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Bill Griffith and Adam Pabarcus Moderate at Bisnow's Twin Cities State of the Market Event

Larkin Hoffman's attorneys Bill Griffith and Adam Pabarcus recently moderated panel discussions during Bisnow’s Twin Cities State of the Market outlook event. Held earlier this month, the event featured insightful conversations with leaders in the Twin Cities real estate and development markets. The first panel, moderated by Bill Griffith, included Pat Barrett, COO of Oppidan Investment Company; Tim Elam, Managing Director at Scannell Properties; and Barry Stoffel, Partner and Integrator at Gardner Builders.  The four covered a range of topics including strategies for navigating the current market and some of the challenges to various asset classes including industrial space, data centers, and senior housing.  Pat Barrett remarked optimistically, "Winds are shifting, and we're headed in the right direction," when discussing emerging trends in the Twin Cities. Adam Pabarcus moderated the event's final panel which included Josh Brandsted, President of Greco Properties; Jay Bhakta, Managing Partner at JR Hospitality; and Angela Ledding, Head of Underwriting at PACE Sloan Group. The panel focused on the future prospects for the Twin Cities real estate market. "We're witnessing significant economic volatility, impacting every facet of property development and management," noted Adam. Discussions centered on the resurgence of office space demand as the city adapts post-COVID-19 lockdown, as well as identified avenues for future growth. Bill Griffith and Adam Pabarcus are both part of Larkin Hoffman's real estate team.  Recently, Bill sat down with Adam and another attorney on the team, Tim Rye to discuss property taxes.  If you would like to learn more about property taxes in how today's market may be affecting your value, please visit the Larkin Hoffman Real Estate Podcast and listen to our latest episode.  Bill Griffith advises local and national clients on legal and policy issues affecting land use, zoning, real estate, environmental review, municipal law, regulatory matters and government relations. He has been legal counsel to Mall of America in all its phases, and serves as city attorney for the city of Columbus. He is a trusted advisor on real estate development and public funding for both private clients and municipalities. Adam Pabarcus is a litigator and trial attorney who focuses his practice on complex real estate litigation and property tax appeals. Adam represents clients in state and federal courts across the country to resolve disputes and advance their business goals on a broad range of issues. Tim Rye is a litigator who advises clients on real estate valuation and property tax appeals. He advises on all aspects of the property tax appeal process, including: reviewing properties for potential success on appeal, filing appeals and all statutory disclosures, researching market data, preparing analyses for negotiations, negotiating resolutions, and litigating appeals if necessary. Tim represents a broad range of clients, including real estate investors, owners, developers, property and asset managers, corporations, and individuals with real estate holdings.

May 13, 2024

Legislative and Judicial Updates

Navigating the Legalization of Marijuana: Update Your Drug and Alcohol Testing Policies – Part One

On August 1, 2023, recreational marijuana and cannabis products became legal in the state of Minnesota. Employers are now asking how this new law affects their employment policies and procedures. In the first of a two-part series of blog posts on how the legalization of marijuana affects drug and alcohol polices, we address whether employers need to modify their drug and alcohol testing policies in light of this significant change in the law. Here are some things to consider in changing existing testing policies and procedures. Understanding the Law Employers are concerned that employees are now allowed to come to work stoned. In fact, the opposite is true. The Minnesota Drug and Alcohol Testing in the Workplace Act (“the Act”) has always prohibited impairment in the workplace, and that has not changed. Under the law, an employer is not required to permit or accommodate cannabis use, possession, impairment, sale, or transfer while an employee is working or while an employee is on the employer’s premises or operating the employer’s vehicle, machinery, or equipment. Although an employer is not permitted to restrict an employee’s lawful off-duty use of cannabis, Minnesota law does not require that employers accommodate or permit an employee’s on-the-job possession or use. Consequently, drug and alcohol policies should include a provision explicitly prohibiting the use of cannabis, drugs and alcohol while working, operating company vehicles or on company premises. Review Your Drug and Alcohol Testing Policy The first step in modifying an existing drug and alcohol testing policy is to review the portion of the policy which prohibits the use of drugs (and alcohol) while working. With certain exceptions, which will be discussed below, the Act removes marijuana and cannabis products from the definition of “drug” for purposes of drug testing, and the substance is now considered separate from drugs and alcohol. Therefore, the definition of “drug” in the policy should no longer include cannabis; nor should it be so broad that it encompasses personal use of the substance off-premises during nonworking hours. Drug and alcohol testing policies should add cannabis to the provision prohibiting the use of drugs and alcohol while working, operating company vehicles or on company premises (e.g. “The Employer prohibits the use, possession, impairment, sale, or transfer of cannabis, drugs, and alcohol…”). When is Drug Testing Allowed? It is permissible to test for cannabis under the new law under certain scenarios, most of which will be familiar to employers with existing drug and alcohol testing policies. Employees may be subject to random testing for cannabis while working in safety-sensitive positions. Employees may also be tested when there is reasonable suspicion that they: Are under the influence of cannabis or other drugs; have violated the employer’s written work rules prohibiting the use, possession, sale, or transfer of cannabis, drugs, or alcohol; have sustained (or caused another to sustain) a personal injury; or have caused a work-related accident or were operating or helping to operate machinery, equipment, or vehicles involved in a work-related accident. Employees may also be tested during the post-treatment period (up to two years, depending upon the employer’s policy). Despite the fact that employers may still test under these circumstances, many drug and alcohol testing policies will nevertheless need to be amended because they have defined prohibited drugs to be those governed by the federal Controlled Substances Act, and while cannabis is a prohibited controlled substance under federal law, it is not a prohibited substance under Minnesota law. Under most circumstances, testing applicants for cannabis is no longer permissible, and the detection of marijuana in a drug test cannot be used as a reason for rescinding a job offer. However, for the following specific positions, applicants may continue to be tested for cannabis: Safety sensitive positions (jobs where impairment caused by cannabis usage would threaten the health and safety of any individual) Peace officers and firefighters Positions requiring face-to-face care, training, education, supervision, counseling, consultation, or medical assistance to children, vulnerable adults, or patients receiving medical, psychiatric, or mental health care services Positions requiring a commercial driver’s license or operating a motor vehicle for which state or federal law mandates drug or alcohol testing Employment funded by a federal grant or any other position for which state or federal law requires testing a job applicant or employee for cannabis Additionally, the employee protections for the use of marijuana as described above do not apply to all employees. There are exclusions when the specific work being performed requires that employees and job applicants undergo drug and alcohol testing or cannabis testing where: Federal regulations preempt state regulations regarding drug and alcohol testing or cannabis testing for specific employees and job applicants; Federal regulations or requirements are necessary for operating facilities under federal regulation; Drug and alcohol testing or cannabis testing is conducted pursuant to federal contracts for security, safety, or protection of sensitive or proprietary data; or State agency rules adopt federal regulations applicable to the interstate component of a federally regulated industry and the adoption of those rules is for the purpose of conforming the non-federally regulated intrastate component of the industry. Conclusion Considering marijuana’s lingering presence in the bloodstream, some employers might forgo testing altogether. However, those employing workers in safety-sensitive positions are likely to have a different perspective, since an employee coming to work under the influence could cause serious accidents, injury and even death to themselves or others. One thing is certain—all employers must reconsider their drug and alcohol testing policies to account for the legalization of recreational marijuana and cannabis products.

August 24, 2023

Legislative and Judicial Updates

Navigating the Legalization of Marijuana: Updating Drug and Alcohol Policies – Part Two

Last week, we posted a blog addressing how the recent legalization of recreational cannabis in Minnesota may affect employee drug-testing policies. We now direct our attention to employers with questions about their general drug and alcohol policies. Here are some things to consider when changing an existing drug and alcohol policy. Understanding the Law As discussed in the prior blog, the Minnesota Drug and Alcohol Testing in the Workplace Act (“the Act”) has always prohibited impairment in the workplace, and that has not changed. Under the new law, an employer is not required to permit or accommodate cannabis use, possession, impairment, sale, or transfer while an employee is working or while an employee is on the employer’s premises, or operating the employer’s vehicle, machinery, or equipment. Therefore, even though another Minnesota law, the Consumable Products Act (the “CPA”), prohibits an employer from restricting an employee’s lawful off-duty use of cannabis, nothing in the law requires employers to accommodate or permit an employee’s on-the-job possession or use. Review Your Drug and Alcohol Policy When looking to an existing drug and alcohol policy, employers should pay attention to ensure that the policy does not restrict an employee’s off-duty rights. For instance, we often see policies that broadly prohibit an employee’s use of “controlled substances” unless prescribed by a physician for treatment. Marijuana and cannabis products are no longer considered “controlled substances” as they were prior to August 1st of this year, so that prohibition is problematic under the law. In light of this definitional shift, and because pursuant to the CPA an employer may not discipline or discharge an employee because he or she engages in the lawful use of cannabis products off-premises during nonworking hours, employers should consider an impairment-based policy instead. By shifting the focus to what is prohibited while at work, the employer eliminates the risk of restricting what the employee is legally free to do during their off time. Train Supervisors Minnesota law continues to permit an employer to discipline, discharge or take other adverse personnel action against an employee for using, possessing, selling or being impaired while an employee is working, on the employer’s premises, or operating the employer’s vehicle machinery, or equipment. The Act allows an employer to take adverse action against an employee if, as the result of consuming cannabis, the employee “does not possess that clearness of intellect and control of self that the employee otherwise would have.” The person most likely to identify an employee who meets this standard is the employee’s supervisor. Employers should provide employers with training on the symptoms of impairment that can result from use of cannabis products so that supervisors can recognize an impaired employee. Supervisors should be made aware of their critical role in evaluating whether an employee is impaired as a result of using cannabis. Considerations for Job Applicants Employers should be mindful of how the legalization of cannabis alters the rights of not only existing employees but applicants as well. The CPA also protects an applicant’s use of lawful consumable products off the employer’s premises during nonworking hours. Therefore, regardless of whether an employer actually conducts pre-employment testing, the law now makes it unlawful to withdraw an offer of employment based on the candidate’s off-duty, off-premises use of marijuana and cannabis products. Conclusion With the passage of Minnesota’s recreational cannabis law, employers will need to revisit their drug and alcohol policies, as well as any hiring policies and practices affected by the law, to ensure they are legally compliant. Employers need to work with supervisors to assist in recognizing an employee who, as the result of consuming cannabis products, does not possess the clearness of intellect and control that the employee usually has. Employers who have questions about any of this new legislation should contact a Larkin Hoffman attorney.

