Minnesota Supreme Court Holds City Cannot Demand a $1.4 Million “Infrastructure Charge” as a Condition for Approval of a Development

The Minnesota Supreme Court today affirmed lower court rulings striking down a nearly $1.4 million fee that the City of Woodbury sought to charge Larkin Hoffman client Martin Harstad as a condition for approving his 183-unit residential development. Woodbury called the fee a “Major Roadway Assessment;” the Supreme Court called it an “infrastructure charge.” The purpose of the infrastructure charge was to require developers to pay for roadway improvements outside the development that Woodbury deemed necessary in the part of the city where the development is to be located. Woodbury’s position was that new residential development “pays its own way and that all associated costs for the installation of public infrastructure to serve new residential development be the sole responsibility of the developing property owner.” 

The Court held that the fee is unenforceable because “no part of Minn. Stat. § 462.358 [the statute on which Woodbury relied] authorizes a statutory city to impose an infrastructure charge.” The Supreme Court said that, “Had the Legislature intended to authorize a city to condition subdivision approval on a ‘cash fee’ for infrastructure improvements, it would have used those precise terms …. The Legislature did not do so.” 

The Supreme Court also rejected Woodbury’s argument that its statutory authority to require developers to enter into development contracts gave the city the authority to require developers to pay an infrastructure fee. The Court rejected Woodbury’s argument that the fee was “voluntary” because it could be negotiated. The Court said that “the pearl of great price here is approval of the subdivision agreement. A developer who fails to make a ‘voluntary’ payment in an amount Woodbury finds acceptable faces the prospect of denial of the subdivision application. The infrastructure charge is thus a requirement and Harstad is correct that there is nothing voluntary about it.”

Larkin Hoffman’s team of Rob Stefonowicz, Gary Van Cleve, Peter Coyle and Bryan Huntington represented Harstad in the litigation.

The case has been watched closely in the state and across the country because the holding is likely to have a positive impact on the greater issue of housing affordability for potential home buyers.

The entire opinion of the Court can be found here.