Transportation Impact FeesWOLFORD
January 15, 2008
Honorable Mayor Kennedy and city Council
City of Kalispell
R.O. Box 1997
312 1 st Avenue East
Kalispell, MT 59901
RE: Additional Improvements by the Developer Benefiting the City of Kalispell Glacier Town
Center
Dear Honorable Mayor and Council Members:
In the public hearing on Glacier Town center held on January 7, 2008, our team addressed the council
on a variety of topics pertaining to the application as well as the development itself. One of the items on
which 1 personally spoke was the many concessions and donations we have made to the City and others
in order to show our commitment to both the project itself and the city of Kalispell. After making those
statements at the public hearing, I felt it would be appropriate for me to reiterate there in this letter as well
as place some approximate value/cost estimates on these donations to the City.
A couple of the concessions 1 mentioned have somewhat of an intangible value associated with them.
These include switching sites from the Highway 2 site to the current site on Highway 93 to alleviate
concerns involving the aquifer. This change involved hundreds of thousands of dollars in "sunk' casts
primarily associated with preliminary design of the project on that site that we will never be able to
recover. Also included is the transition from an enclosed mall to an open air Lifestyle Center at the
request of many community members which again involved significant "sunk" design costs we will be
unable to recover. Please keep in mind that the building costs associated with the Lifestyle Center design
can be as much as twice the building costs associated with an enclosed mail design when considering
the same size of leasable area. We are talking tens of millions of dollars in additional casts our company
is incurring on this item alone.
In terms of our donations and contributions to the City, let one begin with our expenditures on the City's
traffic needs. As 1 stated in the public hearing, we are accomplishing a major goal in the transportation
needs of the valley by extending Rose crossing from Whitefish Stage Road to Highway 93 at our cost.
Preliminary budgeting puts the cost of this improvement at approximately $3 million. An auxiliary
connection from West Reserve to the southern entrance of the development on Highway 93 called Many
Glacier Road will help alleviate traffic pressure on the Highway 93Mest Reserve intersection and will cost
another $3 million. We will be improving approximately 3000 linear feet of Whitefish Stage Road at a cost
of approximately $500,000. Also, we have agreed to four roundabouts totaling approximately $100,000
and three traffic signals for the project totaling around $750,000. These improvements total
approximately $7,350,000.
The donations and contributions we have made to the city on this project also include a five acre parcel of
land designated for the construction of a community center type of facility that has a value of
approximately $2.1 million. We will be adding a well to the water system costing approximately $500,000
that will help pressurize the water lines in the area at our cost. Most significantly, in terms of cost, are the
parks and recreation amenities we will be providing. The Growth Policy requirements for the area in
terms of parks and open space are 10% or 45.5 acres. We have far exceeded that number and will be
donating approximately 24 acres of extra open space and park lands to the city. The land value alone for
this extra donation had we utilized it as a part of the project exceeds $10 million. The improvements to
this donation of land we will be providing are projected to exceed $2 million. These donations and
contributions total approximately $14.5 million.
As you can see, in combining all of our contributions and donations to the City, you reach a total of
approximately $22 million in projected value/costs. If you include the somewhat intangible value of our
concessions on the project, the value jumps to tens of millions of dollars above even that number.
It is time for this project to move forward. We are not able to entertain or consider paying for additional
items not required under the law without bringing back onto the negotiating table items or amenities we
have previously agreed to finance but were not legally required to provide. I feel our company, Wolford
Development, has far exceeded both what we were required to do for the City as well as what others
have done in the past for the City. We are corn mifted to both this project and the greater Kalispell area as
a whole and l feel that the information contained above more than adequately confirms this fact.
Thanks for your time and consideration on this project; your contributions as well as that of others have
made this a better project. If l can be of any further assistance on any of these issues contained herein,
please let me know.
Respectfully Submitted,
,Q GG�GfIL�
R. Chad Wolford
Wolford Development, Inc.
Theresa White
From: Bill Breen montanab7@yahoo.com]
Sent: Wednesday, January 14, 2009 5:35 PM
To: citycouncilgkalispell.com
Subject: Kalispell Transportation Impact fees
Mayor and City Council
1 am commenting in favor of the proposed impact fees.
These fees place the cost burden for transportation upgrades on those who create the need rather than on the be -leagued
taxpayers. For instance the current gridlock at the intersection of U.S 93 and west Reserve.will become a total disaster
with the proposed Glacier Town Center,Super Wal-Mart and Kohl,s.
1 urge the Council to place these costs more fairly on the developers and not on the taxpayers who are struggling to
survive this recession.
Thank you.
Bill Breen
335 Mountain Meadow Road
Kalispell,MT. 59901
I u8t, L UL L
Theresa White
From: Marc Rold [info@wildhorselimo.com]
Sent: Tuesday, January 13, 2009 12:01 PM
To: citycouncilgkalispell.com
Subject: Comments re: Traffic Impact Fees
Dear City Council:
At last night's Workshop it was stated that you prefer to receive written remarks along with spoken testimony, so l have included a
copy of my text that I delivered at last night's meeting for your reference. I pray for wisdom for you as you wrestle with the
challenges our city faces,
Sincerely,
Marc Rold
704 Sixth Avenue west
257-0880
Traffic Impact Fees are a counterproductive distraction along the road to solving our
pressing transportation challenges. Madam Mayor and Council members, I am Marc Rold
residing at 704 Sixth Avenue West for the past eighteen years. I am not a developer,
consultant, or engineer or invested in property development beyond my simple, active
citizenship in this community. I am, however, intimately acquainted with the
transportation system of this city and Flathead County having driven some 60,000 miles
per year for the past eight years in the operation of our personal transportation service. I
also had the privilege of serving on the Technical Advisory Committee during the
formation of the 2006 Transportation Plan. The Capital Improvement Plan derived from
that document forms a foundation for the Traffic Impact Fee Study in its multiple faulty
iterations. As a committee, TAC identified $120 million worth of projects, many of which
remain from the 1993 Transportation Plan. This staggering amount does not even include
our badly overdue Highway 93 Bypass which is integral to the success of most of the other
projects.
