Loading...
HomeMy WebLinkAboutItem 03.aLakeville M Memorandum City of Lakeville Finance Department To: Mayor and Council Justin Miller, City Administrator From: Jerilyn Erickson, Finance Director Zach Johnson, City Engineer Daryl Morey, Planning Director David L. Olson, Community and Economic Development Director Date: February 22, 2016 Subject: Development Fees Recent City Council discussions regarding development fees highlighted the need to further understand the fees that are currently being charged prior to making any revisions to those fees or initiating any updates to utility studies. Staff has prepared a development fee summary which provides information about the various fees charged in three phases: 1) Platting; 2) Development; and 3) Building. Information includes the purpose of the fees as well as the Fund(s) in which the fees are recorded. Staff has also prepared an estimate of the fees that would be charged based on a home valued at $400,000. Lakeville's average valued home and median valued home (for taxes payable 2016) are $274,673 and $254,800, respectively. The average value of single-family permits issued in recent years has been higher than the average valued home as shown in the following table: Year Single -Family (SF) Permits Value of SF Permits Average Value January 2016 20 5,970,000 298,500 2015 361 113,585,000 314,600 2014 316 107,274,000 339,500 The Finance Committee met on February 3, 2016 and discussed development fees. They received the same documents that are attached to this memo. A number of questions arose as part of this discussion: 1) What is the Council's philosophy on fees? 2) Does the Council want to encourage or discourage development or are they interested more in receiving reimbursement for services provided? 3) What is the benefit to businesses for having park dedication? A copy of the DRAFT Finance Committee minutes has been attached. Council Direction Staff is providing this information for what we see as step one in a multi -step discussion. Identifying and discussing the purpose of each fee, as well as the rationale for how they are calculated, will hopefully allow the Council to identify for staff issues that you would like further discussion. It should be noted that any changes to our fee structure may have ripple effects in other areas, as well. For the most part, platting, development, and building fees help offset the expenses associated with those functions without negatively impacting the property tax funded General Fund. Some of these fees are pass-through costs for consultants and legal fees while other fees cover City staff time and other City expenses. Attachments: 1) Development Fee Summary 2) Estimated Fees on $400,000 Home 3) DRAFT Finance Committee Minutes (February 3, 2016) CITY OF LAKEVILLE Development Fee Summary February 3, 2016 PLAMNG PHASE (See City Ordinances 7itie 70, Chapters 1&2) Fee Type - Application fees Amount $700 Recorded General Fund Purpose Notes Doc processing, legal exp - Planner fees $90 to $140/hr General Fund Compliance review - Eng -Prelim platting $150/acre General Fund Compliance review $500 min/$3,200 max - Eng - Final platting $150/acre General Fund Compliance review $500 min DEVELOPMENT PHASE ISee 0tvOrdinances 7-3_2_ In ;_.3 to C C'nr,nri1 Raenl,rtinn at n7 ....d r1.e'2mTA r.4-46- Fee Type Amount Recorded Purpose Notes -Water lateral access $408+$41 #o $48/ln ft Water Trunk u is eat - provides access rove esaccess from main to curb Applies if existing lateral access lines are in place but were not - San sewer lateral access $418+$41 to $50/In ft Sanitary Swr Trunk stop. assessed to property. Funds previous installation costs. - San sewer availability $327/unit Sanitary Swr Trunk Public health If not in district assessed by Met Council in the 1970's to pay -For metro wide sanitary sewer planning and installation. Then current fees apply and pay for future maintenance of system. - Storm sewer area charge $0.178 to $0.25/sq ft Storrs Swr Trunk Public health Funds flood control and EPA compliance. Additional fees for property in the Crystal Lake drainage area. A credit of $5,500 per acre is given to developers for property deeded to the City for storm water ponds. This is not mandated or required but is done as a good business practice. - Park dedication $1,972 to $4,558/unit Park Dedication Recreation, open space Fee is in lieu of land dedication. Fee calculation was studied and revised in 2012. - Traffic control signs Per sign cost General Fund Public safety Fees collected are equal to contracted installation costs. - Street lights (1 year) $33.68/unit Utility Operating / Public safety Fee is to cover expenses until property is built and sold. C&I is Street Lighting based on LFF. - SWM utility fee (1 year) $31/unit Utility Operating / Public health Fee is to cover expenses until property is built and sold. Does Env Resources not apply to multi family facilities. C&I is based on REF. - GIS fee $75 parcel or lot General Fund Manage public records Funds city based mapping updates. Timely updates are critical for police, fire, snow plowing, and utility services. G:\TomlJerllyn Requests\Development FeeskDevelopment Fee Analysis; Dev Fees