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9.2. SR 11-16-2015 E04y1� ,.,�� Request for Action River To Item Number Mayor and City Council 9.2 Agenda Section Meeting Date Prepared by Work Session November 16, 2015 Zack Carlton,Planning Manager Item Description Reviewed by Park Dedication Fee Update Cal Portner, City Administrator Reviewed by Action Requested Provide direction on the preferred method to calculate park dedication. Background/Discussion At the October 19, 2015, City Council Work Session, Rita Trapp of Hoisington Koegler Group,Inc. (HKGi) presented recommendations for changes to the city's park dedication fee. The proposed changes to the fee schedule are to ensure compliance with state statute by linking the fee to the fair market value of the property. Staff reviewed eight different options,based on land value,which could be used to establish the fee and decided to use the county appraised value due to the low cost (free), ease of administering, and is a generally accepted method in the planning and development community. The alternative techniques evaluated closely were an appraisal study completed by an outside firm to establish a value for different land classes or requiring the developer to pay for an appraisal prior to final platting. The first option was not preferred as it would cost the city between $3,500 and $10,000. The study can be paid for with park dedication fees,but it will need to be updated periodically (every 3-5 years) to verify the fee is still a fair valuation of the land. The second option was not recommended as it adds another cost (beyond the park dedication fee itself) and additional time to the development process. The presentation by HKGi indicated a likelihood that the amount of money collected by the updated fee would decrease,but the size of the decrease cannot be identified with certainty. Council directed staff to review park dedication fees that have been collected over the past few years to get an idea of how much lower the park dedication fees would be with the recommended approach of using the county assessed value. Staff reviewed 15 residential plats, five commercial developments, and six industrial developments from 2006 to present. A couple of the projects never came to fruition and a few are projects in concept review or are vacant property. The 2015 county assessed land value was used for comparing the current per unit fee to the proposed percent of value fee. Comparison Spreadsheet Residential Using our current park dedication fee schedule process,we collect an average of 29% of the assessed value on residential properties. Staff's recommendation is to collect 10, 13, or 16% (based on density) of the value of the property being developed, or an equal portion of land for park purposes. Although this is POWERED 6T Template Updoted 4/14 INAMIRE1 a significant reduction, the goal of evaluating our current dedication rate is to establish a rational connection between park dedication fees collected and the fair market value of the land. Commercial/Industrial Using our current park dedication fee schedule we collect 8% and 6% of the assessed value on commercial and industrial development respectively. Utilizing the proposed 10% calculation will increase, on average, the amount of park dedication for commercial and industrial developments. Planning and economic development staff does not believe the city should increase the amount of park dedication for developments that have less impact on our park system than residential development. Alternatives If the City Council is not comfortable with using the county appraised value, staff's recommended alternative is to have an appraisal study done to establish a fair market value (per acre) for four land classes. Staff recommends low-density residential, high-density residential, commercial, and industrial. There are different ways the fair market value can be used to establish the fee and if the Council desires to move in this direction staff will explore options. Regardless of the method used to calculate the park dedication fee, the city will likely experience a decrease in the amount of money collected. The goal of reviewing the fee is to ensure compliance with state statute and base the fee on the fair value of the property. Planned expansions to the parks system cannot be funded wholly by the park dedication