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Transportation Impact FeesCity of Kalispell Post Office Box 1997 - Kalispell, Montana 59903-1997 Telephone (406) 758-7701 Fax - (406) 758-7758 February 5, 2009 TO: Mayor & City Council FRM: Interim City Manager Re: 9 February Workshop The following staff information is submitted to the council in preparation for the 9 February workshop: • Memo on alternatives to the CIP (Jim Hansz) Information paper on impact fee policy issues (Myrt Webb) • Information paper comparing transportation impact fees (Myrt Webb) • Draft example of an extension agreement for roads (Jim Hanz) • Legal opinion (Charley Harball) Public Works Department M/VA -/VA 2011" Arenue East, P.O. Box 1997, Kalispell, MT 59903 Phone (406) 758- 7720 — Fax (406)758-7831 www.kalispell.com REPORT TO: Mayor and City Council FROM: James C. Hansz, P.E., Director of Public Works Myrt Webb, Interim City Manager SUBJECT: Work Session Transportation Impact Fees MEETING DATE: February 9, 2009 At the last work session on this subject City Council asked staff to estimate the change in fee if the Capital Improvement Plan is modified to remove projects to reduce its value. It is recommended to remove entire projects from the CIP rather than to arbitrarily reduce all project values. The present value of the CIP is $12,406,270.00. Staff has reviewed the CIP and identified two reasonable alternatives based on recent discussions. ALTERNATIVE #1- REMOVE PROJECTS MSN 2, 3, 23, 28, AND 29 These projects have previously been questioned by the development community as not sufficiently related to growth. These projects have the following values: MSN 2 = $1,780,535.00 MSN 3 = $2,979,080.00 MSN 23 = $449,447.00 MSN 28 = $356,107.00 MSN 29 = $534,161.00 Total = $6,099,330.00 Removing the value of these projects from the CIP results in a new CIP value of Original CIP $12,406,270.00 -$6,099,330.00 Revised CIP 41= $6,306,940.00 The resulting impact fee with this reduced CIP value is: $6,306,940/134,118 trips = $47.03/trip The impact fee for atypical single family home would become: 9.57 trips/SFR x $47.03/trip = $450.00 ALTERNATIVE #2 - ALSO REMOVE PROJECT MSN 9 (ROSE CROSSING) This project was noted by a Council member as one that could be reasonably covered by a Developer Extension (Latecomer) Agreement if it is ever constructed. The CIP value of this project is: MSN 9 = $2,03 5,268.00 Deducting the value of this project from the previously revised CIP value results in: Revised CIP $6,3 06,940.00 MSN 9 -$2,03 5,268.00 Revised CIP #2 = K271fi72.00 The resulting impact fee with this reduced CIP value is: $4,271,672/134,118 trips = $31.85/trip The impact fee for a typical single family home would become: 9.57 trips/SFR x $31.85 = $305.00 CI ATM A 12 V Reducing the value of the growth -related CIP will reduce the impact fee. The CIP should be reduced by the elimination of entire projects rather than by arbitrarily reducing the aggregate value of the ten projects that make up the current CIP. By removing projects MSN 2, MSN 3, MSN 23, MSN 28, and MSN 29 from the CIP there is a reduction in the impact fee of approximately 49%. By removing the aforementioned projects and project MSN 9 from the CIP there is a total reduction of the impact fee of approximately 65%. Information Paper: Transportation Impact Fees Policy Issues: • Credit: it is common for cities that have transportation impact fee to give credit to developers that construct all or part of the projects on the transportation impact capital improvement (CIP) list. While the concept of credit is simple in practice there are several aspects to consider: 1. The improvement must directly assist a project that is on the impact CIP. 2. The costs being claimed must be verified by a city engineer to be reasonable and directly related to a CIP project. 3. The credit should be applied when a building permit is issued and only as a credit not as cash. 4. Credit should not be given for improvements required for the development even if the improvements are on the CIP. • Grandfathering: while it may seem reasonable to forgive impact fees for ongoing projects but there should be a time limit. Some approved final plats may build out for 10-20 years. It does seem reasonable to forgive impact fees for such an extended period. Grandfathering, if used, should only be applied to building permits. • Outside Funding: there is a reasonable probability that we will receive funds from federal or other sources that could be used for CIP projects. These funds should first be applied to costs that were not in the initial CIP estimates. Examples are right-of-way and upgrade of existing capacity. If there were outside funds remaining they could be applied to the CIP costs which would reduce the per unit fee. An alternative would be to credit previous impact fee payers. Information Paper: Transportation Impact Fee(TIF) Comparison for Office, Retail and