August 24, 2023

Finding the Future Podcast Series

Finding the Future: “Getting to Yes” Interview with Karla Henderson

Last year, the City of Bloomington Minnesota hired Karla Henderson to help steer the city’s redevelopment as Director of Community Development.  She is well qualified for the job since she served in Detroit Mayor Dave Bing’s inner circle and brings a wealth of experience turning around neighborhoods to her new job in Minnesota. Early in her career, Henderson made a critical decision to move from Ann Arbor back to her hometown of Detroit. “I really felt like my hometown was going through a crisis with the former mayor being convicted and going to jail. I remember hearing about Dave Bing running for mayor and got kind of excited about that. I did not know him, I’d never met him, but really felt like this was a fresh start for the city.” Henderson reached out to his team and landed an interview and the top job in the City’s building department.  “I used a joke that was every gal’s dream job to be over the building department. But I got there and I understood quickly that we touched everything.” Henderson oversaw a large team of 300 staff members and a hundred inspectors covering everything from zoning and inspections to property maintenance and demolition. About six months later, Mayor Bing approached her to take on the role of Group Executive over planning and facilities.  In that role, she tapped into HUD dollars and expertise from the Obama administration to begin the work of reinvesting in Detroit’s neighborhoods. In a move that some might see as a step down from her leadership roles in Detroit, Henderson decided to move to Minnesota during the Covid pandemic to be near family. “I always believed that a job either pulls you away or pushes you away. This job pulled me here.  You’ve got the Mall of America, you have the equivalent of the University of Michigan for Ann Arbor, this is an economic engine, not to mention a Triple A bond rating.” Still, Henderson recognizes that there is much work to do.  “I feel just like I did in Detroit, I can use this position to reduce some of the disparities and do things a little bit differently and focus on small businesses and our commercial neighborhoods, commercial corridors that have been somewhat ignored.” Those who get to know Henderson over coffee or over decades, are struck by the way her personality engages people and pulls them into her vision, or how quickly she affirms the vision of others, empowering them to take risks. “My whole career I’ve been fortunate, like when I talked about Mayor Bing, I’ve worked for organizations that have let me take risks – it’s okay to fail and learn from it. If we’re doing the same thing, we’re not growing.” In a recent example, a staff member suggested that they do something to connect with Muslim residents during the month of Ramadan.  “I had an employee that came in my office and he said, what if we pick a day and we fast, and then we go and we break our fast at the mosque at Dar Al Farooq Dar. I said, ‘I love that idea’.” Henderson consulted the City Attorney on how to accept a meal from the mosque in light of the state’s gift law. “So, we got creative in finding a way to ‘get to yes’ and 20 employees went, including our fire chief and public works director; one of our employees brought her daughter. That’s what I want, somebody to say, ‘I have an idea. What do you think about this?’ And then we just go off and we make it happen.” In a move that really defines Henderson’s first year in Bloomington, she set out to reuse an abandoned fire station for a small business center providing space and expertise for local startups.  Henderson toured the City one day with the senior planner. She recalled, “Everybody loved to show me the new fire station and I did a tour there and it is absolutely beautiful. And I said, where is the old one?  So, we drove by it and I said, ‘there’s nothing wrong with this building.’ I would hope they wouldn’t tear it down.” Since then, the City set aside $500 thousand from pandemic relief funds for the small business center and the McKnight Foundation awarded the project a grant of $250 thousand.  Henderson is still waiting to hear from the Federal Economic Development Agency on a grant request of $1.5 million. “The City Council had to make a 20-year commitment to operate the project. I love that I work for an organization whose leadership says ‘we’re in now’ – that is all-in.  It really sends the message that we mean what we say. We are partnering with you.” Henderson has already flipped the traditional model for economic development on its head. Instead of tearing down a 60-year-old shopping center serving an existing neighborhood, Henderson would prefer to find resources to improve the building while keeping tenants in place. “We are working on a facade improvement program. There’s a smart team of planners and Port Authority members putting together the criteria.”  According to Henderson, “When you start to do these incremental little things, people notice.” On the other hand, notes Henderson, sometimes tearing down a vacant building is just the thing that is needed to turn a neighborhood around.  The City is using a grant to demolish an old gas station at Penn Avenue and 90thStreet.  Working with the owner of Gyropolis, a Greek restaurant next to the gas station, the corner will be redeveloped replacing a building that sat vacant for 15 years. In closing, I asked Henderson for the best kept secret in a city known for its proximity to the airport and Mall of America.  “I would say the best kept secret in Bloomington are the youth. The Chamber had this round table where you go and talk about your job.  I met 70 young people and I was blown away by how in touch they are with issues.” On the spot, Henderson offered five students jobs at the City for the summer. Now the City is working on a program for workforce development helping businesses hire local youth. Henderson is following a model called “BrookLynk” that provides internships to young people in Brooklyn Park and Brooklyn Center.  I don’t know if we’ve done a good enough job of taking that talent and growing it.” Henderson explained how changing demographics in the city is creating an opportunity to welcome and attract new talent by making sure people feel valued in what they do.  According to Henderson, not only does it help the City recruit and retain people, but they have a better chance of success in their jobs and in their careers. Bloomington is like many aging suburbs in the country, full of opportunity and challenge.  Sometimes, all that is needed is a strong leader who can unlock talent, ideas and initiative by making people feel heard. Bill Griffith practices real estate and municipal law and is the host of Finding the Future, a podcast that explores innovation in land use and sustainability. Listenherefor the interview with Karla Henderson.  If you have a story about innovation in land use and sustainability, please reach out to Bill.

July 11, 2022

Local Government

Fees, Fees, Fees!

In my practice representing developers and landowners, I routinely review dozens if not more, of development agreements over the course of a year.  Without question, the most complained about aspect of virtually all such agreements, by a wide margin, is the extent of fees being imposed by a given city.  Municipal fees are the runaway train of the development business; while this problem affects all businesses engaged in the development of land, it is crushing the housing industry, creating an artificial market condition that has all but eliminated new, more affordable, entry-level housing. I sat through a public hearing this week involving a city’s consideration of a new tree replacement ordinance.  One objecting landowner has calculated that the cost of complying with that city’s new ordinance, after adoption, will exceed the cost of his land.  This is not marginal land, off the beaten path in the middle of nowhere; it is prime real estate in a fast-growing region of the metro area—the land commands a premium.  While the land will sell, even with the fee imposed, the added cost of the fee will be reflected in the price of the new home. I am working on another project in another city involving the redevelopment of an outdated commercial site.  The site is located in a prosperous community with a highly-regarded school district with good freeway access.  The land commands a premium for redevelopment.  It is not a marginal site.  However, in this situation, the municipal fees likely to be incurred, most significantly park fees, will also exceed the price of the land.  Crazy. Ever since the “Great Recession” put cities across the country on a serious diet, a growing number of them have resorted to collecting all manner of fees to backfill their budgets in hopes of avoiding general property tax increases.  Guess what—it is working.  To be fair, cities are allowed to impose fees in an amount that corresponds to a service being provided or a cost incurred.  But Minnesota law very clearly bans cities from imposing fees that are disconnected from a service provided or a cost incurred by that city.   A Minnesota housing industry group has documented the tens of millions of dollars collected by cities which arguably violate state law. The response to this growing phenomenon is essentially a “yawn”.  Various industry groups have tried for years, with Republicans and Democrats in charge, to address this problem, with little progress to show for it.  In the end, state policy-makers are unwilling to limit the power of local elected officials to impose fees on anything.  No wonder landowners and developers are forced to seek relief in court; nobody else with authority appears to be listening or care.

July 16, 2021

Local Government

Hollydale Golf Course: The Complex Road to Redevelopment Approval

The redevelopment of any large land area can be very difficult to accomplish, especially when it is surrounded by homeowners who like the status quo.  This is especially true when the conversion involves a golf course: pastoral, quiet, well-landscaped (maybe a few stray golf balls).  The surrounding landowners (most often homeowners) understandably love the open space, the seasonal nature of the sport and the relative quiet they experience as a neighbor.  However, the redevelopment of golf courses has been occurring with some regularity for the past 20 years throughout the country as demographics and loyalty to the sport has changed.  Throughout Minnesota, and certainly throughout the metro area of Minneapolis-St. Paul, at least a dozen golf courses have been closed and redeveloped, sometimes multiple courses in the same city.  In most instances, the closures were strongly resisted by citizens, especially by the directly affected residents of a given course.  Often the final decision on the redevelopment has been rendered by a judge. All of these redevelopment conversions endure a lengthy public process to entitle the replacement use, most often a housing project of some sort.  They not only are costly and time-consuming to complete, but very often they are politically challenging.  No elected official wants to inject controversy into their community especially if that elected official has the final word on whether the proposed redevelopment goes forward.  Plymouth, Minnesota endured the most recent such redevelopment involving the former Hollydale Golf Course.  (this was the 4th course to close in Plymouth over the last decade or so).  The closure of Hollydale was a surprise as to timing only; its fate was known for some time as the owners had previously communicated their intentions to the city. In the Internet age, a proposal to redevelop a site like Hollydale instantly draws a crowd—both opponents (plenty) and supporters (less visible).  Web site pages are quickly created, and links distributed far and wide, enabling commenters to not only weigh in from across a given city, but also literally from around the world.  It’s quite a thing to read posts from individuals who are not from the neighborhood, or even the subject community, who have an opinion and want you to know it! In the case of Hollydale, the developer and landowners worked closely with city staff to create a very low-density land-use plan that tried to hit all the critical policy markers while avoiding (or fixing) obstacles to success.  That was not enough, unfortunately.  The neighborhood was well-organized and very active in expressing their opposition to the redevelopment and their advocacy for the city acquiring the site for some public use, even if only as open space.  After careful deliberation, the city declined to pursue acquisition, in part due to the high market value being placed on the land by the owners.  But even the clear decision was not enough; notwithstanding strong support of city staff and an extensive record supporting the redevelopment, opponents persisted and successfully prevailed on the City Planning Commission and the City Council to block the redevelopment, the latter decision by a narrow margin. As often happens in this circumstance, and given the strong record in support of the redevelopment, the developer and owners sued the city to overturn the denial.  Fortunately, after reviewing the decision with city legal advisors, the city allowed the project to be resubmitted with several changes, but no loss of building lots.  The City Council voted to approve the revised redevelopment allowing the developer and owners to proceed with it. The moral of the story: frankly not sure if there is one; persistence paid off in different ways for the developer and owners, as well as the opposed resident group.  The redevelopment process was unquestionably made more difficult and expensive for the developer.  And the pressure on City Council members was substantial and direct.  Fortunately, the City Council had the interests of the entire City of Plymouth in mind when it decided to settle the lawsuit and approve the redevelopment essentially as previously proposed. Larkin Hoffman attorneys Peter Coyle, Gary Van Cleve and Bryan Huntington represented the Hollydale Golf Course developer in connection with its land use application and the related litigation leading to the final approval. Tags

June 24, 2021

Legislative and Judicial Updates

Did You Know There Is a New Independent Contractor Ordinance in the City of Minneapolis Effective January 1?

The City of Minneapolis determined that many freelance workers (independent contractors) need legal and economic protections since they are not covered by employment laws.  The City, therefore, enacted the Minneapolis Freelance Worker Protections Ordinance (the “Ordinance”).  This Ordinance, effective January 1, 2021, requires companies to enter into written agreements with most freelance workers. The Ordinance contains provisions applicable to a commercial hiring party, and other requirements applicable to an individual hiring party. Commercial Hiring Party A commercial hiring party means any person or entity regularly engaged in business or commercial activity, including a digital network-based entity, who retains a freelance worker to provide any service as part of that business or commercial activity.  A commercial hiring party that retains freelance workers to perform work in the City of Minneapolis must have a written contract with each worker if the worker will perform a minimum of: $600 worth of work within a one year period; or $200 of work within one week. The Ordinance applies to a commercial hiring party that retains a freelance worker not only when the worker provides services directly to that company.  It also applies to a freelance worker who provides services through a digital network to a third party. “Retains” means to enter into a contract through which the freelance worker provides services either to the hiring party or to a third party (such as a digital platform).  For example, if food is delivered in the City of Minneapolis via a digital network, the digital network must have a written agreement with the driver. The written agreement must be signed by the freelance worker and contain the following minimum elements: The name and address of the hiring party and the worker; An itemization of all material services to be provided by the worker; The compensation for the services, including the rate or rates and method of compensation; and The date on which the hiring party must pay the agreed-upon compensation or the mechanism by which the date will be determined. Where the parties are not able to specify the total compensation prior to performance, the written contract must describe the method by which the total compensation will be determined and identify which party is responsible for maintaining the information necessary to determine the compensation (such as tracking the number of hours worked, the applicable project or other method by which the freelance worker is paid). If the commercial hiring party is responsible for tracking the information necessary to determine the compensation, the commercial hiring party must provide the freelance worker with an earnings statement setting forth the total compensation being paid and a detailed calculation by which the amount was determined. When the independent contractor/freelance worker is responsible for keeping track of this information, they must provide the commercial hiring party with an invoice stating the total compensation amount and a detailed calculation by which the amount was determined. If the contract does not specify the date or mechanism for when payment becomes due, payment must be made no later than 30 days after the completion of services. Individual Hiring Party Individual hiring party means any person who retains a freelance worker to provide any service in the City of Minneapolis when the person is acting in a personal capacity and not as part of or on behalf of a business or commercial activity.  These provisions could apply to painters, handymen, cleaning persons, nannies, groundskeepers, and other freelancers who perform services for an individual. The Ordinance applies if the compensation is $600 or more, either by itself or when aggregated with all contracts for services between the same individual hiring party and freelance worker during the calendar year, for work performed in the City of Minneapolis. Individual hiring parties and freelance workers performing services in the City of Minneapolis are required to have a written contract only if the freelance worker requests a written contract. The freelance worker must present a proposed written contract to the individual hiring party before the work begins.  The written contract should include the same information described above for a commercial hiring party and both parties must sign the contract. The Ordinance does not obligate an individual hiring party to retain the services of a freelance worker who has proposed a written contract, nor does it require either party to enter into a contract if the parties are unable to agree upon the terms. Penalties The Minneapolis Department of Civil Rights investigates and enforces the Ordinance.  It is a violation of the Ordinance for a hiring party to fail or refuse to pay the agreed-upon compensation or require the freelance worker to accept as a condition of timely payment less compensation after the work has commenced.  If a hiring party is found to have violated the Ordinance, a freelance worker may be able to recover compensatory damages in the amount of the unpaid sum and liquidated damages up to double the compensatory damage award.  There are also additional civil fines, fines for repeat violations and the City’s Department of Civil Rights can seek reimbursement for investigation costs. If a commercial hiring party fails to create a written contract, it is subject to a fine of up to $250 for each violation, if the freelance worker can establish they requested a written contract and made the hiring party aware of the requirement that the contract be in writing. A freelance worker who passes only incidentally through the City in the performance of the contract is not covered by this Ordinance. No Effect on Contract Validity The Ordinance provides that it is a defense to any alleged violation under the Ordinance that the freelance worker has not completed the services contracted for, unless the failure to complete such services was caused by the hiring party’s failure to cooperate in good faith with the freelance worker.  The hiring party cannot withhold timely payments for completed services because of a dispute over whether other services had been completed. The Ordinance makes clear that the existence of a written contract that complies with the Ordinance is not be construed as evidence that an individual is properly classified as an independent contractor. Recommendation Any commercial hiring party which uses an independent contractor to perform any services in the City of Minneapolis should review their written contract to ensure that it contains the above-described elements.  If no contract exists, the company should immediately prepare such a contract. If you have any questions as to whether this Ordinance applies to a particular freelance worker or any other questions concerning the requirements of this new Ordinance, you can contact a Larkin Hoffman labor and employment law attorney.

