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HomeMy WebLinkAboutMitchell Development IFCR-0601 Hearing of Impact Fee Appeal.pdf Page 1 of 6 Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: Chris Saunders, Assistant Director Tim McHarg, Director Chris Kukulski, City Manager SUBJECT: IFCR-0601 Mitchell Development MEETING DATE: Monday, February 7, 2010 AGENDA ITEM TYPE: Action Item RECOMMENDATION: Conduct hearing of impact fee credit request and associated appeal regarding credit eligibility. 1. Decide whether or not to waive Criterion 5 regarding timing of work. 2. Decide whether to direct Staff to advertise a public hearing for consideration of amendments to the CIP to possibly cure the existing non-conformance with Criteria 3 and 4. BACKGROUND: Chapter 3.24, BMC authorizes the City to conduct an impact fee program. This program includes mechanisms for impact fee credits and for appeals of administrative decisions. Mitchell Development Group made application for impact fee credits. In reviewing that application, Staff made findings on June 16, 2010 with which Mitchell Development Group disagreed. They appealed those administrative findings. An appeal committee established by Chapter 3.24 heard the initial appeal and made their decision on September 1, 2010. Mitchell Development Group now appeals that decision to the City Commission as allowed in Section 3.24.110.I, BMC. The City Commission originally set the date for consideration of the appeal on October 25, 2010. At the request of the appellant, the item was rescheduled and was considered on January 10, 2011. Since the appeal and the credit request are directly connected they were be presented as a single item. At the January 10, 2011 meeting the Commission chose to waive Criterion 5 for two of the elements of the credit request, the traffic signal and the sewer main; and directed staff to prepare for further consideration related amendments to the impact fee capital improvement program. On January 17th, after further discussion the Commission acted to put the item on the February 7, 2011 agenda for additional discussion. Summary History of credit request and appeal The MSU Foundation requested and was approved to annex 43.85 acres to the City of Bozeman. On July 29, 2002, the City Manager signed the annexation agreement. The property was subsequently sold and developed along with other property as the Bozeman Gateway commercial subdivision/PUD. The City, MDT, and developer entered into a memorandum of understanding 31 Page 2 of 6 in September 2004 regarding certain street work on West Main Street and several intersections. The MOU did not mention any specific funding amounts or means of participation. The Findings of Fact for the Bozeman Gateway subdivision were presented to the City Commission on the October 9, 2006 consent agenda. Prior to the subdivision approval, the developer, Mitchell Development Group, had begun construction of Garfield Street and Fowler Avenue on February 8, 2005. On September 28, 2006, Mitchell Development approached the City via letter about the possibility of impact fee credits for some of the infrastructure installation. Staff conducted an informal review and in a personal meeting in early October with a representative of Mitchell Development shared the conclusion that impact fee credits were not available due to a failure to meet the timing requirement for credit request and lack of compliance with other required criteria. A formal application for impact fee credits was received by the City on October 24, 2006. The initial application listed four general work elements affecting streets with a cumulative cost of $5,227,600.73, as shown on the last page of the letter dated January 25, 2007 and included in Appeal materials as Exhibit D. After the formal application was received, numerous conversations in person, via telephone, and meetings were held to discuss the application and how the deficiency of timing could be overcome. Correspondence was received with additional information during this time, portions of which are included in the Appeal materials. In early 2010, it was concluded that the matter could not be overcome within administrative bounds. A formal denial of the credit was issued in writing on June 16, 2010. A copy of the denial letter is included as Exhibit F in the appellant’s materials. All administrative decisions relating to impact fees under Chapter 3.24, BMC are subject to review and appeal. An appeal of the denial was received on July 29, 2010. The first step in the appeal process is review by the Development Impact Fee Review Committee, which is established in Section 3.24.110.I, BMC. The Committee met on September 1, 2010 and after hearing from Staff and Appellant upheld the denial. A copy of their minutes, decision, and findings are attached. A decision of the Development Impact Fee Review Committee (DIFRC) may be appealed to the City Commission. An appeal from the DIFRC’s decision was received by the City Clerk on September 15, 2010. After several requests for rescheduling by the Appellant, the Commission will consider the item on January 10, 2011. The current description of the credit being sought and the applicant’s rationale is contained in the Appellant’s materials in the letter dated July 29, 2010 and beginning on page 5. Materials Provided with this Cover Memo There is considerable material involved in this item. Please recognize that the material spans a period of six years and reflects on-going discussions. This summary cover memo is the only new material generated by Staff in forwarding this appeal to the City Commission. The items are listed and attached in chronological order. There is some repetition of earlier materials in later attachments. · Initial correspondence (dated September 27, 2006) 32 Page 3 of 6 · Staff review notes (dated October 9, 2006) · Impact fee credit request (dated October 24, 2006) · Denial letter (dated June 16, 2010) · Appeal and supporting materials (dated July 29, 2010) · Staff response to appeal for Development Impact Fee Review Committee (dated September 1, 2010) · Development Impact Fee Review Committee minutes (dated September 1, 2010) · Development Impact Fee Review Committee findings (dated September 21, 2010) · Correspondence regarding Garfield Street from appellant (dated September 7, 2010) · Staff response to correspondence (dated September 20, 2010) · Appeal to Commission (dated September 15, 2010) · Appellant letter to the Commission (dated December 29, 2010) · Appellant’s supporting material to their December 29, 2010 letter (includes copies of some materials listed above) Requirements for Impact Fee Credits The City’s impact fee program is established in Title 3, Chapter 24 of the Bozeman Municipal Code. This local ordinance implements impact fees under the authorizing statute of Title 7, Chapter 6, Part 16 of the Montana Code Annotated. A mechanism for impact fee credits is required under state law and is implemented under Section 3.24.100, BMC. To qualify for an impact fee credit, a proposed infrastructure construction project must meet certain criteria. If the criteria are not met then the project is not qualified. Some of the criteria are adopted to ensure correct use of impact fees, and some are to help ensure that the impact fee program can operate smoothly and effectively. All of the criteria must be satisfied. Criteria 1) Capacity Expanding (beyond project related). Impact fees solely exist to create more infrastructure capacity to serve new development. This criteria ensures that a project is not maintenance or other ineligible activity. The measure of capacity expansion varies by infrastructure type. This is not a locally generated or flexible criteria. Criteria 2) Not Project Related. This criteria separates those capacity expanding improvements which are necessary for the minimum service to the installing development from those which expand capacity in the overall infrastructure systems. Compliance with minimum standards are included as “project related” improvements. Examples of project related improvements includes local streets and minimum diameter water mains. This is not a locally generated or flexible criteria. A local definition of Project Related is established in Section 3.24.040.M, BMC. Criteria 3) CIP Listed. The City prepares a Capital Improvement Program (CIP) to schedule the construction of infrastructure. The CIP provides a means to describe future work and its sequencing that can be available both to staff and the public. The CIP coordinates multiple funding sources, including impact fees, to support construction of major projects. The CIP contains a subset of the possible capacity expanding projects described in the facility plans. As a rolling five year document, the CIP provides a near term understanding of expected expansion work. The City Commission may amend the CIP at their discretion to add or remove projects or change the sequence in which they may occur. 33 Page 4 of 6 Criteria 4) CIP Funded. The impact fee CIP lists funding for capacity expanding projects over the next five years. Sometimes the City includes projects on the CIP which do not have full funds allocated to them. This may be due to a project spanning multiple years with initial phases at the latter end of the CIP, as an advisory of what projects are being considered as the next possibilities for funding, or to hold an option open for the Commission to adjust the CIP scheduling as needs in the community change. Projects which have no allocated funds need to be moved into the funded schedule before they are available for impact fee credits. Criteria 5) Timely Request (before construction or dedication). The City Commission has stewardship for the paid impact fee funds and the City’s infrastructure. To enable the Commission to act deliberately in establishing the impact fee work program, the provisions of Chapter 3.24 include a requirement that prior to undertaking work for which impact fee credits are desired an applicant must first get approval for impact fee credits. This enables the City Commission to manage the financial commitments of the City and the overall health of the impact fee program without unexpected surprises and funding commitments which interfere with high priority projects. The impact fee program is required to keep a positive projected fund balance at the end of the five year time horizon of the CIP. In the past, the City Attorney has noted that Criteria 5 is a protection for the City in its administration of the impact fee program. As noted above, it assists in maintaining an orderly and healthy impact fee program. However, as the criterion is for the benefit of the City, the City Commission, and only the City Commission, may choose to waive this criteria. Credit Types If a credit is requested and meets the adopted criteria, Section 3.24.100.G provides for three different means to award a credit. The three options are described in the ordinance, Section3.24.100, as follows: “Upon receipt of such a written request, the City may, at its discretion: 1. Arrange for the reimbursement of such excess credit from the impact fee fund for the same type of service or facility from development impact fees paid by others; 2 . Arrange for the reimbursement of such excess credit through the issuance of a promissory note payable in not more than ten years and bearing interest equal to the interest rate paid by the City for its long-term debt; or 3. Reject the request for cash and provide credit. Such excess credit shall be valued at one hundred percent of actual developer costs for the excess improvements, or at the actual appraised value of such excess improvements, at the City's option.” The choice of which credit mechanism to use is at the discretion of the City. The credit applicant may indicate their preference. 