Your desire to make growth shoulder its fair share of impacts on our community is
admirable. With well-defined and easily determined impacts such as sewer and water this
may be entirely appropriate and most certainly readily quantifiable. The matter of traffic
impacts is far less clear cut, much more subjective and demonstrably elusive (as you may
have noticed over the past couple of years). Just the specter of this amorphous, punitive
cost being added to development of meaningful, beneficial projects for the commerce of
our community has shut down numerous opportunities to create new jobs, economic
activity and increased property tax revenue to operate our public services.
The time, energy and effort dedicated to the pursuit of Other People's Money in the form
of Traffic Impact Fees, hoping to address some $12 million of the $220 million identified
1/13/2009
1a8%�,/-WV1L.
transportation projects seems misguided. Even if the proposed draconian Traffic Impact
Fees are implemented to raise $12 million for transportation system needs, the much
broader and more pernicious problem of the remaining deficiencies remains. This means
that none of this collected money can be used until our existing deficiencies are addressed.
Such an approach is analogous to planning an elaborate wedding, then arguing with the
groom about how to pay for the honeymoon when the bride's family has not the
wherewithal to produce the wedding itself. There will be no honeymoon without the
wedding.
Let's take all the time, effort and creativity we can assemble to resolve the big issue: How
can Kalispell address the multiple millions in long existing deficiencies, plan for future
growth with travel corridors, design concepts and sustainable funding mechanisms? Once
we grapple with the big picture and quit deluding ourselves that someone else is going to
pay for all of this, then we can move forward as a community to enjoy and improve the
marvelous place we have chosen to live. Until then, ladies and gentlemen, let's put the
unproductive and rancorous distraction of Traffic Impact Fees to death.
1/13/2009
WOLFORP
January 12, 2008
Mayor and City Council
City of Kalispell
201 First Avenue East
Kalispell, MT 59901
Dear Mayor Kennedy and City Council Members,
I hope each of you and your families had a wonderful holiday Season l
The purpose of this letter is not to further debate the validity and credibility of the Impact Fee report
produced by Mr. Randy Goff and HDR, as we feel that it has already been discredited on a plethora of
issues, but rather to illustrate the economic and political implications of your decision to move forward
with impact fees in today's economic climate. Unfortunately, as time all have witnessed, the world has
changed dramatically in the recent past and we think it is important for us all to keep in mind that the
decisions we make now in the face of this turmoil will have tremendous impacts on our fellow citizens as
we all attempt to recover from this downturn.
Decrease in Availability of funds, Increase In the Cost of Funds that are Available
It is no secret that the banking industry has been one of the hardest hit by the current economic
downturn. As an industry, bankers have by and large extended credit in cases where they probably
shouldn't have. The media often uses the term "underwater' to describe people around the world and
in the United States whom owe more on their various loans than the asset securing there is actually
worth in today's economy. The reality of the situation is that when you refer to an individual or
business being "underwater" on a particular loan, there is a bank behind them that must also be
"underwater" on that particular loan because they are under collateralized. This has generated a
tremendous unknown loss factor on the part of the banks because they are not certain at this point just
how many of their loans will end up having some portion of the loan written off as unpaid debt. The
unknown loss factor has driven banks to circle back and attempt to shore up these collate ralization short
falls on loans outstanding as well as new loans being made, if any.
The net result of this is that developers have no chance of being able to obtain loans on things like
impact fees that have no hard asset behind them to use as collateral. The same principle also applies to
ideas like latecomers fees that rely on future growth in order for the borrower and thus the bank to be
repaid. Understandably, bankers are only making loans that have little or no risk of not being repaid
under any circumstance. It is impossible to know what trend growth will follow in the future. Given
today's economy, there is a tremendous risk that latecomer's fees may either never be repaid or will
only be repaid after some extended period of time.
Many of the people whom, in the past, would consider a move to Kalispell and the rest of Montana
every year will no longer reap large financial benefits from their homes as they sell them to move.
Instead, they may be looping at significant lasses that could prevent them from making the move even if
they desperately want to. The effect of this: growth slows down, nee► housing never materializes and no
latecomer's fees are ever paid to the city and then, in turn, the developer and its bank never get repaid
for these fees.
This is not a viable option for financing City projects and we are deeply concerned for those whom the
City has already placed on the hook for these types of projects. It now appears to me that they will not
be reimbursed for their expenditures and ►will end up in a bad situation with their lenders over these
issues. These individuals have stepped up to the plate for the city of Kalispell, essentially putting their
personal and/or company's guarantee up with no risk to the City, in lieu of the City doing its part to
increase the tax base, on something that they thought had a very strong chance of being repaid in a
timely manner with projects like ours in the pipeline. impact fees will likely put our project on hold
indefinitely. If the City stops our project and others like it with these egregious fees, you will be
knowingly and intentionally causing unjust harm and financial hardship on the folks who have extended
the City's infrastructure on their nickel, reasonably expecting our project to connect and pay latecomer's
fees.
We have recently been approached by the public works department to potentially participate in another
project that would necessitate latecomer's fees called the westside Sewer Interceptor Loop. we are
also aware that several Council members as ►well as the Public !works department believe that utilizing
something similar to a latecomer's fee is an appropriate way for our company to receive the credits
towards our impact fee payment for funds which we spend on a CIP project such as the extension of
Rose Crossing. This would further increase latecomer's fees which in turn increase the cost burden on
those who would potentially move to Kalispell. Surely the City understands that there is a price ceiling
that people can pay for these fees and still continue to move to the area. Besides the fact that our
company has little or no chance of obtaining funding from any bank to do so, why would we want to
count on reimbursement from any latecomers agreement with the City when we have seen from others'
example that the city will continue to pile fees on top of fees until somebody gets burned? The City
needs to recognize that this is not a viable option and it needs to come up with a way to hold up its end
of the bargain on the promises it made to service projects like ours when they were approved.
