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HomeMy WebLinkAboutLoyal Garden Payback Request Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: Bob Murray, Project Engineer Rick Hixson, City Engineer SUBJECT: Loyal Garden Payback Request MEETING DATE: May 20th, 2013 AGENDA ITEM TYPE: Action RECOMMENDATION: Establish a payback district for the lift station and force main in the amount of $2,455.08 per gross acre and bring back a revised agreement for execution by the City Manager. BACKGROUND: The Loyal Garden Subdivision received preliminary plat approval in 2006. The final plats were filed in 2 phases in 2007. Combined they created 154 lots on 75.04 acres. As with most subdivisions, the majority of the improvements for each phase were complete when the final plat was filed, and a few (landscaping, luminaries, sidewalks, ect.) were financially guaranteed with an improvements agreement. At that time staff and the development team had several discussions regarding establishment of a payback district and/or reimbursement for some of the infrastructure through impact fees. As has been the standard practice on all other payback requests, they were told that a payback district could not be set up for the same infrastructure that they receive reimbursement for by impact fees. This is because impact fees pay for all over-sizing that is required to comply with the City Master Plans. The remaining portion of that infrastructure is the minimum size required for the subdivision. In this case the impact fee eligible improvements included the oversized offsite water mains, oversized offsite sewer mains, and intersection improvements to Cottonwood/Huffine as they were all installed in accordance with the applicable master plans. The sewer lift station and force main were not impact fee eligible because they were not included in the Wastewater Facility Plan effective at the time the preliminary plat was approved. In 2007 the applicants brought an impact fee request to the Commission for the above-listed impact fee eligible improvements. There was a question as to whether or not they met the timing requirements for that request, but at the hearing staff explained that those timing issues were created by a misunderstanding on our end, and were no fault of the applicant. As a result the impact fee request was approved in the amount of $136,241.46 for the water over-sizing, $42,861.80 for the sewer over-sizing, and $130,710.95 for intersection improvements to Cottonwood and Huffine. The preliminary plat for this project was approved under the 1998 Wastewater Facility Plan. That plan showed all of this property connecting to the existing main in Yellowstone Avenue 268 north of Huffine (see attached zone 2 drainage area improvement map). In order for that to occur however, the sewage needs to be pumped since that connection point is higher than this property. Staff did not want each of the properties in this area to install their own lift station because they are labor intensive from a maintenance standpoint. As such the project was approved by the Commission with the following condition: The sewage lift station should be located as far as practical from building sites to minimize odor or noise complaints. The lift station shall be sized to collect the area that cannot gravity feed to the connection on Yellowstone. The final service area for the lift station shall be reviewed and approved by the City Engineer as part of the design report. As a result of this condition, the lift station was constructed with capacity for the adjoining properties to the east and southwest as shown on the attached sewer payback area exhibit. Initially only the area to the east was included, but the property to the southwest was exploring annexation and development. They approached the Loyal Garden development team and capacity was added for that property as well. The lift station and force main necessary to provide sewer service to the area were not impact fee eligible because they were not included in the 1998 Wastewater Facility Plan. We have always agreed that these improvements would be eligible for a payback. The applicant’s development team was actively working on a payback. This is evidenced by the CD that was provided with the initial payback request late last year. It contained a dozen spreadsheets put together in 2007 to track the costs to be included in a proposed payback. At that time, the information or request for a payback were never submitted to the City, the issue was simply dropped on their end. At some point the project went through chapter 11 bankruptcy. Assistant City Attorney Cooper is prepared to discuss how that does or does not affect establishment of a payback in general, but the attached documents that were provided indicate the applicant was working on a payback independent of the City during the bankruptcy proceedings. In the 2nd Amendment to the Chapter 11 plan, it states (DIP is Debtor in Possession): “Similarly, the DIP constructed water lines to the Loyal Garden Subdivision with extra capacity so the adjoining landowners could connect. The DIP was allowed to negotiate with the adjoining landowners for reimbursement in the event there was a connection. The DIP offered the landowners a written reimbursement agreement but the agreements were not executed. The