the proposed improvement.  If an owner claims the physical characteristics of his/her property make it legally impermissible, physically impossible, or financially infeasible to develop or improve the property in a manner that would enable the property to benefit from the proposed utility improvement, the property owner has the burden of demonstrating that the property cannot be developed or improved.  Some examples:

±The utility company's inability to provide service to the parcel via the main line extension;

±Plat restrictions on development of the property;

±The cost to develop the property would exceed the increase in value due to development.

Any property ‘excluded’ from a USAD district will not be included in the calculation of the signature thresholds (see KPB 5.35.107(C)(5)), and will not receive the benefit of the improvement or be subject to the assessment (see KPB 5.35.110(E)(4)).

  • Is there a deferral for economically disadvantaged property owners?

A deferment of payment of principle only (assessment lien) may be available to qualifying residents of property within the special assessment district (see KPB 5.35.155).  If approved, the deferral is a postponement of payment of principle only – this is not a forgiveness of the debt. 

Residents must apply for the deferment each calendar year to certify that the qualifying conditions continue to exist.  See the KPB Finance Department for all restrictions and requirements for the deferment of principle.

ü  Applications and annual renewals (to verify qualifying conditions continue to exist) must be submitted to Finance by February 1st;

ü  Real property must be owned and occupied as the primary residence and permanent place of abode of the qualifying applicant;

ü  Property owner must be economically disadvantaged – annual adjusted gross income is less than 200% of the Poverty Guidelines for Alaska per U.S. Health & Human Services;

ü  Interest will continue to accrue and must be paid on an annually basis;

ü  If the property owner no longer qualifies for the deferment based on the annual renewal application due to income qualifiers, or for changes in property ownership or residency, then payments on principal will resume, starting with the next payment due.


THE USAD PROCESS

Phase 1)       Initiation of improvement proposal

The sponsor must submit an application and map (or detailed description of the proposed geographic area) to the KPB Assessing Department to form a special assessment district.  Once the sponsor submits the application and map, the assessor will review the proposed district to determine all benefitted parcels are included in the district.

If the assessor approves the boundaries of the proposed district, the assessor will obtain the approval of the borough mayor.  Once the assessor and mayor both approve the boundary, the assessor will consult with the utility company and obtain the utility’s approval of the extension and a written estimate of the total cost of the construction of the extension (see KPB 5.35.030(A)).

Phase 2)       Intent to proceed & filing fee – notice to property owners

Once the utility has provided an estimate cost for construction of the improvement and the total estimated cost for the project has been calculated, the assessing department will provide the estimate cost to the sponsor for consideration.  If the sponsor wishes to proceed with the process, the sponsor may provide a written notice to the Assessing Department of intent to proceed with full administrative review of the petition report and pay the non-refundable filing fee (see KPB 5.35.030(C) & (D), & KPB 1.26, Schedule of Rates, Charges and Fees).

i USAD’s involving more than 150 parcels may have an additional 30 days to collect signatures at the discretion of the mayor, so long as the delay has no negative impact on the utility company's estimate and timeframe for construction. The sponsor must request the additional time when submitting the notice of intent to proceed with administrative review (see KPB 5.35.107(B)).

Notice to property owners Administrative review of petition report.  Pursuant to KPB 5.35.030(E), after the written notice to proceed and filing fee are received by the assessing department from the sponsor, the assessing department will mail notices to all district property owners of the proposed USAD.  The notice will include the following:

±A description and map of the special assessment district and proposed improvement;

±The timeframe for the mayor to complete the administrative review – not less than 45 days and not more than 60 days from the date of notice per KPB 5.35.105(C);

±That the legal description of parcels within the proposed district as of the date the mayor approves the petition report will be used to determine assessments.  Any action to replat parcels within the proposed district must be completed and recorded before the date the mayor approves the petition report; and

±That parcel owners may submit comments, including objections to their parcel's inclusion in the proposed district, in writing within 45 days of the date the assessing department mails the notices, in order to be considered in the mayor's review of the petition report. Comments may be submitted via mail, hand-delivery, email, or fax.  The date the assessing department receives the written comment will determine whether that comment has been timely submitted.

