04-0211R

RESOLUTION ESTABLISHING ASSESSMENT INTEREST RATES FOR 2004.

BY COUNCILOR NESS:

RESOLVED, that, pursuant to Section 68 of the Duluth City Charter, the following rates of interest are to be charged on the unpaid portion of any assessment for any project for which an assessment role is approved by the council during the year 2004:
(a) If the rate of interest paid by the city on bonds to finance the construction of the project to which assessment is related was less than eight percent per annum, the rate of interest to be charged on the assessment then unpaid shall be equal to the rate of interest on the city's bonds plus 1.25 percent, provided that in no event shall the rate exceed eight percent;
(b) If the rate of interest paid by the city on bonds to finance the construction of the project to which assessment is related was eight percent per annum or higher, the rate of interest to be charged on the assessment then unpaid shall be equal to the rate of interest on the city's bonds.

FURTHER RESOLVED, that all previous resolutions establishing the assessment rates of interest under Section 68 of the Charter shall have no prospective application but shall continue to apply to any assessments to which they previously applied.


STATEMENT OF PURPOSE:  The purpose of this resolution is first to establish a new rate of interest applicable to new assessments in accordance with the Charter and to establish a rate of interest 1.25% above the city's actually cost of financing its projects to provide some funds to cover the city's costs and losses.

The Charter presently allows the council, by resolution, to establish any rate of interest it chooses on assessments, provided that it does not exceed eight percent; however, if the interest rate the city has to pay exceeds eight percent, the city council may change an interest rate in excess of eight percent per annum, but not in excess of the interest rate it is required to pay.

This resolution proposes establishing the rate of interest at the bond rate plus 1.25%, up to the Charter limit of eight percent, to cover the costs of administration of the assessment program and to cover the situation where the city either cannot collect an assessment or incurs additional costs when the collection of assessments are delayed.