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Minn. developers, homebuyers stand to win after court rules city's road fees are illegal

WOODBURY, Minn. — A longtime method of charging developers for future roadways in Woodbury is unlawful, the Minnesota Court of Appeals affirmed Monday, Sept. 18.

The city's practice of charging developers fees for future road improvements fell under legal fire last year when New Brighton-based developer Martin Harstad contested Woodbury's policy after it sought to collect $1.3 million for roads outside of Harstad's 183-home residential project.

Appellate Judge Diane Bratvold wrote in the court's opinion that, "the city lacks express or implied authority under (state statute) to impose the MRA," or Major Road Assessment fee, which a district court previously determined was unlawful

At issue was whether developers or cities should be responsible for road improvements outside of a developer's subdivision. But some observers say the court's decision will have wider implications and raises questions on who pays for public infrastructure: cities or the developers themselves.

"It's a landmark case," said Dave Siegel, executive director of the Builders Association of the Twin Cities. "It'll help developers as they go forward, and I think it'll help cities know the boundaries."

In pre-hearing briefings filed earlier this year, the League of Minnesota Cities, who represents Woodbury and other cities across the state, wrote the case would have "statewide significance."

Justin Templin, an attorney representing the city, said Monday that the ruling will place greater share of that burden on the City of Woodbury's taxpayers.

"As growth continues, how can a city pay for streets and other infrastructure improvements made necessary by new development?" he said in an email.

But Siegel said he sees the court's ruling as more of victory for homebuyers than developers as the region grapples with rising housing costs and concerns over affordability.

The added costs on top of developing the land is often passed along to homebuyers, he said, which can quickly add up and price homebuyers out.

In Harstad's case, the road fees would have gone toward funding roundabouts and other roads to handle any increased traffic and adding more than $6,000 per home.

"Builders don't have a problem paying their fair share," Siegel said. "This became problematic because it far exceeded the development itself, and they're saddling yet-to-be residents with the costs."

Woodbury, along with a number of other cities, charges developers fees to help cover road infrastructure outside of a development that may be needed as a result of the added growth.

Since 2011, Woodbury has charged builders nearly $5.4 million for major road fees, according to a review of developer contracts. The city calculates its fee at about $20,000 per acre in the area south of Bailey Road where Harstad planned to build the Bailey Park neighborhood.

Templin said Woodbury is considering its next steps, including seeking review by the Minnesota Supreme Court.