As a result of all of the information above, it is easy to see why there will be few, if any, banks willing to
lend on the types of fees that the City has been piling up. If they would lend, they would require an
unacceptable rate to entice them to overlook the fact that this debt would be completely unsecured.
Increase in Required Rate of Return on Funds
Stretching back to the 90's, development has seen a period of sustained growth in which a variety of
factors including inexperienced developers, aggressive city planners, easily attainable money, increased
downward pressures on rents, increased upward pressure on tenant build -out allowances, and a
growing economy drove down the returns required to fund a project. These returns on new
development have been driven down to a point at which, when the economy took a dramatic downturn,
they are not worth the risk associated with them. As such, much of the money typically available for
development is either on the sidelines waiting for things to improve or it has moved to another asset
category altogether that provides more acceptable returns. Now, banks as well as developers are
realizing that they may have accepted rates of return on their investments that were not justified by the
risk of ground up development and are requiring much higher rates of return than previously expected.
After having our profit margin squeezed so thin by opposition groups, the planning Department, the
Planning Board, as well as the City Council, this project is now on the verge of not meeting those newly
established rates of return that are being required in order to access funds in our industry after the
downturn. Believe it or not, we do have to make a profit in order to build this project and there is a
point, which we are extremely Close to and that impact fees would surpass, in which this project does
not make a return that is considered appropriate for the level of development risk we would be
assuming. Since our project has been delayed for such an extended period of time, not only has
Kalispell been without the economic rewards of our project for the past few years, but the City is in dire
jeopardy of never receiving these benefits because it continues to increase our costs and fees at an
alarming rate. I have laid these benefits out previously in a letter to the Council and I have attached that
letter for the Council's reference.
Getting our project in place will add up to approximately $500,000 in tax revenue to the City annually
just from phase one of our project alone. The City will consequently have a larger reserve of funds
available to help it navigate tough times which are not predicted to end any time soon. We also believe
it is very possible that the City will not be operating at a budget deficit in future years if the tax revenue
from our project is in place. If Glacier Town Center were open and operating without the
implementation of impact fees, we feel that both Wolford Development as well as the City would be
able to make an appropriate profit that would benefit both parties.
Decrease in Retailer Expansion Interest
Due to the recent economic downturn, retailers are obviously in a much different frame of mind than
they were even six months ago. The comments l have made previously to City Staff and the Council
regarding how Kalispell is perceived by retailers as a viable location for expansion are even more
relevant now than they were then. As a point of example, Coldwater Creek, a women's fashion retailer
based in Sandpoint, Idaho, had planned on expanding at a rate of 05 stores per year at the end of 2007
and they may have.had 100 viable opportunities at that time. Now, they are expanding at a rate of 15
stores per year and they probably have 200 or more viable opportunities because of increased vacancies
in major metro areas. Because of the allure of dense populations in metro areas, Kalispell is much less
attractive demographically when compared to these areas. In order to make Kalispell one -of the
locations that make the cut with this decrease in retailer expansion plans, the Council is going to have to
change its mind set completely and become friendlier to new business. Adding fees that increase the
cost for a company to do business in Kalispell insures that they will choose some other City in which they
too can expect an appropriate profit margin to warrant the investment. It has now been proven that
Kalispell and cities like it are not recession proof and will not grow continuously just because "people
want to live in Kalispell". In order to remain solvent over the long term Kalispell must be friendly to
business and growth. our company, as a local property owner, has a vested interest in the long terra
viability of this City and we believe this Council, the City Staff, and the consultant the City has paid tens
of thousands of dollars needs to be held accountable for the accuracy and prudence of the proposed
impact fees, just as we are held accountable when requesting entitlements from the city.
It is clear by recent public statements of City officials that the city is nearing exhaustion of the cost
cutting measures that could help right its financial ship. I apologize for repeating myself but we want to
emphasize that the City needs to be focused more on its own bottom line, which based on these official
comments, would only improve by grooving revenue. It is a fact that has been proven time and time
again across the country: Projects like ours increase the revenue base for cities tremendously. Use that
revenue over time to complete projects that improve the transportation system rather than kill our
project because of egregious fees on the front end.
Decrease in Construction ,bolas
It is no secret that employees in the construction industry are suffering right now because of a lack of
work. Don't further the hardship on those individuals by stopping projects in the pipeline with these
fees and other fees. Do the right thing by those taxpayers and make it easier for there to get back to
work on new construction.
Increased Cost Burden Placed on Citizens when They Must Travel to Find Goods and Services that
Meet Their Needs
If helping those whom are out of construction work isn't enough to prompt the Council to table these
and all other fees indefinitely, consider the remaining taxpayers who could use a break also. There are a
variety of goods and services that people have to travel to other areas to obtain. Don't cause them
further economic hardship by having to travel to meet these needs. Keep our project viable by tabling
these fees indefinitely and let us bring these goods and services to Kalispell while increasing the local tax
base via the development of Glacier Town Center.
Mayor Kennedy, Council Members, Impact Fee committee Members.. City Staff, and all other groups and
individuals whom are and have been participating actively in the discussion of Impact Fees, we at
Wolford Development want to thank you for your time and consideration of the points included herein.
The Council has already mitigated the effects of our project on all roads in which we have a direct
impact by requiring us to pay for intersection improvements and we have readily agreed to do so,
therefore, we believe that it is not necessary or appropriate for our project to pay Impact Fees.
Furthermore, we have agreed to connect Rose Crossing as well as another direct connection between
Highway 93 and west Reserve Drive at our cost. If impact fees are tabled, we believe we can still
accomplish all of this and keep our project viable. Again, I have attached the letter to the City Council
that I previously sent regarding the benefits to the City of our project.