Page 1 of 2 7./3/2016 DEVELOPMENTPHASE (continued) Fee Type Amount - Eng Dev contract admin 1 3% proj const; - Eng Dev Inspection fees $61 to $126/hr - Future upgrade/constr. Roads $62 to $160/LFF Trails Per calculation Remove Cul-cle-Sac Per calculation Recorded IPurpose General Fund I Project management General Fund JObservation, compliance Notes Review, monitor, consult, coordinate, process LOC's. These costs run 8-9% for city projects. Estimated at 7% of construction costs. Escrow to City Cost allocation Cost of 1/2 local road (for 1 side of road). but considered Cost allocation Developer pays for grading and 5/8 of aggregate base and a fee to the bituminous. Developer paid 100% of base when trails were 5' developer wide. When trails became 8' wide it was agreed that the City would cover 3/8 of base cost. Returned to subsquent developer for adi properties. BUILDING PHASE (City Ordinances 9- 9-3 and 7-S-4, Mn Statutes 326B. 72 7, 32B.148 and 326B. 753) Fee Type Amount Recorded Purpose Notes - Water connection $2 050 to $4,100/unit Water Trunk Public health Funds trunk oversizing, wells, and towers. - San sewer connection $825/unit SanitaryTrunk Public health Funds trunk oversizing and lift stations. - Building permit Valuation based General Fund Public safety Funds admin support & code compliance inspections. - Plan/Energy Review fees % of Bldg permit fee General Fund Public safety Similar plan review is 25% of building permit fee (rnostcornmon). Standard plan review if 65% of building permitfee. - MCES SAC Unit $2,485 Met Council Public health Funds passed through to Met Council, - Plumbing permit $90 General Fund Public health Funds admin support & code compliance inspections. - Water/sewer permit $90 General Fund Public health Funds admin support & code compliance inspections. - Water meter/PRV Cost + 15% Water operating lRecord management Funds cost of meter and administrative time. Mechanical permit $90 General Fund Public safety Funds admin support & code compliance inspections. -I Electrical permit $135 General Fund Public safety Funds admin support & code comDliance insoections. C&I = Commercial and Industrial GIS = Graphic Information System LFF - Linear front footage LOC = Letter of Credit REF = Residential Equivalent Factor G:\TomVerilyn Requests\Development FeeslDevelopment Fee Analysis : Dev Fees Page 2 of 2 2/3/2016 CITY OF LAKEVILLE Estimated City Fees on $400,000 Home February 3, 2016 Fee Type Amount Development Phase: 825.00 Platting 42.96 Sanitary sewer availability 327.00 Storm sewer area charge 2,331.75 Park dedication in lieu of land (low density) 3,781.00 Traffic control signs 49.72 Street lights (one year) 33.68 Surface water management utility fee (one year) 31.00 GIS mapping fee 75.00 Engineering Development Contract Administration 732.64 Engineering Development Inspection 377.65 Estimated City Fees Per Lot $ 7,782.40 Building Phase: Water connection 4,100.00 Sanitary sewer connection 825.00 Building permit 2,856.45 Plan Energy review (25% of building permit) 714.11 Plumbing permit* 90.00 Water/sewer permitd° 90.00 Water meter (3/4") and pressure reducing valve (1 ") 420.00 Mechanical permit* 90.00 Electrical permit* 135.00 Estimated City Fees $ 9,320.56 ESTIMATED TOTAL CITY FEES *Includes $3 state surcharge $ 17,102.96 Other Fees (Collected by City, Passed Through to Other Agency): Metropolitan Council - SAC Unit $ 2,485.00 State of MN - State Surcharge $ 200.00 Other Escrows: City of Lakeville - Landscaping Escrow $ 2,000.00 G:\Toml,Jerilyn Requests\Development Fees\Development Fee Analysis: Const Cost 2/3/2016 CITY OF LAKEVILLE FINANCE COMMITTEE MEETING MINUTES February 3, 2016 Members Present: Chair John Tuschner, Owen Gohlke, Jake Johnston, Darrel Mullenbach, Tim Peterson, Bruce Rydeen Members Not Present: Chris Hoins Others Present: City Administrator Justin Miller, Finance Director Jerilyn Erickson, City Engineer Zach Johnson and Recording Secretary Pat Vinje 1. Call to Order Chair John Tuschner called the meeting to order in the Orchard Conference Room at City Hall at 7:00 PM. 2. Approval of agenda The agenda was approved by consensus with no changes. 3. Approval of October 21, 2015 Minutes Chair John Tuschner asked for comments on the minutes from the October 21 meeting. Minutes were approved unanimously by consensus with no changes. 4. City Council Actions The City Council will be considering a liquor store on Keokuk Avenue near Wal-Mart. The Finance Committee may be asked to consider financing options. There will be a meeting by the Liquor Committee in the near future and Council will discuss this topic at their March work session. 