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Home My WebLink About12 03 2018 Street Impact FeesHOFF BARRY, P.A. ATTORNEYS SARAH SCHWARZHOFF Direct: 952.746.2713 | Email: sschwarzhoff@hoffbarry.com Page 1 of 3 MEMORANDUM To: City Council From: Sarah Schwarzhoff, City Attorney; Frank Boyles, City Manager Date: December 3, 2018 Re: Proposed New Street Financing As previously explained, the City needs to reconsider its street financing in the wake of the Minnesota Supreme Court’s decision in Woodbury v. Harstad. After the discussion with the Council at the September 17, 2018 workshop the staff discussed how the various new financing options would be implemented and proposes the City proceed as set forth in this memorandum. At the workshop staff presented a number of possible options, which have now been discarded: • Moratorium – the cost to the City in lost development and building revenue would be significant. • PUD – trying to gain extra benefit through the PUD process would be subjective and would still likely result in shortfalls in street financing. • Wait – the City has developments in process and needs to proceed. If the legislature offers a solution the City can reconsider its process. • Levy – development should bear its own costs. Shifting those costs to the residents is not considered a fair or sustainable option. • Franchise fee – this would simply shift the financing shortfall to another area. This leaves the following options which the staff proposes to combine into a comprehensive street financing program: • Premature – the City can declare any plats requiring or abutting on significant infrastructure premature until that infrastructure is complete. • Special Assessment – the City can construct the needed infrastructure and specially assess the benefited properties. • Developer Build Infrastructure – the City can require each developer to build all infrastructure on or serving the plat including any oversizing. • Deposit – the City can require a deposit which will be used by the City to construct infrastructure in the future. There are two types of street infrastructure that need to be financed: • Infrastructure needed now to serve the proposed development (ie a street that needs to be constructed or a turn lane that needs to be added to serve the residents of the proposed development). Page 2 of 3 • Infrastructure needed in the future once overall development reaches a certain point (ie intersection that will be needed when three corners of the intersection have developed but not needed immediately for the proposed development). There are a number of complications: • Ensuring infrastructure is completed in reasonable “pieces”. The City needs to avoid having streets constructed a half of a mile at a time, one side at a time and “leapfrogging”. This may result in the first developer being responsible for more infrastructure (ie two miles instead of just the half mile abutting the development; both sides of any street constructed; any distance between existing street and the development) than otherwise might be the case. • Allocating costs. None of the available options are perfect and each will shift the burden of financing infrastructure. o If developer build is used, the cost is shifted to the properties with large infrastructure and the first developments to be constructed. An early developer may be required to construct an entire street section and any developments constructed at a later time will benefit from that construction. When discussed at the workshop the Council asked about a payback to refund the developer that constructed the improvements. There is no mechanism to collect funds from future developers to complete this type of payback. o If special assessment is used, the cost is shifted to the first developments. In theory, the City could assess any benefiting raw land that has not developed. However, since the land is not being developed the City will have no ability to require a waiver of the special assessment. If the assessment is appealed and lost, the City will be responsible for any shortfall in funding. Because of this risk of appeal, staff recommends the City assess the full amount to the original developer from which a waiver can be obtained. o If a deposit is used, the final developer avoids paying its share and the City bears the risk of excess costs. Any land that has yet to develop will not have provided a deposit. Staff does recommend assessing the undeveloped land due to the benefit it will receive even with the risk of appeal. The City will bear the risk of any lost assessment appeals as well as the risk of any additional costs as it will be unable to request additional funds from the already developed property. • Deposit. The Supreme Court specifically identified collecting security as an alternative method to finance street infrastructure, however the Court did not provide specific direction. The Court did state that there must be a reasonable possibility of at least part of the deposit being returned. The City will need to consider how to collect and maintain the deposits to ensure they are used as security and not simply as a collected fee. Because this is a relatively unused method of financing, the City may be at some risk that it will be challenged. In order to address as many of the complications as possible, staff proposes the following new street financing procedures: • For infrastructure needed now: the developer will construct the infrastructure at its cost, the City will construct the infrastructure and specially assess the developer, or the development will be deemed premature. This will shift the costs to the first development as noted above but will ensure that the cost is paid by the development, not the existing residents. • For infrastructure needed in the future: the City will collect a deposit from each developer for its share of the City’s estimated cost of the infrastructure. When the infrastructure is warranted, the City will construct using City funds and the various deposits held from developers. Any remaining funds exceeding each depositor’s share will be returned. Page 3 of 3 775 Prairie Center Drive | Suite 160 | Eden Prairie, Minnesota 55344 Main: 952.941.9220 | Toll Free: 800.989.9220 | Facsimile: 952.941.7968 www.hoffbarry.com Each development may be a combination of infrastructure needed now or in the future. For each development the City and developer will work together to create a comprehensive program to finance the infrastructure needed for that development. The City also has some developments that are already in process with preliminary plats approved (Parkhaven, Cardinal Ridge, Trillium Cove, Haven Ridge and Meadows at Cleary Lake). Staff is working on a plan for those developments and will update the Council as progress is made with each developer. In order to proceed with the proposed plan, City staff will be doing the following: • Remove street fees from the City Code and Fee Schedule (Sarah) • Draft a new policy detailing the new procedure (Sarah) • Establish a special assessment policy for development driven assessments (Sarah) • Establish a deposit procedure to address collection, retention and return of deposits (Sarah) • Determine what improvements are needed (Jason) • Estimate the costs of the needed improvements (Jason) • Divide improvements into “pieces” and allocate the pieces to property to be developed (Jason) • Discuss infill projects and platted outlots to determine procedures and possible deposits (Casey) • Determine how to incorporate any costs that may not be financed by the new procedure into our Capital Improvement Plan (Cathy)