We believe that we have had a lively and much needed debate on the validity of Impact Fees in today's
environment and we think it is clear that sitting at a red light for fifteen extra seconds here and there
because an intersection doesn't have as many lanes as we would like to have is far less important than
the economic viability and solvency of the City as a whole. our project and others like it will be stepping
stones for the City t❑ accomplish these transportation goals once the economy improves at some point
in the future because of the increased tax base we will create. Please do the right thing for the
taxpayers of the City and help us keep our project viable rather than neglecting its benefits to the local
economy.
Respectfully,
R. Chad Wolford
Wolford Development, Inc.
Theresa white
From: Frances MacKay fram43@centurytel.net]
Sent: Monday, January 12, 2009 4:47 PM
To: citycouncilgkalispell.com
Subject: impact fees
There is no way to foresee exact future impact costs associated with development. Good effort seems to have been made to arrive
at fair impact figures for Wal-Mart at Hutton Plaza and Glacier Town Center. l would like to see those fees accepted and move
forward .
Thank you.
Frances MacKay
64 Buffalo Stage
Kalispell
1/13/2009
Theresa white
From: Bergit Olsen dergitolsen@yahoo.com
Sent: Monday, January 12, 2009 4:58 PM
To: citycouncilgkalispell.com
Subject: Go with Transportation Impact Fees
Developers are feigning a coordinated campaign without merit to use the economic downturn to overturn things lobbying
developers don't like. Too bad.
There are also developer -led moves to "reform" growth laws to take some of state planners' review powers away and let
more pliable local planners do the work. Too bad.
Should developers be charged fees for negatively impacting residents? Yes. New development often uses existing (or
requires new) infrastructure including roads, sewers, refuse collection, parks, fire, police, and schools. When developers
provide this infrastructure to users for "free," who should pay? Not the community.
Sorry but no go. Developers should not be allowed to buy a community's rights away, like they have been doing for quite
some time now.
When properly designed, impact fees are an equitable way for growing cities to offset the high costs imposed on the city
by new development.
New development places considerable strain on the existing infrastructure, local services, and facilities of a city. To offset
the strain imposed by new development, the city must build new schools, police and fire stations, roads, parks, electricity,
water, and sewage facilities, and make other improvements. These new improvements all require substantial sums of
money to build and operate.
Who should pay for the impact of new development: the developers who drive and profit from the development or the
preexisting community that wakes up one day to an increase in its already excessive property taxes? The developers
should pay.
Legislature should enact an enabling statute, giving authority to localities to impose impact fees. If this is not favored,
then the Montana Supreme Court should find implied authority in municipalities to impose impact fees under their home
rule powers.
If development impacts the community infrastructure, then development pays for the impacts.
Thank you.
1/13/2009
JAM k 1 2 2049 MOIL 11: 03 AM FAX NO, R 02/03
Datsopoulos, MacDonald Lind, P.C.
Attorneys at Law
Mitten Datsopoulos
�DennisE'�.JLi�.i�yd
i�` �!
William err VLinCanagan
Rebecca l . Summerville
David B. Cotnor
Darla J w Rack
Terance P. Perry -L
Via Fncsimil[406-7,58-77581
Ms. l ellie Danielson, OECD
City of Kalispell
P.O. Box 1997
Kalispell, Montana $9901
Central Square Building
201 W. Main street, Suite 201
Missoula, MT 59802
Phoiie: 06,7 28,0610
Fax,. 06.5 3.013
www.dmllaw.com
Ptonald B. MacDonald (19 6-2002)
Re: City of Kalispell Impact Fees
Our File o.: 20093.006
Dear Ms. Danielson
Molly X, Howard
Phil M cCreedy
Trent N, Baker
Erilca R. P'eterniall
Del M. post
.deter F. Lacny
Matthew A. najdassin
osl i n E. Monahan
Alex Beal
+ Also admIfte4 in Washlnolon
Also 96milled In Massachwaags
As we stated in our November IS,, 2008 letter to you, this firm represents theA Montana
Association of Realtors, With that later, we noted certain deficiencies In the Kalispell Area
Transportation 1II= 2006 Update ( TP) and requested farther documentation, all of which should be
Publicly available documents per Montane. Code Annotated § 7---1602(2).
"Tie date sources and metbodclogy supporting adoption and -calculation of an impact fee must be
available to the public upon request,"
As we noted in our prcviaus letter, the KATP fails to demonstrate tho :following;
1, determination of service area(s);
methodology and time period for government to assign proportionate share of capital
costs for facility expansion to serve to development;
3. methodology for exclusion of operatlon and maintenance costs and correction of existing
deficiency from the impact fee--
4. amount of impact fee to be imposed for eacli unit of increased service demand;
JAN-121;2009 MOM 11:06 AM
._.._... ....�_ FAX N01
R 02/02
Datsop► olos, MacDonald & Und, P.C.,
Ms. Kel fle Danielson, CEcD
Ja-ivary 8, 2009
Rage 2
5. bUdgetary component to sehedu a construction of public fine lity capital improvements. to
serve projected '�yrro"h,
6. budgetary componeint prgjecting costs of capital improvements;
7. budgetary component allocating collected impact fees for construction or capital
improvements., and,
d,
$. budgetary component that covers at least a 5-year period and is reviewed and updated at
least every two years,
inoe you have faied to respond to our request, and to comply with Montana law, we are led to
conclude that the I ATP does not contain the requested documentation. If that is the case, we may be
'Foreod to file suit against you to ensure that Montana and United States law is followed, acid for the
da-mages suffered by REALTOR8 inembers as a result of the K.ATPIs deficiencies and illegal provisions,
Sincerely,
W ll liam K1' aii
W .'V1ab/nbr
Cc., Montana .Alsscciation of IEALTORS
.A.tm; Glenn Oppcl, Government A.fav7s Director (Via. E-mail)
�orr,e Colpepper (Via Email)
DoNALD & Li D11 P.C.
sq.
PAMELA D. BUCY
LUXAN MURFITT
GARY L. DAVIS
HARLEY R. HARRIS
PROFESSIONAL LIMITED LIABILITY PARTNERSHIP
ERIN F. MacLEAN
ATTORNEYS AT LAW
PATRICK E. MELBY
CANDACE C. PAYNE
MONTANA CLUB BUILDING ■ 24 W. SIXTH AVE.