fee,and alternative funding sources will need to be identified. Financial Impact Changes to the amount of park dedication collected. Attachments ■ Park Dedication Comparisons ■ Staff Report to City Council dated October 19, 2015 N:APublic Bodies\Agenda Packets\11-16-2015\Final\x9.2 sr Pork Dedication 11-16-2015.docx Net Area Residentia 2015 Net Current Proposed Proposed Financial %of Project County Cost Per Acre Dedication Per Dedicatio Dedicatio Current Platted 1 Units Value Fee Schedule n Per 10% n Per 16% Pact Rates enior P 15-04 10 1 $ 50,462 $ 5,046 $ 3,712 $ 5,046 $ 1,334 136% Froehlichs Happy Corner P 08-07 5.58 1 $ 71,700 $ 12,849 $ 3,712 $ 7,170 $ 3,458 193% Roc 's Manner P 08-02 5.62 1 $ 66,100 $ 11,762 $ 3,712 $ 6,610 $ 2,898 178% Rocky Ride Estates P 07-10 3.08 1 $ 62,000 $ 20,130 $ 3,712 $ 6,200 $ 2,488 167% Sunset Acres of ER P 06-16 36.67 4 $ 263,400 $ 7,183 $ 14,848 $ 26,340 $ 11,492 177% Heritage Park P 15-03 1.05 3 $ 29,348 $ 27,950 $ 11,136 $ 2,935 $ 8,201 26% Clark Addition P 14-08 1.21 1 $ 46,700 $ 38,595 $ 3,712 $ 4,670 $ 958 126% Prestigous Woodland Hills 2nd P 14-04 13.2 13 $ 62,381 $ 4,726 $ 48,256 $ 6,238 $ 42,018 13% DHJ P 1403 0.31 1 $ 25,002 $ 80,652 $ 3,712 $ 2,500 $ 1,212 67% Heritage Maples P 13-03 3 20 $ 98,000 $ 32,667 $ 74,240 $ 9,800 $ 15,680 $ 64,440 13% Depot at Elk River P 08-06 5.85 60 $ 477,000 $ 81,538 $ 222,720 $ 47,700 $ 76,320 $ 175,020 21% Rohlf s 2nd Addition P 07-04 1.02 2 $ 22,327 $ 21,889 $ 7,424 $ 2,233 $ 5,191 30% Elk River TBS P 06-14 0.83 1 $ 3,700 $ 4,458 $ 3,712 $ 370 $ 3,342 10% Chrisan Fa ms P 06-13 2.28 1 $ 49,000 $ 21,491 $ 3,712 $ 4,900 $ 1,188 132% T of Brook H lls P 06-10 8.95 2 1$ 129,200 $ 14,43615 7,424 $ 12,920 $ 5,496 174% $1,456,319 Average/Acre $ 415,744 $ 180,132 $ (235,612) 43% $ 32,840 Urban Residential Average%of Net County Value we currently collect: 29% MSB Campus Addition P 08-09 3.77 lCommerciall$ 724,500 1$ 192,175 1$ 28,064 1$ 72,450 1 1$ 44,386 1 258% Zane Street Commons P 08-08 5.46 lCommerciall$ 356,800 1$ 65,348 1$ 40,644 1$ 35,680 1 1$ 4,964 88% EDA Prop west of Westbound C3 3 lCommerciall$ 228,600 1$ 76,200 1$ 22,332 1$ 22,860 1 1$ 528 102% West of Subway by Fairbault Food C3 2.53 lCommerciall$ 220,400 1$ 87,115 1$ 18,833 1$ 22,040 1 1$ 3,207 117% Pro east of Allina Clinic C3 6.08 lCommercial $ 529,7001$ 87,122 1$ 45,260 1$ 52,970 1 1$ 7,710 117 $2,060,000 Average/sgft $ 155,133 $ 206,000 $ 50,867 133% $ 2.33 Commercial Average%of Net County Value we currently collect: 8% Natures Ede Business Center 2nd P 14-0 37.78 Industrial $ 774,900 $ 20,511 $ 93,883 $ 77,490 $ 16,393 83% Renner 4th Addition P 08-05 11.85 Industrial $ 521,900 $ 44,042 $ 29,447 $ 52,190 $ 22,743 177% Portside Addition P 08-01(Metal Craft 9.8 Industrial $ 832,300 $ 84,929 $ 24,353 $ 83,230 $ 58,877 342% Gemstone P 07-09 4 Industrial $ 78,400 $ 19,600 $ 9,940 $ 7,840 $ 2,100 79% Prop east of Metal Craft 7.31 Industrial $ 477,600 $ 65,335 $ 18,165 $ 47,760 $ 29,595 263% County Property 19.62 Industrial $1,281,938 $ 65,338 $ 48,756 $ 128,194 $ 79,438 263% $3,967,038 Average/sgft $ 224,545 $ 396,704 $ 172,159 177% $ 1.15 Industrial Average%of Net County Value we currently collect: 6% 2015 Fee schedule fees Residential(permit) $ 3,712 Commercial(per acre) $ 7,444 Industrial(per acre) $ 2,485 lk of Request for Action River To Item Number Mayor and City Council 9.1 Agenda Section Meeting Date Prepared by Work Session October 19, 2015 Michael Hecker, Parks and Recreation Director Item Description Reviewed by Park Dedication Fees Cal Portner, City Administrator Reviewed by Action Requested Discussion of Park Dedication Ordinance language. Background/Discussion Based on City Council direction in June 2015, staff worked with HKGi to update the city's Park Dedication ordinance. This work provided includes potential approaches for the determination of Park Dedication and recommended revisions to the City Code. HKGi Planner Rita Trapp will lead a presentation with City Council on recommendations and updates to the city's Park Dedication Ordinance Financial Impact N/A Attachments ■ HKGi Update Memo on Park Dedication P01WfIHE0 HT Template Updated 4/14 INAT' UREI Hoisington Koegler Group Inc. fflim To: Elk River City Council and City Staff From: Rita Trapp AICP Subject: Update on Park Dedication Study Date: October 14, 2015 As was directed at the June 15th City Council Work