Presenting a live 90-minute webinar with interactive Q&A Leveraging Development Agreements Between Municipalities and Private Parties Attracting Private Funding for Long-Term Development Projects and Addressing Land Use and Infrastructure Issues WEDNESDAY, MARCH 11, 2015 1pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Shelby D. Green, Professor, Pace Law School, White Plains, N.Y. Gregory W. Jones, Esq., Ancel Glink Diamond Bush DiCianni & Krafthefer, Chicago Rob Killen, Shareholder, Kaufman & Killen, San Antonio The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.
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Leveraging Development Agreements between Municipalities and Private Parties: Value of Development Agreement Presented by Rob Killen
Why Enter into a Development Value for Municipality Agreement? Certainty in the development process Generation of incremental real property tax and sales tax Incentivize certain types of development Job creation Protection of environmental features (e.g. endangered species habitat, trees, water resources) 6
Why Enter into a Development Agreement Value for Developer: Certainty in the development process Creation of necessary public infrastructure Offset development costs 7
Why enter into a Development Agreement? Value for Municipality Value for Developer Certainty in the development process Generation of incremental real property tax and sales tax Incentivize certain types of development Job creation Protection of environmental features (e.g. endangered species habitat, trees, water resources) Certainty in the development process Creation of necessary public infrastructure Offset development costs 8
Potential Development Agreement Incentives Direct Municipal Assistance Applicability of Current or Future Ordinances Tax Abatement or Reinvestment Annexation Special Districts 9
Direct Municipal Assistance Grants Fee Waivers Construction of pubic improvements Participation in costs of public improvements 10
Applicability of Current or Future Ordinances Permitted land uses upon annexation Grandfathering/Vested rights Special zoning districts 11
Tax Abatement or Reinvestment Tax Abatement Tax Rebate Tax Increment Reinvestment Zone 12
Annexation Non-Annexation Agreement Delayed Annexation 13
Special Districts Districts with Land Use Controls Districts that use existing tax revenues Districts that can collect taxes and assessments Examples in Texas 14 Municipal Utility District (MUD) Water Control & Improvement District (WCID) Public Improvement District (PID) Special Improvement District Road District Municipal Management District (MMD) Municipal Development District County Development District
Example 1 SunEdison Solar Farm Project: Solar farm in south San Antonio Incentive: Non-Annexation Agreement, Tax Abatement Value to developer: No City taxes Value to Municipality: Additional renewable energy 15
Example 2 Cibolo Canyons & JW Marriott Resort Project: Residential development, 1000+ room hotel and 2 TPC golf courses Incentive: Special district, non-annexation agreement Value to developer: District collects property, sales, and hotel occupancy taxes Value to Municipality: Aquifer recharge zone protection and destination resort 16
PETCO Headquarters Example 3 Project: Creation of corporate headquarters Incentive: Tax abatement and grant Value to developer: Cash and no taxes Value to Municipality: Over 400 high paying jobs 17
City Base West Shopping Center Example 4 Project: Retail shopping center Incentive: Purchase of real property and drainage improvements Value to developer: Equivalent of grant for public improvement Value to County: Job creation, public infrastructure, new retail in underserved area 18
Broadway Apartments Example 5 Project: Apartment complex in central San Antonio Incentive: Tax abatements and fee waivers Value to developer: Reduced city taxes and significant fee reduction Value to Municipality: Creation of housing near downtown 19
Leveraging Development Agreements between Municipalities and Private Parties: Community Benefit Agreements Presented by Rob Killen 20
What is a Community Benefit Agreement? A Community Benefits Agreement is a contract signed by community groups and a real estate developer that requires the developer to provide specific amenities and/or mitigations to the local community or neighborhood. (Source Wikipedia) 21
What is a Community Benefit Agreement? In exchange, the community groups agree to publicly support the project, or at least not oppose it. Often, negotiating a CBA relies heavily upon the formation of a multi-issue, broad based community coalition including community, environmental, faith-based and labor organizations. (Source Wikipedia) 22
Why Enter into a Community Benefit Agreement Value to Developer Reduce risk by establishing community support Value to community group Enforceable agreement to provide benefit 23
Difference Between CBA & Development Agreement Developer Development Agreement CBA City Community Group 24
Examples of CBAs and Benefits 25
Atlanta Beltline Benefits Affordable Housing Historic preservation Art (Light rail loop) 26