DALE E. REAGOR
P.G. BOX 1144 • HELENA, MONTANA 59624
MONICA J. TRANEL
(406) 442-7450
FAX 1�405} 442-13s't V1IALTER S. MURFtTT (193[1-2tiD2)
H.J. LUXAN (1918-1984)
VIOLA J. ZINDELL, CLA, PARALEGAL
LISA A. THOMPSON, CLA, PARALEGAL
January 12, 2009
Mark Goldberg
Goldberg Properties
195 west 12th Avenue
Denver, Co 80204-3622
Re: Legal Issues with January 2009 HDR Report
Dear Mark:
You have asked this Firm to review the January 2009 "Draft Report for the City of
Kalispell: Impact Fees for the Transportation System" ["HDR Report"] to determine
whether it is in compliance with the requirements of Title 7, Chapter 6, Part 16 of the
Montana Code Annotated "Impact Fee Law"]. Many of the issues and/or questions
arising under the Impact Fee Law (e.g. vesting of rights, the effect of recent City
annexations, offsets and credits, issues under § 7--6--1 602( 1)(k), MCA, appeals, capital
budgeting requirements, etc.) cannot be answered unless and until the City of Kalispell
adopts an ordinance implementing the HDR. Report and actually attempts to assess an
impact fee, and so will not be addressed in this letter. Further, we understand that the
HDR, Report has already been modified a number of tunes based on the identification of
significant factual and methodological errors by Goldberg and others. we do not have
the technical expertise to determine whether those modifications have fixed all the
technical problems. The above aside, and assuming that the City does intend to proceed
on the basis of the HDR Report, several items are of note.
1. The HDR Report fails to account for or properly allocate project costs
between the correction of existing deficiencies and growth.
The Impact Fee law is very clear: "Costs for correction of existing deficiencies in
a public facility may not be included in the impact fee. ' § 7-6--1602(5)(b)(ii), MCA.
This requirement is in fact required by the constitutional framework upon which impact
Mr. Mark Goldberg
January 12, 2009
Page 2
fees and other government exactions on property use and development are based. A
well -recognized legal treatise on land use explains that "[c]ourts uniformly strike down . .
. attempts to remedy existing infrastructure deficiencies" through impact fees. See
Callies, Land Use Law § 9.01. As an example, in the leading case of Northern Home
Builders v. County of DuPage, 621 N.E.2d 1012 (Ill. Ct. App. 1993) the Couniy's road
impact fees were upheld because "[t]he County did travel surveys which allowed it to
determine which road segments were deficient due to existing development. Impact fees
are not spent on those roads...." Id. at 1020. Among other things, this requirement is a
way to prevent current taxpayers from unreasonably shifting responsibility for their past
unwillingness to fund public projects (characterized in the case law as "the sins of the
past") to a small class of future taxpayers.
The method that the Legislature put in place to make sure this requirement was
addressed in an objectively reasonable and justifiable manner is embodied in the impact
fee study parameters set out in § 7-6-16o2(1), MCA. Relevant to the "preexisting
deficiency" question are the requirements that the government seeking to impose an
impact fee must:
prepare and approve documentation that:
(a) describes the existing condition of the facility;
(b) establishes level of service standards;
(c) forecasts future additional needs for service for a defined period of time;
[and]
(d) identifies capital improvements necessary to meet future needs of service[.]
Attachment A to this letter sets out an outline of what we believe is the proper approach
to this issue under the above provisions.
To attempt to meet the above -quoted criteria the HDR Report relies on the
Transportation Plan. However, while the Transportation Plan arguably describes the
existing conditions of the Kalispell -area road system and forecasts future needs and
identifies capital improvements, it does not in any legally -sufficient way establish a level
of service standard ["LOS"] as a benchmark against to which to assess which (or which
portion) of the projects identified in Exhibit 2 are (or is) properly allocated to new
development and which properly remains the responsibility of the taxpayers as a whole.
.
This is n part unremarkable because the Transportation Plan itself was not prepared for
. p p
the purpose of meeting the Impact Fee law's objective of properly allocating
p P Y g
responsibility between classes of taxpayers; but rather, and
, sirn.p Y 1 to provide a basis for
rationally addressing the current and future transportation needs of the entire study area.
Mr. Mark Goldberg
January 12, 2009
Page 3
Instead, the HDR Report it establishes a target LOS implicitly and almost by
default. In Exhibit 2 HDR adopts the 2003 We ratio as the denominator of the fraction
that is used to allocate responsibility for the listed projects between new development and
(in a very few instances) preexisting deficiencies. Apart from the remarkable result of
this approach, which is to allocate virtually all of the listed projects to future
development, the implication of adopting the 2003 We ratio as the denominator of this
fraction is that the 2003 vlc ratio is the LOS standard for purposes of § 7-6--1602(1)(b),
MCA, criterion.
There are several defects in this analysis. First, this approach effectively defines
away "pre-existing deficiency." This is despite the fact that many of the projects in
the Transportation Plan itself are narratively described as being to "correct existing
deficiencies" or something similar. At an intuitive or "common sense" level, this does
not make any sense. In addition, the adoption of the 2003 vlc ratio to meet the statutory
standard is not discussed or explained in a way that the average reader (or decision
maker) can understand how and why that decision was made. More bluntly, it is an
important decision required under the statute that is buried in the numbers. Unless
corrected this problem would render any decision by the City Commission to "adopt" the
HDR Report as the basis for an impact fee arbitrary and capricious, and thus legally
questionable.
Second, this approach also illustrates the problems inherent in using the
Transportation Plan as the basis for an Impact Fee. The vlc ratios (2003 and 2030) in
Exhibit 2 are taken verbatim from the Transportation Plan. The geographic area of the
Plan is greater than the geographic area which is relevant for purposes of the Impact Fee.
