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9.6 SR 02-16-2021Request for Action To Item Number Mayor and City Council 9.6 Agenda Section Meeting Date Prepared by Work Session February 16, 2021 Cal Portner, City Administrator Item Description Reviewed by Street Impact Fee Legislation Justin Ferrite, P.E., Public Works Director Reviewed by Zack Carlton, Planning Manager Action Requested Discuss Street Impact Fee Legislation. Background/Discussion In March of 2020, the City Council approved a resolution supporting Infrastructure Accountability at the request of League of Minnesota Cities. On February 10, 2021, the Minnesota House of Representatives Committee on Local Government received testimony and discussed HF 527, Street Impact Fee. Mayor Dietz has requested a Council discussion. Financial Impact N/A Mission/Policy/Goal Elk River Vision Attachments ■ March 2, 2020, Staff Report ■ HF 527 ■ March 2, 2020, Meeting Minutes The Elk River Vision A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community engagement that encourages and inspires pi ospei ly. M TUREJ Updated.• August 2020 Request for Action To I Item Number I Mavor and City- Council 8.3 Agenda Section Meeting Date General Business March 2, 2020 Item Description Resolution Supporting Infrastructure Accountability Action Requested Adopt, by motion, a resolution supporting legislation Prepared by Zack Carlton, Planning; Mana,�,er Reviewed by Cal Portner, City Administrator Reviewed by Justin Femrite, Public Works Director Background/Discussion In the fall of 2018, the Minnesota Supreme Court ruled on Harstad v. City of W/oodbu y finding there was no existing statutory authority to collect fees for future infrastructure improvements when approving residential developments. The League of Minnesota Cities is urging cities to pass a resolution supporting legislation that would authorize cities to collect infrastructure development fees to fiend municipal street improvements as a necessary component of growth. The goal of the legislation is to ensure that new development pays for new development and to limit the possibility that existing taxpayers would be forced to pay for infrastructure needs resulting from anew residential subdivision. Financial Impact None Attachments a Infrastructure Fee Fact Sheet Resolution. The Elk River Vision A welcoming community with irvolutionay and sphyted resourcefulness, exceptional 1,41AW-0 0 W E Rservice, and communityengagement that encouizages and inspiresprosperity If not addressed, existing taxpayers will foot the bill for streets that are only needed because of proposed residential development. (2') LEAGUE of LHC MINNESOTA CITIES 9,2020 League of Minnesota Cities. All Rights Reserved. PROBLEM: When a new subdivision proposal is presented to a city by a developer, city officals consider how that development will connect with the rest of the community through new city streets, or how the added capacity will impact existing city streets. Many cities plan street work years in advance, and new development creates additional demand. However, legal interpretation of current law does not allow for cities to collect fees from developers to help pay for these future investments. LEAGUE -SUPPORTED SOLUTION: The League supports HF2296 / SF2442 and HF2297 / SF2443 (Rep. Brad Tabke, Sen. Eric Pratt), providing the necessary statutory authority for cities to be able to charge developers fees that cover the infrastructure improvements that are needed because of the new residential development. BACKGROUND: The Minnesota Supreme Court found in Harstad v. City of Woodbury that cities do not have the statutory authority necessary to impose a fee for future street improvements when approving residential development. Cities need a clear and lawful path forward to support development while protecting the interests of current taxpayers. For more Information: Irene Kao, Intergovernmental Relations Counsel Phone: (651) 281-1260 Email: ikao@lmc.org www.imc.org/builditright City of Elk River City Council Resolution 20- A Resolution of the City Council of the City of Elk River Supporting Infrastructure Accountability WHEREAS, the development and construction associated with that growth are driving the need for road improvements, street oversizing, street redesign, and street reconstruction; and WHEREAS, municipal statutory authority appropriately exists for fees to support added need for parks, sewer, and water; and WHEREAS, this municipal authority does not exist for infrastructure development fees; and WHEREAS, city streets are one of the four major types of infrastructure local government is responsible to provide to protect public safety and health, and city streets represent a separate but integral piece of the network of roads supporting movement of people and goods; and WHEREAS, existing funding mechanisms, such as Municipal State Aid (MSA), property taxes, and special assessments have limited applications, leaving cities under -equipped to address growing needs; and WHEREAS, neighborhood streets are constructed according to city standards by developers; and WHEREAS, funding sources for larger streets and intersections to support new developments have historically come from infrastructure development fees; and WHEREAS, the Minnesota Supreme Court found in Hw:aad v. Of of Woodbuy that no statutory authority existed for these infrastructure development fees; and WHEREAS, cities should not be forced to make current residents and businesses pay for costs of growth through local taxes but rather by those that are responsible for the growth; and WHEREAS, cities are finding it difficult to develop adequate funding systems to support needed infrastructure development related to growth while complying with existing state statutes; and 1Q11BII a NATUREI WHEREAS, cities need flexible policies and greater resources in order to meet growing demands for street improvements. