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Development Fees and Cities Q&A <br />January 2019 <br />Page 2 <br />Question: Why not use special assessments? <br />Answer: While this is an option, there are some significant risks to cities. For example, if the city installs <br />the public improvements but the developer doesn't finish the project or the subdivided lots do not sell <br />and sit empty, the city will face delays in recovering their costs and could be forced to charge taxpayers <br />for the bill. <br />Question: How are fees calculated? <br />Answer: Cities set fees to cover costs incurred by reviewing, investigating, and administering an <br />application. State law requires that these fees must be fair, reasonable, and have a connection (nexus) to <br />the actual cost of the service for which the fee is imposed. In addition, the need must be roughly <br />proportional to the size and proposed use of the development. For example, in a five -house subdivision, it <br />may be reasonable to require dedication of land for a small public playground, but not multiple acres for a <br />community park. Some fees are required to be based on the appraised value of the land. On request, a <br />city must explain the basis of its fees. <br />Question: Why are regulations and fees for developers so different from city to city? <br />Answer: Subdivision regulations vary from city to city because each city has different development and <br />planning goals, which are tailored to the unique attributes of their community. For example, one city may <br />value preservation of agricultural space, while another city values the creation of affordable housing. <br />Some fees are required to be based on the appraised value of the land, which is an additional reason why <br />they can be different from city to city and even from neighborhood to neighborhood. <br />Cities can require a written contract known as a "development agreement." Development agreements are <br />negotiated between the city and developer and detail the fees and specifications of the project. This give- <br />and-take can ultimately reflect the unique characteristics of the project and can provide flexibility in fees <br />and requirements. Regardless, statutory cities are not allowed to require a cash fee for the construction of <br />future road improvements as part of a development agreement. <br />Question: What happens to money collected after the project is complete? <br />Answer: If there is any leftover money, those funds are returned when all required conditions of the <br />development are met. <br />For more information, visit www.lmc.org/development. <br />