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HomeMy WebLinkAboutFinal adoption of Ordinance No. 1823, revising Section 2.06.1680 prohibit refunds of paid Impact Fees in exchange for credits Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: Chris Saunders, Assistant Planning Director Tim McHarg, Planning Director SUBJECT: Second reading of Ordinance 1823 which amends Section 2.06.01680, BMC to prohibit refunds of paid impact fees in exchange for impact fee credits MEETING DATE: March 19, 2012 AGENDA ITEM TYPE: Action. RECOMMENDATION: Approve the second reading of Ordinance 1823. Recommended motion: Having heard and considered public testimony, the recommendation of the impact fee advisory committee, and information from staff I move to provisionally approve Ordinance 1823 as presented. BACKGROUND: The City issues impact fee credits to reimburse persons who build qualifying capacity expanding projects in defined infrastructure systems. Credits can be issued in three different form: cash, cash over time with interest, or a book balance which can off-set fees charged to particular building permits. The City’s preference is to pay in cash as that has the least long term cost for the City and is most advantageous to the private party. A decision to issue a book balance credit is done because the decision maker has determined it is in the best interest of the City to do so at that time. The City issues refunds of impact fees paid for several reasons. Refunds are given when needed to preserve standards of fairness and the linkage between the fees charged and delivery of services. Recently a question arose of whether a refund can be given when a person who has already paid impact fees on a project later acquires impact fee credits from a third party and wishes to give the credits to the City in exchange for a refund of the fee already paid. Finance, legal, and planning staff discussed the matter. The present code language neither prohibits nor authorizes the practice at this time leaving the matter to administrator discretion. After discussion, Staff concluded that there were more possible problems with this practice than benefits. Staff discussed whether less than an absolute prohibition was workable and concluded that there was no meaningful basis upon which to draw distinctions in time, cost, or other objective factor. Therefore, Ord. 1823 is proposed to adopt language specifically prohibiting this kind of refund. 106 The impact fee program has been in place for sixteen years. Credits have been issued to many parties for work performed. It is estimated that there have been over 200 transfers of issued credits between private parties. This question has only arisen in the last few months and only from one party. Staff does not believe that there will be any meaningful negative impact on any credit holder or future project from this amendment to the code. The Impact Fee Advisory Committee considered this item at its March 8, 2012 meeting. They recommend approval of this ordinance. Minutes of their meeting are attached. UNRESOLVED ISSUES: None ALTERNATIVES: No substantive alternatives have been identified. The Commission may adopt or not adopt the ordinance as they believe is best. FISCAL EFFECTS: This ordinance does not have any specific cost associated with it and does not alter any adopted departmental budget. Attachments: Draft Ordinance 1823 Impact Fee Advisory Committee minutes Report compiled on: March 8, 2012 107 Ordinance 1823 Page 1 of 4 Ordinance No. 1823 AN ORDINANCE OF THE CITY COMMISSION OF THE CITY OF BOZEMAN, MONTANA, PROVIDING THAT THE BOZEMAN MUNICIPAL CODE BE AMENDED BY REVISING SECTION 2.06.1680 TO PROHIBIT REFUNDS OF PAID IMPACT FEES IN EXCHANGE FOR IMPACT FEE CREDITS. WHEREAS, the City of Bozeman is committed to addressing the community’s expressed needs and desires for services; and WHEREAS, the City of Bozeman is committed to meeting those desires and demands for services in a fiscally responsible manner; and WHEREAS, the City of Bozeman is committed to meeting those desires and demands for services in a manner which recognizes the fiscal and legal interest of all of the system users now and in the future; and WHEREAS, Sections 7-6-1601 through 7-6-1604, MCA provide specific authority and guidance about the necessary documentation to establish an impact fee and procedures to adopt and administer an impact fee; and WHEREAS, the City of Bozeman adopted an impact fee program in 1996 through ordinance 1414 which has been amended from time to time; and, WHEREAS, it is desirable to clarify elements of the ordinance relating to refunds of impact fees after having been paid and upon a request to exchange the payment for credits; and WHEREAS, the City Commission considered all public comment offered at their regular meeting on March 5, 2012; and WHEREAS, the Impact Fee Advisory Committee considered the draft ordinance at its March 8, 2012 meeting and recommended approval of the ordinance as written. 