Phase 3)       Administrative review of the petition report

Pursuant to KPB 5.35.105, after the assessing department mails the notices to all affected property owners of the full administrative review of the petition report, the assessor or assessor’s designee will prepare a petition report for the mayor’s review.  The petition report will contain all documents that will be included in the petition, such as a project information sheet, a map of the proposed district, and the estimated assessment roll (a spreadsheet that will include information such as the name of each recorded owner, tax parcel number, assessed value and legal description of each benefitted parcels, the estimated cost of the project and cost per parcel).  Also, all comments or parcel owner objections regarding inclusion of their property in the proposed district which were received timely in the allowed comment period. 

Administrative timeframe: The mayor will consider the petition report and make a final determination to approve the report or to require additional or amended information not less than 45 days and not more than 60 days from the date the assessing department mails notice to affected property owners to allow for the comment period.  

If the mayor determines the district boundary as proposed in the petition report is improper, the mayor may modify and resubmit the district boundaries to the utility company for further consideration.  The sponsor must provide written agreement of any changes to the boundaries, cost per parcel, or other project elements prior to the project proceeding.

If the petition report is approved by the mayor, the assessing department will prepare a final petition to provide to the sponsor for disbursement to all property owners (see KPB 5.35.106).

Phase 4)       Circulation & filing of petition, signature requirements

The final petition will contain all the information in the petition report approved by the mayor, and a petition signature page which the owner(s) of record must sign to signify their approval of the project.  The assessing department will provide at least one copy of the petition to the sponsor for distribution.  The sponsor will be responsible for distributing the petition to all property owners within the approved boundaries and collecting the signatures of those property owners who support the formation. 

The following is pursuant to USAD, KPB 5.35.107: 

Deadline for signatures – 45 days:  The sponsor must submit the completed petition signature page(s) to the assessing department within 45 days of the date on which the assessing department distributes the petition to the sponsor.  For this reason, it is very important to coordinate distribution of the petitions.  For example, the sponsor may want to consider mailing the out-of-area petitions a few days before distributing the local petitions to allow for a delay in mail time. 

i USAD’s involving more than 150 parcels may have an additional 30 days to collect signatures at the discretion of the mayor, so long as the delay has no negative impact on the utility company's estimate and timeframe for construction. The sponsor must request the additional time when submitting the notice of intent to proceed with administrative review (see KPB 5.35.107(B)).

Petition signature thresholds: in order to be considered by the assembly for formation, the petition must contain the signatures of:

  1. at least 60% of the total number of parcels subject to assessment within the proposed district, and
  2. at least 60% in value of the property to be benefitted.

Signature requirements:

  • Multiple owners. When a parcel is owned by more than one person or entity, signatures for each owner are required in order for the parcel to count towards the signature thresholds.
  • Signature by Proxy. Signatures by proxy will not be accepted by the clerk.
  • Power of Attorney. The signature of a power of attorney will only be accepted by the clerk if the signature is accompanied by a copy of the Power of Attorney document providing authority for such signatures.
  • Business entities.
    • Corporations: For parcels which are owned by a corporation, the petition must be signed by two individuals: one of whom is the chair of the board, the president, or the vice president, and the other of whom is the secretary or treasurer; or by another person or persons who have been given authority via corporate resolution.
    • Limited liability companies: For parcels which are owned by a LLC, the petition must be signed by a member if the LLC is member-managed, or by the manager, if a manager has been designated.
    • Other business owners: For parcels which are owned by another type of business entity, only those persons who have signatory authority to bind the business entity under Alaska Statutes may sign the petition as owner.
    • Where a parcel is owned by a trust, only the trustee may sign as the property owner. If there are co-trustees, a majority must sign the petition in order for the parcel to count towards the signature thresholds unless otherwise provided in the trust document. The signature of the trustee(s) will only be accepted by the clerk if it is accompanied by a copy of the trust document.
    • Kenai Peninsula Borough. For property owned by the Kenai Peninsula Borough in the proposed district, the mayor will be the designee for signing any petition. If the Borough abstains (declines to vote) from participating in the petition signature process, the total number of parcels within the district, for the purpose of calculating the signature thresholds, will be reduced by the number of parcels owned by the Borough within the proposed district.