Industrial Use Below is a comparison between the proposed Kalispell TIF's and the TIF's for Bozeman and Missoula. It should be noted that there is a significant difference between the population and growth pattern of Missoula and the patterns of Bozeman and Kalispell. Not only is Missoula a much larger city is has also grown at a much slower rate that either Bozeman or Kalispell. Missoula also has a very different fee structure that does not use ITE codes. The Bozeman fees are 60% of the recommended fees. Missoula: 2000 population (census) 57053 2008 population (estimate) 67165 increase 2000-2008 18% Bozeman: 2000 population (census) 27509 2008 population (estimate) 37981 increase 2000-2008 38% Kalispell: 2000 population (census) 14223 2008 population (estimate) 20298 increase 2000-2008 43% Fee Comparison ($ per 1000ft2): Kalispell Bozeman Missoula Office (ITE code) Medical-Dental(720) 3505 6011 2849 Single Tenant(710-715) 1122 1542-2494 1052-1447 Retail (ITE code) 24hr Market(851) 27918 27975 2231-3205 Quality Resta u ra nt(931) 4867 13820 " Fast Food w/Drive-in(934) 24062 38397 " Bank w/Drive-in(912) 12672 19884 " Mall(820) Indiv 5107-6012 " >300k ft2 Industry(ITE code) General Light Industrial(110) 676 1436 550 Manufacturing(140) 371 784 301 Warehouse(150) 481 1020 391 DRAFT DEVELOPER EXTENSION (LATECOMERS) AGREEMENT FOR REIMBURSEMENT FOR KALISPELL PUBLIC ROAD SYSTEM EXTENSIONS AGREEMENT, made this day of , 200_, between , ("Developer") and the City of Kalispell, situated in Flathead County, Montana ("City"). WITNESSETH: RECITALS A. The City owns, operates and maintains a system of public roads within its City limits; and B . Developer has constructed, under agreement with the City, extensions to said public road system (collectively the "Extensions"), as more particularly depicted on Exhibit "A," attached hereto and incorporated herein by this reference, which Extensions are capable of serving parcels now owned by the Developer and others; and C. The Extensions are located within the City's existing corporate limits, and shall be subject to the City's public works standards for performance; and D. The total project cost for design and construction of the Extensions amounted to $ as more specifically itemized on Exhibit "B," attached hereto and incorporated herein by this reference; and E. The City and Developer desire and intend by this Agreement to provide for collection of the fair pro rata share of the total project costs of the Extension from the owners of the properties which benefit from the Extensions, but who did not contribute to the original cost thereof. F. The City has determined and Developer has agreed that the fair pro rata share of the total project costs of the Extensions, to be collected from the owners of properties who connect to and use the Extensions, shall be based upon the traffic generation associated with the expected use of the subject properties determined at the trip rates set forth in Section 5 below, and based upon the trip rate factors for traffic generation listed in the manual of Trip Generation developed by the Institute of Transportation Engineers, current edition. NOW, THEREFORE, in consideration of the mutual covenants and agreements hereafter set forth, it is agreed by and between the parties hereto as follows: I. All of the recitals set forth above are adopted by the parties as material elements of this Agreement. LATECOMERS AGREEMENT P. 1 2. Developer shall transfer title, free and clear of all encumbrances, to the Extensions, by a bill of sale to be executed and delivered by Developer to the City. Developer shall assign easement deed for utilities from State of Montana to Developer (hereinafter referred to as easement), to be executed and delivered by Developer to the City. In the event that any lien or other claim against the Extensions are asserted after conveyance to the City, Developer shall defend and save harmless the City from loss on account thereof. In the event the City shall be put to any expense in defense of such claim or otherwise, then the City shall have a lien against any funds then or thereafter deposited with it pursuant to this Agreement. 3. Developer warrants that it is the owner in title absolute of the Extensions, that it has neither permitted nor suffered any person or other entity to use the Extensions prior to the date of this Agreement, except the real property owned by Developer as identified on Exhibit "C," and as described in Section 8 below. 4. The City agrees to accept the Extensions for ownership and maintenance as part of its road system by acceptance of the bill of sale if the Extensions are constructed in accordance to City of Kalispell Standards for Design and Construction, 2005. Further, the City agrees to collect from owners of properties who have not heretofore contributed to the project costs of the Extensions, and who subsequently connect to and use the Extensions, a fee equal to the fair pro rata share of the total project costs as set forth in Section 5 below ("Assessment Fees"). Such Assessment Fees shall not be collected by the City with respect to the property by the Developer, as more particularly set forth on Exhibit "C," and as described in Section 8 below. 