leveraging development agreements between municipalities...

Leveraging Development Agreements Between Municipalities and Private Parties Attracting Private Funding for Long-Term Development Projects and Addressing Land Use and Infrastructure Issues

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WEDNESDAY, MARCH 11, 2015

Presenting a live 90-minute webinar with interactive Q&A

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

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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

Agreement?

Value for Municipality

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

• 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)

Value for Developer

• 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

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

14

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

Example 1

15

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

Example 2

16

PETCO Headquarters

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

Example 3

17

City Base West

Shopping Center

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

Example 4

18

Broadway Apartments

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

Example 5

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Leveraging Development Agreements between

Municipalities and Private Parties:

Community Benefit Agreements

Presented by Rob Killen

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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

• Reduce risk by establishing community support

Value to Developer

• Enforceable agreement to provide benefit

Value to community

group

23

Difference Between CBA & Development

Agreement

Developer

City Community

Group

Development

Agreement

CBA

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

Benefits

Park and rec facilities

Parking permit

program, living wage

Job training

20% affordable housing

Interest free loans to

non-profits

(LA Lakers arena, housing, retail)

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

[email protected]

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

[email protected]

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


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


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


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


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


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


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


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)


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 [email protected]

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

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