Nothing has been done to translate the traffic numbers in the Transportation Plan into
numbers relevant to the Impact Fee criteria or area. For example, much of the traffic
used in the vlc ratios taken from the Plan is ifrom outside the city limits of Kalispell, and a
.p
good part of it s pure "pass -through" traffic. Both of those categories are not
appropriately included in an impact fee study designed to allocate responsibilitywithin
the....Citv o Kalis ell between taxpayers generally and new development more
specifically. Put differently, while the projected increases in traffic certainly may
materialize, a good part of those increases are not caused by new development in the
City. The HDR Report does not address this fact and is thus on questionable legal
grounds.
� g
Mr. Mark Goldberg
January 12, 2009
Page 4
2. The HDR Report does not adequately address the criterion in § 7-6-1602(1)(g),
MCA.
Section 7-6-1602(l )(g), MCA, requires an impact fee study to "make a
determination as to whether one service area or more than one service area for
transportation facilities is needed to establish a correlation between impact fees and
benefits." In contrast to the matter discussed above, at the least it must be acknowledged
that the HDR Report attempted to address this criterion. However, the way in which it
did so is clearly deficient and is perhaps the most glaring of the deficiencies in the entire
HDR Report. Before pointing out that error we would make two preliminary
observations. First, the principles of governmental, administrative, and constitutional law
under which impact fees and similar exactions arise dictate that a decision by the City on
this criterion must be objectively reasonable and not arbitrary or capricious. Secondly,
the Impact Fee law clearly states that "[the data sources and methodology supporting
adoption and calculation of an impact fee must be available to the public on request." § 7-
6-1602(2), MCA.. Thus the legislature made clear the requirement that the information
(data sources) and thought processes (methodology) that go into the assessment be made
available to the public so the public can determine for themselves the reasonableness and
basis of the fee.
In stark contrast is the section in the HDR Report addressing this criterion. In
Section 5.3, HDR states that "the City and the Impact Fee Advisory Committee
determined that the entire city would be treated as a single zone." As the basis for this
"determination" HDR explains that "only the trips generated and project costs with the
current city limits were utilized[,]" and secondly "the intuitive knowledge of the
transportation system.." As discussed above, the first of these two statements is incorrect,
at least to the extent the Plan's vlc ratios were used as the tool to allocate virtually total
responsibility for longstanding City priorities/projects to new development. More
problematic, however, is the statement that the determination of this criterion was based
on "intuition." Several questions immediately arise: who's intuition is HDR describing?
g
The Committee's? The City Commission's? The Public Work's Director's? More
importantly, how can someone outside the City reasonably know this same fact? By its
very definition "intuition" is subj ective and unknowable. In both respects this
explanation fails to meet the requirements of the lave.
One way to illustrate the deficiencies in the HDR report is to contrast the HDR
Report's Section 5.3 rationale with a situation where a similar question was successfully
y
addressed. In Northern Illinois .dome Builders the Court upheld the decision to split t
p p he
into nto I 1 zones as follows:
Mr. Mark Goldberg
January 12, 2009
Page 5
DuPage County divided itself into I 1 districts based on the following criteria:
location of existing and proposed municipal boundaries; location of major
developable parcels of land; existing major retail/employment centers; location of
potential transportation corridors; CATS one -quarter -section -based zone system;
and the existing county highway system.
621 I.E. 2d at 1020. Thus in that instance a fact -based, reasoned decision based on
relevant criteria was articulated in the development of an impact fee. The contrast
between the HDR. Report's approach and the approach in Northern Illinois Home
Builders is so clear little further discussion of the point is needed. The HDR Report
fails to adequately address § 7-6-1 602(1 )(g), MCA.
3. The HDR report contains a number of other errors that should be addressed
before it is adopted.
The HDR Report contains a number of other errors that may or may not prove to
be substantive, but nonetheless should be rectified. The first lies in the statement in § 1.3
that "[flhe City has had the report reviewed by its legal counsel and they have found that
it complies with the requirement under Montana law." we have asked the City Attorney
to provide us with evidence of this review and have been made aware that nothing
connected to it has been reduced to writing. In light of the significant legal questions
associated with the HDR Report, we question whether the Commission can (or at least
should) accept HDR's representation on its face. we would suggest the better course of
action would be for the Commission to request that the City Attorney confirm this in
writing and provide some explanation of how he views the above questions. Relatedl , in
that same section HDR states that the Report has been prepared in accordance with
(9" generally accepted' accounting ... principles." Nothing in HDR's qualification
statement suggests to us that HDR is qualified to make that representation.
As the above discussion illustrates, significant questions remain regarding the
question whether the HDR Report comports with Montana law.
Si
MARLEY S
For Lux n & Murfitt, PLLP
Attachment 1
CORRECTING EXISTING- DEFICIENCIES
Under Montana law you must determine:
1. Where you are now in terms of level of service;
2. What the LOS should be under your regulations and what it will cost to remedy
the shortfall; and
3. What need to be done to keep the level of service at the selected standard of
service on account of future growth.
For example, at a particular intersection Kalispell determines that the current level of
service is at Level C. However, under current regulations that intersection should be at
Level B. Then Kalispell further determines that, due to a particular project, the LOS at
the corrected intersection will decline to a B-minus in the next five years.
Impact fees may be properly imposed, collected, and spent beeping the LOS at the
intersection at a B, but may not be used to fund the correction of existing deficiencies in
the first place. In other words, you may not use impacts fees to get from LOS Level C to
B, only to it at a B in the future.
Step 1: Correcting Existing Deficiency
Level B
fee (Impact s NOT OK.)
Level C
Step 2: Correcting Impact of New Development
Level B
T (Impact fee OK)
Level B-
If Steps I and 2 are combined in time, them the costs of the Jro' ect must be allocated first
p
to Step I and then, and only then, to Step 2.
rage 1 Vl 1
Theresa White
From: Stan Makman [makman 9centurytel.net]
Sent: Monday, January 12, 2009 4:1 5 PM
To: citycouncil@kalispell.com
Subject: impact tees comment
City Council,
Thanks you for all the work you have done researching the proposed transportation impact fees. Please adopt these fees.
