City fees may be skirting the law

Developers say the parks fees charged by suburbs have gotten out of control and don’t reflect land values or use.

 

Twin Cities suburbs are collecting millions of dollars in parks fees from people who may never use their parks.

A system designed to ensure that new neighborhoods teeming with kids have access to parkland has morphed into one in which practically anything that gets built is slapped with an add-on parks fee that can easily run into the hundreds of thousands of dollars.

The idea behind these park-dedication fees, charged by cities, is that new development brings new park users, so developers should either donate land for parks or pay a fee to fund them. The extra expense to builders is passed on to buyers, meaning higher mortgages or rents.

In a time when senior housing is booming in the suburbs and single-family housing has slumped, critics are questioning whether it’s fair to charge all developments equally — especially when the amount some cities charge has risen, sometimes with no apparent connection to the cost of developing parks.

“The average age of our residents at other similar facilities is 86,” Scott O’Brien of Trident Development told the Shakopee City Council not long ago. “Given the acuity level in assisted-living units, and their age, I wouldn’t say they would not ever use a city park — but they are not users of city parks.”

But city councils have grown used to the funds and are loath to surrender them. In one case, Edina rejected a developer’s request to have the park dedication fee for a senior project reduced from $695,000 to $312,000. In a letter to Mayor Jim Hovland and the city council, former planning commission member Gordon Johnson said: “The city needs the money and can ill-afford to give it up.”

Cities that set a fixed park fee for all developments are coming at it backward, according to a lawmaker who was chief author of a 2004 bill requiring a “nexus” between the fees and actual parks needs created by a new project.

“It can’t just be willy-nilly,” said Minnesota Sen. Carla Nelson, R-Rochester. “It needs a rationale. Nothing is to be on autopilot, so to speak.”

Senior projects aren’t the only source of complaints.

Developers complain that while the value of land has shriveled, parks fees that are supposed to be based on that value are staying high or even rising. And they say cities often set their fees based not on what they need, but on what other cities can get away with charging.

“In a market where you’ve seen taxable land values drop 50, 60 percent, you’ve not seen park fees drop one iota,” said Peter Coyle, a Minneapolis attorney specializing in land use.

City officials say it hasn’t always dropped that much, and that some have adjusted rates. Eden Prairie has raised fees in recent years — its multifamily fee went from $4,100 per unit in 2006 to $5,500 in 2010, holding steady since — but that city takes credit for not raising them even more.

“We’re trying to stay with the market and not get too high in pricing because it has an impact on how attractive we are to developers,” said Jay Lotthammer, parks and rec director. “As the market went down a few years ago we stopped increasing the rate and held the line. … As it goes up you won’t see us raise them.”

Different uses, different rates?

Commercial and industrial developments aren’t exempt, either. In many places, highly automated industrial buildings are being charged as high a rate as a store or an office teeming with workers and customers.

“If you build a 500,000-square-foot warehouse that staffed by five people you shouldn’t be paying the same rate as a retail complex,” Coyle said.

Some cities are creating tiered rates for different uses. But a survey last fall by parks staffers in Shakopee found that’s more the exception than the rule.

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