HomeMy WebLinkAboutMitchell Development Impact Fee Credit Request No. IFCR-0601.pdf
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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 impact fee credit request
MEETING DATE: Monday, March 21, 2010
AGENDA ITEM TYPE: Action Item
RECOMMENDATION: Consider the impact fee credit request and act to approve or not
approve the request consistent with earlier actions to amend or not amend the capital
improvement program.
Recommended motion: Finding the request to be consistent with the criteria for approval, I
move to approve the requested impact fee credits in the amounts of $224,615.61 from the
wastewater impact fee fund and $384,579.39 from the transportation impact fee fund with the
conditions as recommended by staff.
BACKGROUND: Chapter 3.24, BMC authorizes the City to conduct an impact fee program.
This program includes mechanisms for impact fee credits. 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. That decision was appealed to the City Commission as
allowed in Section 3.24.110.I, BMC.
The City Commission considered the matter at their January 10 and February 14, 2011 meetings.
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.
These amendments were presented separately at this March 21, 2011 meeting.
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
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.
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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
considered the item on January 10, 2011 and February 14, 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. An updated cost summary was presented to
the Commission on January 10th.
Extensive supporting materials were provided with the original credit requests/appeal. As those
have been previously provided to the City Commission they are not attached to this memo as that
would be redundant.
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.
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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.
The Commission considered this item as part of the CIP listing action conducted earlier this
evening.
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.
The Commission considered this item as part of the CIP listing action conducted earlier this
evening.
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.
The Commission considered this item as part of the CIP listing action conducted earlier this
evening.
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.
The Commission considered this item as part of the CIP listing action conducted earlier this
evening.
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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 Criterion 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. On January 10, 2011 and February 14, 2011, the City Commission choose to waive
Criterion 5 for the signalization of Fowler Avenue and W. Main Street and oversizing the
sewer line under Fowler Avenue between Main Street and Garfield Street.
If the City Commission chooses under earlier agenda action items to amend the impact fee
capital improvement program to include the two credit items requested, then the criteria for
approval will have been met and staff recommends approval of the request.
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.
In conversation with the Applicant on March 3rd they indicated that they prefer option 3 as it will
provide the simplest and most expeditious processing of the request.
UNRESOLVED ISSUES:
Will the City Commission consider granting the requested impact fee credit?
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If the Commission decides favorably on the impact fee credit request, the following six items are
recommended conditions of approval:
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 values are 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
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. The amount of the granted credit is $224,615.61 for wastewater and
$384,579.39 for transportation.
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. The commitment from the wastewater impact fee fund is
$224,615.61 and the commitment from the transportation impact fee fund is $384,579.39.
ALTERNATIVES: 1) Grant the credit as requested and consistent with earlier City
Commission actions to amend or not amend the CIP.
2) Make findings as to why the credit does not meet the required criteria and do not approve the
requested credit.
Attachments: Initial credit application request form
Updated cost sheet see items 5 & 6
Report compiled on: March 9, 2011
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