February 1, 2021

Legislative and Judicial Updates

Who’s Paying the Price for Gov. Walz’s Eviction Moratorium?

We are nearly 9 months into the so-called COVID-19 global pandemic.  While not without historical precedent, COVID-19 has wreaked havoc on the physical and economic health of millions both within the United States and around the world.  In Minnesota and across the country, governors and their public health departments have exercised “peacetime” emergency powers designed both to limit the spread of the virus but also to minimize its adverse impacts, both physical and financial, to the broader population.  The success of these measures has been mixed. While much is being written and debated regarding the merits of social distancing, including masking policies, as a means of protecting public health, less is being written and debated regarding the direct economic effects of some of these policies, which in any other context, would spawn enough litigation to swamp state and federal courthouses in all 50 states. In Minnesota, there have been few such challenges to the emergency powers exercised by Gov. Tim Walz.  These challenges have targeted public health decrees relating to social distancing, including mandatory stay-at-home and business closure orders.  The author is not aware of any such challenge finding success in a courtroom, probably due to the underlying legal authority granted to state leaders, but also the perceived public health benefit of these orders. Certainly stay-at-home orders, including business closure orders, have imposed massive economic hardship, but their public health premise has thus far shielded Gov. Walz and other national leaders from successful legal challenges.  Less discussed are those policies that actually impose a government-sanctioned cost on businesses and individuals with no direct public health connection, akin to a government taking of property with no due process or compensation for the loss. The clearest example is the COVID-related policy that blocks landlords from evicting or non-renewal of a lease of a residential tenant for non-payment of rent.  In Minnesota, Gov. Walz imposed a restriction on tenant evictions almost immediately, along with other prescriptive measures.  The prohibition on evictions or lease terminations is nearly universal in scope, allowing evictions or lease terminations only when there is clear evidence of criminal activity occurring in the leasehold premises that endangers the safety of others, such as threats of violence or illegal drug use.  But for this limited exception, landlords have no remedy for a tenant’s failure to pay rent, whether willful or otherwise. The actual economic plight of the tenant, if any, is irrelevant.  What’s ironic is that thousands of tenants facing sudden unemployment have benefitted from state and federal cash grants to supplement traditional unemployment benefits.  Not only have such policies not been tied to meeting existing lease obligations, they have actually led business owners to complain that they can’t attract workers back to their jobs. Yes, under the emergency orders the tenant has a continuing legal obligation to pay rent when due, but a tenant needs no excuse, no permission, no reason at all, to withhold payment of rent.  Meanwhile landlords, including thousands of small property owners, are forced to eat the cost of this policy, hoping to be made whole some other day, if they are not first foreclosed upon by an unforgiving lender. Someday the moratorium on tenant evictions will be lifted and a flood of eviction proceedings will commence in district court across Minnesota and across the country, searching for the attention of a backlogged court system.  Yet the high cost of seeking a court remedy paired with a low likelihood of actually collecting past-due rent means that in the end, landlords will solely bear the financial cost of this COVID-19 policy notwithstanding the undisputed government-sanctioned “taking” being imposed on private property owners

August 28, 2020

Local Government

Making the Most of Virtual Public Hearings

Today, most public hearings are conducted online or by conference call, whether before the Planning Commission, City Council, Board of Adjustments or County Board. Every unit of government has switched to some form of telephonic or video hearing format in response to the global pandemic. The good news is projects are still being approved by local bodies, but making an effective presentation is challenging, particularly when there is a point of conflict to be resolved by the public body. What follows are the best practices for virtual hearings. Start by requesting in-person appearances wherever possible. A few public bodies still conduct hearings in-person, and some are considering hybrid models that would offer either in-person or online appearances. Since in-person appearances are always preferable to online, ask whether in-person is an option. Prepare for the online hearing in the same way you would an in-person appearance. It is always best to dress the part and come prepared. While the pandemic has forced a bit of informality in the hearing process, which comes with its share of electronic glitches, public bodies appreciate the decorum that comes with a presentation prepared by a professional using the same rules of procedure that existed before the pandemic. Send arguments in writing ahead of the hearing. While this is good advice in all cases, it is even more important now that hearings are conducted online.  A good written outline, sent ahead of time, will help the public body follow your testimony and keep you as the presenter on track and within any time limits imposed by the public body. Turn on your video if that’s an option. Most public meetings allow outside participants to turn on the video offered by the platform used for the hearing. By turning on the video, you are elevated to the same status as other participants in the hearing and become a more effective communicator. Make use of online reports, findings and plans. Since almost every project comes with a staff report, you can ask the staff or other presenters to put the report on the screen and then walk through required findings or project plans to make your point. As an alternative, send the staff a package of your materials in PowerPoint or similar format to use during your presentation. Continue to make use of supporters in testimony for your project. Local bodies have gotten good at creating an online queue for those that want to testify. While it may take some patience as they figure out who is online, the hearing must be available for all who want to testify in writing or by audio and video. When you are done with testimony, recap your points and turn off your video or mute your mic. It is now common to hear dogs barking or kids crying in online meetings but it certainly improves outcomes if everyone respects the hearing process by not contributing to the disruption that often occurs when the public testifies from home. Keep your sense of humor. We are living in extraordinary times and are often saved by our own sense of humor in the face of the ridiculous. If someone burps, slams a door or spills a cup of coffee on their keyboard, just keep your wits about you and offer a kind pause while the meeting or hearing comes back to order. And remember to stay safe out there! Bill Griffith has been practicing land use and municipal law for over thirty years. He enjoys interviewing experts on the future of land use and sustainability.  You can listen to his podcast, Finding the Future here.

July 24, 2020

Legislative and Judicial Updates

A Summer of Special Sessions: Is July’s Special Session the Last Chance for a Deal on Bonding, COVID-19 Relief & Police Reform?

Margaret Vesel and Matthew Bergeron recap the Minnesota Legislature’s week-long June special session and preview the special session beginning on July 13, 2020. They discuss the ongoing negotiations over law enforcement reform, capital investment, and bonding and examine how the seemingly unrelated issues are interconnected when it comes to finding a “comprehensive deal”. Our Team The Larkin Hoffman Government Relations team is engaged daily with key state government decision-makers to gain assistance and remove barriers critical to our clients’ ongoing operations, and perhaps even their survival. We are available to assist you on issues ranging from influencing the governor’s Executive Orders to requesting waivers from state government requirements to revising legislative proposals that will become law.

July 10, 2020

Construction

Preparedness Plan Requirements Guidance for Construction Revised with Little Real Change

This post is co-written by Phyllis Karasov and Mike Schechter. On Wednesday, June 24, we wrote an article on the Minnesota Department of Labor and Industry’s guidance that requires a preparedness plan for the construction industry. The guidance was confusing and placed onerous responsibilities on contractors, owners and public entities, including ensuring that plans among owners, generals, subcontractors, and others align.  AGC of Minnesota and Housing First Minnesota have been advocating for meaningful clarification and change in the guidance on behalf of the construction industry. DLI updated its guidance on Thursday, June 25th. The effective date of Monday, June 29 has not changed.  Given the ongoing vagaries, late and continued updates, challenges to comply, and general confusion, AGC is working to delay this effective date to permit better dialogue with DLI, hopefully more workable guidance and communicate the guidance with the industry. As it stands now, the updated guidance does little to address the construction industry’s concerns.  The guidance lists most of its protocols as “required” with a few protocols described as “recommended.” Many additional mandates have been added.  The latest updated guidance also loosens the general contractor’s responsibility for compliance by subcontractors and others on the job site, although the general contractor is still responsible for ensuring that businesses performing work activities at the worksite have COVID-19 preparedness plans that meet the requirements of the guidance.  General contractors must also ensure diligent investigations are conducted at the worksite to evaluate and assess instances of exposure, whether actual or potential, involving workers who have COVID-19 or there is reason to believe may be COVID-19 positive. We recommend that construction contractors contact OSHA Consultation with their concerns and questions to elevate the significance of the challenges these requirements pose. OSHA Workplace Safety Consultation can be reached at OSHA.consultation@state.mn.us .  You can also contact Phyllis Karasov with questions or for assistance with the drafting of a Preparedness Plan. About the Authors Phyllis Karasov, Larkin Hoffman Phyllis Karasov is chair of the Larkin Hoffman labor and employment law practice group and advises businesses on labor and employment matters. Her clients come from a variety of sectors, including construction, manufacturing, higher education, K-12 private education, nonprofit and healthcare. She provides counsel in all areas of human resources, including hiring, handbooks, regulatory compliance, discrimination, sexual harassment, discipline and termination, Americans with Disabilities Act, OSHA rules and the Family and Medical Leave Act. As a former National Labor Relations Board attorney, Phyllis is often called upon to represent clients in labor union matters including arbitrations, collective bargaining agreements and union contracts.  Phyllis is also on the Board of Directors for the Associated General Contractors of Minnesota. Mike Schechter, Associated General Contractors of Minnesota Mike Schechter is the General Counsel and Director of Labor Relations for the Associated General Contractors of Minnesota.  AGC serves the construction industry to improve construction conditions, create jobs, promote safety, and benefit the communities.  It works with government, unions, community groups, and related businesses and associations.  You can learn more about Mike at https://www.linkedin.com/in/mikeschechter.

June 26, 2020

Construction

How Far Can the Governor Go On His Own? Part 2

Recently I commented on a growing level of concern regarding Gov. Tim Walz’s use of his statutory public safety “emergency” authority to promulgate wide-ranging and consequential executive orders affecting the state’s economy and citizens.  While many groups, including health care and service organizations, were required to suspend their operations for at least two months, the construction industry was deemed “essential” and, thus, allowed to continue normal operations, albeit subject to COVID-related “best practices”.  The good news is that the construction industry has been able to maintain its operational capacity notwithstanding a general pause in business and commercial spending.  The better news is that the construction industry seemingly has done so with very limited COVID-related infections.  You would think that would count for something? You would be wrong. With this backdrop, it was a surprise to see the new “guidance” with Executive Order 20-74 released by the state’s Department of Labor and Industry (“DLI”) which imposes significant new mandatory requirements on the construction industry.  This guidance, which has the force of law, comes with limited input from the construction industry itself.  To the extent it did consult, it chose not to listen to the concerns raised by construction industry representatives about the scope of DLI’s new policies.  These new policies “mandate” site-specific safety plans for all participants in the construction industry, whether they are general contractors, sub-contractors, suppliers, service consultants or owners.  On the surface, the notion that this industry should have credible COVID safety plans in place makes sense—which have been required since March 2020.  But DLI’s new mandatory policies turn common sense on its head by mandating an overly bureaucratic safety program for the construction industry that will be expensive, prone to errors and likely will not measurably affect safety.  Construction is unique in that the “job site” can change by the day, week or hour.  Sub-contractors and their workers come and go with no pre-determined schedule.  Combine that with the task of managing many, perhaps dozens, of active job sites, and one begins to understand the record-keeping and compliance challenge posed by the new DLI directive. Why do this? And why do this now?  Who knows?  Certainly, nobody within DLI or other state agencies have identified a problem they are seeking to solve.  It’s as though we’ve arrived at a spot in managing COVID risks in which someone’s random idea of public safety can be now be implemented simply at the stroke of a pen, with virtually no public input and dubious public policy justification, consequences be damned.  As a reminder, the governor’s authority to promulgate “emergency” Executive Orders is essentially a policy-mandating blank check.  It’s application in the modern era is without precedent and is virtually unchecked. State legislators and the electorate will (hopefully) learn a lot from the COVID-related experiences; much of it undoubtedly beneficial, but plenty to raise legitimate cause for concern.  We do want state leaders to have the authority to respond to bona fide public safety emergencies, and Gov. Walz and his administration have done that.  But about a month ago, they passed the threshold of true COVID crisis management and have missed the opportunity to bring the rest of the state along with their long term response to COVID.  It’s not too late. Executive Order 20-74: Continuing to Safely Reopen Minnesota’s Economy and Ensure Safe NonWork Activities during the COVID-19 Peacetime Emergency Order Preparedness Plan Requirements Guidance –Construction

June 23, 2020

Legislative and Judicial Updates

How Far Can the Governor Go On His Own?

