Court to Hear Major Impact Fee Case

Woodbury street funding mechanism at issue in major industry legal challenge.

Woodbury street funding mechanism at issue in major industry legal challenge.

Woodbury and Twin Cities devel­oper Martin Harstad could have a major impact on how Minnesota cities and counties assess road fees related to new developments.

At issue in the case is whether local governments can force devel­opers to pay for road improvements outside of proposed developments.

In 2015, Harstad was informed by the city that his 183-unit resi­dential development would incur $1.3 million in additional fees to pay for traffic-related improvements in Woodbury. The fees, called Ma­jor Roadway Assessment (MRA), were in addition to the fees Harstad would pay for roadways within the development and would be dedicat­ed for projects elsewhere in the city.

Harstad sued Woodbury, arguing that state law does not give Wood­bury the authority to impose fees for construction of road improvements outside of the development, even if those needs are driven by the devel­opment itself.

In November 2016, the district court sided with Harstad, saying the MRA fees were illegal. In his decision, Judge Richard Ilkka called the longtime practice “unlawful and unenforceable.”

Woodbury, supported by the League of Minnesota Cities, appealed the lower court’s ruling, and the case is currently with the Minnesota Court of Appeals.

In mid-March, housing indus­try advocates filed a friend-of-the-court brief supporting Harstad in his case against Woodbury’s ille­gal fees. Rochester-area develop­er Frank Kottschade, the Builders Association of the Twin Cities and the National Association of Home Builders signed the brief, citing a similar case between the City of Ea­gan and Country Joe Homes in the 1990s.

The Court of Appeals will hear the case on June 21 in St. Paul.

Harstad v. Woodbury At A Glance

  • The district court held that Woodbury’s Major Roadway Assessment was an illegal impact fee and in addition, is an illegal tax.
  • Twenty years ago, the court weighed in on a similar major case in Country Joe v. Eagan, where the Minnesota Supreme Court ruled that the Eagan fee constituted an unlawful tax.
  • The Minnesota Court of Appeals hearing in June will test the precedent set in Country Joe and will guide how local govern­ments apply transportation fees to new development projects.
  • BATC, NAHB, and Rochester developer Frank Kottschade joined as amici curiae (friends of the court) and argue: “Woodbury’s MRA is indistinguishable from Eagan’s road unit connection charge (in Country Joe). Both charges were moti­vated by the purpose of raising revenue rather than recouping the cost of regulation. Thus...the MRA is a tax that is unlawful because it is not authorized.”

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