Development Following Harstad v. Woodbury Decision

Cities Retain Many Infrastructure Funding Options

In the four months since the Minnesota Supreme Court’s landmark decision in the Harstad v. Woodbury case, cities have repeatedly suggested that developers aren’t “paying their way” in new residential developments.

The development community has responded by indicating such is not at all the case. In fact, developers cite the myriad of fees they presently pay as one of the fundamental challenges to affordability.

And the court case made clear that cities continue to have a wide array of infrastructure funding mechanisms at their disposal, most notably area-wide assessments, bonding for projects, paying out of the city’s budget, or denying projects as premature.

Housing Industry and Cities Respond

Immediately following the key decision, Housing First Minnesota sent a letter out to the state’s top 25 growth cities to better understand who might have been levying impact fees not allowed by state statute and what steps those cities intended to take following the ruling.

Housing First Minnesota reports that the majority of the cities responding to their request had either not used impact fees or had ceased using them due to the court case. Further, they indicated they had no intent to reconfigure their fees to recoup revenue that had previously been gained using the now clearly unsupported impact fees.

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One city, Dayton, enacted a year-long moratorium on development on Sept. 26, 2018 in response to the court decision. Dayton had long relied on the impact fees identified as improper in the court case. Under the moratorium, no new developments can proceed in Dayton unless preliminary plat approval was already granted by the city council prior to Sept. 26, 2018. As of the printing of this issue, the Dayton moratorium remains in effect, thus effectively stifling new home construction in the city. In addition, the city has begun to require new traffic studies on proposed development following the court’s decision.

Next Stop: Minnesota State Legislature

The League of Minnesota Cities listed infrastructure impact fees as one of its 194 legislative and administrative priorities for 2019. The city of Dayton, at its Sept. 26, 2018 council meeting, said authorizing impact fees for new developments was one of the city’s top priorities.

“If enacted, Minnesota would have one of the highest number of authorized impact fees in the nation, which already included water, sanitary and storm sewer, and park fees,” said David Siegel, executive director of Housing First Minnesota. “At a time of eroding housing affordability, government should be looking to decrease the price of homes, not add thousands of dollars to the price of new housing units.”