Minnesota businesses and citizens have been operating under a Peacetime Declaration of Emergency, Executive Order 20-01, since March 16, 2020.  The impetus for the Declaration was the rapidly-emerging Coronavirus as a global health crisis with far-reaching implications.  Since the original Declaration, the governor has issued 75 Executive Orders addressing various COVID-related topics from health care to real estate to construction to education.  He also has acted several times to extend the timeline under which his Peacetime Declaration remains in effect; the most recent Order extends the emergency powers until July  13, until the Executive Order is rescinded by proper authority, or until it is terminated by a 2 majority vote of each house of the Legislature pursuant to Minnesota Statutes 2019, section 12.31, subdivision 2(b), whichever occurs earlier. The Executive Orders have legal effect; many Minnesotans have been cited for violating them, including the owner of a saloon in central Minnesota who dared to challenge the restrictions on his business.  For the most part Minnesotans have accepted the governor’s Orders as a necessary component of preserving public health and safety.  However, over the past 30-45 days a growing number of people are questioning how far the governor can go in implementing new Executive Orders, which have the effect of a duly promulgated law, albeit a law that was not created by the Minnesota Legislature nor even one resulting from normal public rulemaking.  Here’s the thing: the Minnesota Constitution vests the authority to promulgate new laws solely in the legislature, subject to a possible veto by the governor if he disagrees with what has been passed.  In addition, the governor, through his executive branch agencies, has the authority to promulgate rules to implement existing statutory authority, but those rules must go through a public review process and are subject to court review, all of which takes time. The authority exercised by Governor Walz has, thus far, superseded all traditional checks and balances imposed by the Constitution.  A growing number of legislators are objecting to this usurpation of authority by the governor but, thus far, have not been able to muster sufficient bipartisan support to rein in his actions.  Furthermore, no Minnesota court has yet issued a ruling enjoining Governor Walz from acting unilaterally under the Peacetime Declaration.  This is likely due, at least in part, to the structure of the law which authorizes the governor’s actions, but also the unease that would attach to any court order that could unintentionally contribute to the spread of the virus.

June 19, 2020

Legislative and Judicial Updates

Minnesota Supreme Court Holds Minneapolis Paid Sick and Safe Time Ordinance Applies to Employers Outside of Minneapolis

On June 10, 2020, the Minnesota Supreme Court issued a decision affirming the Court of Appeals and upholding the determination that the Minneapolis Paid Sick and Safe Time Ordinance (“Ordinance”) applies to employers outside of Minneapolis, finding that the Ordinance was not preempted by state law and did not violate the extraterritoriality doctrine. In 2016, the Minneapolis City Council passed the Sick and Safe Time Ordinance. The Ordinance allows employees who work in the geographic boundaries of the City of Minneapolis for at least 80 hours a year, to accrue one hour of sick and safe time for every 30 hours worked, up to a maximum of 48 hours in a calendar year. After its passing, a number of business entities lead by the Minnesota Chamber of Commerce sued the City of Minneapolis for a declaration that the Ordinance is invalid to the extent it purports to apply to employers with no offices or other physical location within the city limits. The district court upheld the validity of the Ordinance as it applied to employers within Minneapolis, but issued an injunction preventing the Ordinance from applying to employers outside of the city. For more details about the Ordinance and its procedural posture, please click here. In Minnesota Chamber of Commerce v. City of Minneapolis, the Minnesota Supreme Court first analyzed whether Minnesota state law preempted the Ordinance under two different theories: conflict preemption and field preemption.  The Court found that the state law, Minn. Stat. § 181.9413, governing employer-provided sick and safe time, and the Minneapolis Ordinance did not present an irreconcilable conflict between each other. Therefore, the Ordinance was not preempted under the theory of conflict preemption. The Court further found that the subject matter of the Ordinance, employer-provided sick and safe time, has not been “so fully covered by state law as to have become solely a matter of state concern,” nor was there any legislative intent that the state law was meant to preempt local action by occupying the field of sick and safe time. Additionally, the Chamber could not show that the local regulation would have unreasonably adverse effects upon the general population of the state. Therefore, the Court found that the state law does not occupy the field of employer-provided sick and safe time. The Supreme Court then considered the extraterritoriality doctrine, for only the third time in its history. The majority stated that a court must look to the purpose and effect of the regulation when facing a challenge to a local ordinance based on the extraterritoriality doctrine. The court ultimately found that the Ordinance’s purpose was to safeguard the public health and welfare of all persons working in the city of Minneapolis, regardless if their employer is located outside the city, and to regulate activity within the geographic limits of the city. For the foregoing reasons, the court found that the Ordinance was a valid exercise of municipal authority and did not violate the extraterritoriality doctrine. Justice Anderson, joined by Chief Justice Gildea, wrote a dissent arguing that the Ordinance violated the extraterritoriality doctrine due to its reach beyond the borders of Minneapolis. “[T]he Ordinance applies to businesses outside of Minneapolis and requires those businesses to perform activities outside of Minneapolis, and both the City and the court concede as much.” Justice Anderson warned that the majority created a new test by looking to the primary purpose and effect of the Ordinance, rather than the statutory authority as established in prior case law. He stated that the court’s application of this new test is alarming and ignores the broader, state-wide effects of the Ordinance. To read the full decision, please click here. Any business with employees who work in Minneapolis, whether or not the business has offices within the city, should be aware of and comply with the Ordinance.  Larkin Hoffman employment attorneys stand ready to assist businesses who are impacted by this ruling.

June 11, 2020

Local Government

Restaurants and Bars Allowed to Re-open—sort of

Gov. Tim Walz has announced that restaurants and bars in Minnesota will be allowed to re-open for sit-down service effective June 1st.  Sort of.  The caveat is that sit-down service must be restricted to outdoor seating areas only, with criteria for maintaining social distancing amongst both guests and staff.  Previously, restaurants had been allowed to provide menu services limited to drive-thru, delivery or pick-up options.  Many restaurants have opened under the first set of restrictions and more still will likely try to re-open with the new outdoor seating option.  As we approach the official start of summer, Minnesotans will be happy to have an entertainment option that is anywhere but their couch.  But bar and restaurant owners have less to cheer about–even with the new option to serve guests, some bars and restaurants will stay closed; and many that choose to open will struggle to survive even if they re-open given the ongoing restrictions limiting customer traffic and revenue.  In fact, notable restaurants such as Bachelor Farmer in Minneapolis and Pazzaluna in St. Paul have already announced they are closing for good. It’s been said repeatedly by hospitality professionals that if they can’t open 100% for business, it makes no sense to open up on a partial basis.  Like all businesses, bars and restaurants have certain fixed and variable costs that require a calculated flow of customers to be viable.  The reality is that these businesses operate on very tight margins and require strong customer flow to pay the bills; opening at restricted capacity won’t cut it.  While bar and restaurant staffing is scalable, the rent is not, taxes and utilities are not.  And planning a menu that relies on outdoor seating only, with the variability of weather and uncertain customer response will be very challenging.  These are the basic business calculations to be considered.  Yet, the unfortunate truth is that, notwithstanding these business realities, until bar and restaurant customers feel safe sitting inside next to a few hundred of their closest new friends, the core of these businesses is literally “off the table”. The practical consideration for many bars and restaurants is how they could even open with outdoor seating?  For a freestanding restaurant with a typical parking lot, it is likely that a limited amount of outdoor seating can be created, if it doesn’t already exist.  A limited amount.  Because it rains.  And the wind blows.  Or it’s really hot.  And after August, it can become cold.  In these circumstances outdoor seating is not viable.  The option for outdoor seating is a real challenge for bars and restaurants that lack the space to set up any sort of outdoor seating, whether in a parking lot, sidewalk or greenspace.  For bars and restaurants located inside a hotel or office building, it may be physically impossible to re-open.  But even if it is possible, it likely will be necessary to negotiate with a landlord for the right to use an area that has not been part of the lease.  It may also be necessary to secure local government approvals to set up tables on a public sidewalk or in a parking lot not otherwise approved for this purpose.  These things take time and have added costs.  Even then, this option likely will provide limited seating, under variable weather conditions for a limited duration.  For some, good enough.  But not for all, unfortunately. The practical challenges confronting any business or other organization seeking to resume normal operations are daunting.  That’s especially true for bars and restaurants.  And even if the challenges can be addressed, the ongoing question is whether the employees and customers at these establishments will feel safe enough to venture out?

May 21, 2020

Legislative and Judicial Updates

Shelter in Place: Take It or Leave It?

Minnesota, like many states across the country, is gradually trying to loosen the restrictions on its citizens so that we can try to return to some level of normalcy.  Most recently, Gov. Tim Walz (D-MN) let his “shelter in place” executive order lapse.  This means that a broad mix of businesses, non-profits and government agencies can attempt to resume normal operations.  However, the governor has retained a prior order that will keep bars, restaurants, theaters, etc. and other similar uses closed for a few more weeks.  For many, especially small business owners and their employees, re-opening means a chance to save their company or organization and/or get a paycheck to pay the rent and buy groceries.  But what does the push to “re-open the economy” really mean? If you are in the construction business, your life, along with your employees, goes on pretty much as it has since the governor’s original shelter order went into effect at the end of March.  The construction industry, including suppliers and service providers, was declared “essential” under the governor’s original order and, thus, allowed construction companies and their employees to continue their work.  This was a big relief to the construction industry and, especially, the home construction industry given the acute and growing demand for housing of all types and price ranges.  There may have been suppliers or service providers who were affected by closure orders in other states or countries which, in turn, affected the construction industry in Minnesota but these impacts were limited from we have seen and heard.  But that isn’t the same as saying that the affected employees at these companies are universally happy to be at work given the real health risk that has influenced everyone’s thoughts and actions over the past two months.  In fact, the real question is whether the general public will react to the removal of shelter orders with a shrug and essentially ignore it.   After all, the coronavirus risk is still present, testing is not yet widely available, contact tracing is even less available and no vaccine is available for general inoculation.  Just because it’s possible to walk into a store doesn’t mean the public will feel safe in doing so, especially given the ongoing safety practices being recommended for businesses and organizations of all types. In the face of this fact, a larger percentage of public and private organizations will have a very hard time convincing a skeptical public, whether employees, consultants, customers or world travelers, that it is safe to venture out and reengage the world.  After all, who wants to venture out to a restaurant to be served by a waiter wearing a mask keeping his or her “social” distance from you?  Plus, only a quarter to half of the available seating can be occupied (and for now likely will have to be outside the building, which is fine for a summer day, but not fine in December or in a rain storm).  For homebuyers, the opportunity to tour homes personally vs online will be challenging as both the potential buyer and the seller will be leery about exposing each other, respectively to a risk of infection.  At a minimum, those assisting with the sale of a home will need to take care that all surfaces likely to have been touched during a tour are sanitized—not good. We all want to resume our lives in the most normal way possible.  But the honest truth is that until each of us feels safe in venturing out that sense of normalcy is a long way off. Please Join Us Join Peter Coyle on Thursday, May 21st at 3:30 PM for Bisnow’s Twin Cities Deep Dive: Projects in Progresswebinar.  Peter will be joined by Blake Hastings, President of Oppidan, Anne Behrendt, CEO of Doran Companies and Mark Jepson, Executive Director and Managing Partner of Commercial Investment Properties to discuss “How Developers are Weathering the Storm and Completing Projects Amidst Uncertainty”.  Topics discussed will include: What cost implications has the pandemic had on development projects? What measures are developers taking to ensure the safety of their workers on construction sites? How are developers managing investor relations and delayed timelines. How are companies handling supply delays? What will the Twin Cities real estate market look like after this pandemic? Please click here to register: Twin Cities Deep Dive: Projects in Progress

May 20, 2020

Legislative and Judicial Updates

Navigating State and Local Governments During a Pandemic: How Continuing Government Action on Major Issues Can Impact Your Investments

Peter Coyle and Jacob Steen discuss the land use, government relations and regulatory environment during the COVID-19 pandemic. They share examples of how Larkin Hoffman has been able to assist clients in overcoming the unique challenges presented by a statewide stay-at-home order and discuss the ways that the global pandemic has shaped the local land use and zoning approval process. About the Larkin Hoffman Podcast Briefings The Larkin Hoffman Podcast Briefings series was developed to discuss issues affected by the COVID-19 crisis. Our attorneys will address corporate, employment, real estate, construction, franchise, bankruptcy, insurance, litigation and other matters in this series. Over the next few weeks, there will be several podcasts on developing matters. Larkin Hoffman is available to help. Please reach out for additional guidance

May 1, 2020

Eminent Domain

How Will COVID-19 Affect Real Estate Values?

Those of us in the real estate practice—and particularly in areas concerning real estate valuation such as eminent domain and property tax appeals—are obviously quite concerned about the impact of the COVID-19 pandemic on our clients’ property values as we all proceed through these very uncertain times. I think about two upcoming quick-take hearings that I have for clients in late March and early April. The quick take hearing is the critical time during an eminent domain proceeding when the court grants the government title to and possession of the real property needed for whatever public project necessitated the taking. The date of this transfer of title and possession—the so-called “take date”—is the date on which the property will be valued for purposes of determining the damages that the property owner is owed as “just compensation” for the taking. Will the unfortunate timing of my clients’ quick take dates in the midst of this pandemic affect their ability to recover just compensation? It’s anybody’s guess at this point. Josh Folland and his group of appraisers at Valbridge Property Advisors have interviewed Twin Cities real estate professionals to try to assess the potential impacts of the pandemic at this early stage. I’m pleased to pass on Valbridge’s newsletter and report for your information. If you have thoughts (or experiences) of your own, we’d love to hear from you. Stay safe and stay well. Valbridge notes that market sentiment is likely to change as the impacts of the virus become more clear. They will continue to survey the market and will publish updates to this report.