Signature withdrawal:  A signature on a petition may be withdrawn only by written notice from the signer submitted to the assessing department prior to the final filing of the petition signatures by the sponsor. A withdrawal is effective only if notice of the withdrawal is submitted before the filing of the completed petition.

Certification of petition:  Once the completed petition is submitted to the assessing department, the borough clerk will determine whether the petition contains sufficient signatures.  If the petition meets the requirements of the signature thresholds, the borough clerk will certify the petition and submit the petition to the mayor to prepare a resolution to form the district and proceed with the improvement.

v  Prepayments on lien limits and/or delinquent real property taxes:  For the purpose of the restrictions for prepayments of assessments (lien limits) and past-due borough real property taxes, any required payments must be received no later than close of business at least 15 days prior to the date the assembly will act on the resolution to form the district and proceed with the improvement.  Prepayments of assessments (only) are refundable if the assembly does not approve the resolution (see KPB 5.35.070(C) & (D)).

Phase 5)       Resolution to form the district and proceed with the improvement

                        & Ordinance of appropriation of funds

If the borough clerk certifies that the petition has sufficient signatures, the mayor or mayor’s designee will prepare for assembly consideration a resolution to form the district and proceed with the improvement (see KPB 5.35.110(A)).  The finance department will prepare an ordinance of appropriation for the estimated funds required for the project (see KPB 5.35.125).  A public hearing will be held the night the resolution and ordinance are to be considered.

All property owners within the district will be notified of the public hearing by certified mail not less than 35 days before the date of the hearing, and by publication in a newspaper of general circulation in the borough not less than 30 days before the hearing (see KPB 5.35.110(B)).

Written objections to the necessity of the formation of the district may be filed with the borough clerk for a period of 30 days after mailing of the notice of the public hearing.  If written objections are filed by the owners of parcels bearing 50% or more of the estimated cost of the improvement, then the assembly may not proceed with the improvement (see KPB 5.35.110(D)).

After the public hearing, the assembly may adopt the resolution to form the district and proceed with the improvement.  If adopted, the resolution will authorize the mayor to proceed with the construction of the improvement, and require the clerk to record in the district recorder’s office a copy of the resolution and the estimated assessment roll (see KPB 5.35.110(E)).

Phase 6)       Implementation of the improvements

After adoption of the resolution to form the district and proceed with the improvement and a contract has been signed by the mayor, the construction process can begin (see KPB 5.35.110(F)).  In the event that the borough puts the project out to bid, and the lowest, responsive, responsible, qualified bid exceeds the appropriation by more than 10 percent, then no contract will be entered without further assembly approval.  Prior to such further approval, the borough clerk will provide notice to all property owners of the time and place when they may be heard on the question (see KPB 5.35.125(B)).

Phase 7)       Ordinance levying assessment

After the project has been completed and the final costs have been calculated, the final assessment roll will be developed, and will be submitted with an ordinance confirming the final assessment roll and levying the assessments.  The ordinance will set the times for payment of the assessments, the rate of interest on unpaid installments, and the penalty and rate of interest on delinquent installments.  A notice of this hearing will be sent to all participants by regular mail not less than 15 days before the hearing, and by public notice in a newspaper of general circulation.  After the public hearing on the ordinance, the assembly may confirm the assessment roll by ordinance (see KPB 5.35.150).

Phase 8)       Notice of assessment

Notice of assessment statements must be mailed to the owner of record of each property assessed within 15 days after the enactment of the ordinance of assessment.  For each property the statement will designate the property, the total allocated assessment, the assessment lien amount, the schedule of payments, the time of delinquency, penalties, and notice of the deferral of principal option (see KPB 5.35.160(A)). 

After enactment of the ordinance levying the special assessment, the borough clerk will file in the office of the district recorder an appropriate notice of assessment lien on all parcels assessed (see KPB 5.35.160(C)).

Hopefully this overview has been helpful in explaining some of the steps to implementing a Utility Special Assessment District.  For further information and details, please contact:

Kenai Peninsula Borough

 Assessing Department

 Special Assessment Coordinator

144 N Binkley Street

Soldotna, AK 99669

 (907) 714- 2230

www.kpb.us/assessing-dept

assessing@kpb.us