Greenfield - Tying interest rates on special assessments for road projects to the city's actual costs and using any extra cash from those projects to help pay them off sooner will be explored by the Greenfield Legislative Committee in coming weeks.
Perhaps 40 percent of Greenfield residents go with the 10-year installment plan to pay special assessments when the road in front of their homes is stripped down to the dirt and rebuilt, said Alderman Tom Pietrowski, Legislative Committee chairman.
Current best-guess scenario
Property owners pay an interest rate that is the city's best guess of what the rate will be when the city borrows for the project. The city tacks on another half a percent administrative cost so it can keep track of the payments.
But because there can be a delay of many months between when the interest rate is set and when the money is borrowed, either the homeowner or the city can be on the short end of the stick, depending on whether rates rise or fall.
Last year it was the homeowners on the short end. The interest rate they are paying is 4.7 percent, but the city borrowed money at 3.4 percent.
Even though this isn't big money in real terms, Pietrowski said he would like homeowners' interest rates to more accurately reflect the real rate.
In this case the perfect rate would be 3.9 percent. So, homeowners with an average $3,000 special assessment would pay $24 less than they are with the 4.7 percent interest rate. (However, Milt Vandermeuse, city finance director, noted that the $24 overage shrinks as the homeowner pays off the special assessment over the years.)
Who's paying for what?
More troubling for Pietrowski is the way that the city uses the special-assessment fund paid into by the installment payers - that fund is used to pay for road projects where special assessments aren't charged at all, he said. Only those whose streets are completely rebuilt pay special assessments.
Pietrowski freely admits to feeling 'somewhat slighted' when money he pays in special assessment payments goes to other projects.
He advocates keeping special assessment money with their projects.
'It should be applied to the project to pay the debt down,' he said.
But he readily acknowledges there is a flip side to that. Because that would reduce the amount of funding available locally for road projects, the city would have to borrow more for them, he said.
The committee will need to explore all those ramifications, Pietrowski said.
WHAT: Greenfield Legislative Committee consideration of rules regarding special assessment interest rates and use of payments
WHEN: 6:30 p.m. April 16
WHERE: Greenfield City Hall, 7325 W. Forest Home Ave.