5. The total project costs for the Extensions including costs eligible for reimbursement under this Agreement are as itemized on Exhibit "B." Said eligible portion of the total project costs includes costs for design engineering, surveying, construction, construction inspection and construction contract administration incurred and paid by Developer. The Assessment Fees for each of the properties who subsequently connect to and use the Extensions shall be based upon the estimated traffic associated with such properties in the amount set forth in Section 5(a). The amount set forth in Sections 5(a) is based upon total capacity of as described on Exhibit "C," for which no Assessment Fee shall be charged and for which Developer shall not be entitled to reimbursement pursuant to this Agreement. (a) The Assessment Fee for owners of properties who subsequently tap onto, connect to or use the Extensions shall be $ per trip, adjusted annually in accordance with Section 5(b) below. The maximum number of trips for which Developer shall be entitled to reimbursement shall be (b) The per trip Fee set forth in Sections 5(a) above shall be increased annually, over the prior year's Assessment Fee, on the first day of January each year, based upon the ten (10) year United States Treasury Note rate as of the last day of the immediately preceding November, plus 1.5%. 6. The total trips for purposes of computing the Fees to be collected pursuant to this Agreement shall be determined by in accordance with Exhibit "D," attached hereto and LATECOMERS AGREEMENT P. 2 incorporated herein by this reference. 7. Notwithstanding anything to the contrary in this Agreement, the Fees to be collected pursuant to this Agreement shall not be collected with respect to property owned by Developer as described on Exhibit "C," attached hereto and incorporated herein by this reference. 8. The City agrees not to allow any use of the Extensions without the owners of properties to be benefited from said use having first paid to the City the Fees and such other charges as set forth in Sections 4 and 5 above. During the term of this Agreement, the City shall not have the authority to waive the Fees for using the Extensions, without the prior written consent of Developer. To the extent that the City does waive any Fees, the City shall be responsible for payment to Developer of the Fees that would have otherwise been payable by the owner of such properties benefiting from using the Extensions. 9. The City shall pay to Developer the sums agreed by it to be collected pursuant to the provisions of this Agreement within sixty (60) days after receipt thereof at the address of Developer as set forth hereinafter or at such other addresses as Developer shall provide to the City. 10. In the event of the assignment or transfer of the rights of Developer voluntarily, involuntarily or by operation of law, the City shall pay all benefits accruing hereunder, to the assignee or successor of the Developer after notice of the transfer has been given. In the event conflicting demands are made upon the City for benefits accruing under this Agreement, the City may, at its option, commence an action in interpleader joining any party claiming rights under this contract, or other parties which the City believes to be necessary or proper, and the City shall be discharged from further liability upon paying the person or persons whom any court having jurisdiction of such interpleader action shall determine, and in such action the City shall be entitled to recover its reasonable attorneys' fees and cost, which fees and costs shall constitute a lien upon all funds accrued or accruing pursuant to this Agreement. 12. Nothing contained herein shall be construed to affect or impair in any manner the right of the City to regulate the use of road system, of which the Extensions shall become a part under the terms of this Agreement, pursuant to the provisions of any ordinance, resolution or policy now or hereafter in effect. The imposition by the City of any such requirement shall not be deemed an impairment of this Agreement though it may be imposed in such a manner as to refuse service to an owner or owners of a parcel in the benefited area in order to secure compliance with any such requirement of the City. 13. This Agreement shall become operative as of the date first written above, and shall remain in full force and effect for a period of years after the date first written above, or until Developer, or its successors or assigns, shall have been fully reimbursed as aforesaid, whichever event occurs earlier; provided, that in the event the Extensions, or any portions thereof, shall during the term of this Agreement, be rendered useless by the redesign or reconstruction of a portion of the Extension, or of the City's road systems, then the City's obligation to collect for Developer the Assessment Fees provided pursuant to this Agreement LATECOMERS AGREEMENT P. 3 shall cease. 