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Elk River, Minnesota, as follows: The Council supports legislation that would authorize cities to collect infrastructure development fees to fund municipal street improvements as a necessary component of growth. Passed and adopted this 2nd day of March 2020. John J. Dietz, Mayor ATTEST: Tina -Allard, City Clerk p0WEAEIi t NATUREI LE42. Infrastructure Fees Issue: New development and the resulting growth create an increased demand for public infrastructure and other public facilities. Severe constraints on local fiscal resources and dramatic forecasts for population growth have prompted cities to reconsider ways to pay for the inevitable costs associated with new development. Traditional financing methods tend to subsidize new development at the expense of the existing community, discourage sound land -use planning, place inefficient pressures on public facilities, and allow under -utilization of existing infrastructure. Consequently, local communities are exploring methods to ensure new development pays its fair share of the true costs of growth. In Harstad v. City of Woodbury, 916 N.W.2d 540 (Minn. 2018), the Minnesota Supreme Court recently clarified that state statute does not provide the authority for cities to impose infrastructure fees to fund future road improvements when approving subdivision applications under Minn. Stat. § 462.358, subd. 2a. Given the existing authorization to impose fees on new development of other infrastructure, such as water, sanitary and storm sewer, and for park purposes, it is reasonable to extend the concept to additional public infrastructure and facilities improvement also necessitated by new development. Response: The Legislature should authorize local units of government to - impose infrastructure fees so new development pays its fair share of the off - site, as well as the on -site, costs of public infrastructure and other public facilities needed to adequately serve new development. 01/12/21 REVISOR MS/EH 21-01463 This Document can be made available in alternative formats upon request State of Minnesota La HOUSE OF REPRESENTATIVES NINETY-SECOND SESSION H. E No. 527 02/01/2021 Authored by Masin, Albright, Elkins and Hanson, J., The bill was read for the first time and referred to the Committee on State Government Finance and Elections 1.1 A bill for an act 1.2 relating to local government; authorizing municipalities to charge a street impact 1.3 fee; amending Minnesota Statutes 2020, section 462.358, by adding subdivisions. 1.4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.5 Section 1. Minnesota Statutes 2020, section 462.358, is amended by adding a subdivision 1.6 to read: 1.7 Subd. 12. Street impact fee. (a) In addition to all other existing authority of a 1.8 municipality, a municipality may impose a fee as set by ordinance on an applicant based 1.9 on the net buildable acreage of the subdivision, the subdivision's impact on the municipality's 1.10 transportation system, or the municipality's transportation plan. 1.11 (b) The municipality must place any cash payments received in a special fund which 1.12 may be used only for costs related to the municipality's approved transportation plan, 1.13 including the acquisition and construction, maintenance, or improvement of streets, roads, 1.14 intersections, and related transportation infrastructure. 1.15 (c) In addition to any other authority, the municipality may deny the approval of a 1.16 subdivision based solely on an inadequate transportation system within the municipality. 1.17 (d) Previously subdivided property, from which the municipality has received a street 1.18 impact fee, that is resubdivided with the same number of lots is exempt from street impact 1.19 fee requirements. If, as a result of resubdividing the property, the number of lots is increased, 1.20 the street impact fee applies only to the net increase of lots. Section 1. 1 O1/12/21 REVISOR MS/EH 21-01463 2.1 Sec. 2. Minnesota Statutes 2020, section 462.358, is amended by adding a subdivision to 2.2 read: 2.3 Subd. 13. Street impact fee nexus. (a) There must be an essential nexus between the 2.4 fee imposed under subdivision 12 and the municipal purpose for the fee. The fee must bear 2.5 a rough proportionality to the need created by the proposed subdivision or development. 