Chapter 4.35
COST RECOVERY
Sections:
4.35.030 Application for establishment of a zone of benefit.
4.35.050 Limitations on zone of benefit recovery charge.
4.35.060 Council review of application.
4.35.080 Challenge to formation.
4.35.090 Agreement and right to reimbursement.
4.35.130 Penalty for violation.
4.35.010 Purpose.
This chapter provides a method to reimburse a person or the city for financing the construction of sewer, water, surface water management, or street improvement facilities in whole or in a disproportionately large part. It is intended to be used to mitigate the cost of financing such public improvements by distributing those costs to other benefited property owners at the time those benefited property owners connect to or make use of the improvement. [Ord. 441 § 1, 2023.]
4.35.020 Definitions.
The following words, terms and phrases, when used in this chapter, shall have the meanings ascribed to them in this section, except where the context clearly indicates a different meaning:
“Develop” means making a material change in the use or appearance of a structure or land, dividing land into two or more parcels, creating or terminating a right of access or connection to a street or other utility. Any development proposal (such as a minor land partition, a subdivision, a planned development, construction of a new building, or similar) that is reviewed by the city and required as a condition of approval, per the Halsey Development Code, to install or connect to a street or utility improvement which has already been constructed by a previous developer will pay for the portion of the existing improvement that it would otherwise have been required to provide.
“Extension of services” means improvement of a public facility to extend it to serve a property or properties to allow for their development. Extension of services is most often required as a condition of approval of a land use decision, or as a requirement for issuance of a building permit.
“Parcel of land” or “parcel” means a platted lot or any other tract of land which is occupied or may be occupied by a structure or structures or other use, including the yard and other open spaces required under the Halsey Development Code, or reasonably attributable to an existing or proposed use.
“Person” means an individual or any legal entity, including the city.
“Public facility” means any public improvement or utility, including, but not limited to, streets, sanitary sewer, water, storm drainage, or similar.
“Zone connection charge” means the charge imposed pursuant to this chapter, designed to reimburse a person for the costs of financing sewer, street surface water management, or water improvement facilities. The zone connection charge is not intended to limit or replace, and is in addition to, any other existing fees or charges collected by the city.
“Zone of benefit” means the area benefited by the construction of sewer, water, surface water management or street public improvement facilities financed in whole or in part by a person without the formation of a local improvement district. [Ord. 441 § 1, 2023.]
4.35.030 Application for establishment of a zone of benefit.
(1) Any person who is required by the city to finance construction of street, sewer, water, or storm drain improvements or some combination thereof that will provide special benefit to parcels other than those for which the person has obtained development approval may request that the city establish a zone of benefit recovery charge. The city may also be the applicant.
(2) A written request to establish a zone of benefit recovery charge shall be submitted to the city administrator within three months of the city’s acceptance of the improvement or installation of the public facility. The city administrator may extend the deadline if the applicant demonstrates that the delay was not caused by the applicant and was created by unanticipated or unforeseen circumstances. The request shall consist of the following information:
(a) A description of the location, type, size, and cost of the public improvement.
(b) A narrative explaining why the applicant believes all or part of the cost of improvement is eligible for reimbursement pursuant to this chapter.
(c) A map showing the properties to be included in the proposed district, including the city’s zoning designation; the location, square footage and street frontage of the property or properties to be included in the zone; and identification of the properties owned by the applicant, if any.
(d) The cost of the improvements to be reimbursed. If the application is filed after construction, the application shall include the actual cost of construction as evidenced by a contract, receipts, invoices or other similar documents. If the application is filed prior to construction, the application shall include the estimated cost of the improvements as evidenced by bids, projections of the cost of labor and materials, or other similar evidence satisfactory to the city administrator.
(e) A proposed methodology for spreading the cost among the properties within the zone of benefit and, where appropriate, defining a “unit” for applying the zone connection charge to property that may, subject to city approval, be partitioned, adjusted or subdivided at a future date. The methodology should consider the factors set forth in HMC 4.35.040 pertaining to the city engineer’s report.
(f) The date that the city accepted the public improvements or the date that the improvements are estimated to be completed.