34 Page 5 of 6 UNRESOLVED ISSUES: 1) Will the City Commission waive Criterion 5 regarding the timing of application for impact fee credit? · Waiving Criterion 5 does not commit the City to awarding the requested credits. Waiver of Criterion 5 removes a procedural barrier to consideration and allows the Commission to consider the individual merits of the elements of the proposal. · If Criterion 5 is not waived then the initial determination, which is the subject of the appeal, is upheld and the credit application and appeal have completed processing and no impact fee credit will be awarded. 2) Will the City Commission consider amending the impact fee CIP to address the deficiency for Criteria 3 and 4? · If the Commission directs Staff to prepare an item to be considered for inclusion on the CIP this does not commit the Commission to award the requested credits. It would trigger the public notice and documentation processes allowing Staff analysis of, and public comment on, whether each item meets Criteria 1 and 2. A public hearing would be scheduled wherein each possible amendment to the CIP was considered by the Commission and an opportunity for the public to participate in the decision is provided. This is the time when the bulk of the material in the packet is considered to determine whether there is a basis to consider an element of the credit request as capacity expanding beyond the minimum standards needed for the development. The Commission would then act to formally amend, or not amend, the CIP to include one or more of the requested credit elements. This would address Criterion 3. o Part of the amendment to the CIP to include an additional item would also include the funding for that item. This would address Criterion 4. Depending on the balance in the impact fee fund for a specific type of infrastructure the inclusion of additional item(s) may require removal of another project from the CIP. · If the Commission does not direct Staff to begin the process to consider amending the CIP then the credit process is terminated as the credit request fails two of the required criteria. In order to grant the appeal and award credit the City Commission must decide favorably on both of these unresolved issues. Staff recommends that, for clarity of both the discussion and motions, the City Commission consider each element of the request individually. As described in their minutes, this recommendation reflects the same methodology used by the Development Impact Fee Review Committee when they took action. If the Commission decides favorably on some, or all, of the credit request, the following six items are recommended conditions of approval for each favorable credit request: 1. The credit will be made available as a balance maintained by the City against which the credit holder may draw to offset impact fees due as building permits are issued. (Option 3 in Section 3.24.100.G, BMC) 2. The final credit value will be established based upon review of final actual costs and shall be adjusted to remove any project related costs as defined in Section 3.24.040, BMC and as 35 Page 6 of 6 required by Chapter 3.24, BMC. Eligible costs are limited to those meeting the criteria of 3.24.040.J, BMC, therefore costs for temporary work or other cost attributable to construction timing or other construction management choices is not eligible for reimbursement. 3. The impact fee credit is only valid for qualifying improvements and does not include any costs necessary for the processing, design, installation, or development of the individual projects within the Bozeman Gateway development. 4. This agreement does not supersede any other agreement between the applicant and City which may limit the amount of reimbursable cost. 5. Costs generated by making application for an impact fee credit or finalizing an impact fee application are procedural costs distinct from the completion of the capacity expanding work and are not eligible for reimbursement. 6. The applicant shall agree in writing to the above listed conditions of approval, and any necessary revisions to the City’s capital improvement program shall be completed, prior to the credits becoming effective. FISCAL EFFECTS: Granting the appeal will commit impact fee funds to pay for the requested impact fee credit. Exact amount will depend on which if any of the requested credits the Commission decides to allow and final calculation of allowable costs. The requested credits apply to both transportation and sewer impact fees. The most recent correspondence notes a combined cost of $1,068,200.40, Appeal materials page 14 of the July 29, 2010 letter. A revised cost sheet was provided by the applicant’s at the January 10th meeting. ALTERNATIVES: 1) Uphold determination that the requested credit does not conform to required criteria. 2) Direct Staff to initiate amendment(s) to applicable CIP funds and approve some or all of the requested impact fee credit. Completion of this alternative will require subsequent steps by the Commission. Attachments: Initial correspondence Impact fee credit request Denial letter Appeal materials Staff response to appeal Development Impact Fee Review Committee minutes, decision and findings Correspondence re: Garfield Street from appellant Staff response to correspondence Appeal to Commission Letter from Appellant and supporting materials Revised applicant materials from January 10th meeting Report compiled on: January 27, 2011 36 37 38