5. Development Fees Finance Director Jerilyn Erickson presented a summary of current development fees the City utilizes. Finance has met with Engineering, Community and Economic Development and Planning Departments to analyze the current development fee structure. In the future there will be an update to the utility rates and comprehensive plan. There are three phases to the development fees including platting, development and building. Development fees will be reviewed by Council at a work session on February 22. Bruce Rydeen asked what the objective was for the development fees. Ms. Erickson replied that each City uses a different method to calculate fees. Considerations include expansion plans entailing utilities, roads, parks, etc. Finance Committee Meeting Minutes, February 3, 2016 Page 2 Mr. Miller stated that development was very busy and productive in 2015. Some developers have asked how rates are determined and what is done with fees collected. Ms. Erickson stated that some fees are recorded in the General Fund and some fees are in the Enterprise Funds. Fees are referenced by ordinances, resolutions, statutes, etc. Development begins with the platting phase involving addressing and reviewing the plat itself. Mr. Johnson commented that commercial/industrial property has different standards than residential. Review is done by staff and the developer reimburses the City for the fees expended and those are held in the General Fund. Darrel Mullenbach asked what the philosophy is for the fee structure. Does the Council want to encourage, or discourage development, or are they interested more in receiving reimbursement for fees? When housing is added, is it a plus or a minus? Whether the Council encourages or discourages development, the City needs to follow the Council's philosophy and the rates will follow. The rates are in place per their philosophy and the Committee should determine where the rates should be per their philosophy. Mr. Miller responded that the Council's position is not to discourage development but to encourage it in an orderly fashion. Utilities are installed in phases, not by leapfrogging. The goal is to have development pay for infrastructure while fees and property taxes pay for services. Darrel Mullenbach commented that it is a loss at first when bringing residents into the community. Ms. Erickson replied it takes two to three years for residents to be fully taxed. Bruce Rydeen added that the commercial/industrial properties pay taxes that offset the residential tax lag. Mr. Miller stated that Fiscal Disparities come into place at that time. Ms. Erickson will ask Council their philosophy on development fees Darrel Mullenbach commented that fees are passed through to the resident by the developer. John Tuschner asked if the platting phase was the same for residential as it was for commercial/industrial. Mr. Johnson replied that the fees are the same but there are variances with staff review charges. 2 Finance Committee Meeting Minutes, February 3, 2016 Page 3 Bruce Rydeen questioned why charge fees for staff review if staff are paid from the General Fund. Mr. Miller replied that staff review time is not paid for through the tax levy. Tim Peterson asked if Lakeville's fees are consistent with other cities. Mr. Miller responded that each city is different. Lakeville's fees fall in the mid-range of fees charged by cities. Ms. Erickson discussed the development phase which includes utility infrastructure which is charged per service or front foot. The Water Trunk Fund is separate from the Water Utility Fund. The Water Utility Fund covers the operations of the water system. Park dedication is determined by high/medium/low density per unit or per acre. Land can be dedicated in lieu of fees. Mr. Miller stated that Mattamy Homes has dedicated 66 acres for a park area and the City will pay for additional land to make a larger park area. Bruce Rydeen asked what the benefit is to businesses for having park dedication. Business owners ask him this question. Mr. Miller responded that park dedication fees are for development only — not improvements or maintenance. Mr. Johnson added that the park plan identifies park search areas. That determines whether land is acquired or cash is taken. Ms. Erickson stated that the park dedication fees were studied in 2012 and lowered during the recession. John Tuschner asked if the City could reduce the park dedication fee and establish a park maintenance fee. He supported taking cash to restructure and improve parks and expand them. Owen Gohlke suggested a separate line item on the property tax bill for parks within the taxpayer's radius. He asked who pays for parks after they are developed. Ms. Erickson replied that the tax levy covers expenses associated with park maintenance. Mr. Miller stated that plats can only collect park dedication fees once. 3 Finance Committee Meeting Minutes, February 3, 2076 Page 4 Owen Gohlke commented that the money source would be done when the City is fully developed. Mr. Miller added that property taxes are used for rehabilitation of parks. John Tuschner commented that land acquired through park dedication cannot be sold at a later time, such as when the park is no longer in use. Mr. Miller mentioned a new park plan was approved that includes more unique park amenities vs. cookie cutter parks. Features will include dog parks, off-road biking courses, etc. Ms. Erickson continued discussing the fees in the development phase. Traffic control signs, street lights, environmental resources fees, GIS fees, fees for contract administration (3% of project construction costs), (8-9% for City projects). Consultants are used for developer projects and City staff for City projects. Mr. Johnson stated if