The Town of Grand Chute recently surveyed residents concerning the best way to fund roads. The survey asked residents to choose among three “pay as you go” options: property taxes, debt financing, or special assessments + debt. The survey was not designed to determine how to fund roads at the LOWEST COST TO RESIDENTS.
To answer that question requires an analysis of three slightly different options: a Dedicated Road Fund, debt financing, or special assessments + debt. The survey did not present a Dedicated Road Fund option, WHICH IS THE PURPOSE OF THIS STUDY. A Dedicated Road Fund collects revenue from residents each year as they use the road; the revenue is invested and earns interest until the funds are needed for road improvement projects.
As an example, the study created the fictional Town of Anytown for the funding analysis, which approved a new road in a new development. The Town engineer determined the road will require reclaim and repaving in 20 years at an estimated future cost of $300,000 and will need to be rebuilt in year 40 at an estimated future cost of $700,000. The Town wants to determine how to fund those costs at the lowest cost to the residents.
Three Ways to Pay for Roads
Option 1: Property Tax –> Dedicated Road Fund — Residents pay for the road as they use it. A share of their property taxes is invested in an interest-bearing account dedicated to road funding.
Option 2: Town Debt — The 20 years or 40 years go by and Anytown issues a 10-year bond at 5% to cover the cost of the road work. The residents who pay off the debt may or may not be the ones who used the road over the 20 or 40 years.
Option 3: Special Assessment + Debt — Only residents who currently live on the road are required to pay the special assessment, which is supplemented by future debt payments from all residents who may or may not have used the road over the 20 or 40 years.
Road Study Results
Our analysis (full analysis is online here) makes it clear that the Board of the Town of Anytown would best exercise its fiduciary responsibility to residents by establishing a Dedicated Road Fund, as doing so results in the least cost for the residents to pay for future required road improvement costs.
| Road funding method | Cost to Residents | ||
| 20 yr. | 40 yr. | Total | |
| Dedicated Road Fund | $199,980 | $354,567 | $554,547 |
| Debt to pay for the road | $399,200 | $931,035 | $1,330,235 |
| Special assessment + Debt | $266,050 | $615,030 | $881,080 |
This same analysis applies to Grand Chute. A substantial share of the Town debt is for past and present road improvements. Every resident of the Town of Grand Chute is paying substantially more for roads than would have been necessary had any prior Town Board, any prior Town Board member, or any Town Administrator ever conducted a study to determine “What is the lowest cost to the residents to fund roads projects?”
