Harstad v. Woodbury Case Heard Before State Supreme Court

Minnesota Judicial Center, St. Paul, Minn.

Minnesota Judicial Center, St. Paul, Minn.

Twin Cities developer Martin Harstad’s suit against the City of Woodbury was heard in the Minnesota Supreme Court on May 8, and the looming decision will have a major impact on the housing industry.

Harstad sued the City of Woodbury in 2016, contending the city’s Major Roadway Assessment (MRA) fees, which are used to pay for traffic-related improvements throughout the city, were not permitted under state law. The city was withholding approval of his 183-home project unless he consented to the city’s $1.4 million MRA fees. Washington County Court sided with Harstad in 2016, calling Woodbury’s MRA fees “unlawful.”

In September 2017, the Court of Appeals upheld a lower court’s ruling that these fees are unlawful, upholding a district court ruling. The Minnesota Supreme Court granted Woodbury’s petition for review in November, after the League of Minnesota Cities took the unusual step of filing an amicus brief encouraging the Supreme Court to accept Woodbury’s appeal.

In February, Housing First Minnesota submitted a friend-of-the court (amicus) brief in support of Harstad’s suit against the City of Woodbury. In the brief, cosigned by Rochester-area developer and Housing First Minnesota member Frank Kottschade and the National Association of Home Builders, the industry says the previous court decisions, which ruled that Woodbury’s MRA fees represented impact fees not authorized by the State of Minnesota, should be upheld.

In addition to the housing industry and local government interests, this case has been closely watched by policy makers and the media. Following the Court of Appeals decisions in September upholding the district court ruling in favor of Harstad, the Star Tribune ran an editorial supporting the view of the City of Woodbury, and a response from Housing First Minnesota supporting Minnesota’s home builders and developers.

Like the Country Joe v. Eagan case 20 years ago, the Harstad v. Woodbury decision by the Minnesota Supreme Court will have a major effect on the housing industry.

If the Supreme Court upholds the previous rulings, the court would reaffirm the long-held limited taxing authorities of cities as it related to new development. Should the Supreme Court reverse the lower court decision, cities could gain increased taxing ability for new developments and possibly gain the power to withhold development agreements unless developers pay for unrelated road projects requested by the city.

A decision from the Supreme Court is expected later this summer.