March 20, 2020

Construction

Are Attorneys’ Fees Recoverable on a Mechanics’ Lien Claim Involving a Homestead?

Under Minnesota law, a contractor may collect reasonable attorneys’ fees in a mechanics’ lien foreclosure action even if the property is a homestead. The amount of the award is in the discretion of the court. That is not the case in every state as recently illustrated in Iowa. Historically, Iowa has liberally construed its mechanics’ lien statute to promote restitution and prevent unjust enrichment. Iowa also has a longstanding history of protecting the homestead. Until recently, Iowa courts had never addressed the interplay between these competing interests. The Iowa Supreme Court recently decided Standard Water Control Systems, Inc. v. Jones, examining the intersection between Iowa Code chapter 561 concerning homesteads and chapter 572 regarding mechanics’ liens. The Supreme Court concluded that attorneys’ fees cannot be recovered by a mechanics’ lien claimant from a homestead foreclosure provided that the homeowners assert their homestead rights before a foreclosure decree is entered. Standard Water Control Systems, Inc. v. Jones In June 2013, Iowa homeowners hired a contractor to waterproof their basement. With 95% of the project completed, the contractor accidentally drilled through the home’s water and sewer lines. After the homeowners refused to pay their $5,400 bill or permit the contractor to finish the project, the contractor filed a mechanics’ lien foreclosure action against the homeowners. Following more than three years of litigation, the Iowa Court of Appeals ordered the homeowners to pay most of the contractor’s bill but sent the attorneys’ fee issue back to district court. The district court entered a revised decree granting the contractor the right to foreclose a mechanics’ lien against the home for both the principal amount due and the contractor’s attorneys’ fees. Two weeks before a scheduled sheriff’s sale of the home, and after the revised decree, the homeowners asserted their homestead exemption for the first time, claiming that the district court violated their homestead rights by including attorneys’ fees in the mechanics’ lien foreclosure decree. The homeowners argued that their house could not be sold to pay the attorneys’ fees because it was their homestead. Iowa Supreme Court’s Decision The Iowa Supreme Court decided that “homestead rights generally prevail over a mechanics’ lien including attorney fees.” It concluded, however, that homeowners must raise the homestead exemption before a foreclosure decree is entered. In this case, the homeowners asserted their homestead rights too late because the foreclosure decree had already been executed. Therefore, they waived their right to claim the homestead exemption and the attorneys’ fees were properly included in the lien foreclosure. Of course, the Iowa Supreme Court decision is nothing that cannot be changed by the state’s legislature. Such a bill, S.F. 458, is working its way through the Iowa Legislature and, if passed, will make it clear that attorneys’ fees would be recoverable in the foreclosure of a mechanics’ lien against a homestead. Subscribe to this blog and we will keep you posted on the outcome of that effort.

February 26, 2020

Construction

When do Statutes of Repose Begin to Run on Condominium Projects?

A statute of repose defines the date by which a particular type of claim must be asserted before it becomes untimely, or “stale,” and can no longer be pursued.  This provides designers and builders of construction projects some security that, after a certain date, they cannot be hauled into court to answer for their alleged breaches of contract, negligence, or breaches of warranty. What if the claim involves the construction of a condominium project? Would the statute of repose be calculated based on the completion of each condominium unit, each separate building of the complex or to the entire complex? The Minnesota Supreme Court recently provided much-needed clarity regarding the application to condominiums of the statutory repose periods for breach of warranty and other claims in Village Lofts v. Housing Partners III Lofts, LLC. Statutory Residential Warranties and the Statute of Repose Minnesota Statutes Ch. 327A provides certain statutory warranties with respect to the construction of new homes and the renovation or remodeling of existing homes, including condominiums.  Village Lofts involved the assertion by a condominium homeowners association of claims against the developer and builder for, among other things, breaching the 10-year statutory warranty against major construction defects.  The project involved the construction of two separate condominium buildings, each of which was completed and occupied on different dates. In Minnesota, claims for breach of the statutory warranties are barred by the statute of repose if they “accrue” more than 10 years after the “warranty date.”  This analysis involves answering two important questions:  (1) On what date does a statutory warranty claim accrue? and (2) What is the applicable “warranty date” that starts the 10-year statute of repose running? When Does a Warranty Claim Accrue? The Supreme Court cited a case from 2004, Vlahos v. R&I Constr. of Bloomington, in stating that a breach of warranty claim accrues “ . . . when the homeowner discovers, or should have discovered, the builder’s refusal or inability to ensure the home is free from major construction defects.”  In Village Lofts, the Court concluded that the claims for breach of warranty accrued in May, 2015, at the earliest, when the Association notified the developer and builder of the alleged problems and the developer and builder did nothing.  Therefore, the Court reasoned, if the “warranty date” for the statutory warranty claims is prior to May, 2005, then the claims are barred by the 10-year statute of repose. What is the Applicable Warranty Date? Chapter 327A defines “warranty date” as “the earliest of:  (a) the date of the initial vendee’s first occupancy of the dwelling; or (b) the date upon which the initial vendee takes legal or equitable title in the dwelling.”  This definition works well with single-family homes, but it does not work well for condominiums.  In Village Lofts, the Association argued (and the Court of Appeals agreed) that the warranty date is to be determined for each individual condominium unit.  The developer and the builder argued that the warranty date has to be determined for each of the separate buildings based on when the first occupant (in each respective building) occupied or took title to that unit. The Court determined that the statute was ambiguous, which enabled it to go through a detailed exercise to interpret the Legislature’s intent and allowed it to look beyond the words of the statute.  The Court concluded after much discussion that “ . . . the Legislature intended that there be a single warranty date for a condominium building rather than different warranty dates for each unit.”  This conclusion saves us from the absurd and impractical result of having to determine warranty dates for each individual unit and permits the calculation of the statute of repose using the first unit in a building that is occupied or to which title has transferred. Non-Warranty Claims The Court also considered the statute of repose for Village Loft’s non-warranty claims.  Claims for defective and unsafe improvements to real property are governed by Minn. Stat. § 541.051, Subd. 1(a), which provides a statute of repose of 10 years “ . . . after the date of substantial completion of the construction.”  The issue in Village Lofts was whether the two condominium buildings, Buildings A and B, were considered one “improvement” or two.  The Court concluded they were two separate improvements because, among other things, (a) each was given a separate Certificate of Occupancy on different dates, (b) each building independently meets the Court’s definition of an improvement, and (c) the Legislature intended the trigger, substantial completion, to be determined when the contractor can turn the building over to the person that hired the contractor to be used for its intended purposes.  Because each building was its own improvement, the Association’s non-warranty claims were barred by the statute of repose. Conclusions and Take-Aways The “Warranty Date” for the statute of repose applicable to claims of breach of statutory warranties for condominium projects is determined on a “per building” basis, and not on a “per unit” basis. When a condominium development involves multiple buildings, each of which is deemed its own improvement, the determination of substantial completion for purposes of the application of the statute of repose for defective and unsafe improvements to real property is determined on an improvement (building) by improvement (building) basis.

January 29, 2020

Construction

Another City Attempts to Collect Illegal Transportation Fees – Struck Down by the Court Again

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 theHarstad 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.

January 22, 2020

Local Government

A Sobering Reminder of Who is in Charge of Your Land

Imagine you are a landowner whose property is dedicated to a use that has run its course—say a golf course for example.  The land represents a sizable family investment and naturally your thoughts turn to what other uses are possible to assure the land is put to a productive and, hopefully, profitable use for the benefit of your family.  While the property is surrounded by a mix of low density housing, it nonetheless sits adjacent to city streets with ample capacity for added traffic, available transit service and easy access to the interstate highway.  The market seems to favor higher density market-rate housing right now, either work-force or senior housing.  You have been reading that cities are seeking out more dense projects including housing to attract young families and to retain seniors.  And, your property is one of a few private land areas of any size left for development within an otherwise fully developed community.  It would seem a good time to convert the land to a new use that is supported by the market, but only if you can secure the necessary land use and zoning changes that are needed to bring this about.  Unfortunately, once you begin the public approvals process to convert your land use, you are abruptly reminded that you have virtually no control over (or say in) what happens next. I frequently receive calls from landowners or business owners who are trying to convert property to a new use and need to understand what this entails.  Invariably, we confirm for these owners what a specific city process will require to complete a land use or zoning amendment.  While the process of changing a land use designation seems simple and fair on its face, in practice it may be far from simple or fair.  Here’s a real-life example.  Our owner above, submits an application to change the land use designation of his property to allow the possibility of higher density housing to be constructed.  Obtaining the land use change is important as any potential buyer wants to understand what is going to be allowed before pursuing a purchase agreement and a formal development application.  The use allowed will determine the value, ie. price, of the land.  Once the owner submits the necessary land use application to change the allowed use, she is rendered a spectator to what happens next, with virtually no power to affect the ensuing course of events. State law gives cities in Minnesota very broad authority to decide the land use designation for all property within a given jurisdiction.  This means that the owner’s well-reasoned plan to change the land use designation for her property is essentially irrelevant from the city’s point of view.  A city could accept the application and approve it, it could deny the change or go a different direction entirely, whether the owner is supportive or not.  Moreover, a land use application, by law, must be reviewed in a public hearing conducted by a planning commission or city council.  This requires public notice and opportunity to comment from surrounding residents.  What the owner quickly learns is that the surrounding residents earnestly believe they have a right to dictate the future land use designation (or that it not change at all).  If enough residents rise up to oppose the landowner’s application, it becomes politically treacherous for city leaders to ignore the residents’ objections. It is hard enough on the landowner to hear residents who she may not even know speak critically of the proposal to change the land use, attributing it to the owner’s greed or complete disregard for the impact of any change on the surrounding residents.  More than a few will avow that it should be converted to a city park.  It is even harder on the owner when the city’s leaders make it clear that they are listening to the residents, first and foremost, and effectively ignore the interests of the landowner.  But the real “topper” is when the city not only rejects the landowner’s request but then decides to initiate a land use change of its own for the property, without regard to the owner’s interest or financial consequences, including whether the new, alternate land use designation will be viable in the marketplace.  The sad truth is that the landowner in this situation has little choice but to let the process play out, hoping that some good will come of it.  Meanwhile, if a new land use designation is approved, the county assessor will likely revalue the property based on whatever new designation is approved by the city, putting a new property tax burden on the owner without any certainty that the land can be sold for its newly designated use. It’s a sobering reminder that as the landowner, the only certainty you have is your obligation to pay your property taxes; the rest is out of your control.

November 13, 2019

Local Government

Minneapolis Bans Drive-Throughs; Will It Do Any Good?

In August 2019, the Minneapolis City Council adopted an ordinance banning new drive-through windows in the city. With the adoption of the new Minneapolis 2040 Comprehensive Plan, beginning in January of 2020, all gas stations will soon be prohibited, as well. These policy changes are part of the City’s aggressive goal of reducing greenhouse gas emissions by 80 percent by 2050. While these goals are laudable, the impact of these policies is likely to be nominal at best, and will almost certainly have unintended impacts. In other places, drive-through bans are usually adopted with the goal of curbing obesity. In Minneapolis, however, which consistently ranks as one of the healthiest cities in the nation, cutting emissions is the goal. While the few studies available have shown that drive-through bans have little or no impact on health outcomes, there is little or no evidence that such a ban will have an impact on greenhouse gasses. While it seems logical that a ban may reduce some emissions, the act is more likely to be a symbolic act signaling the city’s aggressive stance on climate change. Minnesota law protects land uses that are subjected to new zoning regulations. An existing drive-through use that is lawfully established will become “grandfathered” or legally nonconforming when the ban goes into effect. Therefore, as long as a nonconforming drive-through remains in continuous operation, the law will protect that use in perpetuity. While a nonconforming drive-through cannot be expanded, it can be repaired, replaced, maintained, and improved, including through reuse by a new operator. While the city ordinance alludes to “being consistent” with the goal of reducing emissions, that assumes that drivers will use drive-throughs less, which seems like wishful thinking. The policies will eliminate new drive-throughs, but the existing uses in operation are likely to continue to operate in perpetuity or at least until redevelopment of the property. From an economic perspective, banning drive-throughs actually fixes the supply. If demand increases for convenience uses, such as drive-through coffee shops, the existing uses will have a higher property value and thus, no incentive to redevelop into newer concepts that may otherwise serve their customers and align with City land use goals. Practically speaking, even if one operator goes out of business, the use may continue as long as a new operator is established within a year. It’s clear this policy will yield little real gains in terms of reducing emissions and, at the same time, create challenges for individuals with disabilities. More than half of the dozen or so drive-throughs approved in the city from 2013-2018 were for pharmacies and banks. Unlike fast food drive-throughs, banks and pharmacies are low volume but critically necessary for individuals with disabilities. The drive-through ban does not apply to parking spaces designated for curbside pickup; however, as a practical matter, requiring store staff to walk from the store to customers is likely to increase idling time. Moreover, in sub-zero temperatures, if the city decides to enforce its ban on cars idling for over three minutes, the policy will be to force individuals with disabilities to either break the idling ordinance or sit in freezing temperatures. Accordingly, the city is asking those who rely on drive-throughs to bear the burden of the city’s new policy. Minneapolis’s ban on drive-throughs is a symbolic act that is likely to have limited impact on greenhouse emissions. While the goal is worthwhile, this policy will ensure that existing drive-throughs will retain their value as demand increases and the supply remains consistent or decreases.  And as the median age of Minnesotans continues to rise, the impacts of the city’s policies will fall disproportionately on those with disabilities and limited mobility.

