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Published: March 19, 2008
written by Jerry Deschane
Cities, towns and villages will be updating their impact fee ordinances and subdivision ordinances again, as a result of legislation signed by Governor Doyle on January 4. Wisconsin Act 44 makes several changes to state laws governing impact fees and subdivision exactions. Among the changes is a provision restoring the power of a municipality to impose a fee in lieu of land dedication as part of its subdivision ordinance, as long as that fee is limited to the acquisition or initial development of parks.
Park Fees are Back
For decades, local governments used their power to regulate subdivisions as the legal authority to require developers to dedicate land or pay a fee in lieu of that land dedication. The land or the fee was used to provide parks to serve the development. The authority to impose such a fee was taken away two years ago when the legislature passed 2005 Wisconsin Act 477.
Act 477 modified ss. 236.45(6), Wis. Stats., to include a statement that, "...a municipality, town, or county may not, as a condition of approval under this chapter, impose any fees or other charges to fund the acquisition or improvement of land, infrastructure, or other real or personal property." This change forced local governments that wanted to collect a fee from developers to use the impact fee statute, which includes numerous restrictions on timing, payment, and use of the fees.
Act 44 restores fees-in-lieu of land dedication, but in a limited manner. Local governments (towns, cities and villages, but NOT counties) once again have the power to impose a subdivision exaction fee. However, that fee may only be used to fund the acquisition or initial improvement of land for public parks. The bill further refines "improvement of land for public parks," to mean only the, "grading, landscaping, installation of utilities, construction of sidewalks, installation of playground equipment, and construction or installation of restroom facilities on land intended for public park purposes." The fee must bear a rational relationship to the need caused by the development, and must be proportional to that need.
Impact Fees May be Held Longer
Another major area of change has to do with the amount of time that a local government may hold onto impact fees. Wisconsin's original impact fee enabling legislation was wide open on the topic of how long they could be kept. Local governments were only limited to a "reasonable" amount of time, and were left to decide how long "reasonable" could be. Act 477 limited the holding time to just seven years, with an additional three years if the municipality found that there was a "hardship" that required more time before the fees could be used.
Some local governments and developers questioned whether the seven years was measured from the date the ordinance was passed, or from the date of collection. Others argued that a seven-year period is not long enough for infrastructure such as sewage treatment plants that are primarily funded through bonding.
Act 44 extended the retention period for new impact fees to ten years, with a three-year extension available if the municipality finds, in writing, that there are extenuating circumstances that require holding the fees longer. In addition, the Act clearly states that impact fees that are collected "within seven years of the effective date of the ordinance," but not used within 10 years, must be returned to the current property owner, with interest. Impact fees collected more than seven years from the effective date of the ordinance are subject to the more flexible "within a reasonable time," standard.
The bill also clears up confusion about the fate of impact fees that have already been collected, but have not yet been used. Those fees were broken up into three groups. Impact fees that were collected prior to January 1, 2003 must be used no later than December 31, 2012 or refunded. Impact fees collected between January 1, 2003 and April 10, 2006 must be used within 10 years of collection, or refunded. Impact fees collected after April 10, 2006 must be used according to the new statutory time limits.
Limits on Professional Service Fees
The bill addresses two issues that have nothing to do with impact fees; one is professional service fees (e.g., engineering oversight fees); the other has to do with the dedication of storm water ponds.
The bill does not allow a local government that chooses to pass on its costs for engineering, environmental consulting and other professional services to the developer to charge a premium for those costs. Newly-created section 66.0628(3) states, "If a political subdivision enters into a contract to purchase engineering, legal, or other professional services from another person and the political subdivision passes along the cost for such professional services to another person under a separate contract between the political subdivision and that person, the rate charged the other person for the professional services may not exceed the rate customarily paid for similar services by the political subdivision." This new clause is a response to land developers' concerns that engineering oversight costs are an unregulated and rapidly-growing expense. Some developers have complained that they pay more for city oversight than for original engineering work on some projects. The language will not solve that problem, but will at least assure developers that they are not paying higher rates for the service than the city itself pays.
New Storm Water Dedication Requirements
New requirements in chapter 236 help set the stage for municipal takeover of storm water ponds and other runoff management facilities. The new paragraph is section 236.29(4), and it is entitled "Acceptance of storm water facilities dedicated to public." The paragraph sets the standards that must be met for a local government to accept the dedication of a storm water pond or other runoff facility. Unless a different timeframe is agreed upon, under those standards, a facility cannot be dedicated to a municipality until at least 80 percent of the lots in the subdivision have been sold, and that a professional engineer has certified to the municipality that: a) the facility is functioning properly in accordance with the plans and specifications of the municipality; b) any required plantings are adequate, well-established, and reasonably free of invasive species; and c) any necessary maintenance, including removal of construction sediment, has been properly performed.
The Wisconsin Builders Association Land Development Council, which was the principal driver of this language, originally wanted local governments to be mandated to take ownership of all storm water facilities within a new subdivision. While many municipalities automatically assume control of the ponds, some have left that responsibility up to home owners associations, or have not addressed the issue at all. The Development Council fears that those ponds will not get adequate maintenance in the future, which will lead to flooding problems.
Not surprisingly, local governments were unwilling to accept a mandate. The two sides were able to find consensus on the language of Act 44. The Act does not force government management, but describes the circumstances under which such a dedication may take place. As with all elements of Wisconsin subdivision law, local governments are free to negotiate alternative solutions with developers.
You Give a Little, I'll Give a Little
The politics behind the policy of Act 44 are worth mentioning. Local governments were blindsided by the previous legislature's restrictions on park fees. Their lobbying groups were unable to find common ground on the changes being pushed by the developers, and furthermore they did not expect that Democratic Governor Jim Doyle would sign a controversial bill that was supported by an organization that had endorsed his opponent. To the municipalities' surprise, the Governor did sign the bill, leaving them scrambling to update their ordinances.
At the same time, Act 477 arguably created "unintended consequences," not the least of which was local governments requiring developers to give up prime building sites for park land, when those developers would have preferred to pay a fee in lieu of the land dedication. Several attorneys argued that those municipalities could have adopted a park impact fee (and many did so) rather than take developable land off the market, but they chose not to.
Finally, both sides wanted to do some fine-tuning of the timing of payment statutes, and to address the storm water pond issue. An opportunity for compromise was born.
Time to Update the Ordinances
Wisconsin Act 44 became effective on January 18 of 2008. The new impact fee deadlines, park dedication fees, and storm water facilities language are all tools that may be applied to subdivisions and certified survey maps submitted any time after that. Local governments should consult with their legal counsel and with their respective associations for guidance on how to properly apply the new rules. Builders and developers are encouraged to have their attorneys compare any proposed ordinances to the new statutes. A good resource for developers is the Wisconsin Builders Association Land Development Council, under the direction of Pat Stevens (pstevens@wisbuild.org).
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