(g) The city administrator or city engineer may request the submittal of any additional information deemed relevant.
(h) An application shall be accompanied by a deposit as established by city council resolution. The purpose of the deposit is intended to cover the city’s costs in providing notification to affected property owners and the city engineer’s examination, review, and administration of approved agreements. If actual costs of processing the application exceed the deposit, the remainder of the expense must be paid by the applicant before the zone of benefit will be recorded. The costs of processing the application may not be included in the computation of the recovery charge. [Ord. 441 § 1, 2023.]
4.35.040 Application review.
Upon receipt of a complete zone of benefit application, as determined by the city engineer, the city engineer shall review the request for the establishment of a zone of benefit. The city engineer and city administrator will prepare a staff report to be submitted to the council. The report shall include the following information:
(1) An explanation as to why the applicant is or is not qualified for reimbursement pursuant to this chapter;
(2) A description of the proposed area for the zone of benefit;
(3) An estimate of the actual total costs of the public improvement and the portion of the cost for which the applicant should be reimbursed according to this chapter;
(4) The area or parcels which are specially benefited by the improvement, and whether or not such parcels would, as a condition of future development, be required to construct all or any portion of the same improvement for which a recovery charge is sought;
(5) That portion of the cost of the improvement within the area of the proposed zone of benefit which is appropriate for reimbursement by the owners of property identified inside the proposed zone of benefit;
(6) An evaluation of the method used to calculate the proposed fee, and an alternative recommendation if appropriate;
(7) A methodology for spreading the cost among the properties within the zone of benefit and, where appropriate, defining a “unit” for applying the reimbursement charge to property that may, subject to city approval, be partitioned, adjusted or subdivided at a future date. The methodology should consider the cost of the improvements, prior contributions of property owners (only if for the same type of improvement at the same location), the value of the unused capacity, rate making principles employed to finance public improvements, and other relevant factors;
(8) A proposed reimbursement charge for the zone; and
(9) The 10-year time frame in which to administer the cost recovery request. [Ord. 441 § 1, 2023.]
4.35.050 Limitations on zone of benefit recovery charge.
(1) The cost to be reimbursed to the applicant, if other than the city, shall be limited to the actual cost of construction, engineering, acquiring off-site rights-of-way, and proportionate share of the value of property dedicated to the city. Engineering may include surveying and inspection, but shall not exceed 15 percent of eligible construction costs. If the applicant is the city, the costs to be reimbursed shall also include an administration cost and all costs associated with the acquisition of easements and rights-of-way. If the applicant is other than the city, the costs to be reimbursed for rights-of-way shall be limited to the reasonable market value of land or easement purchased from a third party to complete off-site improvements. Actual costs shall not be deemed reasonable if the city determines that such costs significantly exceed prevailing market rates for similar projects or discrete portions thereof. In such a case, the city may reduce the reimbursable cost to the prevailing market rate for similar projects, or discrete portions thereof. In addition, the following costs shall not be subject to reimbursement:
(a) Costs for that portion of the improvement that benefits the applicant’s own property.
(b) Costs for improvements that are not dedicated to and accepted by the city as a public improvement.
(c) Financing costs; permits or fees required for construction permits; land or easements dedicated by the applicant; costs that are eligible for system development charge credits; or any costs that cannot be clearly documented.
(d) Costs for relocation of electrical, telephone, cable television or natural gas utility relocation benefiting an applicant’s property.
(e) Costs for extra work or materials required to correct deficiencies in construction to bring the improvement to city standards.
(f) Cost or value of real property which the applicant was required to dedicate or reserve for public use as a condition of development.
(g) Except as otherwise specifically provided by the city council, the obligation to pay a recovery charge shall not apply to that portion of a parcel which is developed by the city for public purposes, such as parks, fire stations, or similar community service facilities. If a zone of benefit charge exists for such a parcel and that parcel is subsequently sold, then the purchaser of the property shall assume the charge.
(h) Zones of benefit established for public improvements completed by the city shall remain in effect until such time as the reimbursement fee has been collected from all properties within the zone of benefit.
(i) The zone of benefit will expire 10 years after it is adopted by council.