October 30, 2019

Eminent Domain

Relocation Reimbursement: Actual Moving Expense or Business Re-establishment?

Property owners forced to move their business locations through condemnation for the Metropolitan Council’s Southwest Light Rail Transit project are generally entitled to compensation on two fronts—first, they are entitled to just compensation for the taking of their real property; second, they are entitled to relocation benefits for the costs and expenses of moving their business operations to new business premises. Navigating the weird amalgam of federal statutes, federal regulations and state statutes governing “relocation reimbursement” can be confusing and frustrating for these business owners. Consider a business client of ours requiring both warehouse and office space that relocates after condemnation to a building once occupied by a manufacturing business. The city insists that the new and different use required by the business—warehousing as opposed to manufacturing—requires installation of a new water line to accommodate sprinkler system modifications for the former manufacturing space that will now become warehouse space.  The cost?  $90,000. Can the business owner receive relocation reimbursement from Metropolitan Council for this necessary modification to carry on the business in the new location? It may depend on whether that cost is considered an “actual moving expense” or a “business reestablishment expense.”  Why does it make a difference?  Because the law caps “business reestablishment expenses” at $50,000—not a difficult lift to reach for an established, successful small business possessing a large inventory that is forced to relocate.  But there is no monetary limit on “actual moving expenses,” other than that the expense must be “reasonable.” In the example of the sprinkler modifications, the regulations are less than clear. On the one hand, the relocation regulations state that, “modifications necessary to adapt utilities at the replacement site, to the personal property …” can be reimbursable as an actual reasonable moving and related expense.  Application of this rule would exclude the water utility expense from the $50,000 cap.  On the other hand, the relocation regulations also state that, “[r]epairs or improvements to the replacement real property as required by Federal, State, or local law, code or ordinance …” may qualify as a reestablishment expense.  Application of this rule would subject the expense to Minnesota’s $50,000 cap on reestablishment expenses.  The Metropolitan Council rejected the business owner’s $90,000 expense for reimbursement, concluding that it was a reestablishment expense subject to the $50,000 cap, which the owner had already exhausted through reimbursement of other expenses. Where does that leave the business owner? The allowable recourse to the Metropolitan Council’s final determination is appeal to an Administrative Law Judge.  The process ultimately could wind up in the Minnesota Court of Appeals if the administrative hearing process leads to an unsatisfactory outcome.

October 30, 2019

Local Government

Upcoming Ramsey County Elections Could Have a HUGE Impact on Local Development

Politics can be loud. With all the national media and punditry focused on the 2020 presidential primary, it would be easy to miss the significant local races on the ballot this November. However, with economic markers pointing towards a potential slowdown or recession, having a strong understanding of the local political landscape is essential for real estate and housing developers. For example, three of the largest redevelopment projects in recent Twin Cities history are currently located in Ramsey County. They include the following project: Twin Cities Army Ammunition Plant (427 acres)—The most contentious of the three developments, by far, is the Twins Cities Army Ammunition Plant, or “TCAAP,” site in Arden Hills, Minnesota. Currently known as the “Rice Creek Commons,” negotiations over the development of the county-owned site have broken down as city and county officials have struggled to see eye-to-eye on issues such as housing density and the inclusion of affordable housing. Ford Plant (135 acres)—This is the former site of the Ford Motor Company assembly plant located in the Highland Park neighborhood of Saint Paul, Minnesota. While the St. Paul City Council adopted the Ford Site Master Plan in 2017, there have been numerous efforts to revise or modify development plans since then (most recently in April, 2019) and, with the extended development timeline for a project this size, those efforts will continue to come before the council. Hillcrest Golf Course (112 acre)—Having ceased operations as a private golf course in 2017, the Hillcrest site is located on St. Paul’s east side. In recent months the St. Paul Port Authority has entered into development negotiations with the land owner and even gone as far as requesting a $10 million bond sale to facilitate redevelopment. With significant issues for all three projects remaining to be settled, there are a number of key local elections worth noting on the ballot this November. Ramsey County Commissioner (District 1): Following Commissioner Blake Huffman’s sudden resignation last May, a special election was called to fill the remaining year of his term. While the office of county commissioner is non-partisan, the Ramsey County Board is largely made up of commissioners with a history of endorsements from their local Democratic Farmer-Labor Party (“DFL”) units. Huffman was a notable exception, having previously held himself out as a Republican candidate for governor. Therefore, while the outcome of the election will have minimal impact on the political make-up of the Ramsey County Board, District 1 covers the TCAAP site and will place Huffman’s successor in an important post as parties look to break the current contentious gridlock. Following a primary that saw a slate of nine candidates reduced to two, the November general election will pit former Republican State Representative Randy Jessup against the DFL-endorsed political newcomer, Nicole Frethem. Jessup has strong name recognition in the generally right-of-center district having run for the Minnesota House of Representatives in 2014, 2016, and 2018 and having served in the House from 2015-16. However, Frethem was the top vote-getter in the August primary, coming away with a 41%-34.4% advantage.  Turnout will be key come November as Fretham, an outspoken progressive, looks to flip the most conservative district in the county.  The eventual winner will have to face the voters again in 2020. St. Paul City Council (Ward 6):Longtime East Side City Councilmember Dan Bostrom surprised many when, in late December 2018, he announced his resignation. Many people thought Bostrom, 78, might retire instead of seeking re-election, and potential candidates were already lining up to seek the seat, but his decision to vacate the seat he had held since 1996 shook up the campaign landscape significantly. Following a series of public interviews, Mayor Melvin Carter and the St. Paul City Council appointed Kassim Busuri, an educator and youth worker, to serve the remainder of his term, making Busuri the first Somali-American to serve on the city council.  However, Busuri angered many, including a number of his city council colleagues, when he went back on a commitment he made during the appointment process to not seek the seat in the November general election. His campaign came under additional scrutiny in June when he was accused of making anti-gay posts on Facebook.  Busuri now faces five challengers in an open ranked choice voting ballot. Among the five challengers, the two who stand out as the most formidable are Nelsie Yang, an economic justice organizer for the progressive community organizing group, TakeAction Minnesota, and Terri Thao, a member of the St. Paul Planning Commission and former chair of the board for the East Side Neighborhood Development ‎Company. The November ballot will also include small business owner Alexander Bourne, activist Greg Copeland, and housing advocate Danielle Swift. Ms. Yang’s campaign touts a number of significant political endorsements, including Women Winning, the St. Paul Regional Labor Federation, Take Action Minnesota, Our Revolution, and OutFront Minnesota. Meanwhile, Ms. Thao has been endorsed by Ramsey County Board Chair Jim McDonough, the St. Paul Area Chamber of Commerce, and multiple state representatives. The large number of candidates in the field make it difficult to predict who will ultimately represent the East Side, but it is clear that the eventual winner will likely have a significant voice in the Hillcrest development. St. Paul City Council (Ward 1): One of the other hotly contested city council seats to watch is in Ward 1, which includes the Frogtown, Summit-University, North End, Lexington-Hamline and Snelling-Hamline neighborhoods. Ward 1 has seen significant new investment in recent years with the opening of the Green Line LRT as well as the construction of Allianz Field. However, this race is worth noting for its potential impact on future developments, both along the University corridor as well as throughout other parts of St. Paul. The race pits incumbent City Councilmember and 2017 mayoral candidate, Dai Thao, against two well-organized challengers. Thao’s political career and tenure on the council has been tumultuous.  An outspoken critic on issues of police office accountability, Thao has found himself the subject of more than one investigation into his conduct while in office—including being acquitted in late 2018 of multiple charges related to an allegation that he illegally assisted a voter in marking their ballot. In April, DFL delegates endorsed Thao’s campaign for re-election, though that too was not without controversy. Thao is being challenged by Anika Bowie, the vice president of the Minneapolis NAACP, and former staffer to Congresswoman Betty McCollum, Liz De La Torre. Bowie’s campaign touts her strong ties to the community (she’s a fifth-generation resident of the Rondo neighborhood) as well as her service on the St. Paul Police Civilian Internal Affairs Review Commission.  She has also received a slew of progressive endorsements, including Women Winning, Our Revolution, and OutFront Minnesota. De La Torre’s campaign has focused on her career of service, including her work with Congresswoman McCollum as well as current work with victims of sexual violence. She has been endorsed by AFSCME Council 5, the Stonewall DFL, and Ramsey County Chair Jim McDonough. With ranked-choice voting, it is difficult to handicap the Ward 1 race, but seeing as how Councilmember Thao currently serves as one of two members of the city council on the St. Paul Port Authority, his re-election could have significant impacts on multiple redevelopment projects in the city.

September 11, 2019

Local Government

Cities Making it Harder to Supply Affordable Housing

The fact that Minnesota, and especially the metropolitan region of St. Paul/Minneapolis, is experiencing a severe affordable housing crisis is not disputed.  The Metropolitan Council recently released data documenting that the metro region of Minnesota is growing substantially but that the supply of new housing, affordable across a broad range of housing types, is lagging.  Within this dire circumstance, the supply of affordable rental housing is especially acute and apt to get worse.  Published reports indicate that vacancy rates for rental housing of all types in the metro region is at approximately two percent.  The repercussions of this fact are two-fold: rental rates across the board are rising, outstripping the growth of wages; and the supply of rental housing defined as “affordable” based on federal housing standards continues to shrink. Ironically, rather than pursue policies to increase the supply of all types of housing, especially for those most in need of entry-level or “work force” housing, local governments are increasingly adopting policies that likely will impede the supply of such housing.  We’ve recently documented the trend of cities in the metro region to adopt policies which compel builders of new housing units (multi-family and, in some cases, single family) to set aside some percentage of the constructed units (typically 10 percent) for sale or rental to individuals whose income falls below established affordability thresholds.  This policy will make it harder to justify the investment in new rental (and some single-family) housing.  Let’s assume a builder proposes to build 100 market rate apartment units.  Under these policies (as an example), 10 of the units must be reserved and priced to be affordable to eligible renters.  Let’s assume that the affordable rental rate is set at 70 percent of the presumed market rate for such apartment units.  The rent differential tied to the reserved affordable units must be reallocated to the remaining 90 market units, pricing them at a higher rental rate than previously planned.  There are several problems that arise:  first, will the more expensive market rental units be competitive in the targeted market area; how will a lender underwrite that added risk?  Closely related what if, for some reason, the new “affordable” units are not affordable enough to meet the need?  There is a risk that some of these rent-restricted units will not be fully utilized even if the broader market for apartments remains strong.  It is too early to know for sure how developers and builders will react to these policies especially if surrounding jurisdictions do not impose similar “affordability” policies. The most recent contribution to this discussion is Minneapolis’ proposal to restrict the screening process used by landlords in determining suitable tenants for their buildings.  Under its most recent proposal landlords will be burdened with new restrictions on considering the criminal background, financial capacity or rental history of a prospective tenant.  Let’s agree that there is a valid public policy behind an effort to promote the availability of housing of all types.  But the target of this latest policy proposal is the owner of a private apartment building of no particular size, whose private capital (likely with financing) is at risk; for some it’s their sole source of income or future retirement.  Minnesota is already a very expensive state in which to do business; policies like that being proposed in Minneapolis will make it more so. The unvarnished objective of this new policy is to compel landlords to assume more financial risk when renting their units to a new tenant with an uncertain background.  Large ownership groups may be able to establish the systems to manage the highly intrusive requirements of the city’s tenant screening restrictions (and pass along that added cost to renters), but smaller landlords will be stepping into bureaucratic quicksand, leaving them exposed to expensive claims that the new screening policies are being improperly applied.  To add insult to injury, a related ordinance proposal would compel landlords who require payment of the last month’s rent as a form of security deposit at the outset of the lease term, to accept payment of that deposit for up to three months after the commencement of the lease.  Many landlords use the “last month’s rent deposit” as a simple test of a tenant’s financial capacity to make regular rent payments.  Unfortunately, under this policy change, the tenant will legally be in possession of the apartment by the time the landlord learns that the tenant is not able to pay the required security deposit.  This puts the landlord in the position of accepting the financial risk based on demonstrated non-performance or initiate an action to evict the tenant.  Neither prospect is appealing. Those with capital invested in existing multi-family properties in Minneapolis may be stuck with complying with these new tenant screening policies absent a successful challenge to their adoption.  But others considering where to invest their capital will have plenty of other, less restrictive jurisdictions to choose from rather than investing in Minneapolis.