108 Ordinance 1823 Page 2 of 4 NOW THEREFORE, BE IT ORDAINED BY THE CITY COMMISSION OF THE CITY OF BOZEMAN, MONTANA: Section 1 That Section 2.06.1680 of the Bozeman Municipal Code be amended so that it reads: 2.06.1680 Refunds of Development Impact Fees Paid A. Refunds of development impact fees shall be made only in the following instances and in the following manner: 1. Upon application to the impact fee coordinator by the applicant, the city shall refund the development impact fee paid if capacity is available and service is denied. 2. Expenses and encumbrances. a. Upon application to the impact fee coordinator, the city shall refund the development impact fee paid and not expended or encumbered within ten years from the date the development impact fee was paid or spent in a manner not in accordance with this division or MCA 17-6- 1602. Refunds shall be paid to the owner of the property at the time the refund is due. In determining whether development impact fees have been expended or encumbered, fees shall be considered encumbered on a first-in, first-out (FIFO) basis. b. When the right to a refund exists due to a failure to expend or encumber development impact fees, the city shall publish written notice within 30 days after the expiration of the ten year period from the date development impact fee was paid. The published notice shall contain the heading "Notice of Entitlement to Development Impact Fee Refund." 3. If an applicant has paid a development impact fee required by this division and has obtained any of the types of permits or extensions listed in 2.06.1640.A.1, 2.06.1650.A.1, 2.06.1660.A.1, or 2.06.1670.A.1, and the permit or extension for which the fee was paid later expires without the possibility of further extension, then the applicant who paid such fee shall be entitled to a refund of the fee paid, without interest. In order to be eligible to receive such refund, the applicant who paid such fee shall be required to submit an application for such refund within 30 days after the expiration of the permit or extension for which the fee was paid. 4. A refund application shall be made to the impact fee coordinator within one year from the date such refund becomes payable under subsections A and B of this section, or within one year from the date of publication of the notice of entitlement of a refund under subsection B of this section, whichever is later. Any refund not applied for within said time period shall be deemed waived. 5. A refund application shall include information and documentation sufficient to permit the impact fee coordinator to determine whether the refund claimed is proper and, if so, the amount of such refund. 6. A refund shall include a pro rata share of interest actually earned on the unused or excess development impact fee paid. 7. All refunds shall be paid within 60 days after the impact fee coordinator determines that such refund is due. 8. Any refund payable pursuant to subsections A and B of this section, shall be made to the record owner of property as of the date the refund was due. 9. Once paid, an impact fee may not be refunded in exchange for impact fee credits issued according to 2.06.1690. 109 Ordinance 1823 Page 3 of 4 Section 2 Repealer. All provisions of the ordinances of the City of Bozeman in conflict with the provisions of this ordinance are, and the same are hereby, repealed and all other provisions of the ordinances of the City of Bozeman not in conflict with the provisions of this ordinance shall remain in full force and effect. Section 3 Savings Provision. This ordinance does not affect the rights and duties that matured, penalties that were incurred or proceedings that were begun before the effective date of this ordinance. All other provisions of the Bozeman Municipal Code not amended by this Ordinance shall remain in full force and effect. Section 4 Severability. That should any sentence, paragraph, subdivision, clause, phrase or section of this ordinance be adjudged or held to be unconstitutional, illegal, or invalid, the same shall not affect the validity of this ordinance as a whole, or any part or provision thereof, other than the part so decided to be invalid, illegal or unconstitutional, and shall not affect the validity of the Bozeman Municipal Code as a whole. Section 5 Codification. This Ordinance shall be codified as indicated in Section 1. Section 6 Effective Date. This ordinance shall be in full force and effect thirty (30) days after final adoption. PROVISIONALLY PASSED by the City Commission of the City of Bozeman, Montana, on first reading at a regular session held on the _____ day of ________________, 2012. 