DL puts housing development on hold
Paul Renner's Timber Creek development came before the Detroit Lakes City Council last week. After many projects in the city, it seemed like a no-brainer to pass the acceptance of bids for street and utility improvements.
It was a no-go though. The council rejected the bids, saying they couldn't change policy.
Council members and Renner met Monday afternoon during the Community Development Committee meeting to discuss accepting the bids for street and utility improvements to Renner's Timber Creek Third Addition Phase 2.
Renner, owner of Lakes Country Developers, said later in the week that his development was required to have water and sewer 14 feet deep, but the city was requiring him to pay and install lines 30 feet deep to accommodate a development, Brookridge, adjacent to his property.
That's a $7,500 extra fee Renner's not going to pay.
According to City Engineer Gary Nansen, Renner is required to put in a deeper sewer line for his development because it will benefit future developers near Renner's land.
At Tuesday's council meeting, Renner said he was fine with paying his share, but he didn't see why he should have to go above that and pay for something that was for another developer.
He requested the city pay the difference between what he needs to pay and what is the extra for future developments.
"The city was certainly sympathetic to that request," Nansen said.
"They said absolutely not, if you want water and sewer, you'll pay this," Renner said he was told in the Community Development Committee meeting.
Nansen said later in the week it's city policy to assess the developer, regardless who it benefits in the future.
Estimating the difference in cost, Nansen said it was between $7,500 and $10,000.
"It's not the numbers (cost), but a policy issue," he said.
Steve Lund, who sits on the Detroit Lakes Planning Commission, lives in Timber Creek and works for Midwest Bank, worked out some numbers of his own and sent them on to council members.
"I'm extremely disappointed with the council's quick action with this issue," he wrote. "I thought we were much more of a progressive community that this."
He calculated over the next 20 years, the city is losing approximately $11 million dollars with the loss of the Timber Creek addition and apartment building Renner has decided not to build.
Tax base on the future 30 homes in the addition, assuming a 3 percent inflation, would have brought in $2.1 million. Home construction costs were valued at $7.5 million. Interest on the home construction loans was $150,000. Tax base for the apartment building, assuming the 3 percent inflation, was $322,000, and interest on the apartment loan was valued at $1 million. All adding up to $11 million.
Lund said those figures don't reflect the multiplier effect with money circulating throughout the town either.
"Seems like a decent return for a pretty minimal upfront investment," he wrote.
Nansen said the city didn't want to set precedence by paying the assessment for one developer and not the next.
But what about making the other developer, who is benefiting from the deeper lines, pay the difference?
Nansen said administratively, that's not exactly realistic.
He said for example, if infrastructure was put in to benefit one property but also benefited four other surrounding properties, and the first owner only paid what he needed, the rest of the costs would be assessed to the remaining four. If that kept going down the line, the last person to develop would have been assessed five different times, he explained.
"This is policy, and this is how we've applied it in the past," Nansen said of charging Renner for the deeper infrastructure.
Renner disagrees. He said in other cities, the property developer is only charged for what he or she needs and the remaining cost is deferred to the next developer if there was some alteration to infrastructure.
Nansen said that like other developers, Renner has likely benefited from other developers having to put in infrastructure in the past.
Nansen said the cost of the deeper lines was always in the report, which also stated the city doesn't include that in the portion of assessments the city pays.
"He knew upfront about the cost. He brought it (wanting the city to pay for part of the station) to the table at the last part," Nansen said.
"The committee (Community Development Committee) wanted to work with him as much as possible. When it came down to it though, they couldn't modify the policy," he said.
Someone who strongly disagrees with the decision not to modify the policy is Alderman Ron Zeman.
"It's disappointing we as a city can't work out a deal with a local developer, that being Paul Renner," he said. "The city should do a better job of negotiating."
He said last month the city wrote off a $1.4 million loan to the Detroit Lakes Community and Cultural Center, but this month it can't work out a $7,500 difference with Renner.
When Renner stood and spoke at the council meeting Tuesday, he said by denying the bids for his development and putting a stop to the development, the city is denying the $80,000 a year in new property taxes the houses would have brought as well.
"Can you imagine a business turning down $80,000 in revenue yearly over a $7,500 dispute?" Zeman asked.
He said since the council meeting, he's gotten many calls from people saying, "the city is looked at as bullies" against the trades people.
Renner said later in the week that the city is losing more than the $80,000 in taxes. All construction Lakes Country Developers does is local.
"We are Detroit Lakes based, and I believe in Detroit Lakes," he said. Renner has been in business for 27 years. He's already invested $22-$25 million in Detroit Lakes, he said.
He added that since the city has denied his latest housing project, he's taking another project off the construction schedule.
Last month, the council approved Renner's request for a 14-unit apartment building. He said he wouldn't bother with the apartment now.
"The message they've sent is they don't want to do business with me," Renner said.
He said he may revisit building the apartment building, but it will be in another city.
It's more than a dispute over one project, Renner said. There have been issues over the years between the city and Lakes Country Developers.
Zeman said he's hoping the city and Renner can sit down and work something out, because he doesn't see why the city would want to lose the housing developments -- single-family homes and apartment building.
Renner said he'd be willing to continue with Timber Creek if he doesn't have to pay the $7,500. It's a matter of principle for him now.
If he can't work out something with the city, he said he's fully prepared to stop the development. The land will be worth much more in 10 years anyway.
At the council meeting, Alderman G.L. Tucker said it's unfortunate to lose the development and the apartment building, but that he supports the council's decision.
Alderman Bruce Imholte was also in favor of sticking to policy and not accepting the bids.
"I don't want to see a headline in the newspaper that says DL's against development. It's not true. It's complicated," he said.