The development community has long maintained that the practice of cities exacting transportation fees or charges from developers as a condition of development approval is illegal, but the issue had not been directly and fully addressed by the courts until the Minnesota Supreme Court handed down its decision in Harstad v. City of Woodbury in August 2018. The supreme court confirmed that cities have no legal authority to impose transportation (also called “infrastructure” or “impact”) fees or charges and that this practice is illegal and unenforceable. Despite the supreme court’s unambiguous holding, and over the objections of builders and developers, including advocacy-group Housing First Minnesota, the City of Dayton enacted an “offsite transportation charge” requiring developers to pay these banned fees. Last week, this practice was (again) declared illegal and unenforceable when the Hennepin County District Court struck down Dayton’s fee.
Dayton, a northwest Twin Cities suburb, was one of several Minnesota cities collecting transportation fees from developers when the Harstad decision was issued. In response to the Harstad ruling, Dayton admitted its transportation fee was illegal, removed the fee from its fee schedule and enacted a moratorium on development so that it could “study and respond” to the Harstad decision. After a ten-month development moratorium, Dayton announced plans to resurrect its transportation fee practice pursuant to a new policy and procedure that required developers to pay an “offsite transportation charge” in one of two forms—either a “Project Specific Transportation Charge” or a “General Transportation Fee.” Dayton, before it adopted its repackaged and relabeled transportation fee, was on notice from the building and development community that its transportation fee policy and ordinance was illegal and would be challenged in court. The city ignored these warnings and adopted its re-branded transportation fee in July 2019.
Housing First Minnesota challenged Dayton’s transportation fee in court. Last week, the Hennepin County District Court, citing the recent Harstad decision, struck down the city’s transportation charge and the associated policy, procedures and ordinances implement the fee as “illegal, null and void and unenforceable” and permanently enjoined the city from enforcing its transportation fee.
This is now the fourth court (including the district court and appellate courts in Harstad) to reject a city’s attempt to impose transportation fees. We fully anticipate, should there be future attempts to enact such fees, that they will meet a similar fate.