Options offered in undergrounding Longboat utilities

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The discussion many Longboaters have been waiting for, the cost to underground utilities on all of Longboat Key, is under debate and review.

The commission will have several options to consider including whether to ask voters to pay for undergrounding utility lines along Gulf of Mexico Drive only, or in every part of the key that is currently not undergrounded.

The town commission asked Town Manager Dave Bullock to develop cost estimates for undergrounding Gulf of Mexico Drive in Spring of 2014, and in Fall 2014 he reported back that it would cost about $20 million.

That cost included new lighting, burying fiber optic cable for telecommunications as well as the existing FPL power lines.

Bullock last fall also offered a process that the commission rejected wherein neighborhoods would vote and pay to have non-Gulf of Mexico Drive streets undergrounded.

The commission then asked Bullock to develop with a consultant the cost to underground the rest of the island, which came back at a cost of an additional $21 million.

Bullock wrote in a report that the commission will consider on Tuesday, that undergrounding Longboat Key’s electric increases its reliability, safety and is more aesthetically pleasing. Bullock said that the town would have to issue debt to fund the planning, design and construction of the undergrounding and that all debt must be approved by a referendum.


How to pay for it…

In short, there are three options as far as the project scope is concerned: underground just Gulf of Mexico Drive; underground Gulf of Mexico Drive and the rest of the Key; or, do neither and Florida Power and Light will instead install larger hardened electrical poles.

How residents end up paying for the cost of undergrounding is one of the main policy decisions the commission has to determine and voters would subsequently have to approve.

Bullock is proposing that either ad valorem property taxes be used to pay back the cost for either GMD or the entire project, or non-ad valorem assessments be made according to the calculated benefit to each property owner. Another scenario is the commission could choose a combination of either.

Part of the difficulty is in the fact that between 60-70 percent of Longboat Key residences already enjoy underground utilities including all properties behind the gates of Islandside and Bay Isles.


Manager’s four options

Bullock is offering the commission four options with option one entitled, “Town-wide using ad valorem.” In this scenario, the total cost of about $42.1 million to underground the entire town would be paid by all property taxpayers. A uniform millage would be multiplied by the assessed property value and a tax would be placed on the property tax bills for the life of the loan. In this scenario, those with higher property values would pay more than those with lower values.

Bullock cites as an advantage to town-wide burial with ad valorem taxes is that everyone would pay a uniform tax rate and that property taxes are familiar to property owners and that ad valorem taxes are generally deductible.

Bullock says a disadvantage to this method is that some properties, namely those who currently have above ground lines, would benefit more than others but pay at the same tax rate. That disadvantage means that properties with “high taxable value and undergrounded properties will pay a disproportional share of the project.”

Bullock adds that property owners having previously paid for undergrounding their property or neighborhood, such as in Bay Isles, would receive no credit.

The cost for the owner of a $500,000 home would be about $250 annually if the town issued a 30-year financing bond at 3.83 percent. If the town issues 20-year bonds at an estimated 3.49 percent, the cost goes up to $315 per year for 20 years.

The second option Bullock proposes is to use ad valorem property taxes for undergrounding Gulf of Mexico Drive, which is estimated to cost $23.4 million. The owner of a $500,000 home in this scenario would pay about $140 annually on a 30-year bond and $175 per year if the town were to issue 20-year bonds. In this option as well as the first option, all taxpayers would pay a proportional cost.

In option three, ad valorem taxes would be used for undergrounding Gulf of Mexico Drive and non-ad valorem assessments would be made for the remainder of the town. In this scenario, GMD would be paid exactly as in option two with all voters voting on GMD. But the second part of option three would require the creation of a special assessment district, composed of all properties that need to be undergrounded and the amount assessed would be calculated on the benefit undergrounding has for each of the properties within the district. In this case, voters in the areas being undergrounded (other than GMD) in the special district would decide the fate of that part of the project.

This process of calculating the benefit to each property must be made in a parcel-by-parcel study by hired consultant of the town. Residents in the non-undergrounded areas other than along GMD would have two amounts added to their tax bill each year, the ad valorem tax for GMD and a non-ad valorem assessment.

Option four is the town pursuing island wide undergrounding using solely non-ad valorem assessments. In this option, all properties would pay their proportionate share based on the benefit. Annual assessments proportional to the benefit received would not necessarily have any relationship to taxable values of the property. Those in areas that are currently undergrounded would receive credit and pay far less than those who would see their utilities in front of their homes buried. In this scenario, the entire island would vote on the project, but the payment amount would vary and be determined by the benefit calculation made by the town study. Those who already have their utilities undergrounded would still have a say in the fate of an island wide project, without having to bear the cost other than the one for Gulf of Mexico Drive.


What’s next

The commission will have to debate the politics and fairness and viability of the above options on Tuesday, Feb. 17 at 1 p.m. in Town Hall. The next opportunity to place it on a voter referendum would be in the Nov. 3, 2015 election.

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1 Response for “Options offered in undergrounding Longboat utilities”

  1. Ross P. Alander says:

    There are a number of more important and critical issues then underground utilities that need to be dealt with before we take on this new “nice to have” expense, i.e. pension costs, traffic, sewer pipe concerns, wages and retaining employees, employee development, etc.

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