110 Ordinance 1823 Page 4 of 4 ____________________________________ SEAN A. BECKER Mayor ATTEST: ____________________________________ STACY ULMEN, CMC City Clerk FINALLY PASSED, ADOPTED AND APPROVED by the City Commission of the City of Bozeman, Montana on second reading at a regular session thereof held on the ___ of ____________________, 2012. The effective date of this ordinance is __________, __, 2012. _________________________________ SEAN A. BECKER Mayor ATTEST: _______________________________ STACY ULMEN, CMC City Clerk APPROVED AS TO FORM: _________________________________ GREG SULLIVAN City Attorney 111 Page 1 of 4 Impact Fee Advisory Committee Meeting – March 8, 2012 MINUTES THE CITY OF BOZEMAN IMPACT FEE ADVISORY COMMITTEE CITY COMMISSION MEETING ROOM, CITY HALL, 121 NORTH ROUSE AVENUE, THURSDAY, MARCH 8, 2012 6:00 P.M. ITEM 1. CALL TO ORDER AND ATTENDANCE Chairperson Pro Temp Carpenter called the meeting to order at 6:08 p.m., in the City Commission Meeting Room, City Hall, 121 North Rouse Avenue, Bozeman, Montana. Members Present Staff Present Randy Carpenter, Chairperson Pro Temp Chris Saunders, Assistant Planning Director Erik Nelson George Thompson Rick Hixson Chris Mehl, City Commission Liaison Members Absent James Nickelson, Chairperson Anna Rosenberry David Graham, Vice Chairperson Rob Evans ITEM 2. MINUTES OF JANUARY 26, 2012. Mr. Thompson moved, Mr. Hixson seconded, to approve the minutes of January 26, 2012 as presented. The motion carried 6-0. Those voting aye being Chairperson Pro Temp Carpenter, Mr. Nelson, Mr. Thompson, Mr. Hixson, and by proxy given to Mr. Hixson Ms. Rosenberry and Mr. Nickelson. Those voting nay being none. ITEM 3. PUBLIC COMMENT {Limited to any public matter within the jurisdiction of the Impact Fee Advisory Committee and not scheduled on this agenda. (Three-minute time limit per speaker.} No public comment was forthcoming. ITEM 4. CITY COMMISSION LIAISON {A standing item to be used as needed} Mr. Mehl asked the Chairperson Pro Temp is he could wait to give his report until Item 2 under the Project Reviews. His request was granted. ITEM 5. PROJECT REVIEW 1. Presentation of Ordinance #1823 to revise credit provisions to prohibit after the fact refunds based on credits. (Saunders) 112 Page 2 of 4 Impact Fee Advisory Committee Meeting – March 8, 2012 Assistant Director Saunders presented the item to the Committee giving a short history of how the issue came under consideration, the discussion staff had had internally on the issue, and how they had not been able to define a solid rationale for allowing requests for reimbursement of fees already paid in exchange for credits for some but not others. The most equitable approach appeared to either allow for all or none and they had concluded that the possible benefits for allowing such refunds were not enough to overcome the disadvantages to the City. He summarized the discussion the Commission had had on the matter on March 5th. Assistant Director Saunders described the credit program as it operates today and the scope of the credit processes. He noted the municipal code is currently silent on this issue and staff believes that the ordinance should be clear on the matter. Mr. Mehl noted the Commission had voted on this on March 5th as a split 3-2 vote. Chairperson Pro Temp Carpenter asked why the split. Mr. Mehl noted the infrequency of the issue only once in 16 years and a desire to not limit the flexibility for businesses in using this option. Credits function like commodities and there was some concern about possibly reducing their value. Mr. Nelson said he didn’t see the value being reduced by this approach. The Committee discussed how the credits can be like commodities; and how the options for exchanging and using them works now and would work if the ordinance was adopted. The Committee discussed the possible disadvantages if a large refund was requested in the future and whether it might affect other projects on the capital improvement program. Assistant Director Saunders described how the City had handled the first request that gave rise to the discussion of this issue. Mr. Nelson asked how the transfers would work and why someone would want to engage in this kind of impact fee credit exchange and refund process. Assistant Director Saunders explained how it would work. Mr. Nelson asked if the City helps facilitate connecting people who have the credits and people who may be able to use them and asked if more effort could be put in that direction. Assistant Director Saunders described the process the City uses and that the issue usually comes up with a larger commercial project. He noted that there have been several creative ways people have come up with to monetize a non- cash impact fee credit