City of Bozeman advised the DIP that if there was an agreement in place with an adjoining landowner before 2009 the City would honor it. It appears the time for such reimbursement has expired. The issue again appeared to be dropped until late last year when the Crescent Cross Property which is a portion of the property to the east of Loyal Garden came before the Commission for annexation. Mr. Madill the President of Covenant Investments provided public testimony during the annexation hearing saying he was supposed to have a payback set up for the lift station and force main. The Commission directed staff to work with Mr. Madill to bring back a proposed payback. We have been trying to resolve the issues surrounding establishment of a payback since. Attached is all of the correspondence that has taken place since the annexation hearing late last year. We have been unable to resolve the majority of the issues, each of which will be described in the following section. UNRESOLVED ISSUES: The majority of the issues involved with this request remain unresolved. The first of these is the timeliness of the request. As stated above the final plats were filed for both phases of this development in 2007. The City does not have an ordinance or even formal written policy regarding the establishment of paybacks, so there is no codified time limit. The Commission can certainly take into the consideration the timeliness of the request 269 when deciding whether or not to set up the payback. As mentioned above, one of the properties within the proposed payback area has begun to move forward with development of a portion of their property without the added costs associated with a payback in place to consider. If the Commission does choose to establish the payback regardless of the timing of the request, it is our recommendation that the requested effective time frame of the payback be reduced from 20 years to 14 to account for the 6 years the infrastructure has been in place. The next unresolved issue is which improvements should be included in the payback if established. As discussed earlier, the development was required to add capacity to the lift station and force main. Irrespective of the timing issue, we agree that this infrastructure is eligible for inclusion in a payback request as they did not receive impact fees for these improvements. The applicants have included a number of other items in their request that we do not feel should be approved. These other improvements can be generally characterized in two basic categories; oversized water and sewer mains that were previously part of the impact fee reimbursement, and local mains within the subdivision. The oversized water and sewer mains are shown in the applicant’s package entitled Loyal Garden Payback Summary. Sheet 1 of 2, Payback Agreement Sewer Exhibit, shows both the previously discussed lift station and force main and a piece of gravity sewer main that is part of their requested payback. The applicant installed a 12” gravity sewer main in Yellowstone Avenue from Valley Commons Drive to the south side of Huffine in accordance with the 1998 Wastewater Facility Plan. They were paid the $42,861.80 in sewer impact fees for all of the over sizing in this line, that is for the costs above and beyond what it would cost to install the minimum standard sized 8” main. An 8” sewer main is the minimum size allowed to be installed by both our standards and the state Department of Environmental Quality (DEQ). Attached are the DEQ standards in place at the time this subdivision was approved. Similarly, Sheet 2 of 2, Payback Agreement Water Exhibit, shows the offsite water mains included in their request. Like the sewer, impact fees were paid for the difference between an 8” main and the 10” and 12” mains that were installed to meet the requirements of the Water Facility Plan. Our standards in place at the time (attached) required all water mains be a minimum of 8” diameter. Additionally both our design standards and the Unified Development Ordinance (UDO) required that all water systems be looped which is why there are two points of connection shown on the water sheet. It is our recommendation that this group of improvements be excluded from any payback because the applicant was already reimbursed for the over-sizing with impact fees which is everything above and beyond the minimum sized infrastructure required to serve the subdivision. The other category of improvements, mains within the subdivision, are all shown on sheet 3 of 62, utility plan, of the applicant’s package. On this sheet the lines highlighted blue and pink are part of their payback request to be included for the property to the east. The short piece of blue is the water that they stubbed to the adjoining property line for the property to the east to connect to. The pink is the sewer that is also stubbed to the property line for future extension, but it also provides service to all of the commercial lots in the northeast corner of Loyal Garden. The green and yellow lines are part of their payback request to be included for the property to the southwest. These are all lines that are necessary to provide service to a large number of the lots within the Loyal Garden Subdivision. All of the water and sewer mains shown are the standard 8” minimum size allowed. When the other properties within the proposed payback develop, they will also need to install the minimum size mains, provide for the looping of water, and extend the mains to the property lines for future connection. This is the same as it was for Loyal Garden and every subdivision within the City of Bozeman. Our recommendation is that these improvements be excluded from any payback that is established. 