Planning and Development

Virtually all local government jurisdictions in the United States follow a development code when evaluating a proposed development application (Houston, Texas is a notable exception, along with rural townships dominated by traditional agricultural uses). Rather than follow the dictates of their respective development codes, however, a growing number of jurisdictions compel that some types of land use applications follow a planned development approach, backed up by a development contract.

This planned development approach may offer helpful flexibility to the project applicant. It can also be a time-consuming and expensive process that yields no better outcome than would be realized by traditional zoning and subdivision regulations. Moreover, many of these jurisdictions use the development contract to extract concessions from the applicant that would not otherwise be permissible under a straightforward application of their rules.

I often see development contracts used to compel dedication of oversized rights-of-way, payment of questionable fees and even to impose conditions unrelated to the actual project being proposed. Inasmuch as the development contract typically is provided to the applicant toward the end of the review process, the applicant is left with little time to review or seek the advice of counsel and often has no choice but to accept the document as-is or risk losing their project. This, of course, is exactly the outcome that these jurisdictions expect. I often get calls from clients who are upset about the process cities use with development contracts. Unfortunately, once the contract is signed and recorded, it is too late to do anything to remedy it.

I strongly encourage my clients to seek a clear understanding at the earliest opportunity of the anticipated conditions of approval likely to be recommended by the planning staff, including the terms of any development contract and any extraneous fees or other impacts. Some cities cooperate and some don’t. The unfortunate outcome of this approach by cities is to generate more distrust and animosity from project proponents, who otherwise are held to very strict standards as a condition of project approval. That’s fine when the conditions are known in advance and the applicant can make an informed decision about whether to pursue a project or to abandon it as too expensive or burdensome. But to use the planned development process, coupled with a development contract to trap the unwary is simply unfair.

It may not occur to you, when you walk from the bus stop to your office, that you are taking part in a form of “multimodal” transportation. Again, if you get off the train in Minneapolis and pick up a Nice Ride (bicycle) for a tour of Nicollet Island with visiting friends, you are taking part in multimodal transportation. Almost every trip we take requires multiple forms of transportation; car, transit, carpooling, biking and walking.

Leveraging multimodal transportation in the development arena was the focus of one of two panels sponsored recently by Larkin Hoffman and the Minneapolis/St. Paul Business Journal. Panelists included Lucy Galbraith, transit oriented development director at Metro Transit, Mark Fabel, executive vice president at McGough Construction, and Jaci Bell, director of development for Kraus-Anderson Realty.

Until the 1980s, most developers viewed transit as the way people got to work in the central cities. Planners and designers changed all that by creating incentives to partner on transit oriented development (TOD), locating transit stops in or around private offices, shopping centers and multifamily sites. Green space, parks, bike sharing and other public amenities were added to many TOD projects more recently. TOD has created some of the most vibrant urban environments here in the Twin Cities and around the country.

Take a look at Bloomington Central Station (BCS), a 45-acre campus developed around a transit station and public park. Planned by McGough, the project combines the headquarters for Health Partners, with condos, apartments, a new Hyatt hotel and structured parking facilities. BCS is just two station stops from Mall of America, a pioneer in transit-oriented development, which was constructed more than 25 years ago with a transit station built into its east parking deck. More than 10 years ago the last station for the blue line added light rail transit (LRT) to Mall of America and what is now the busiest transit station in the state.

Panelists also pointed to more than $2 billion of commercial development along the green line which runs in the center of University Avenue between downtown Minneapolis and downtown St. Paul. Adult bookstores and movie houses have been pushed out by successful ethnic restaurants and groceries, student housing, senior housing and new employers, all connected by LRT.

Galbraith noted that 40 percent of employees don’t drive to work, so good transit and multimodal facilities are essential to attracting employees from an increasingly tight labor pool. Sometimes employee incentives take the form of free- or reduced-price transit passes. Other employers offer bike racks, showers or preferred parking for carpools. Today’s smart phone apps, like ZAP, even create opportunities for friendly competition among coworkers who uses transit or bike to work. The entire environment for TOD has improved dramatically in 30 years.

For a complete review of the TOD panel, follow this link to the Q&A published by the Business Journal.

Cities throughout Minnesota are busy updating their comprehensive plans, a process that typically occurs every 10 years or so. As a reminder, comprehensive plans serve as the visionary roadmap for a city’s intended long-term growth; the implementing tools are the zoning ordinance, subdivision ordinance and similar policies. Of course, cities have the discretion to amend their comp plans any time they choose to, provided they follow proper procedures in doing so, but most elect not to do so because of the burden it imposes on staff.