14. An administrative fee of six (6) percent, in addition to the per trip fees described previously in this Agreement, will be assessed by the City of Kalispell, Montana. 15. No waiver, alteration or modification of any of the provisions of this Agreement shall be binding unless in writing and signed by a duly authorized representative of the City and Developer. 16. All communications regarding this Agreement shall be sent to the parties at the addresses listed below, unless notified to the contrary. 17. All of the provisions, conditions, regulations and requirements of this Agreement shall be binding upon the successors and assigns of Developer, as if they were specifically mentioned herein. 18. This Agreement shall be construed in accordance with the laws of the State of Montana, and jurisdiction of any resulting dispute shall be in Flathead County, Montana. The prevailing party in any legal action arising from this Agreement shall be entitled to all costs and expenses, including attorneys' fees, expert witness fees or other witness fees and any such fees and expenses incurred on appeal. 19. Any invalidity, in whole or in part, of any of the provisions of this Agreement shall not affect the validity of any other of its provisions. 20. No term or provision herein shall be deemed waived and no breach excused unless such waiver or consent shall be in writing and signed by the party claimed to have waived or consented. 21. This Agreement, including its exhibits and all documents referenced herein, constitutes the entire agreement between the City and Developer, and supersedes all proposals, oral or written, between the parties on the sub j ect. IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year above written. DEVELOPER [NAME] [TITLE] DATE , 200 LATECOMERS AGREEMENT P. 4 NOTARY BLOCS Exhibit A — Road system extension drawings Exhibit B — Breakdown of Reimbursable Costs Exhibit C — Legal Description of Development Exhibit D — Trip determination CITY OF KALISPELL, MONTANA [NAME] [TITLE] DATE , 200 LATECOMERS AGREEMENT P. 5 City of Kalispell Charles A. Harball Office of City Attorney City Attorney 201 First Avenue East P.O. Box 1997 Kalispell, MT 59903-1997 DATE: LEGAL OPINION January 29, 2009 TO: Myrt Webb, Interim City Manager Mayor Pamela B. Kennedy and Kalispell City Council FROM: Charles Harball, City Attorney Tel 406.758.7977 Fax 406.758.7979 charball@kalispcll.com ISSUE: Whether the Kalispell City Council has the legal authority to enact impact fees at any rate less than formulated by a legitimate study setting forth the maximum fee allowable? CONCLUSION: Yes. The City of Kalispell has the legal authority to enact impact fees at any rate less than formulated by a legitimate study setting forth the maximum fee allowable. 1. The City of Kalispell is a General Powers ci. The electors of the City of Kalispell have not granted the City of Kalispell a self governing power through a City Charter, therefore the authority of the City is regulated by MCA. 7-1-4124. Under these general powers, the City may enact ordinances and resolutions and otherwise exercise powers not inconsistent with law necessary for effective administration of authorized services and functions. Although this is a fairly broad mandate, the City must find its authority under the laws of the State of Montana. 2. State law currently allows, but does not require. the Citv of KalisDell to develop and impose impact fees. In 2005, the state legislature enacted MCA 7-6-1601 through 7-6-1604. This law first defines impact fees and then gives local governments the authority to enact these fees so long as certain empirical validation and documentation is in place to ensure that the fees that are imposed are not in excess of the proportionate share of the costs incurred or to be incurred by the governmental entity in accommodating the development charged. It is important to note that the statute does not, in any way, require local government to impose impact fees. That choice is left to the discretion of the local government. Legal Opinion Imposition of Less Than Maximum .Allowable Impact Fees January 29, 2049 Page - 2 3. The determination by the City of Kalispell to impose impact fees is discretionary which leads to the legal conclusion that the City may therefore impose an impact fee at a level that is less than the proportionate share of costs incurred or to be incurred by the City in accommodating the development charged. If it is legal for the City to determine to pay for its infrastructure by means that do not include impact fees, it is also legal for it to include the charge of impact fees that may be less than the maximum allowable charges. Any impact fee charged, however, must meet the requirements that an empirical analysis has been made to ensure that the fee charged does not exceed the proportionate share of costs incurred or to be incurred by the City in accommodating the development charged. 