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9.5 SR 07-20-2020City of Elk* River Request for Action To Item Number Mayor and City Council 9.5 Agenda Section Meeting Date Prepared by Work Session July 20, 2020 Zack Carlton, Planning Manager Item Description Reviewed by Park Dedication Fees Cal Portner, City Administrator Reviewed by Action Requested Review the results of the land valuation study and discuss updates to the Park Dedication Fee. Background/Discussion Earlier this year, the City Council directed staff to complete a residential land appraisal study for use in evaluating and updating the current Park Dedication Fee. The appraisal study was completed in June and the results generally show an increase in the park dedication fee. One of the hopes for the appraisal study had been to further break down the high -density fee into different unit or dwelling unit/acre categories to reduce the fee for the high -density category. Due to the limited number of sales and the ultimate densities of those projects it will be difficult to adjust for smaller apartment buildings and achieve the goal of reducing the fee. Staff will present options for calculating the per -unit fee during the work session and will look for direction on the update to the fee schedule. Financial Impact A change to the Park Dedication Fee will likely increase park dedication revenue. Attachments ■ Draft Appraisal Study received June 12, 2020 The Elk River Vision A welcoming community with revolutionary and spirited resourcefulness, exceptional,` 01 e service, and community engagement that encourages and inspires pi ospei ly INAMIRE1 MEMORANDUM To: Mr. Zack Carlton, City of Elk River From: Jason L. Messner, MAI, and Randy J. Deones Date: June 12, 2020 Subject: Average fair market value of un-platted residential land At your request, this memorandum is intended to summarize our research and analysis of residential land sales proximate to Elk River in order to arrive at an indication of average market values for un-platted residential land in the City of Elk River. It is noted that this consultation is not intended to be an appraisal of any particular property within the City of Elk River. Rather, the function of this memorandum is to provide guidance to the City in determining appropriate park dedication fees. SCOPE OF WORK The following data and information pertaining to the review of park dedication fees have been examined. I • Reviewed City of Elk River zoning and land use information • Reviewed Minnesota Statute 462.358 Subd. 2b. regarding park dedication fees • Investigated comparable high -density, medium -density and single-family residential land sales • Completed statistical analysis on observed market -transacted sale prices 22014 -City of Elk River Land Analysis June 12, 2020 Page 2 ZONING Single-family residential development in the City of Elk River is allowed within the R1a-Rid residential zoning districts. However, the R1 a and R1 b zoning districts allow single family residential development without public utilities. Alternatively, the R1c and R1d Districts are intended for land that is, or will be, served by municipal sanitary sewer, storm sewer and municipal water. Potential density in these areas is expected to be less than four units per acre. The land sales summarized on the following single-family residential sales grid are considered to have zoning and potential uses consistent with the R1 c and R1 d zoning districts. Alternatively, medium -density residential development in the City of Elk River is allowed within the R2 and R3 zoning districts. These districts are