August 7, 2019

Legislative and Judicial Updates

Inclusionary Zoning Expands its Footprint in Minnesota

Last week the City of Bloomington adopted an expansive “inclusionary zoning” ordinance for the purpose of compelling developers of single and multifamily housing to include a portion of their new housing as affordable based on prescribed income standards.  “Inclusionary zoning” refers to a policy that compels developers to include some land use component desired by a given city as part of a development project being proposed in that city.  It is justified in the affordable housing context to address the need in Minnesota and nationally to supply more affordable housing to a greater number of people, either through subsidy or otherwise. Under Bloomington’s ordinance, any developer proposing 20 units or more of single or multifamily housing must commit at least 9 percent of such units to be affordable based on specified income and affordability parameters (the city backed away from imposing the requirement on existing housing based on objections from multi-family from owners of such properties.  The ordinance does outline a set of “credits” that are potentially available to the developers of new housing to offset, at least partially, the financial burden of the new ordinance requirements, such as increased density or other performance criteria.  The city reserves to itself the question of whether any such credits would be awarded for a given project, leaving the developer on the hook until that determination is confirmed.  A developer seeking to avoid entanglement in the city’s evaluation process can buy its way out through a substantial payment to the City.  Bloomington’s ordinance adds to those ordinances previously enacted by the cities of Minneapolis and Edina.  Undoubtedly other cities will follow the lead of these cities. In the author’s opinion, while laudable for their legitimate objective of addressing an important social policy, the approach of compelling private developers to contribute land or cash as a condition of securing an approval for new housing is quite plainly a regulatory taking.  In no other segment of our development economy do we require private developers to commit their private funds to help solve a broad societal problem, such as housing affordability, absent clear legal authority from the legislature.  For example, developers are routinely required to contribute land or cash to cities for the creation of new park systems as part of new developments based on an explicit grant of legislative authority; notably this policy applies to all forms of development, such as commercial and industrial, not solely housing.   No such legislative grant of authority has been extended to so-called inclusionary housing ordinances.  If challenged, it is most likely that Minnesota courts would render invalid such ordinances as lacking either constitutional or statutory support. Recently the Minnesota Supreme Court unanimously determined that a city’s general transportation fee policy was invalid and illegal because it lacked appropriate statutory authority, which authority cities have been seeking from the Minnesota legislature for many years.  The transportation fee was imposed in addition to costs incurred by developers to construct all the necessary transportation improvements for given development projects.  The policy enabled cities imposing such a fee to illegally secure millions of dollars from developers, willingly or unwillingly, as the price of receiving approvals to which the developers were otherwise entitled.  Fortunately, virtually all cities who had been collecting a general transportation fee suspended this practice based on the unequivocal decision of the Supreme Court. The same argument applies to the spate of inclusionary housing ordinances.  Credit Bloomington with constructing a thoughtful ordinance that seeks to balance its regulatory stick with the possibility of a bag of carrots to offset the financial burden imposed by its ordinance.  But the ordinance is selectively applied to only a segment of new housing construction and there is no certainty of receiving an offsetting “credit” once the city completes its review.  Make no mistake, Bloomington’s ordinance, as with those of Minneapolis and Edina, are sticks first, with no assurance of a sweet-tasting carrot in the end; developers will hesitate to pursue new housing projects in the city absent certainty of the financial trade-offs required under the new ordinance.  Unfortunately, the real losers under the city’s ordinance may be those most in need of new housing.

March 4, 2019

Local Government

Reasonable Accommodation and Group Homes

In the realm of local land use there are few development proposals that have the tendency to evoke neighborhood resistance than a new group home. The response is particularly vehement when the home is intended to serve those with chemical dependency and especially controversial in a low-density neighborhood. While most people acknowledge a need for residential treatment, “not in my back yard” is a common response when residents perceive a threat to their property values, neighborhood character and safety. As treatment models have evolved, residential group homes have become the gold standard for treatment and recovery. Group home and residential treatment models have popped up in residential communities across the country as health professionals and families grapple with the opioid epidemic. While the perception is that group home residents are “outsiders” coming into the community to spread crime, the reality is that the addiction is a disability that affects every community and class of society. These are the brothers, sisters, and parents, and friends who already live in our communities. What protections are afforded to those who are simply seeking a safe place to recover and overcome in a familiar community, close to their support network? The Federal Fair Housing Amendments Act of 1988 (FHAA) was intended to expand the Civil Rights Act of 1968, which prohibits discrimination in housing based on race, color, religion, sex or national origin. The FHAA extended those protections to families and persons with disabilities and makes it illegal to “discriminate in the sale or rental, or to otherwise make ‎unavailable or deny, a dwelling to any buyer or renter because of a handicap of . . . that buyer or ‎renter . . . or any person associated with that buyer or renter.” ‎Discrimination includes “a refusal to make reasonable accommodations in ‎rules, policies, practices, or services, when such accommodations may be necessary to afford ‎such person equal opportunity to use and enjoy a dwelling.” ‎ Individuals living in group homes recovering from alcohol or chemical dependency are classified as having a “handicap” under the FHAA and are protected, as long as they are not currently engaged in the illegal use of or addiction to a controlled substance. As a result, in the context of group home locations, discrimination by local government can include the refusal by a municipality to make reasonable accommodations to spacing requirements, occupancy restrictions, and use restrictions under the ‎local zoning ordinance. ‎ The FHAA does not preempt local zoning control, but it does require reasonable accommodation of zoning rules that otherwise would not permit residents of group homes to live where they want, with the services they need and in an environment is conducive to healing. Reasonable accommodation protects disabled persons’ right to live in the dwelling or home of their choice, not just some property within the community. These protections apply even if the local zoning code does not allow the use, or in some instances, specifically prohibits the use. Despite the fact that the FHAA is 30 years old this year, many communities still resist new group homes based on the fears of residents. The resulting burden on project proposers to obtain relief under the FHAA is often far heavier than it should be under the law. As the opioid epidemic continues to rage and the group home model continues to gain movement as an effective tool in overcoming chemical dependency, it remains to be seen whether local governments will willingly recognize their responsibilities under the law.

March 29, 2018

Local Government

New Local Leaders Emphasize Importance of Housing Affordability Problem

In cities and towns across Minnesota, newly elected mayors and city council members assumed their positions Jan. 1. While each official typically has a list of policy objectives to be pursued during his or her term, an increase of affordable housing to meet growing demand is frequently on the top of the list. This year is no different: The new mayors of St. Paul and Minneapolis have stressed the need for their respective cities to address this problem. When the average person thinks about “affordable housing” they may think about subsidized housing, such as Section 8 housing. While this is an important category of housing, it represents a very small percentage of the greater market. Instead, the focus should be on “housing affordability,” which connotes a broader market perspective. In this scenario, there is enormous demand that the private housing market could and would serve if the challenge of building an affordable home is addressed. For example, 10 years ago 72 percent of new homes built in the Twin Cities sold for less than $325,000. Today only 38 percent of new homes sold for less than $325,000. Meanwhile, incomes for potential homebuyers, especially at the lower income thresholds, have increased only modestly in that span of time. Contributing Factors The cost of land, materials and labor are all significant contributors to the cost of housing and each has increased substantially following the recession. However, of equal or greater importance, is the impact of local government policies that regulate land use in a way that arbitrarily drives up the cost of land and the house constructed on that land. The St. Paul Pioneer Press has documented that an identical home costs $20,000 more to construct in Minnesota as opposed to being constructed in Wisconsin. National data indicate that regulatory costs comprise 25 percent of the cost of new housing. For local government officials who are serious about addressing housing affordability in their community, taking a hard look at the impact their regulations have on housing would be good place to start. For example, city policies that require new housing to be constructed on over-sized lots or meet minimum dimensional standards directly affect housing affordability. The core cities and first-ring suburbs are full of desirable housing (undersized by today’s standards) on very small lots; these homes and neighborhoods are highly valued and frequently draw above-market offers when put on the market. Why such housing can’t be constructed in all cities in Minnesota is a question for local government leaders to answer. Another example relates to local government fees. Few would question the need for cities to cover the costs associated with constructing and operating sewer, street and park systems. Housing contractors accept their responsibility to pay their fair share of these costs as part of the permitting process. Unfortunately, cities have determined that developers and contractors of all sorts, but especially housing contractors, are an easy source of revenue to avoid taxing their residents. Consequently, we see local park fees as high as $6,000 per housing unit and street fees of $20,000 per acre depending on the city. These are on top of what the developer or contractor is required to build and pay for within their new development area. Cities pocket millions from these practices and won’t give up on them easily; yet, if they are truly serious about addressing housing affordability for their local work force and for their children, these policies must be examined and be repealed or substantially pared back. The new year is always a time for optimism about the year ahead. Let’s hope this optimism translates into policy changes that allow more housing to be constructed that is affordable to more Minnesotans.

January 17, 2018

Local Government

Participating in a City’s Comprehensive Plan

Cities throughout Minnesota are busy updating their comprehensive plans, a process that typically occurs every 10 years or so. As a reminder, comprehensive plans serve as the visionary roadmap for a city’s intended long-term growth; the implementing tools are the zoning ordinance, subdivision ordinance and similar policies. Of course, cities have the discretion to amend their comp plans any time they choose to, provided they follow proper procedures in doing so, but most elect not to do so because of the burden it imposes on staff. I imagine one of the hardest tasks confronting a city official when considering a comp plan update relates to a proposed land use change that radically departs from the existing plan, possibly catching affected residents totally unaware or worse. This dilemma occurs especially in growing cities in which large sections of historically agriculture land is being considered for inclusion under an active development designation, such as commercial or residential. It also occurs when cities are seeking to redevelop a blighted area, perhaps by moving from commercial to residential or vice versa. We’ve all attended the meeting at which a land use change is being debated and residents object to the change on the basis of its impact on their neighborhood and lifestyle. Inevitably the resident will note that when they bought their home they checked the city land use maps to confirm they were buying adjacent to property guided for a low or no-impact development; the proposed change, if adopted, will have an impact. It’s a fair point and yet we all know (well, maybe we don’t know) that owning one’s own property does not guarantee any sort of long-term use of another’s property. Were it any other way we would never see another new development occur anywhere. Of course, we’d all love to preserve natural vistas, tree stands and marshy meadows that give us personal enjoyment. One way to do this is to buy the desirable property containing such features! Absent that step, possibly the city could be convinced to buy it; not usually viable either. In the end, the city is legally entitled to consider and act on land use changes that support future growth desired by the city (actually the underlying landowner’s consent is not even required – the city can do it unilaterally over the landowner’s objection). Some cities embrace change and see value in growth and redevelopment. It funds infrastructure, schools, parks and makes for a more vibrant community. Growth begets growth. Others object to growth and prefer to preserve the existing character of their respective cities in order to protect small-town charm, rural character, large-lot development pattern, etc. For this latter group of cities, the worry is not about a land use change that triggers expansive growth, but rather a change that impedes growth that was formerly contemplated by landowners based on an existing plan. Plenty of speculative investment in real estate occurs based on one comp plan, only to see that investment quashed, based on a change in direction. We’ve seen this “growth-no growth” whipsaw play out in several semi-rural cities in our metropolitan region. As others have noted in this blog, one way to get ahead of the surprise element of a planning change is to participate in a city’s comp plan review process, either as an appointed committee member or as an observer. This, of course, becomes troublesome because it often involves frequent daytime and nighttime meetings that are not easy to attend as a volunteer. Short of that, paying attention to a city website and registering for notices of future meetings or actions is a good fall-back option.

