City fees may be skirting the law

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.

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."

"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.

They asked 16 suburbs whether they have any special fee considerations for multifamily or senior developments, parks chief Jamie Polley told her council. Twelve didn't, and two said they don't but might consider reductions on a case-by-case basis.

Polley's own position is that even a unit whose occupant never uses a park can heighten demand on parks. "Patients do have family and friends who may come to the community," she said.

Critics aren't convinced the money is always used for what it's meant for. Even though cities must set parks fees aside in a separate fund, one study found that some do not bother. A slideshow presenting the study to a group of commercial developers described the situation as a "sandbox for lawyers."

Angry as they plainly are, developers — conscious of the wrench an unhappy city can throw into their plans — were reluctant to comment for the record.

"I spoke to our development team and we have decided to pass on commenting on this particular topic," e-mailed Charlotte Lozier, director of marketing and communications for Shelter Corp., which develops senior projects.

Kaye Rakow, director of public policy for the state chapter of NAIOP, the Commercial Real Estate Development Association, failed to find a member willing to speak out.

"They're all frustrated about it," she said. "But the main reason they don't want to comment about it publicly is that they all have projects going on."

For their part, some elected officials say that they're risking a slippery slope in granting concessions to certain users.

Some cities, however, have made changes. Lakeville, a hot spot for senior projects and home building recently, charges just 25 percent of the standard fee for assisted-living units, and memory-care units are charged nothing. Last year, the city cut park dedication fees for residential projects by 25 percent to keep the charges in line with land values.

But the city hasn't budged on charging its usual rate to commercial and industrial developments, even though it knows some developers say the users of those properties don't benefit from parks.

"We know that's a topic that gets debated," said Dave Olson, the city's economic development director.