categorized as the Two Family Residential District and the Townhouse/Multiple Family Residential District, respectively. Development densities for these districts are expected to range from four to seven units per acre. The land sales summarized on the following medium -density residential sales grid are considered to have zoning and potential uses consistent with R2 and R3 zoning districts. Lastly, high -density residential development in the City of Elk River is allowed in the R4 and PUD zoning districts. These districts generally comprise the high -density residential category, which includes multi -family development such as apartments and senior housing, with densities over seven units per acre. The land sales summarized on the following high -density residential sales grid are considered to have zoning and potential density similar to the R4 and PUD zoning districts. Due to the differences in potential density and the corresponding values perceived by the market, the single-family, medium -density and high -density comparable land sales are presented on separate summary grids. The respective land sales are considered to have zoning and potential densities consistent with the corresponding residential zoning districts in Elk River as stated previously. Lands guided for residential development in the City of Elk River are identified on the City's Land Use map on the following page. As depicted on the City's land use map, the majority of the land available for development is located in the eastern portion of the City. PATCHER MESSNER Valuation Counselors 22014 -City of Elk River Land Analysis June 12, 2020 Page 3 PATCHER MESSNER Valuation Counselors 22014 -City of Elk River Land Analysis June 12, 2020 Page 4 PATCHER MESSNER Valuation Counselors 22014 -City of Elk River Land Analysis June 12, 2020 Page 5 PARK DEDICATION FEES The City of Elk River is reviewing its park dedication fee requirements applicable to new subdivisions to ensure consistency with the State's statute. The purpose of this memorandum is to aid in determining the need for updating the City's market value estimates of residential land. These land use market values are vital for establishing cash fees in lieu of park land dedication. I;tatP ltatIItP Minnesota Statutes 462.358, Subd. 2b. enables the City to require dedication of a portion of a subdivision to the public for parks, recreational facilities, playgrounds, trails, wetlands or open space. Minnesota Statutes 462.358, Subd. 2b. (c). further requires that there be an essential nexus between the dedication of land or payment of fees based upon the City's purpose for the dedication and that the dedication or fee must be roughly proportional to the need created by the development and, where fees are to be dedicated in lieu of land, that the fee be "based on the average fair market value of the un platted land for which park fees have not already been paid." DEVELOPMENT LAND SALES The purpose of this consultation was to investigate land sales in order to develop average fair market values of residential development land in the City of Elk River. The average market value is necessary for the City of Elk River to complete their review of park dedication fees and determine if modification of the current fee structure is needed. The sales comparison approach is the preferred, and most common, technique for developing a market value estimate for land. Typically, the sales comparison approach compares vacant land sales to value a particular property. However, in this case, there is no specific subject property. As such, no adjustments are made to the