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Commentary: Inequity and the taxpayer tab for housing development

By John Diers Mar 20, 2019

Twenty-five million dollars is a lot of money. It could end up on the public tab if developers are allowed to fatten their profits and unload the costs of their projects on Prior Lake property taxpayers.

Growth and development doesn’t pay for itself, nor should retired homeowners or young families struggling with student loans or business owners get stuck with the costs of development. It’s said we live in a new Gilded Age. A better term might be the Age of Inequity — an absence of simple fairness that puts greed before the common good.

Here’s a good example: New Brighton developer Martin Harstad wanted to build 180 homes in the City of Woodbury but didn’t want to pay the $1.3 million the city wanted for road improvements made necessary by his project. He sued. Last August, the Minnesota State Supreme Court ruled for Harstad, stating that Woodbury didn’t have state statutory authority to levy the fee. Harstad saved $1.3 million and left Woodbury taxpayers with the bill.

Before the ruling, Prior Lake was charging developers $6,549 per buildable acre for road improvements linked to their projects. The fee covered everything from a new road to extensions or widening of an existing road to traffic signals. More homes mean more cars, more traffic and more wear on existing infrastructure. The money went to a fund the city used for street improvements attributable to development projects. Take away the projects, and none of these improvements would be needed.

After the court’s ruling, the expense falls on property taxpayers while the developer walks away with a fatter profit. The city counts 3,755 acres of developable land. Multiply that by $6,549 per acre for street improvements, and there’s a revenue loss to the city of about $25 million — all of it to be made up by taxpayers unless, of course, the city takes a page from the city of Lake Elmo and says no to all future developers and development. That’s one possibility. There are more.

The court decision puts the issue in the lap of the Legislature. On Feb. 18, the Prior Lake City Council unanimously adopted a resolution to the Legislature to pass a law giving cities the authority to impose road improvement fees on developers. Other cities and townships in Scott County have adopted similar resolutions. A bill has been introduced, sponsored by Reps. Tony Albright and Brad Tabke in the House and Sen. Eric Pratt in the Senate, but its fate is uncertain. Special interests and lobbyists with big guns have this legislation in their sights.

Enter Housing First Minnesota, a developer trade association that markets itself as a friend of the homebuyer and affordable housing. It’s been arguing that municipal fees and regulations make it impossible to build a single-family home in the Twin Cities for less than $375,000. I can remember when a simple new home with three bedrooms and two baths went for $75,000. Of course, it wasn’t 4,000 square feet, nor did have a three-car garage or sit on a half-acre lot on a cul-de-sac in a project with an upscale name.

Housing costs are grossly inflated, but how much of it is driven by developers and landowner speculation? Expensive homes on big lots mean more profits for developers and landowners. Is their cause affordable housing or enriching developer profits and dumping the costs on property taxpayers? In an Age of Inequity, the answer is obvious.

The question before the Prior Lake Council is what to do if the lobbyists win and the bill fails. If it does nothing, there will be taxpayers with torches and pitchforks at City Hall. However, based on my discussions with the mayor and council members, they’re engaged and proactively committed to protecting taxpayer interests.

The city hired a consultant to make a firm estimate of the costs of future road improvements. That number could be important in negotiations with developers, especially if the issue goes to litigation. The council could go on to suspend annexation agreements and declare projects premature. It could also let developers develop but not commit to a dime’s worth of infrastructure improvements. Try selling upscale homes if prospective buyers have to drive through a cow pasture to get to them.

It’s the nuclear option, but the city could declare a moratorium on all development and developers, conduct a full study of the economic, environmental and social costs of development, then make a determination on how or if it proceeds with development in future years. That study should be part of the 2040 plan.

The city is at a tipping point. I’m reminded of my favorite 19th century journalist and rabble-rouser, Mary Elizabeth Lease. It was the Gilded Age, and Lease was a Populist. She’s remembered apocryphally for telling Kansas farmers to “raise less corn and more hell.” In the Age of Inequity, her words apply in a different way for a different cause. Prior Lake taxpayers should remember them.

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John Diers is a Prior Lake resident who spent 40 years working in the transit industry and is the author of “Twin Cities by Trolley: The Streetcar Era in Minneapolis and St. Paul” and “St. Paul Union Depot.” To submit questions or topics for community columnists, email editor@plamerican.com.