(2) Reimbursement for street improvements shall be recoverable only from those properties which lie adjacent or contiguous to a street improvement and which, but for such improvement, would otherwise be required upon development to construct all or a portion of such improvement. [Ord. 441 § 1, 2023.]
4.35.060 Council review of application.
(1) Upon receipt of a complete zone of benefit application, the city administrator will submit it to the city engineer for review. Once the city engineer’s review and the staff report are completed, the city administrator will set a hearing before the city council to consider the request.
(2) Notice. Not less than 10 days before the hearing, notice of the hearing shall be: (a) published in a paper of general circulation, and (b) mailed by regular mail to the applicant and to all property owners within the proposed zone of benefit as shown on the most recent assessment role in the county assessor’s office. Notice shall be deemed effective on the date of mailing. Failure to receive notice by the applicant or affected property owners shall not invalidate or otherwise affect formation of the zone of benefit.
The notice shall:
(a) State a zone of benefit has been proposed that includes the property of the person receiving notice;
(b) Briefly describe the zone of benefit, the park, street, water, sewer, or surface water management improvement facilities to be reimbursed; the amount (or estimated amount) of the zone connection charge; and the circumstances under which the charge must be paid;
(c) Set the time, date, and location of the hearing;
(d) Include a statement that the failure of the owner of property subject to such proposed recovery charge to object in writing will be treated and relied upon as a waiver of objection to the establishment of the proposed zone of benefit recovery charge; and
(e) If the application is made prior to construction of the proposed public facility, the notice will include a statement that the proposed fee is an estimation and that the actual fee will be based on actual costs after the work is complete and approved by the city.
(3) Hearing. At the hearing, the city council should consider:
(a) The proper boundaries to the zone of benefit, taking consideration of all properties contiguous to or otherwise located so as to directly benefit from the improvement; and
(b) The reasonable actual or estimate of costs for which applicant may be reimbursed pursuant to HMC 4.35.050. The applicant shall not be entitled to reimbursement for any costs in excess of reasonable actual costs. If the zone of benefit is formed before actual costs are known, the zone connection charge may be based on estimated costs. If estimated costs are used, the methodology or the certificate of payment or both shall provide for a recalculation of the cost not later than three months after completion and acceptance of the improvement by the city. [Ord. 441 § 1, 2023.]
4.35.070 Resolution.
(1) If the council determines that formation of a zone of benefit is appropriate, the council shall establish that zone by resolution. The resolution shall:
(a) Establish the area of the zone of benefit, the zone formation date, and the date when the right of reimbursement ends.
(b) Set forth the actual or estimated cost of the park, street, water, surface water management, or sewer improvement facilities, and the portion of the costs for which the applicant should be reimbursed.
(c) Establish the zone connection charge methodology.
(d) Establish the zone connection charge for the zone.
(e) Direct that a certificate of payment and right of reimbursement be issued to the zone applicant.
(2) Upon the resolution’s adoption, it shall be sent to the applicant and all affected property owners and recorded in the office of the county recorder to provide notice to potential purchasers of property within the zone. The recording shall not create a lien. Failure to make such a recording shall not affect the legality of the formation or the obligation to pay the zone connection charge. [Ord. 441 § 1, 2023.]
4.35.080 Challenge to formation.
No legal action intended to challenge or contest the formation of the zone of benefit, the methodology, or the amount of the zone connection charge shall be filed after 60 days following formation of the zone of benefit. Challenge shall be exclusively by writ of review, and not otherwise. [Ord. 441 § 1, 2023.]
4.35.090 Agreement and right to reimbursement.
The right to reimbursement is a contractual right between the city and the applicant. When the applicant is other than the city, the resolution shall instruct the city to enter into an agreement with the applicant pertaining to the zone of benefit improvements. If the agreement is entered into prior to construction, the agreement shall be contingent upon the improvements being accepted by the city. The agreement shall contain at least the following provisions:
(1) Identification of the person receiving the right of reimbursement.
(2) The improvement(s) shall meet all applicable city standards.
(3) That the total amount of potential reimbursement shall not exceed the actual cost of the public improvement(s).