through private transactions. Chairperson Pro Temp Carpenter asked if there had been any public comment on the ordinance at the City Commission meeting. Assistant Director Saunders replied that there had not been. Assistant Director Saunders noted that either allowing or not allowing the ability to do a credit refund should be legally fine and it is a matter of deciding the City’s preference. Mr. Nelson noted it could enable an upfront exchange of credits and avoid the concerns about timing if there was more effort put into sharing the opportunity for purchase of credits with the users so more people were seeking to acquire and use those credits. Assistant Director Saunders noted that the City prefers to simply pay for qualifying work with cash rather than a book balance impact fee credit as it is simpler for both the City and the person doing the work. Credits other than direct cash have only been issued in limited circumstances. There was a discussion on if there were credits which could move as there were changes in development on lots with constructed buildings. 113 Page 3 of 4 Impact Fee Advisory Committee Meeting – March 8, 2012 Mr. Hixson moved to recommend approval of Ordinance 1823 to the City Commission. Mr. Thompson seconded. The motion carried 6-0. Those voting aye being Mr. Hixson, Chairperson Pro Temp Carpenter, Mr. Thompson, Mr. Nelson, and by proxy given to Mr. Hixson Ms. Rosenberry and Mr. Nickelson. Those voting nay being none. 2. Update on March 5, 2012 City Commission discussion. (Saunders) Assistant Director Saunders noted that the City Commission had conducted a work session with the Committee and the consultants in February to consider several policy issues relating to the update to the transportation impact fees. He gave a report of the actions the City Commission took on each of the items at their follow up meeting on March 5th. He noted the Commission’s decisions have been forwarded to the consultants and he will be working with the consultants to move the update project forward. The Commission direction was: Methodology – Use the incremental expansion option. Be very clear about what projects are currently expected to be constructed with this approach and how the existing/new split is worked out. System Improvements – Use the major street network as shown on Figure 9-2 in the transportation plan including the collectors. When describing the basis of the network please call out those elements that are state highways. The Commissioners are very interested in seeing what this means in the actual fee outcomes. Funding Mix – The Commission asked the consultants to assume 75% of the urban funds dedicated to maintenance and 25% to capacity expansion. These funds may be used in both ways in the same project. Categories of uses – Residential: Commission chose to use increments of 200 square feet and delete the income based cost differential in the residential categories. This was discussed between the Committee and the consultants during the review of the Setting the Stage document. Categories of uses – Non-residential: Commission wanted to consolidate the uses to broader bands of similar activities. We will be looking to see how the major outliers fit into the new structure. Mr. Mehl gave his liaison report on how the Commission had voted. There were questions and discussion on how the urban funds system works for designating particular streets as urban routes and how the funds are used on the urban routes. It was noted that urban funds are usually used for larger scale projects rather than routine small scale maintenance to get the most results. It takes years to save up enough money in the urban fund account to do a big enough project to make a difference in the level of service. Impact fees can’t be used for maintenance but urban funds can be as can local assessments. ITEM 6. OLD BUSINESS 114 Page 4 of 4 Impact Fee Advisory Committee Meeting – March 8, 2012 No old business was raised. ITEM 7. COMMITTEE COMMENTS Mr. Hixson noted that Bozeman had been included in a recent list of the seven strongest micropolitan economies in the country. There was a discussion of the many good media reports on the City and that is was likely that there will be growth in the future as there are so many good attributes to the City. Mr. Hixson noted the City has been financially solid and that is a significant thing in combination with the many good reports to draw people to the City. ITEM 8. ADJOURNMENT There being no further business to come before the Committee at this time, Chairperson Pro Temp Carpenter adjourned the meeting at 6:56 p.m. Randy Carpenter, Chairperson Pro Temp Chris Saunders, Assistant Planning Director Impact Fee Advisory Committee Dept. of Planning & Community Development City of Bozeman City of Bozeman 115