It is only fair that the developers pay these fees otherwise the only other way to earn the money is to increase our taxes.
The developers will not pull out just because you adopt these fees. They are fighting you for the obvious reason; the less
they pay the more money they can pocket. Please do not let this burden fall on the already struggling citizens.
Thanks y o u
Elizabeth Makman
1/12/2009
HUTTON RANCH PLAZA ASSOCIATES, LLC
135 HUTTON RANCH RD, SUITE 103
KALISPELL, MT 59901
January 12, 2009
The Honorable Pamela B. Kennedy, Mayor
Councilman Robert Haffernnan
Councilman Hank Olson
Councilman Jim Atkinson
Councilman Tim Kluesner
Councilwoman Kari Gabriel
Concilman Wayne Saverud
Councilman Randy Kenyon
Council man M. Duane Larson
City of Kalispell
Kalispell, MT 59901
Dear Madame Mayor and Council Members:
I have stood before you several times going back to April of 2007 and have written you twice, in
April and October 2008. Each time I have sought to deliver the same message: The development
community is not in opposition to the creation and imposition of impact fees. It is only in opposition
to the creation and imposition of fees that are not in conformance with the requirements of Montana
law, and therefore result in the assessment of unreasonable fees.
It may now very well be .the case, due to .the economic crisis we have encountered, that there are
strong and persuasive policy reasons why impact fees are inappropriate at this time. I will leave that
argument to others. Instead, I will again address for you just one of many legal reasons, why this
council cannot adopt the report of HDR as amended, and cannot adopt traffic impact fees as
described in that report.
On the 16th of May, 2005, only 1 month after the effective date of State legislation enabling cities
to enact ordinances providing for the collection of impact fees, this council adopted Resolution
Number 5012. In the second recital to that resolution, which authorized the City Manager to take
necessary steps to engage a professional engineer to study the advisability of impact fees, the
following statement appeared: "It is the finding of City Council that it is appropriate that a charge
be placed upon new development in the city to pay a reasonable fee for the additional capacity for
municipal services that reasonably relates to the service demands and needs of the new
development."
406.756.2771 (phone) 406.756.2777 (fax)
January 12, 2009
Page 2
On October 16, 2006, this Council approved ordinance No. 1587. Section II, entitled Calculation
and Imposition of Impact Fees states: "Any impact fees to fund capital improvements of the City of
Kalispell shall not be approved and adopted by the City Council unless those fees have been
calculated in accordance with 7-6-1602 MCA or as such statute may later be amended."
Time and again I have implored you to examine both the HDR report and all relevant sections of the
MCA. The following are three crucial sections.
Subsection (5)(a) of Section 7-6-1602 states that the impact fee must be reasonably related to and
reasonably attributable to the development's share of the cost of infrastructure improvements made
necessary by the new development.
Subsection (1) of Section 7-6-1603, provides that the collection and expenditure of impact fees must
be reasonably related to the benefits accruing to the development paying the impact fees.
Finally, looking back to Section 7-6--I601, Subsection (6) provides that: "Proportionate share"
means that portion of the cost of the capital system improvements that reasonably relates to the
service demands and needs of the project.
The HDR Report establishes a methodology to apportion the cost of traffic impact fees between
residential development and commercial development. The report then assesses the commercial
portion of the benefit of all roads to be improved, no matter where in the service area, 100% to new
development, irrespective of the fact that all developments located in and around the city obtain
benefit from the road to be improved.
It is obvious to anyone looking at a map of the city, that the improvement of any road is enjoyed by
all commercial developments within and around the city where that road is used to transit to any
business establishment. All commercial activity receives benefits from the road improvement. The
HDR. report; though, assesses 100% of the benefit of the improvement to new commercial
development. This is not a reasonable assumption, or allocation. And, it does not result in a finding
that, as your own ordinance and State law requires, "The charges to be placed be a reasonable fee
for the additional capacity for municipal services that reasonably relates to the service demands and
needs of the new development".
The fee schedule, as proposed by the HDR report is unreasonable because it fails to take into
account the proportional allocation of benefit to all development in the City. Furthermore, it is
unreasonable because it fails to create any correlation between the charges to be placed and the
service demands and needs of any new development.
Specifically, the HDR Report has applied 100% of the cost per new residential trip ($129.08 as
shown in the March 2008 report) to trip factors created only for new developments. This assumes
that the newly created residential trips will not be used to go anywhere else. This is preposterous!
The trip factors utilized by HDR are for all trips to the new commercial development generated by
travelers from throughout the region, not just the areas surrounding the roads to be improved. To
406.756.2771 (phone) 406.756.2777 (fax)
January 12, 2009
Page 3
generate an appropriate trip cost to be applied to new development, HDR should have multiplied the
per trip cost ($129.08) by a fraction, the numerator of which is the assumed number of square feet
of new commercial space to be developed over a specific period, and the denominator of which is
the total square footage of all commercial property in and around the City of Kalispell. This would
result in a much smaller impact fee per unit, but would accurately address the requirement that there
be a correlation between the cost of improvements and the benefit to be received by each new
commercial development.
From comments I have heard, there are some members of the council that believe that if only a
portion of the benefit of new roads is allocated to new development, not enough money will be
raised, and therefore the report of HDR, and attached fee schedule, as proposed, must be adopted.
This is fallacious and dangerous thinking. Montana's enabling law does not create an open mandate
to charge new developments for all of the costs that may be incurred as improvements are required.
It simply gives the City the ability to reasonably allocate those costs to the proportionate share of
benefits given.
As your appointed Advisory Committee has done, I urge you not to accept the report submitted by
HDR until this and many other unresolved issues are properly addressed.