Session, HKGi has been working with City Staff on evaluating potential approaches for the determination of park dedication and recommended revisions to City Code Sections regarding park dedication. Park Dedication Rates Residential Dedication Rate As was identified in the initial park dedication review,the City currently has one park dedication rate for all residential densities.Given the difference in need and impact of the various types of residential development,it is recommended that the City use a graduated system for its park dedication rate.As shown in the previous PowerPoint presentation,the residential park dedication rates in other communities vary between 10%and 20%with a few outliers in some communities. The following table was developed to illustrate the amount of park land needed to serve medium and high density housing developments and the corresponding percentage of park dedication that would need to be required to meet this need.The analysis uses the National Recreation and Park Association standard of 10 acres per 1,000 people. It also assumes that medium density projects like townhomes have 2.25 people per unit and multifamily projects like apartments have 1.75 people per unit. DevelopmentDensity Acres of Dedication Type of (units per Parkland Rate People Townhome Kliever Lake Fields 17.3 4.8 83 187 1.9 11% Townhome Trout Brook Condominium 21.9 5.3 116 261 2.6 12% Townhome Woods at ER Station 34.7 8.6 298 671 6.7 19% Multi-Family Coachman Ridge 4.8 24 116 203 2 42% Staff recommends that the City establish a park dedication rate based on density ranges rather than zoning districts.This is recommended because different densities can occur within the same zoning district. The following chart shows Staff's recommendation based on the analysis and comparisons with other communities. Density7 units per Acre Park Dedication Rate Low Under 4 units/acre 10% Medium 4 to 7 units/acre 13% High More than 7 units/acre 16% 123 North Third Street,Suite 100,Minneapolis,MN 55401-1659 Ph(612)338-3800 Fx(612)338-6838 www.hkgi.com Page 2 Commercial and Industrial Dedication Rate The City currently has a park dedication rate of ten(10) percent for commercial and industrial properties.As was noted in at the June City Council Workshop,the park dedication survey HKGi completed this spring found communities had park dedication rates ranging from two(2)to ten(10) percent with half using 10%. It is recommended that the rate be maintained at 10%at this time. Method of Cash in Lieu Dedication The following table was developed to provide an overview, as well as the pros and cons of each potential method for collecting cash in lieu of a land dedication. Method Overview Set based on Use the fees set by other • Easy to implement • May not be reflective of real neighboring communities as the basis for • Ensures City is estate market communities the fee in Elk River competitive • Potential for legal challenge as does not meet state statute requirements County Assessors Use estimated market value of • Easy to identify • Lags behind marketplace so Value the land for fee collection • Generally accepted may collect too much or too method little Appraisal Study Hire an appraisal firm to • More accurate to • Study estimated to cost conduct a study evaluating the market conditions $5,000 to$15,000 depending average market value of vacant • Established fee that on the number of classes and properties by class.The study developers can be firm selected would take about 2 to 3 certain of • Potential for market lag months to complete and could depending on the frequency be paid for from park that City conducts study dedication.This would be used to set the fee amounts. Require appraisal Require that the developer • Establishes fee at • Adds time to development at time of submit an appraisal as part of exact land value process development the final platting process.Fee • Reflects each unique • Additional cost for developer collection would then be based situation —one firm estimated an on that value. appraisal to cost$2,500+for commercial/multi-family projects Sale Price of Require that the developer • Relatively simple to • May not include value gained Property provide the sale price of the implement through entitlement process property and use that value for • Sale may have occurred a fee collection. significant time ago • Potential for