(4) The reimbursable amount.
(5) The zone connection charge.
(6) The area of the zone of benefit.
(7) The date of zone formation.
(8) The date upon which the right to reimbursement ends.
(9) Applicant shall guarantee the improvement(s) for a period of no less than 12 months from the date of installation.
(10) Applicant shall defend, indemnify, and hold the city harmless from any and all losses, claims, damage, judgments or other costs or expenses arising as a result of or related to the city establishment of the zone of benefit, including the city’s costs or expenses related to collection of the reimbursement charges pursuant to the resolution.
(11) Applicant may not assign or otherwise transfer its right to reimbursement without city’s prior written consent, which will not unreasonably be withheld.
(12) The city shall make reasonable efforts to properly account for and collect the zone connection charge from an affected property. If an outside collection agency is used, their fee may be deducted from the amount paid to the applicant.
(13) Any other provisions the council deems necessary and proper to carry out the provisions of the zone of benefit ordinance, resolution and agreement. [Ord. 441 § 1, 2023.]
4.35.100 Payment.
An owner of property within any zone of benefit shall pay the city, in addition to any other applicable fees and charges, the zone connection charge established by city resolution when any of the following events occur:
(1) The property owner receives final approval for a development permit to develop, subdivide, or partition property located within the zone.
(2) A use of property is expanded to create additional “units,” as that term is defined in the resolution for the particular zone or changed to increase usage. The term “unit” is not limited to residential uses.
(3) A property owner connects to the sewer line or water line or makes use of the surface water management or street improvement. As used in this subsection, “makes use of the surface water management improvement” means installation of an improvement that substantially increases impervious surface on the property at the time of or following construction of the surface water management improvement for which the zone of benefit has been formed. As used in this subsection, “makes use of the street improvement” means installation of an improvement or changing the use of the property at the time of or following construction of the street improvement that increases traffic or congestion on the road improvement for which the zone of benefit was formed.
(4) The zone connection charge is due and payable as a precondition of receiving the first city permit applicable to the development activity undertaken, or, in the case of a connection to a line, as a precondition of receiving the connection permit.
(5) A person who becomes obligated for payment of the zone connection charge as a result of connection to a line constructed through the local improvement district process and who owns property within the district upon which an assessment is levied may be assessed for the zone connection charge in addition to the assessment levied through the local improvement district.
(6) Zone connection charges shall be collected by city and paid to the zone applicant until the earlier of 10 years from the zone formation date or the reimbursement amount specified in the appropriate zone of benefit resolution is recouped. If the city paid the initial cost of construction or a portion thereof, the city will deposit that amount in the fund corresponding to the improvement made. The city may apply collected zone connection charges to any outstanding assessments owed to the city by the applicant.
(7) Failure on the part of the city to collect the zone of benefit recovery charge at the time the property owner applies for permits or applications for development will not relieve the property owner of the obligation. Should an error or omission be discovered, payment of the zone of benefit charges will be due upon notification by the city.
(8) Except as otherwise expressly provided, neither the city nor any officer or employee of the city, acting in an official capacity, shall be liable for payment of any recovery charge. Only those payments which the city has received on behalf of properties within the particular zone of benefit shall be payable to the applicant for the zone of benefit. The city’s general fund or other revenue sources shall not be liable for outstanding and unpaid recovery charges imposed on private property. [Ord. 441 § 1, 2023.]
4.35.110 Prohibited conduct.
(1) No person may cause, maintain, or use a connection to a utility improvement for which a zone of benefit recovery charge has been established and which is due and payable, unless such recovery charge has first been paid.
(2) The remedies provided under this section are cumulative to any other remedies provided by law. [Ord. 441 § 1, 2023.]
4.35.120 Severability.
The invalidity of any section, subsection, paragraph, sentence, or phrase of this chapter shall not affect the validity of the remaining portions thereof. [Ord. 441 § 1, 2023.]
4.35.130 Penalty for violation.
A violation of a provision of this chapter is a civil infraction, punishable by a fine not to exceed $500.00. Each day that a prohibited connection or use exists constitutes a separate violation. [Ord. 441 § 1, 2023.]