270 The applicant makes the assertion that the required water and sewer mains provide more capacity than is needed for the subdivision. From that premise they cite the rule stated in MCA §76-3- 510, that “costs must reasonably reflect the expected impacts directly attributable to [the] subdivision,” as justification for a payback. The staff disagrees with this rationalization. The City is authorized to establish minimum standards for the installation of infrastructure. In this instance, with the exception of the few larger mains installed in accordance with the City’s Facility Plans, all installed mains were the City and DEQ minimum size 8 inch standard. The over-sizing for the larger mains was paid for by impact fees. The applicant was therefore responsible for only the minimum 8” equivalent diameter pipes. The applicant’s position regarding capacity is an assertion not proven. More importantly, the 8” water and sewer mains are the minimum required to address “impacts directly attributable to the subdivision.” Further, the required minimum pipe sizes were a condition of preliminary plat approval. The applicant did not object to or protest that condition at the time of approval, or at any other time until the payback request was submitted. Finally, if the applicant’s assertion regarding excess capacity is correct, it would countermand any argument for a payback. The remedy for an allegedly disproportionate development cost is invalidation of the required condition. Adjoining property owners cannot be made to pay for that alleged additional cost. If the applicant’s premise was correct, the effect of a payback district would be to require adjoining properties – properties also required to install minimum sized pipes – to pay a disproportionate share for their property, and also pay the disproportionate share of the applicant. There are also a number of items that we recommend be cleaned up with the underlying subdivision as part of any approval of the payback request. There are improvements that were never completed with the subdivision. A two year warranty inspection was completed on the project in 2009. The contractor showed up to make sure there wasn’t anything big that needed to be fixed, but said they would not complete anything that was not critical because they were owed a great deal of money on the project. The list, which is attached for reference, is still outstanding and should be complete. Additionally, not all of the parkland, open space corridors, trails, landscape features, and associated landscape irrigation have been completed. Former Planning Director McHarg recommended that a new financial guarantee be provided for these improvements as well as for the remaining sidewalks adjacent to undeveloped lots. The Commission may want to see one of these items done sooner, rather than later. That is the ditch crossing for the trail along Huffine. A photo of this item is attached. As you can see, the trail is constructed on both sides of the ditch crossing, but the crossing has never been completed. The applicant has stated he is generally agreeable to these requirements in correspondence regarding the payback. The final cleanup item is the luminaries in phase two of the development. This item has changed over the last few months. These lights were never completed. Part of the recommendation was going to be that the Commission require completion of the lights and the SLID be brought up to date as a condition of the payback. The Street Department didn’t know this payback request was being developed and were inundated with complaint calls earlier this spring. The callers said they were told by the Homeowners Association to call the City because it was the City’s responsibility to fix the lights. The Street Superintendent hired an electrician who found several significant issues with the installation (email attached) but was able to make the repairs and get the lights working. The costs for the repairs were charged against the SLID putting it further in arrears. The applicant feels that the language in the SLID made it the City’s responsibility to 271 make the repairs. Our recommendation is that the Commission require the SLID be paid up to date as a condition of establishing any payback. ALTERNATIVES: The Commission may choose to establish a payback with all or part of the items included in the applicants request, or choose to deny it in its entirety. FISCAL EFFECTS: None Attachments: Codes and Standards, Applicants submittal, Payback Correspondence. Report compiled on: 5/8/13 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 289 290 291 292 293 294 295 296 297 298 299 300 301 302 303 304 305 306 307 308 309 310 311 312 313 314 315 316 317 318 319 320 321 322 323 324 325 326 327 328 329 330 331 332 333 334 335 336 337 338 339 340 341 342 343 344 345 346 347 348 349 350 351 352 353 354 355 356 357 358 359 360 361 362 363 364 365 366 367 368 369