Denver Gates-Cherokee Benefits Affordable housing Living wage Ban on big box (retail/residential) 27
Hollywood & Vine Benefits Living wage 20% of units are affordable Job training grant Arts grant Employee healthcare (hotel, housing, retail) 28
Staples (LA Lakers arena, housing, retail) Benefits Park and rec facilities Parking permit program, living wage Job training 20% affordable housing Interest free loans to non-profits 29
Similar Agreements Even if your jurisdiction has not adopted a formalized CBA process, there may be similar types of agreements: Example: Deed restrictions with zoning usually negotiated with neighborhood association, community group, park conservancy, etc. 30
San Antonio San Antonio does not have a formal CBA process. However, there is a provision in the development code that encourages such dialogue between developers and neighborhood groups, called the Citizen Participation Plan. 31
Acknowledgments Thank you to The Public Law Center at Tulane University Law School for all of their material on Community Benefit Agreements. www.law.tulane.edu/tlscenters/publiclawcenter 32
Rob Killen rob@kk-lawfirm.com 100 West Houston Street, Suite 1250 San Antonio, Texas 78205 (210) 227-2000 www.kk-lawfirm.com 33
Development Agreements: Validity and Enforceability Shelby D. Green Pace Law School sgreen@law.pace.edu March 2015 Shelby D. Green Development Agreements March 2015 34
Land use regulation as a backdrop Pursuant to police powers Regulations to serve the public health, safety, morals and general welfare What land use regulation entails Adoption of comprehensive plan Enactment of ordinances pursuant to the plan Ordinances Use districts or zones Lot sizes Height Activities Historical Model for zoning Euclidean Legislative acts Rigid segregation of uses Shelby D. Green Development Agreements March 2015 35
Current Land Use Model Bargaining Early Forms 1. Variances authority to use property in a manner prohibited by the zoning ordinance Requiring some showing of undue hardship or practical difficulties But, must be consistent with the public interest 2. Special exceptions or conditional use permits allows a different use than is expressly permitted as of right by the ordinance allows additional uses, which are conditionally compatible within each zone, but which should not be allowed unless specific statutory standards assuring compatibility are met by the landowner More recently 3. Development Agreements Shelby D. Green Development Agreements March 2015 36
Why Bargaining Land use is multifaceted Dynamism inheres in a growing economy Local governments have become more entrepreneurial New land use philosophies Preservation Sustainability Shelby D. Green Development Agreements March 2015 37
What Are Development Agreements Agreements between Developer and Municipality Allowing development With the assurance that the zoning in place at time of agreement will govern the project Benefits To developer Certainty of governing rules Ability to coordinate approvals Ease of obtaining financing To municipality Fulfillment of comprehensive plan Opportunity for exactions Avoidance of litigation Shelby D. Green Development Agreements March 2015 38
Early Legal Challenges to Development Agreements A form of contract zoning Illegal because it portends: Bargaining away police powers By Bilateral agreement That Binds municipality Without public hearing Without regard for the public interest Prohibited by Reserve Powers Doctrine Shelby D. Green Development Agreements March 2015 39
How Courts Responded to the challenges Four Camps: 1. Per se illegal as contract zoning 2. Case by case approach; invalid if: public interest not served extraneous consideration is involved unreasonable process lacks transparency destructive of zoning uniformity 3. Finding conditional zoning Unilateral promise from developer No promises made by municipality Rezoning with conditions Promotes general welfare, not merely private interests Not spot zoning >>> Are contract zoning and conditional zoning distinguishable? 4. Upholding the Agreements Shelby D. Green Development Agreements March 2015 40
Development Agreements as Sui Generis Negotiated Deals Creating rights different from vested rights Public welfare is furthered Subject to public review process Subject to abrogation if the public interest demands Shelby D. Green Development Agreements March 2015 41
Legislative Responses to Challenges Development Agreement Acts By state enabling acts Arizona, California, Colorado, Florida, Hawaii, Idaho, Louisiana, Maryland, Maine, Nevada, New Jersey, New Mexico, North Carolina, Oregon, South Carolina, Virginia, Washington, Utah, and Texas Common Provisions 1. goals, details of project 2. minimum terms specified 3. conformance with comprehensive plans 4. limits on duration 5. mechanisms for review, amendments, cancellations, exceptions 6. approval and adoption Resolution Referendum Administrative General Effect Rules, regulations, official policies governing are those in force at the time of the agreement Shelby D. Green Development Agreements March 2015 42