comparable sales. PATCHER MESSNER Valuation Counselors 22014 -City of Elk River Land Analysis June 12, 2020 Page 6 DEVELOPMENT LAND SALES In general, the sales selected for analysis are un-platted land, or land defined as outlots reserved forfuture development. However, in some cases, previously platted land is included that was replatted for a higher density use. As a group, the comparable sales are expected to indicate a range of unit values established by informed buyers and sellers in the marketplace. The average market value can then be utilized as a reasonable estimation of average fair market values for land in Elk River, thereby meeting the guidelines of Minnesota statute. Sales of land in Sherburne County and surrounding areas were researched using the eCRV database, Northstar Multiple Listing Service and the REDIComps database. Information has been sought on recent sales of parcels that are similar in terms of potential use consistent with the residential zoning categories within the City of Elk River. The search for development land sales focused on un-platted land and outlots in outer -ring suburban areas that closed after February 2016. It is noted that the regional market has a limited number of recent sales of medium -density residential land for analysis. Townhome developments have experienced limited demand since the 2008 housing recession. While townhome units are gradually being absorbed by the market, developers have so far been hesitant to produce more of this property type. The unit of comparison used for each of these property types is price per acre. The sales used in this analysis are presented on location maps, followed by summary grids, and statistical analysis. 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I!a!yL Bl 99L'{ZY 00000SY OS 000'0054 ajq.WV Z-a Otl.1'51 6lOL1 Zl uolle+o of luawal0Wna0 alels3 M vu�yuedlrn0 Z .Nvltlwaa+.j p.j..dxa s 1ozu.4 luawdoianap 6uo1 e'Ayatlatl el0)o ens a6iel ew ueub 'OZOZ W Iuawdplanap 1.a..gd 1s+e a41 u. ua11-111uo.-1 gspu-ILH a gayl 011'luawlsanu!.5.a1O uawdganepP .P15a mean tol..11,—P mo, Due Nlsuap gpul YuawdganeO xawwe45 NN—sm. mu,+olsiB-B'am-,,6V pauoz al ADadoad SlwaIIWA B'Z OSb'B4 OOE'SOL'l4 OS OOf'S6L'LS alq¢I!entl lb Oy K'90L —zI 011 sluewlsanwpu..P asp 3N lS VW09LSll 4 syseway aatlaseO "Pd 11" aaud a!I!1n a..- Nu +.., ad eaud Iol u—w swptl p S u.leaol d.. 0 pug ewwnS saleS puel lepuoplfay Ilwej-el u!S 22014 -City of Elk River Land Analysis June 12, 2020 Page 9 1 - 2 3 9 #� it tt;.�• T 10 Plyrruutil Minneapolis 4 COMPARABLE MEDIUM -DENSITY RESIDENTIAL SALES LOCATION MAP PATCHER MESSNER Valuation Counselors x E m o N of -� `ma_ N n 05 y a vvim a� o Dom' 9 L m vgv F,>E m 30o- N a .�.�o >m� N c v5d y�tost n m m m w o C)❑ M ❑� as ry x� V N w °y 3v am > UE ° v Er 2, m 01m t o °v' Tv„ c p t o05 ��o v o E o m aoAE o°i o'o CD Co no ' cat c a' Qm33v y r o- 2 m y o N i. i.oau 2�'`-12 x E �dv d7, 23D v o> oau; o N N n y E`o,u ¢ �' N a E c ou .3 d uN m t a � m y o v v t v-'s No Zcv - vw z no mm 0 2 s 3 n E a c o �N 2. o 2o m y r o o .. zM a 3 U� d o0 Q a c H e u,o a 3 � <o V ao r o ry vi N r rn M(°r � va v a` po ^ o 0 0 o o r o 0 0 o r d v voi rn N n o o °' c u K G � a N ° O ° o m a N y MS ❑ h � N O r oO O O O O o o p W N` N N d U O r O O O ISO O 1 j 0 Cf9 f9 m i9 N N cli o 43 O C � J � N N v v v v v v v v v o -gyp Q Q Q Q Q Q Q Q Q Q Q w E N ❑ ❑ a c� ° 01 o r M r o m ❑ co °' C N 0_ J a 3 a CL a K a a � W ' v v a a a a U a ¢ U a U a U a a" a a as Lr Q (O m C> 10 W M (D N m f0 O N ° U J JJ T O a N ° m t Q r u y V J v o. o f E N o c o y E = 2 m 0 E -- ti m caa v v E� o. o � LL o a m N �a Y CLa W e 0 E 3~ F Q OU ° ❑ r a wa o N an 3� "'W � dW vo. T -,I c� Nv UE o m o U v E o$ 2 c o Na o c m o�� ° o a� o a?w v a a W v a ii v z >$ 3 I c.