4. The City of Kalispell has made the empirical analysis to ensure that the impact fee charged does not exceed the proportionate share of costs incurred or to be incurred by the City in accommodating the development charged. The City of Kalispell contracted with competent qualified professional engineers who conducted a transportation analysis and developed a transportation plan which was duly considered, approved and adopted by the City Council. This transportation plan is consistent with the requirements of the State's impact fee law. The City also contracted with a competent qualified professional engineer who, utilizing the transportation plan, provided an analysis and methodology of determining, by discrete units, the impacts of various new developments on the City's transportation facilities. This analysis and study, also consistent with the State's impact fee law, sets forth the maximum impact fee, per discrete unit, that the City may charge that is a proportionate share of costs incurred or to be incurred by the City in accommodating each discrete unit of the development charged. Respectfully submitted, Char A. Harba 1, City Attorney Office of City Attomey City of Kalispell WORKSHOP FEBRUARY 9, 2009 1y stance a.I have been in favor of the methodology used to determine source of trips, number of trips and trip allocation. b. I've had no quarrel with the projects listed to determine an estimated cost realizing the list will need to be revised from time -to -tinge as growth occurs. c, The fees were WAY too high because they did not factor in our existing regulations and other sources funding. My fear is that we 'would generate a huge pot of money, hire consultants and build roads perhaps leading to nowhere. (challenge?) d. I have never bought into the idea "eve need to build a tax base". This is a mantra on a six month's cycle -- at budget time "we need more money because of growth", six months later "we need growth to build our tax base". Taxes = services if we are fain ! ! ! e. GROWTH IS INEVITABLE f, Impact fees are necessary. Over time Development A occurs along, say Stillwater Road, mitigating their impacts in accordance with the .extension of Services Plan along Stillwater. Then Development B builds along Stillwater. Impact fees along with SIDs are needed to build between for continuity of roadway. l h are.fees too high Explain existing rates used: 2006, 2007 & 2008 fees (Planning Dept. report) ----------$3, 9553200 Add Glacier Town Center, Phase I fees (Exhibit A)--------- 6,835,400 Add MSN9 required by extension ofServices Plan------- ......220351300 Subtotal ---------------------- 1238259900 Add 186,000 sf Wal-Mart - ----( $3,712/15000 SO ----------- 690,400 Total----------------------------------$13,516,300 That's more in 3 to 6 years than the $ 12.4 million in25 years Plus add in the mitigating measures like stop lights, turn lanes, alignments and width of roads for growth. by Home Depot, Hutton Ranch, Spring Prairie and even the Starling roundabout, all funded by developers and state and federal gas taxes, all development in accordance with the Extension of Services Plan. Recommendations Re: Hansz memo 2I9109 By removing certain roads from the list results in a more equitable way of determining the fees. (explain each road ) However, from. tune--to-time as traffic increases, from whatever source or direction, it may be necessary to use impact fees for other roads noted on the Transportation Plan. Examples: MSN4 -- whitefish Stage from Reserve to Rose Crossing If development occurs and the City annexes it and the Extension of Services Plan is beyond the scope of the developer's requirement, impact fees may need to be used because of growth throw pout the Coun , not specifically related to the project, or M SN 8 — Four Mile Drive from Springcreek to Stillwater -- may need to be dropped if development occurring abutting Four Mile is required by the .extension of Services Plan to build all the road. Roads should not be added to increase ees. I also agree that any grandfathering needs parameters but related to time and Council action. If grandfathering is adopted, grandfathered developments affected would still have to follow the existing .extension of Services Plan which does Not have a Developer Extension Agreement for Roads that allows for developer rebating for oversizing and for latecomers. The existing categories NOT PRACTICAL for Kalispell (explain from Planning Office report) It is suggested that an ordinance be adopted ASAP to: a. Adopt the methodology to arrive at 134,118 trips (cite report), b. Adopt and name source