Some Recent Cases Sierra-Nevada, SW Enter. v. Douglas County (D. Nev. 2011) (because authority retains the ability to rezone as the public interest requires in the future, the contract entails neither a formal, nor a practical surrender of the police power. ) Toll Brothers, Inc. v. Board Of Chosen Freeholders of Burlington (N.J. 2008)(recognizing the value and limits of developers agreements ) 2800 La Frontera No. 1A, Ltd. v. City Of Round Rock (Texas Ct. App. 2010)(reaffirming the validity of development agreements) Neighbors For Responsible Development v. City Of Yakima (Wash. Ct. App. 2006)(rejecting contract zoning challenge) Shelby D. Green Development Agreements March 2015 43
Strengthening the Foundation: Getting the Most out of Development Agreement Statutes Strafford Webinar: Leveraging Development Agreements between Municipalities and Private Parties March 11, 2015 Presented By: Gregory W. Jones Attorney Ancel, Glink, Diamond, Bush, DiCianni & Krafthefer P.C. www.ancelglink.com 44
Overview Basic components Common limits on development agreements Key provisions to enable public-private agreements 45
Why is Statutory Authority Necessary? Development agreements include limits on future zoning power; courts question the authority Municipal police powers are delegated by the state and can be limited by the state Therefore, a state statute supporting development agreements removes a major legal concern 46
Elements of a Typical Enabling Statute Protection of general welfare Permitted scope of an agreement Enabling ordinance Requirements for approval and adoption Conformance to plans and other reviews Binding state and federal agencies Amendment or cancellation of the agreement 47
Protection of General Welfare Outline the connection: development agreements promote public welfare Focus advocates and critics on the benefits e.g., Big-box development agreements 48
Setting the Limits: Required and Permitted Scope Required Scope: Statues should outline provisions and information that must be addressed in each agreement Permitted Scope: Statues should identify any and all limits on scope to prevent unconstitutional conduct e.g., California Statue 49
Requirements for Approval Require an enabling statute to tie agreement to local authority Agreement must be approved by ordinance or resolution e.g., Hawaii, California, Washington 50
Conformance to Plans and Other Reviews Statutes often require compliance with Comprehensive Plans Comprehensive Plans seen as a symbol of future zoning decisions Useful to convince courts that such future powers have not been sacrificed e.g., Hawaii and California 51
Binding on State and Federal Agencies Allowing state agencies to join development agreements expands options Large developments require agency approvals that often limit certainty e.g., Hawaii, California 52
Public Participation Identify proven strategies for incorporating public feedback before the hysteria Avoid the backroom deal label e.g., Water Street District, Naperville, Illinois 53
Armoring the Agreement: Tips for Strong, Successful Agreements Strafford Webinar: Leveraging Development Agreements between Municipalities and Private Parties March 11, 2015 Presented By: Gregory W. Jones Attorney Ancel, Glink, Diamond, Bush, DiCianni & Krafthefer P.C. www.ancelglink.com 54
Overview Use Nollan and Dolan as a framework Eliminate potential duress Avoid long-term, on-going obligations Define terms and benefits to avoid future conflicts Retain police powers 55
Nollan and Dolan: A Blueprint for Safe Negotiation Refresh legal background Nollan v. California Coastal Comm n, 483 U.S. 826, 833 (1987) Dolan v. City of Tigard, 114 S. Ct. 2309 (1994) Voluntary agreements should not be subject to Nollan and Dolan limits BUT.why enter the fray? 56
Eliminate Perceived Duress As with any contract, economic duress is a potential pitfall Development agreements have potential for abuse of bargaining position Frame agreement to reflect voluntary nature 57
Avoid Long-Term, Ongoing Obligations Future conflicts doom development agreements Long-term obligations lose favor when leadership changes on both sides Keep it limited; modify if necessary 58
Retain Police Powers Development agreement should expressly address key legal pitfalls (i.e., Reserved Powers Doctrine) In recitals and substantive provisions, limit time period of vested rights Retain future rights to promote public health 59
Focus on Speed, Not Detour Should target developments that are allowed under zoning code Best used to provide certainty, not avoid zoning laws Problem development = problem agreement 60
Define Terms to Avoid Future Conflicts Limit long-term commitments Define and limit trouble terms e.g., Will relief from impact fees pose problems for a future stormwater utility? 61
Contact Us Gregory W. Jones gjones@ancelglink.com Ancel, Glink, Diamond, Bush, DiCianni & Krafthefer, P.C. www.ancelglink.com Chicago: (312) 782-7606 Vernon Hills: (847) 247-7400 Naperville: (630) 596-4610 Crystal Lake: (815) 477-8980 Bloomington: (309) 828-1990 62