� ❑ m t� Y' a o c J N Z E v Z ti m _ N W Z m ❑ Z c Z m cG Z ❑��z p` Z u Z Z N > Q a w o a? ti `n-O at0i " c E o oo.c J- Mo ion mx W �E K a Yw (9 oc mU QE � Uv m >o Si .� "'3 W M Urn Z 2 E Z U N M 7 u> to r M rn .- 22014 -City of Elk River Land Analysis June 12, 2020 Page 11 9 7 F�fymuu;'� 'tire Minneapolis " 77 13 3 _ ti f - 98 _ f f� i COMPARABLE HIGH -DENSITY RESIDENTIAL SALES LOCATION MAP Lm PATCHER MESSNER Valuation Counselors �e K o f o d o W W W u -a'O ' W�E W A°'o F o o G� m t "E m tin W vo. -2 o WW O a.o w `° = c rn o O N g Wm`1 O Ev oo,o z n� m� o o n E 22o HH m ° $ ° m v ¢'�n NvE u aEt 4° = W W HE N nco¢ W WVN �u°i_wa d a �^ m y E a W� H o. W d E c 'v a - E E > a H met W W c � U° 2 H°_ °1 a H o.y 3 m E $,.:a a H d m o EI oW- H❑ m o E E n ° m m '° E y Ocao'R> F m =vo a 3 m O ,� d wof °oo Sao o,`o_M a i w oamT = n a in E w° 30 v W > m m x'o W 4-�c __ .3 o _ a >•. v F- N w a o dm o Nye QD o o; O�W 'y0a iEF ¢ u c v E _ W W E 3'm co mEc myoE o `wo m u W m ~Ec FQ m2i Zl W O m N OD OJ N O O O M O O M O N N N r N < O r Ol V n �n 0 °I a O R t D a v°0i m a ufOi O„N y f9 ^M, � f9 M f9 M 19 M N C W 9 W O o W u o N y» m Nf r E c W — � y 0 0 o W N a a o a a o o y¢ c a C � � y � - 9 .y ¢ Q ¢ ¢ Q ¢ ¢ Q ¢ Q ¢ Q ¢ N K � c N F � O M U c p a � M ❑ U Y (X t rn v N W L W W U v Q U ¢ U ¢ U ¢ U Q U Q U Q U Q U Q U Q U Q U Q U Q U U Q Q 2 U W 7i W N tOo N N O rn N O m N O w N W w N M m N m N N ro N (p m N N m N r N N r N M W J a J J J W U, J W J W W •, W J E U j J z E E vo U U U c m W o d ¢« a �o �c v c au �w mm W Z W oZ c'R 'w� EU E u c9 o y mN o3 aT 'W� @m ¢oi d ¢ _w' = ro y$ w 25 �� W run¢ w a sw'o a°E W o y(2i LL� =y mo mx C)" i� m3 'W E U WyO W N O W .6 n Q oS ¢ U a W ? f9 Z W > Z to y Z O� c 0 m2 :?m my °' ,aog ai °—y Wt tZ 6i a� Ww m� Jo -� ad ink um` E c �E 3i r� Nz 4 cm d >� Uo Um �m �c �$°o N� �y m3 mE J _ W o NU ZJ m W Om A W N N> m XU) ri E o 0Z N M o N �° r m rn 22014 -City of Elk River Land Analysis June 12, 2020 Page 13 SUMMARY OF FINDINGS It is important to note that the comparable sales have not been adjusted to a specific subject property and not all of the comparable sales presented herein have been verified. Based on our investigation, unit sale prices for single-family, medium -density and high - density residential land proximate to Elk River are summarized as follows: Single -Family Residential Land Range: $8,450 to $84,444 per Acre Median: $41,000 per Acre Mean: $42,223 per Acre (Average 40.62 Acres with a Density of 2.5 Units per Acre) Excluding Outliers Sales 1, 7, 13, 15 Range: Median: Mean: (Average 32.15 Acres with a Density of 2.4 Units per Acre) $14,052 to $75,758 per Acre $41,000 per Acre $41,164 per Acre Medium -Density Residential Land Range: $1 1,689 to $124,598 per Acre Median: $57,681 per Acre Mean: $65,367 per Acre (Average 16.44 Acres with a Density of 7.1 Units per Acre) Excluding Outliers Sales 5 and 6 Range: Median: Mean: (Average 17.25 Acres with a Density of 6.5 Units per Acre) $24,503 to $1 17,283 per Acre $57,681 per Acre $64,750 per Acre PATCHER MESSNER Valuation Counselors 22014 -City of Elk River Land Analysis June 12, 2020 Page 14 SUMMARY OF FINDINGS High -Density Residential Land Range: Median: Mean: (Average 4.82 Acres with a Denisty of 23.1 Units per Acre) Excluding Outliers 7 and 8 Range: Median: Mean: (Average 5.19 Acres with a Density of 21.5 Units per Acre) $45,558 to $294,872 per Acre $146,497 per Acre $158,729 per Acre $62,396 to $258,900 $146,497 $15 6, 640 PATCHER MESSNER Valuation Counselors