I imagine one of the hardest tasks confronting a city official when considering a comp plan update relates to a proposed land use change that radically departs from the existing plan, possibly catching affected residents totally unaware or worse. This dilemma occurs especially in growing cities in which large sections of historically agriculture land is being considered for inclusion under an active development designation, such as commercial or residential. It also occurs when cities are seeking to redevelop a blighted area, perhaps by moving from commercial to residential or vice versa.

We’ve all attended the meeting at which a land use change is being debated and residents object to the change on the basis of its impact on their neighborhood and lifestyle. Inevitably the resident will note that when they bought their home they checked the city land use maps to confirm they were buying adjacent to property guided for a low or no-impact development; the proposed change, if adopted, will have an impact. It’s a fair point and yet we all know (well, maybe we don’t know) that owning one’s own property does not guarantee any sort of long-term use of another’s property. Were it any other way we would never see another new development occur anywhere.

Of course, we’d all love to preserve natural vistas, tree stands and marshy meadows that give us personal enjoyment. One way to do this is to buy the desirable property containing such features! Absent that step, possibly the city could be convinced to buy it; not usually viable either. In the end, the city is legally entitled to consider and act on land use changes that support future growth desired by the city (actually the underlying landowner’s consent is not even required – the city can do it unilaterally over the landowner’s objection).

Some cities embrace change and see value in growth and redevelopment. It funds infrastructure, schools, parks and makes for a more vibrant community. Growth begets growth. Others object to growth and prefer to preserve the existing character of their respective cities in order to protect small-town charm, rural character, large-lot development pattern, etc. For this latter group of cities, the worry is not about a land use change that triggers expansive growth, but rather a change that impedes growth that was formerly contemplated by landowners based on an existing plan. Plenty of speculative investment in real estate occurs based on one comp plan, only to see that investment quashed, based on a change in direction. We’ve seen this “growth-no growth” whipsaw play out in several semi-rural cities in our metropolitan region.

As others have noted in this blog, one way to get ahead of the surprise element of a planning change is to participate in a city’s comp plan review process, either as an appointed committee member or as an observer. This, of course, becomes troublesome because it often involves frequent daytime and nighttime meetings that are not easy to attend as a volunteer. Short of that, paying attention to a city website and registering for notices of future meetings or actions is a good fall-back option.

 

Forgive developer Martin Harstad if he thought he was in Potterville and not Woodbury when the city told him he had to pay nearly $1.4 million in “road assessments” as a condition of approval for his “Bailey Park” residential development. Harstad sued Woodbury to challenge its authority to demand the road assessments and won in both the trial court, and now the Minnesota Court of Appeals in a published decision released September 18.

For now, it’s a wonderful life for Harstad, other developers and for property owners who have been troubled for years over whether Minnesota cities have the power to condition development approvals on the payment of (frequently hefty) fees for future road improvements to accommodate new growth and development. Here, the court of appeals struck down what amounted to an impact fee assessed by Woodbury, but sidestepped the longstanding question of whether impact fees are legal in Minnesota.

As is the case for other developers, Harstad was already paying significant amounts for transportation infrastructure that would be needed within the Bailey Park development. Woodbury attempted to rationalize its road assessment policy by declaring that new development must not only “pay its own way,” but also pay “all associated costs” for “public infrastructure.” This meant, according to the city, that if a proposed development is perceived as contributing to the need for unspecified, offsite road improvements at unspecified locations outside the development, at unspecified points in the future, then road assessments under the city’s formula must be imposed and collected now as a condition of approval for the development.

The court of appeals said that Woodbury can only exercise powers conferred by the state legislature and that Woodbury overstepped its powers here. The court said of the statute on which the city pinned its hopes for upholding the assessment (Minn. Stat. Sec. 462.358, subd. 2a): “In fact, subd. 2a does not authorize collection of any type of assessment. Rather subd. 2a authorizes city planning.”

While Woodbury called its fees “major road assessments,” these types of charges have a variety of names, including “transportation improvement district fees,” “trip charges” and “transportation fees.” The name may vary, but the purpose is the same: cities are seeking to capture revenues for anticipated future upgrades to area roads to accommodate growth from new development. Regardless of a particular city’s label, the commonly-recognized name for this revenue-raising practice is “impact fee.”

Impact fees were defined by the Minnesota Supreme Court in Country Joe, Inc. v. City of Eagan, 560 N.W.2d 681, 685 (Minn. 1997), as fees: (a) in the form of a predetermined money payment; (b) assessed as a condition to the issuance of a permit or plat approval; (c) justified as within local government powers to regulate new growth and development and to provide for adequate infrastructure; (d) levied to fund large-scale, off-site public facilities and services necessary to serve new development; and (e) in an amount proportionate to the need for the public facilities generated by new development. Country Joe did not clearly decide, however, whether impact fees were illegal in Minnesota.