for average trips and trip factor (cite report) c.A.dopt roads eligible for impacts fees.. MSN S, 10, 12, and 30, as a basis for estimating the amount to be funded (cite Transportation Plan) d. A statement that as development occurs, other roads may be added or dropped, but this would not be a method used to specifically increase or decrease fees, e. The Council may revise the fees from time -to -time based on a re-evaluation of the methodology, growth patterns and construction costs, f. Adopt a grandfatheriAg clause effective date with parameters (between July 1, 2004 and July 1, 2009 effective for 6 years after approval of Preliminary Plat) g, Include a revised category list and charges After adoption of Ordinance have the staff revise the Extension ofServices vices Plan to include parameters such as Developer Extension Agreement for Roads as an Exhibit, cite a source for determining capacities of local, collector and minor arterial roads, a souce to be used for estimating trips generated by developments, etc. (comment on Silverbrook Extension) 5. Silverbrook Latecomers Agreement Was a water well developed, on or off the Silverbrook property and connected to the system.? Is the well included in the $1.7 million water system extension costs? Amend item. 8 after City by adding bv approval of the Citv C'o un cil This Agreement is not clear whether it follows our Extension of ,Services Flan. I believe this is supposed to be a Develo er Extension Agreement which is intended to reimburse the developer by people who "hook on" and for the hookers -on, i.e., "latecomers", to pay their proportional share of the costs of the extend line. This is a charge IN ADDITION to the city's System Development charge also known as an "Impact Fee". (read 1 A & 1 B). Oversizing the line is su osed to be paid to the develo er witi im act ees when someone "hooks -on" The city has no mechanism in their regulations called a Latecomers Agreement Here's the real dilemma: Water system-- Exhibit D--- 804 EDIT (ERU under fire flow). (Explain 4000 gprn, ISO, construction type, sprinklers, well with separate fire line, 2 hour storage, etc.) by formula @ 2000 gpm $2.50 x 700,000 sf 113 54 = 1294 — exceeds 804 EDUs I !Volford was the xrst to build would the others have to Pav an thin ? Could o fiord even build? Wouldn't the hones on& in Vall .iRanch Mark Owens and Wol ord plus Silverbrook .exceed 1396 EDUs *%at are the estimated EDUs Lorthe firstphase Glacier Town Center This Agreement is fraught with potential problems. I wonder how much the developer understands ghat is written. This Agreement should have been made before construction started (read page 28). An Agreement should be VERY CLEAR. that there are two fees-- a latecomers fee and and an Impact Fee. It appears to me that only one charge is being applied herein. It appears to be a total charge for both latecomers and impact fees which is okay in uncomplicated situations in that both can go to the developer. But in this case one entity or two entities can end up paying the total amount to compensate the developer for both latecomers and impacting fees (oversizing). The fire flow fees really throws this whole thing into a "cocked hat". January 29, 2009 Editor Daily .Inter Lake P.O. Box 7610, Kalispell, MT 59904 After listening to much testimony and reading written statements and newspaper articles on the transportation impact fees, it become clear to me that the public is not familiar with the City's existing regulation called the Extension ofServices Plan. This plan already requires developers to mitigate impacts their development has on traffic. The plan has been in effect for over 25 years. As an example; the wolford development will aleady have to construct the estimated $2 million road from whitefish Stage to US 93, and reconstruct a portion of the $2 million Whitefish Stage from Reserve to Rose Crossing. These are roads listed and calculating in the fees for the $12.4 million of road enlargements and new roads to be paid from impacted fees. In addition the mall project must provide rights -of -way and roads that mainly benefit future development by others to the north so that project by others will have access, through the mall project, to US 2 and US 93. The foregoing are roads and mitigation measures already required in the Extension of Services Plan. Now add in impact fees calculated by Public works for the first phase project called Glacier Center of $6.8 million to be paid as the mall buildings are built. Plus add in the future transportation impact fees for the hones of the project to be built in the future. All totaled the wolford project would be paying between $9 and $10 million of the total estimated $12.4 million for roads to be upgraded and built due to impacts. The rates proposed do not factor in the City's existing regulations. That's the dilemma. , Robert Hafferman 1337 Third Street west, Kalispell, mt 59901 752--1341