The City Council is considering a $27 million highway allocation bond that would build new streets on the city’s edge and help pave up to 15 blocks of gravel roads within the city limits.

The council held a public hearing Monday on the new street funding proposal. The city would use the extra million dollars in vehicle sales-tax dollars it squeezed out of state lawmakers last year to leverage $27 million.

The city would start out using those dollars to repay the bond and gradually move to using general funds to repay the bonds, which means a property tax increase is possible.

The city would also begin using general funds to cover expenses currently paid for with highway allocation dollars, such as snow removal and repairs to streets, sidewalks, and trails. The city’s property tax levy would be adjusted accordingly.

That means next year the council would have to commit an estimated $660,000 in general funds toward the bond payments, which would increase to $2 million in three years, or about a 1-cent increase in the city’s property tax levy. That equates to $4 per $100,000 of assessed valuation.

“It’s yet another way to try to stretch the dollars even farther,” said Mayor Coleen Seng’s chief of staff, Mark Bowen.

The money would make a dent in a street financing gap estimated at more than $135 million over the next dozen years.

The last time the council approved a highway allocation bond was in early 2004, when it passed a $35 million bond that didn’t rely on property taxes for repayment, but an increased wheel tax.

The money would have to be spent within three years, beginning with the 2007-2008 budget.

The ordinance requires that 80 percent of the money go toward new arterial street construction on the city’s fringe and 20 percent be spent within what was the city limits in 1960.

Of that 20 percent, $750,000 would be available as matching grants to help residents in low- to moderate-income residential areas pave gravel roads. The benefiting owners would pay half of the cost, and city would pay the other half.

That should be enough to pave about 15 blocks. If there are no takers, the money would instead be used for arterial streets.

Lincoln gadfly Bob Van Valkenburg railed against the bond.

“You people don’t have a problem spending money because it’s not your money,” he said.

The Home Builders Association of Lincoln supports the concept of devoting most of the money to new streets, spokesman Fred Hoke said, because it will developments get built more quickly.

He said the resulting construction jobs and new tax revenue should help ensure the property tax impact is minimal.

“It is a small step because $27 million is nowhere close to the amount of road bonding capacity that we should have,” he said.

The Lincoln Independent Business Association, Realtors Association of Lincoln and Lincoln Chamber of Commerce also support of the bond.

The council will vote on the proposed bond next week.

Reach Deena Winter at 473-2642 or dwinter@journalstar.com.

Proposed street projects

Proposed street projects if the City Council approves a $27 million highway allocation bond:

2007

* South Street from Eighth Street to 18th Street

2007-2008

* South 27th Street from Pine Lake Road to Yankee Hill (sidewalks and gravel/substandard paving)

* Fletcher Avenue from 14th Street to Telluride (27th Street)

2008

* Pine Lake Road from 84th to 98th streets.

* 98th Street from Highway 2 to Pine Lake Road

2009

* West Denton from Folsom to Amaranth (near the future Southwest Village development in southwest Lincoln)

* Alvo Road from Northwest 20th Street to North First Street

* West Adams from Northwest 56th Street to Northwest 48th Street

* Adams from 75th to 84th streets (near the 84th and Adams development)

Source: City of Lincoln