The court in Harstad did not address whether Woodbury’s road assessment was an impact fee, or whether impact fees are legally authorized in Minnesota. [This blogger made the case that such fees are not legally authorized in Minnesota in a March 2009 article in Hennepin Lawyer entitled Road Improvements: When Are Special Assessments Legitimate?

The court of appeals in Harstad also did not address whether Woodbury’s road assessment was an illegal tax. Country Joe held that the City of Eagan’s “Road unit connection charge” was an illegal tax under state law that limits municipal taxing powers. The court of appeals in Harstad did not address the illegal tax issue because it was raised only by amicus parties and not by either of the parties to the litigation. The City of Woodbury has until October 18 to decide whether to petition the Minnesota Supreme Court for review.

Many of us are familiar with the scenario of presenting a development application before a public body, such as a city council, that appears to be going well until the wheels come off for some unexpected reason. This happens most frequently when one or more residents who have “only just heard” about the project being considered show up to voice objections, raise questions and make allegations, some of which are untrue. What’s a project proponent to do? Well, if you are well-prepared and fortunate to have a strong recommendation of support from staff, maybe nothing. But, then again, when you are dealing with a public body in a public process, even that may not be enough.

If there is one thing politicians strive to avoid it is controversy and they will avoid it whenever possible. In any case, what matters most is being more prepared than anyone else. If you are perceived as the expert in the room, as evidenced by strong preparation, you may get a measure of deference that helps you successfully complete the process. But if there is any doubt, especially in a chamber full of irate residents, you and your client are likely the least important people in the room.

Part of being prepared requires understanding the development interest for which one is advocating and why the site in question is necessary for future operations. Local zoning regulations bear directly on this question, so you need to be confident about how those regulations help or potentially hurt your cause. It is imperative to evaluate the “risk factors” associated with an application on the front end to avoid, if possible, being surprised deeper into the process, such as at a pivotal public hearing. This means laying out the proposed project in the context of the applicable regulations, such as land use controls, design standards, environmental restrictions, etc., to ensure that any perceived risk exposure has a ready response. One must also understand the nature of the request: Does your application raise a legislative policy question, such as a zoning change, or something that is quasi-judicial, such as a permit?

The former circumstance vests the public body with broad policy discretion provided that it acts fairly and reasonably to apply established standards designed to protect the public. In the latter circumstance, such as a conditional use permit, the rules are tighter and the public body can be held more strictly accountable both to its regulations and the state of the record supporting the application. Your “risk factor” analysis helps you anticipate where you have the greatest exposure so that your record has been properly created to address all applicable standards as well as likely questions. Are you better off doing the traffic study now or waiting to see whether it will be a source of concern down the road? Admittedly, judgments need to be made depending on the facts as you know them.

In the modern age of the internet, it is possible to research all manner of things that may actually be helpful in preparing a development application and the supportive record. However, that same tool is available to everyone else, too, and thus you are always exposed to the prospect of a citizen who has conducted “research” and now purports to understand your project and your business and has an opinion about one or both. Understanding whether your industry is confronting public adversity elsewhere is a key factor in your preparation. If so, what is being used successfully to respond to that adversity? If you or your client has made mistakes, what has been done to remedy them, with assurance that they won’t happen again? For companies that are heavily regulated, such as in the mining sector, this is a constant source of concern. Any negative headline, whether true or not, may well be used to counter your project. Remember, your personal credibility, along with that of your client is being tested in the process; being prepared means knowing where the shots will come from.

Putting a narrative together tied to the applicable regulatory standards, even as a cheat sheet, is an important tool for helping one respond to questions that were not previously the subject of discussion. Not being able to respond confidently in the heat of the hearing to predictable or even random questions may lead directly to a motion to table the pending application, allowing the public body to avoid the potential political conflict that is brewing. Being able to confidently march the public body through the application requirements and the supporting record often leads to the logical conclusion that your application can and should be approved in spite of the opposition.

If your best effort is not working, you may need to make a decision about whether to request that your application be tabled to address specific questions. If you are dealing with a legislative policy question, this approach may be advisable given the breadth of discretion vested in the public body. If however, their discretion is more limited and you have a strong record, you may need to call their bluff and force the members of the body to express their opinions. Once you understand what you are up against, then you can make an informed decision about how to proceed. You might be successful; but then again, you might not. And if not, that’s why saloons exist.