developers to manipulate Negotiation Require that each park • Uncertainty for • Potential to be challenging to dedication fee be agreed to developers come to an agreement through negotiation between • Starting point will still need the developer and the City. to be established • Staff time 0 Potential for legal challenge Page 3 Method Overview Pros1 Allow developer Allow developer to select • Provides more legal • Will end up with lowest to select from whether they want to use the protection as amount of park dedication options park dedication fee or submit developers have possible. Impact depends on an appraisal opportunity to select options provide. preferred option Require"higher" List multiple options and • Best potential to • Potential for legal challenge of multiple require the one with the maximize park remains if options are not options highest park dedication dedication with the based on market realities amount be selected least amount of • Adds time and cost to effort by City developer City Staff and HKGi did attempt to quantify the difference between the various methods. However,the City does not have enough example appraisals to do such a comparison. If such a comparison is desired,the City may want to consider conducting an appraisal study as was described in the third option.Such a study would cost between$5,000 and$10,000 and take two to three months to complete. City Staff has considered all of the options and recommends that the City Council use the County Assessors Value to estimated market value of the land for the collection of cash in lieu of the land dedication. Staff recommends this method as it is the easiest to administer and is generally accepted in the planning and development community. Recommended City Code Revisions Once direction is received from the City Council regarding the industrial park dedication, residential park dedication,and methodology for the cash dedication, proposed ordinance amendments will be developed.City Staff did review all of the references to park dedication to identify any additional changes needed.This review identified the following needs: 1) As shown below the section regarding the use of the cash dedication specifically references the payment of funds for trails.The City does not have a trail fee, nor does it intend to require fees for trails.Thus, it is recommended that the sentence be struck to eliminate any confusion. Sec.30-327. -Dedication of land or contribution of cash for public purpose (e) Use of cash contributions. Any monies paid to the city in lieu of park dedication shall be placed in a special fund and used only for the acquisition of land for parks, playgrounds, trails, and public open space; for the development of such areas and sites; and for debt retirement in connection with land previously acquired or developed for such public purposes. Any monies specifically paid to the city for trails shall be used only for the acquisition of land for trails and for the development of such land. 2) Currently the City Code requires that as part of the development process the Parks and Recreation Commission advise the City Council on the acquisition of land.The vision identified in the recent Parks and Recreation Master Plan is that the City will be emphasizing larger, community parks rather than smaller, neighborhood parks over the next 20 years.To support that vision, it is anticipated that more park dedication will be collected through the cash fee rather than through land acquisition. Because the Parks and Recreation Master Plan provides Page 4 clear direction regarding when park land is the preferred form of park dedication, Staff is recommending that all references requiring Parks and Recreation Commission involvement in the platting process be removed. Staff will continue to make a recommendation regarding park dedication to the City Council and will use the Park and Recreation System Master Plan as a guide. 3) As shown below,the Open Space Preservation Plats requirements include specific provisions for park dedication. Staff has reviewed that section and recommends that it be stricken.The approach for park dedication for these plats will be the same as other residential plats. Sec.30-515 (4) Park dedication fee requirements. Park dedication fee requirements shall be based upon the total number of house lots platted if fees are paid in lieu of land.