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1998-07-24 EDA to Consider Reduction of Development Fees• Michael C. Couzi~ COURI & MACARTHUR Arzdreiv J. MacArthur Anorneys ar Law Marcus W. Miller 705 Central Avenue East PO Box 369 ".dlaulice~~scdinlllinois St. Michael, MN 55376 (612) 497-1930 (612) 497-2599 (FAX) July 24, 1998 Mr. Jim Morse JMJ Properties, Inc. 107 Sinclair Drive Muskegon, Michigan 49441 Re: City of Albertville; Minneapolis Factory Shoppes. Dear Jim: • City staff has recently met with the City's Economic Development Authority to consider your request to reduce the development fees applicable to the proposed outlet mall. While any such reductions would have to be approved by the full City Council, three of the five City Council members were sitting as EDA members during consideration of this matter and would likely support this package were it to be considered by the full City Council. Although Albertville is located in Wright County, it is close enough to the Metro area such that infrastructure (roads, sewers, etc.) constructed in Albertville cost as much as if they were constructed in Minneapolis or one of its suburbs. In short, our infrastructure costs are relatively expensive. Further, because Albertville has grown so quickly in the last ten years, it has outstripped its original infrastructure and has little in "reserve." Virtually all land that has existing sewer and water available to it has either been developed or is in the process of being developed. Further development will mean extensive investment in additional sewer and water trunk lines and additional roads. Likewise, the City is in the process of upgrading its wastewater treatment plant. Cost estimates for this upgrade have recently increased from an estimated $1 million to approximately $4.5 million. As a result, if Albertville is to continue to grow, the majority of these costs must be passed on to the developers of the land so that infrastructure can be built when and where it • is needed. While Albertville has some flexibility as to when it needs to collect many of r i • Mf-. Jim Morse July 24, 1998 Page 2 of 4 these fees, it has much less flexibility on the issue of whether these fees can be waived outfight. Given these considerations, City staff proposes the following arrangement related to the development fees to be incurred with the development of the proposed outlet mall: • Site Plan Review, Subdivision Review, Legal Review/Developer's Agreement, Engineering Review-Estimated between $15,000 and $20,000. The City does not have this budgeted and thus cannot waive this. • Park Dedication Fees-Estimated by JMJ to be $90,000. The City's ordinance currently calls for 10% of the land value to be dedicated. Staff believes that the Council would cut this fee in half, particularly if the outlet mall included some sort of outdoor picnic/resting area open to the public during business hours. • Building Permit Fees-Estimated to be $30,000. Approximately 40% of this amount goes to the City (the remainder goes to the building inspector, an independent contractor). Staff believes that 40% of this fee can be waived outright by the City. • Plan Review Fee, Plumbing Permit Fee, HVAC Permit Fee-Estimated to be approximately $45,000. The City receives 10% of this amount (the remainder goes to the building inspector). Staff believes that 10% of the fee can be waived outright by the City. • State Surcharge Fee, State Inspection Fee-Estimated to be approximately $5,000. The City receives none of this fee as the entire fee is required to be forwarded to the State. Staff believes that the City cannot waive this fee. • Sanitafy Sewer Trunk Access Charge-Estimated by JMJ to be $143,402. City Staff believes the estimated cost to be closer to $84,000 for the outlet mall portion of the properly. This fee is administered as a $1,400 per acre fee, $500 of which is for trunk line improvements and $900 of which is for liftstation improvements. Staff believes that the $500 per acre portion (approximately $30,000) can be deferred (with interest) and paid over afive-year period (see details below). The remaining $900 per acre (approximately $54,000) is necessary for lift station upgrades. Staff recommends, • however, that the City Engineer meet with JMJ's engineer to discuss the possibility of r ~ ! ~ • Mr. Jim Morse July 24, 1998 Page 3 of 4 having JMJ construct a larger lift station in lieu of the collection of some or all of the $54,000. • Sanitary Sewer Access Charge (SAC}-Estimated to be approximately $227,555. This money is earmarked for expansion of the wastewater treatment plant (scheduled to occur in the year 2000). As it currently stands the plant will be at capacity sometime in the year 2000 unless the capacity is expanded. Estimated cost of the expansion is $4.5 million. Staff believes that this fee can be deferred (with interest) and paid over a five year period (see details below). • Water Access Charge-Estimated to be $200. Staffbelieves that the City can waive this charge outright. • Water Trunk Charge-Estimated by JMJ to be $103,000. City Staff believes the estimated cost to be closer to $60,000 for the outlet mall portion of the property. Staff • believes that this fee can be deferred for up to five years. • Storm Sewer Connection Charge-Estimated to be $43,000 to $45,000. Staff believes this cost can be waived in its entirety. The waivers proposed above amount to approximately $105,000, leaving approxunately $500,000 in development fees to be paid (including $54,000 of those fees which may be wrapped into joint City/JMJ improvements), with most of those being deferred. 'The deferral would call for the deferred fees to be split equally over five years with interest at 6%. The deferred fees would likely take the form of a special assessment levied on the property (with the consent of JMJ) and payable over the five-year period. While the City's development fees are indeed high, so are the City's infrastructure costs. These costs are growing even faster as the City's growth accelerates. In addition, the City has begun to identify several road improvements which will be necessary to support the traffic the outlet mall will generate. Initial cost estimates put these figures over $200,000- money the City does not cun-ently have. City Staff believes that the City Council will work with JMJ to locate the proposed outlet mall in Albertville. However, given Albertville's limited size and budget, it is • impractical to expect the City to be able to waive or reduce a majority of its fees without crippling the City's growth potential. ~ ~ 1 f' '. • Mr. Jim Morse July 24, 1998 Page 4 of 4 Please examine the proposal detailed above. Please keep in mind that this proposal has not yet been presented to the City Council for their approval. Please feel free to contact us with any questions, comments or suggestions you may have. Thank you. Sincerely, `~ Michael C. Couri Couri & MacArthur cc: Mr. Dave Lund Ms. Linda Goeb • Ms. Liz Stockman Mr. Pete Carlson Mr. Mike Knowlton r1 U