development is adjacent to a road that needs upgrading, the developer pays per footage. Dodd Boulevard is one example whereby developers share in the cost of upgrading a road. Ms. Erickson spoke of County Road 70 businesses asking why they need to pay a fee now vs. later. The City is reviewing that issue. Mr. Miller added that county roads are handled differently than City streets. The City pays 45% of the cost to upgrade county roads. Residents are assessed 40% of the costs to improve City streets if they benefit. By law, the City needs to show the benefit, if resident is assessed. Owen Gohlke commented that the General Fund should pay expenses associated with infrastructure. Everyone should pay equally. Darrel Mullenbach asked if fees are meant to prohibit, or accelerate development. If a building is built in the City, everyone benefits. Mr. Miller responded that amounts collected do not cover all of the costs. Other taxes such as gas tax, property taxes, etc. contribute toward paying expenses. Ms. Erickson stated that some cities do not assess residents for improvements. Ms. Erickson continued the discussion with the Building Phase of the Development Fee Schedule. In addition to City fees, there are Met Council fees (MCES), which are collected by the City and passed onto the Met Council. The MCES fees are for the purpose of connecting to the regional sewer system. Finance Committee Meeting Minutes, February 3, 2016 Page 5 Bruce Rydeen inquired about the building permit fee. He asked if it was a fee to recover costs. Ms. Erickson replied that it is a fixed component and variable component per State Building Code. Mr. Miller added that it is a fee that pays for review and inspection of properties. Darrel Mullenbach asked if the intention of the building permit fee was to cover the costs. Owen Gohlke stated that there is not a significant difference in time it takes to review a property with a $2 million value vs. a $500,000 value. Bruce Rydeen suggested to charge per hour for review of properties. Darrel Mullenbach commented that the developer wants to know the anticipated costs and would not know the fee if charged by staff's time for review of property. They prefer to know the fixed cost, as it affects their cash flow. Bruce Rydeen suggested using history to set the price for building permits. John Tuschner stated that the fee will be passed onto the end user. Tim Peterson recommended capping the fees. Darrel Mullenbach commented that review per valuation is not relative. John Tuschner added that the fee should be based on square footage. Ms. Erickson cited an example. How do you compare valuation of a 100,000 sq. ft. office building vs. 100,000 sq. ft. cold storage? Bruce Rydeen asked if there was a better way for reviewing commercial/industrial property. The review time must be different. Mr. Miller stated that the City receives questions regarding the commercial/industrial properties. John Tuschner commented that the fees for residential seem reasonable. Darrel Mullenbach reiterated that the philosophy behind the fees needs to be looked at. Ms. Erickson referred to the memo with estimated fees on a $400,000 home. Fees include City, Met Council, State surcharge and landscape escrow. 5 Finance Committee Meeting Minutes, February 3, 2016 Page 6 Mr. Johnson stated that the fees cover the cost of lot development. Jake Johnston asked what the net is to the City for development. Ms. Erickson replied that the fees taken in do not always align when the service is provided. Mr. Miller responded that the costs associated with staff review include use of office space, lights, etc. Bruce Rydeen asked if there would be value in a competitive survey. Mr. Miller answered that the comparisons have been done but there are different ways of charging fees which makes comparisons more difficult. Bruce Rydeen suggested using a bottom line figure vs. individual fees. Darrel Mullenbach added that comparing property between two cities displays the number (fees), but what is the value. The fees are not as important as the where the house is built. Mr. Miller replied that builders know the different fees among cities. Ms. Erickson added that it doesn't appear that development fees have been a roadblock to building activity in Lakeville. Lakeville had the highest number of single family permits in 2015 in the State of Minnesota. John Tuschner inquired about permit activity to date. Mr. Miller responded that 2015 started out slow and increased. Bruce Rydeen asked about inventory vs. available lots. Mr. Miller replied as of the end of 2015, there were 1749 lots approved, 725 permits issued, 693 pending (preliminary not final). The average permits are around 350 per year. There were 361 in 2015. Jake Johnston commented that the median value house in Lakeville is $270,000 and the average sale price is $350,000. 6. Other The next meeting date is to be determined. An email will follow with possible dates. Adjourn Motion by Darrel Mullenbach and seconded by Bruce Rydeen to adjourn. Motion approved unanimously. Finance Committee Meeting Minutes, February 3, 2016 Page 7 The meeting adjourned at 8:16 PM. Respectfully submitted, Pat Vinje, Recording Secretary