Are Developer Fees Driving out Development?

May 13th, 2009

Are Developer Fees Driving out Development?

You would think in this economy that cities would be doing whatever they can
to attract good developers to their communities. The City of Dayton, in
northwest Hennepin County, is doing the opposite.

Until recently, Dayton, just north of Maple Grove and west of Champlin, has
been a rural community. Finally ousting the "Preserve Dayton" anti
development council a few years ago, Dayton embarked on an aggressive
campaign to bring urban sewer and water to their community. From Champlin
they brought sewer and built a new water tower in the northeast segment. And
from Maple Grove they extended sewer and water for the southwest portion of
the City north of Highway 81. Poor timing-the housing slowdown hit as the
pipes were being layed. Not only are land owners and potential developers
hit with all of these huge assessments, the fees keep adding on and
increasing.

Dayton just approved a new Transportation fee of $2,500 per residential unit
or $7,500 per acre and nonresidential development of $11,190 per acre. It
was determined as part of their comprehensive plan studies that it would
cost $84.48 million to complete their transportation plan and this new fee
would generate $44.39 million. Which assumes that the developers come.
Reminds of me "Country Joe vs the City of Eagan" Minnesota Supreme Court
case from 1997. Eagan tried this at the building permit fee and got slapped.
The Dayton fee is collected upon development approval.

Just get the language in this ordnance: "Whereas the developer can
voluntarily agree to pay the transportation fee...in lieu of having the
subdivision denied". Sounds like volunteering in Iran.

What other fees does Dayton impose on developers? Park dedication fees have
just been raised this month to $4772.00 per unit residential,$9700.00 per
acre industrial and $9200.00 per acre commercial. But this excludes trail
fees, which are the developers' full responsibility. I raise this question:
Why, when the City of Dayton contains the 5,400 acre Elm Creek Park Reserve,
the jewel of the Three Rivers Park System (with 20 miles of paved bike
trails and snow making machines for cross county skiing) they need all these
park fees?

Sewer trunk fees being raised for 2010 to $1,770 unit/$3,530/Acre for
residential. Water as high as $2,060 a unit. Stormwater $5,500 an acre. And
on and on.

A Dayton developer has told me that the development costs in Dayton are so
high that the land is worth Zero.

While Dayton has some beautiful land, there are issues to overcome as a
developer. I developed a couple lots there years ago and had to advertise
them as being in Otsego because most people didn't know where Dayton was.
While the Elm Creek Park is mostly within Dayton, if you want to drive there
versus bike you have to go to Maple Grove to get in the main park.
Transportation access is the biggest problem with Dayton. The proposed
I-94/Brockton Lane interchange would help greatly, but, as discussed last
week, thats a pipe dream at the moment.

Given these developer fees, I would think long and hard before investing in
Dayton's Municipal bonds that financed the utility improvements-wondering
where the revenue is going to come from to repay the bonds.