2.6 (b) If a municipality is given written notice of a dispute over a proposed fee before the 2.7 municipality's final decision on an application, a municipality must not condition the approval 2.8 of any proposed subdivision or development on an agreement to waive the right to challenge 2.9 the validity of a fee. 2.10 (c) An application may proceed as if the fee had been paid, pending a decision on the 2.11 appeal of a dispute over a proposed fee, if: (1) the person aggrieved by the fee puts the 2.12 municipality on written notice of a dispute over a proposed fee; (2) prior to the municipality's 2.13 final decision on the application, the fee is deposited in escrow; and (3) the person aggrieved 2.14 by the fee appeals under section 462.361 within 60 days of the approval of the application. 2.15 If an appeal is not filed by the deadline or the person aggrieved by the fee does not prevail 2.16 on the appeal, the funds paid into escrow must be transferred to the municipality. Sec. 2. 2 City Couacil Mmutes March 2, 2020 Page 5 conversations he is confident the DNR will be very familiar with the overall dredging project. Mayor Dietz asked what options would be submitted with the permit. Mr. Wisner stated he hasn't submitted a dredging permit to the state previously, but the state's permitting software should handle the permit request for the potential of two options. He stated the goal was to capture as much of a project as they can when submitting the permit to the DNR while working closely with WSB on carefiilly crafting the two options. Mayor Dietz asked if the Option B would be determined in time for the open house. Mr. Wisner stated surveying work for the lake has not been recently refined and they don't want to do hand surveying during the project due to time constraints, therefore surveying work was being completed during this week via sonar and drone to determine exactly the amount of material to consider be removed. He stated the 429 assessment process would begin by WSB this week and the final TAP meeting would be in April following the open house. Mr. Wisner then discussed the feedback from the meeting with the OLID board last week and discussions surrounding dredging equally versus a deeper dredge in specific areas and how that meets the long-term maintenance objectives. 8.3 Resolution Supporting Infrastructure Accountability Mr. Carlton presented the staff report. Coundlmember Christianson asked what the potential fee impact would be on new development home prices, stating the developer wouldn't pay that but pass the cost onto the new home purchaser, and how this would impact deter growth. Mr. Carlton indicated the impact fee is unknown at this time and wasn't provided in their fact sheet but fees are likely to be included in developer fees similar to other infrastructure fees like SAC and WAC and park dedication fees, which could ultimately increase the price of a home. He noted there would be a big range in what the fee would be and would be difficult to tabulate on a broad basis as it would vary for each city. Councilmember Christianson asked if the city's resolution proves collection of these fees if legislation passes. Mr. Carlton stated his reading of this allows cities to create ordinances and allow cities to evaluate what is the most appropriate and legally defensible fee would be in their community - Moved by Councilmember Westgaard and seconded by Councilmember Wagner to approve Resolution 20-16 Supporting Infrastructure Accountability as presented in the staff report. Motion carried 5-0. 8.4 Discuss Work Session Items Mr. Portner presented the staff report Say NO to a New Tax on Housing, Nonprofits, Businesses, and Property Owners Vote NO to HF 527 (Masin) The proposed language provides new authority for city councils to impose an additional tax on growing businesses, non -profits, and housing developments. The proposal creates an end -run around requirements imposed upon cities under the special assessment laws designed to protect property taxpayers. Local governments already have multiple options to fund local transportation projects including: • General Property Tax Revenue • Special Assessments • State Transportation Aid • Special Service Districts • Taxlncrement Financing • Property Tax Abatement • Loca I Option Sales Tax Minnesota Courts Have Spoken on this Issue A handful of cities have been attempting to impose these fees without legal authority. In 2018, the Minnesota Supreme Court ruled unanimously and struck this down in Horstad v. City of Woodbury. At a time when costs to growing businesses, non -profits, and housing developments are already at all-time highs -adding an additional tax is the wrong approach. Local governments have multiple options to fund local transportation projects that are both transparent and accountable to taxpayers and property owners. Creating a new tax on housing, non -profits, businesses, and property owners is wrong for Minnesota. i GrearerSa ntPai Gr _C = i._ a 11wat—k The Voice of Small Business` `°"80-Y" NA10P `.�� + aaYELDMYEff AIfOC�AYIOD q { 4zf MINI NESOTA SHOPPING CENTER ASSOCIATION HOUSING a FIRST MINNESOTA AM. MiNNLSVIA CHAMBEROF - COhIMI_R' t^ � ::t C M BA