Vquly yours,
Phl
President of the Manager of Hutton Ranch Plaza Assoc LLC
cc: Charles Harball, City Attorney
Myrt Webb; Acting City Manager
406.756.2771 (phone) 406. 756.2 777 (fax)
FiInterstate
Bank
January 8, 2009
Kalispell City Council
Impact Fee Advisory Committee
Po Box 1997
Kalispell, MT 59903
RE: Transportation Impact Fees
First Interstate Bank
2 Main St.
P.U. Box 7130
Kalispell, MT 59904-01 30
406-756-5200
Fax: 406-756-5260
www.firstinterstatebank.com
Dear Mayor Kennedy, Council Members, and Members ❑f the
Impact Fee Advisory Committee:
First Interstate Bank has had considerable experience with commercial and
residential development across the states of Wyoming and Montana. We have
financed numerous projects in all metropolitan areas of the two states. We
realize that all developers must pay a fair share of costs associated with related
impact to infrastructure improvements.
However, the proposed fee schedule and plan for implementation of
transportation impact fees, as described in the H DR Report dated January 2009,
are excessive and, quite frankly, unacceptable. These fees, as currently
proposed, would make it difficult for our bank to help with the financing costs of
new developments.
The resulting impact on the local economy would be devastating to an already
deteriorating employment base. It would also have a negative impact in reducing
a new tax base which is desperately needed in Kalispell.
There has already been a slowdown in commercial development and numerous
job layoffs in the valley. This proposed Transportation Impact Fee will do nothing
but penalize developers, as well as financial institutions who have made loans on
land acquisitions in the city.
We strongly urge the Council to consider a more reasonable level of fee
structure, grandfather in existing projects, or utilize a phase in period over a
number of years.
January 8, 2009
Kalispell city council
Page 2
We do not want potential development to move outside the city because of
excessive fee costs. This will certainly have a negative impact on our tax base
and employment, as well as the future investment environment.
Sincerely,
RFS:jr
........ . .'Ghannber of Com`i�er. . .c
Providing Economic, Community, and Workforce Development Services
www.kalispelichamber.com
January 6, 2009
Kalispell City Council
Impact Fee Advisory Committee
Attn: Mayor Parr Kennedy
PO Box 1997
Kalispell, MT 59901
.e: Transportation Impact Fees
Hear Mayor Kennedy, Council Members & Members of the Impact Fee Advisory
Committee:
The Kalispell Chamber of Commerce has previously provided testimony supporting the
concept of Impact Fees, whereby developers and real estate projects pay for their share of
costs related to infrastructure improvements.
However, the proposed fee schedule and plan for the implementation of Transportation
Impact Fees, as described in the HDR report dated January 2009, are unacceptable. If
adopted, these fees will diminish the business environment, slog the rate of investment,
and put jobs at risk. we urge you to reduce the proposed fee schedule to a more
reasonable level and grandfather in existing projects or structure a phase -in period over
five years or more.
As we enter 2009, the economy in Kalispell and the Flathead valley are fragile.
Unemployment is at 7.3 percent and rising. Home foreclosures are increasing. New
commercial construction projects are at a standstill. Let's implement a transportation
impact fee system that is reasonable and legal. In the end, we all benefit from a strong
economic and investment environment.
OFFICE 406.758.2800 4 406.758.2805 FAX* 15 Depot Park, Kalispell, MT 59901
GLA-clER
BA N� �K
January 6, 2009
Kalispell City Council
Impact Pee Advisory Committee
Attn: Mayor Pam Kennedy
Po Box 1997
Kalispell, Mt. 59901
Re; Transportation Impact Pees
,
C
fir'"✓
w
Dear Mayor Kennedy, Council Members & Members of the Impact Fee Advisory
Committee;
Glacier Bank fully supports the concept of developers paying their fair share of costs for
development related impacts to our transportation infrastructure.
The proposed fees as outlined in the HDR report dated January 2009; however appears to
be punitive to existing and prospective project owners. we feel the fees, as currently
proposed, will make it difficult to finance new projects resulting in reduced new
construction, fewer jobs and a reduction in new tax base. We are already seeing proposed
construction projects being put on hold pending the Council's final decision on these fees
which further exasperates our slowing economy and high unemployment rate.
Our greater concern is the impact on existing developments that were built in cooperation
with the city and aided by bank financing. The projected build -out of these projects did
not anticipate excessively high transportation fees that can run into the hundreds of
thousands of dollars per building.
The old School Station industrial park is a good example. The developers of this project
agreed to be annexed into the city and paid 100% of the cost to extend the city sewer line
to the project. Their decision to build and the financing of the project was based, to a large
degree, upon an agreement with the City of Kalispell to be reimbursed by late -comer hook
up fees. The high SID's on this project coupled with the down turn in the economy have
already brought land sales to a near halt. Adding tens or hundreds of thousands of dollars
in new fees to potential construction projects within the park will likely assure no or very
limited new construction and late -corner hook up fees for years to come.
It would seem unfair to penalize developers who have already made major investments in
our city under the old rules by imposing massive new fees without some grandfather clause
or phase --in period. New developments, under the HDR proposal, will have a keen
advantage over existing projects. If the total cost of a new construction project, including
land cost and the proposed fees, make a project economically unsound they can simply
decide not to buy land in Kalispell. Existing developers who have already purchased land
and invested in our city will be obligated to service debt, maintain their properties and pay
taxes even if they lose sales because of excessive fees or to lower priced lots outside the
city limits. HDR suggests (on page 2--3) that holding these unsold properties' in the "land
market" for higher value developments is a positive for the city. where are these "higher
value developments" and how does anyone benefit by stalling development, the related
jobs and creation of new tax base?
The city's consultant also stated (on page 2--3) that, "The landowner mast lover the land
price to offset thefee in order to make a sale". Stated differently HDR is acknowledging
that projects will not be feasible with the proposed fees without accessing price penalties to
existing land owners.
We'd ask, with all due respect, that you consider reducing the proposed fees to more
reasonable levels and grandfather in existing land development projects or structure a
phase -in period over five years or more.
Sincerely,
Dennis S . Beams
Executive vice President/Chief Credit officer
Glacier Bank 406-756-4256