October 5, 2017

Local Government

What to Make of Expanded City Regulatory Role

Those of us who advise business clients, including real estate development clients, about state and local regulatory matters are pretty comfortable working under the long-standing division of authority between cities and state or federal regulators. We understand, for example, that local units of government are creatures of the state legislature, with powers limited to the specific grant of authority by the legislature (subject to some additional authority for charter cities). We accept that cities get to establish local zoning and development regulations governing development and construction activities, based on express authority conferred under state or federal law or regulations. There has been a long-standing tension, however, between state and local governments about what a given city is expressly or impliedly authorized to do under a city’s so-called police powers, absent a clear preemption. In some areas of regulation, like environmental protection, we rely on policies that are established at the state or federal level to ensure some level of uniformity and consistency. In recent years we have seen cities go in a whole new direction by enacting policies pertaining to areas historically reserved to state or even federal agencies. Refer to municipal actions regarding climate change, minimum wage and mandatory employee benefits as recent examples. Why should the real estate development community care about this trend? Our clients who are considering whether to invest in a particular city, such as Minneapolis or St. Paul, now not only need to be concerned with whether their project complies with local development regulations, but also whether their very business operations are uniquely regulated. They may be very concerned that such cities have taken it upon themselves to regulate aspects of their business in a way they have not experienced before. Many cities are pursuing expanded policies in response to social activism within their community or because of perceived inaction by state or federal officials. However, this trend may cause companies to invest their capital elsewhere to avoid the added burdens and cost of one-off local regulations that can be avoided simply by crossing the boundary line to another jurisdiction. For example, elected officials in Minneapolis have for several years been pushing to enact a substantially higher minimum wage than what is required under state or federal law, applicable to employers doing business in their city. For those employers who hire affected employees, the associated labor costs will be a new factor for them when deciding whether to site a new coffee shop or fast-casual restaurant in Minneapolis or in an adjacent city without such policies. Another example relates to climate change and the adoption by cities of sustainability policies. Historically, matters pertaining to environmental protection have centered on state and federal regulation. We understand that cities have authority to regulate stormwater discharge or wetland infiltration, but those policies emanate from state or federal law. Developers and their clients need to consider carefully what a given city may require of them to manage perceived adverse impacts of new or existing development. For some, this is not a concern as their employees or customers are already demanding more aggressive practices in this area. But not very many companies know how to confirm their “carbon footprint” let alone how to manage it or reduce it. For small manufacturers doing business in such cities, it might be the red flag that tells them it’s time to move on. Given the trend in expanded municipal activism, one has to wonder what are the practical limits to new local government policymaking? If the state environmental regulators have a rule that specifies what is required for environmental review and compliance can a city up the ante and enact its own policies for environmental review, including by establishing more aggressive requirements for environmental impact statements? One clear advantage of having such matters addressed at a higher level is to avoid inconsistent approaches within a state or region that may otherwise lead to confusion and mistakes. We are already seeing this play out as various business organizations have found it necessary to challenge local government actions in court. Thus far the results of such challenges have been mixed. Efforts to preempt local government authority on a broad range of topics have not made much progress – at least not yet. We have entered a new age of democracy, aided in large measure by the internet, in which one person’s pique can be the basis for forming a coalition and organizing behind a cause, electing local candidates to office and proceeding forthwith to enact new regulations. This is playing out before our eyes in Minneapolis and in other cities in Minnesota and elsewhere. Absent a clear indication of federal or state preemption in any given area, it would appear the tracks are laid down and the train is moving. Unfortunately we don’t yet know the train’s destination or the cost of the ticket.

September 27, 2017

Legislative and Judicial Updates

Cities Cannot Require Payment of Fees for Future Road Improvements

Forgive developer Martin Harstad if he thought he was in Potterville and not Woodbury when the city told him he had to pay nearly $1.4 million in “road assessments” as a condition of approval for his “Bailey Park” residential development. Harstad sued Woodbury to challenge its authority to demand the road assessments and won in both the trial court, and now the Minnesota Court of Appeals in a published decision released September 18. For now, it’s a wonderful life for Harstad, other developers and for property owners who have been troubled for years over whether Minnesota cities have the power to condition development approvals on the payment of (frequently hefty) fees for future road improvements to accommodate new growth and development. Here, the court of appeals struck down what amounted to an impact fee assessed by Woodbury, but sidestepped the longstanding question of whether impact fees are legal in Minnesota. As is the case for other developers, Harstad was already paying significant amounts for transportation infrastructure that would be needed within the Bailey Park development. Woodbury attempted to rationalize its road assessment policy by declaring that new development must not only “pay its own way,” but also pay “all associated costs” for “public infrastructure.” This meant, according to the city, that if a proposed development is perceived as contributing to the need for unspecified, offsite road improvements at unspecified locations outside the development, at unspecified points in the future, then road assessments under the city’s formula must be imposed and collected now as a condition of approval for the development. The court of appeals said that Woodbury can only exercise powers conferred by the state legislature and that Woodbury overstepped its powers here. The court said of the statute on which the city pinned its hopes for upholding the assessment (Minn. Stat. Sec. 462.358, subd. 2a): “In fact, subd. 2a does not authorize collection of any type of assessment. Rather subd. 2a authorizes city planning.” While Woodbury called its fees “major road assessments,” these types of charges have a variety of names, including “transportation improvement district fees,” “trip charges” and “transportation fees.” The name may vary, but the purpose is the same: cities are seeking to capture revenues for anticipated future upgrades to area roads to accommodate growth from new development. Regardless of a particular city’s label, the commonly-recognized name for this revenue-raising practice is “impact fee.” Impact fees were defined by the Minnesota Supreme Court in Country Joe, Inc. v. City of Eagan,560 N.W.2d 681, 685 (Minn. 1997), as fees: (a) in the form of a predetermined money payment; (b) assessed as a condition to the issuance of a permit or plat approval; (c) justified as within local government powers to regulate new growth and development and to provide for adequate infrastructure; (d) levied to fund large-scale, off-site public facilities and services necessary to serve new development; and (e) in an amount proportionate to the need for the public facilities generated by new development. Country Joedid not clearly decide, however, whether impact fees were illegal in Minnesota. The court in Harstad did not address whether Woodbury’s road assessment was an impact fee, or whether impact fees are legally authorized in Minnesota. [This blogger made the case that such fees are not legally authorized in Minnesota in a March 2009 article in Hennepin Lawyer entitled“Road Improvements: When Are Special Assessments Legitimate?” The court of appeals in Harstad also did not address whether Woodbury’s road assessment was an illegal tax. Country Joeheld that the City of Eagan’s “Road unit connection charge” was an illegal tax under state law that limits municipal taxing powers. The court of appeals in Harstad did not address the illegal tax issue because it was raised only by amicus parties and not by either of the parties to the litigation. The City of Woodbury has until October 18 to decide whether to petition the Minnesota Supreme Court for review.

September 21, 2017

Local Government

Are you Prepared for the Public Development Application Process?

Many of us are familiar with the scenario of presenting a development application before a public body, such as a city council, that appears to be going well until the wheels come off for some unexpected reason. This happens most frequently when one or more residents who have “only just heard” about the project being considered show up to voice objections, raise questions and make allegations, some of which are untrue. What’s a project proponent to do? Well, if you are well-prepared and fortunate to have a strong recommendation of support from staff, maybe nothing. But, then again, when you are dealing with a public body in a public process, even that may not be enough. If there is one thing politicians strive to avoid it is controversy and they will avoid it whenever possible. In any case, what matters most is being more prepared than anyone else. If you are perceived as the expert in the room, as evidenced by strong preparation, you may get a measure of deference that helps you successfully complete the process. But if there is any doubt, especially in a chamber full of irate residents, you and your client are likely the least important people in the room. Part of being prepared requires understanding the development interest for which one is advocating and why the site in question is necessary for future operations. Local zoning regulations bear directly on this question, so you need to be confident about how those regulations help or potentially hurt your cause. It is imperative to evaluate the “risk factors” associated with an application on the front end to avoid, if possible, being surprised deeper into the process, such as at a pivotal public hearing. This means laying out the proposed project in the context of the applicable regulations, such as land use controls, design standards, environmental restrictions, etc., to ensure that any perceived risk exposure has a ready response. One must also understand the nature of the request: Does your application raise a legislative policy question, such as a zoning change, or something that is quasi-judicial, such as a permit? The former circumstance vests the public body with broad policy discretion provided that it acts fairly and reasonably to apply established standards designed to protect the public. In the latter circumstance, such as a conditional use permit, the rules are tighter and the public body can be held more strictly accountable both to its regulations and the state of the record supporting the application. Your “risk factor” analysis helps you anticipate where you have the greatest exposure so that your record has been properly created to address all applicable standards as well as likely questions. Are you better off doing the traffic study now or waiting to see whether it will be a source of concern down the road? Admittedly, judgments need to be made depending on the facts as you know them. In the modern age of the internet, it is possible to research all manner of things that may actually be helpful in preparing a development application and the supportive record. However, that same tool is available to everyone else, too, and thus you are always exposed to the prospect of a citizen who has conducted “research” and now purports to understand your project and your business and has an opinion about one or both. Understanding whether your industry is confronting public adversity elsewhere is a key factor in your preparation. If so, what is being used successfully to respond to that adversity? If you or your client has made mistakes, what has been done to remedy them, with assurance that they won’t happen again? For companies that are heavily regulated, such as in the mining sector, this is a constant source of concern. Any negative headline, whether true or not, may well be used to counter your project. Remember, your personal credibility, along with that of your client is being tested in the process; being prepared means knowing where the shots will come from. Putting a narrative together tied to the applicable regulatory standards, even as a cheat sheet, is an important tool for helping one respond to questions that were not previously the subject of discussion. Not being able to respond confidently in the heat of the hearing to predictable or even random questions may lead directly to a motion to table the pending application, allowing the public body to avoid the potential political conflict that is brewing. Being able to confidently march the public body through the application requirements and the supporting record often leads to the logical conclusion that your application can and should be approved in spite of the opposition. If your best effort is not working, you may need to make a decision about whether to request that your application be tabled to address specific questions. If you are dealing with a legislative policy question, this approach may be advisable given the breadth of discretion vested in the public body. If however, their discretion is more limited and you have a strong record, you may need to call their bluff and force the members of the body to express their opinions. Once you understand what you are up against, then you can make an informed decision about how to proceed. You might be successful; but then again, you might not. And if not, that’s why saloons exist.

September 13, 2017

Local Government

A St. Paul Neighborhood Continues to Struggle to Balance Reinvestment with Preservation

Stretching from the Cathedral of St. Paul to the Mississippi River, St. Paul’s Summit Avenue is one of the premier stretches of Victorian homes in the United States. Throughout the last four decades, the neighborhood has been the target of investment and restoration that has solidified Summit Avenue as an iconic part of Minnesota’s Capitol City. However, just blocks south of Summit Avenue, in a neighborhood colloquially known as “Tangletown,” residents continue to struggle with how to balance investment and preservation. With meandering side-streets that deviate farther from the traditional grid than even the most infamous of St. Paul avenues, Tangletown exists as something of a micro-community within the Mac-Groveland neighborhood. In recent years, the broader neighborhood has repeatedly expressed concern with a series of “tear downs” which made way for the construction of larger homes. In response to neighborhood pressure, the St. Paul City Council adopted new residential design standards in 2015. A large number of the new requirements only applied to Planning Districts 14 and 15 (largely the Mac-Groveland and Highland Park neighborhoods). The new design standards regulate building heights at the side-yard setback, sidewall articulation, and maximum lot coverage. However, in recent months, the residents of Tangletown have again expressed concern that existing zoning and design standards are insufficient and that the St. Paul Board of Zoning Appeals grants too many variances. As a result, last month St. Paul City Councilmember Chris Tolbert introduced and the council passed, a resolution asking the St. Paul Planning Commission to study the creation of a new overlay or conservation district just for the Tangletown area. While there is no timeline for the St. Paul Planning Commission study, the ongoing burdens placed on the city’s Planning and Economic Development Department by the Ford Plant redevelopment mean any recommendation is unlikely to reach the Planning Commission before mid-2018 at the earliest. While consideration of specialized residential design standards is not unique to St. Paul and historic or preservation districts are a common tool used by municipalities to protect the identity of a neighborhood, a Tangletown-specific overlay district raises a number of interesting issues. First of all, Minnesota statutes section 462.357 – which provides municipalities their statutory authority to promulgate zoning restrictions – ties said authority to “the purpose of promoting the public health, safety, morals, and general welfare.” Open questions remain as to how design standards for a neighborhood, only marginally distinguishable from its surrounding area, would promote the public health, safety, morals, and general welfare. Additionally, the statute requires that “regulations shall be uniform for each class or kind of buildings, structures, or land and for each class or kind of use throughout such district.” While the 2015 standards encompassed all of Planning Districts 14 and 15, a Tangletown-overlay likely would cover a much smaller area. Going forward, the St. Paul Planning Commission and City Council will have to weigh the value of responding to the neighborhood’s desire with the possibility of creating a cumbersome patchwork of building regulations.

September 6, 2017

Local Government

Concerns with Density Remain as Plans for St. Paul’s Ford Plant Advance

On July 28, the St. Paul Planning Commission voted unanimously to recommend a redevelopment plan for the 135-acre Ford Motor Company property in the Highland Park Neighborhood of St. Paul. Nearly a decade in the making, the plan would provide the zoning and land use guidance necessary for any master developer seeking to redevelop the site. Originally constructed in 1912, the Ford property became available for redevelopment when the Twin Cities Assembly Plant closed in 2011. The proposed redevelopment plan would divide the Ford property into six districts and allow for increased height and density in each district moving east away from the Minnesota River. For example, along the western end of the property, residential development (including townhomes and multi-family buildings) would be limited by a maximum height of 48 feet. Along the eastern end of the property, near existing commercial development, the plan allows for buildings between four and 10 stories tall. Planning Commissioner Kris Fredson successfully amended the plan to allow for a slight increase in density along the river in an attempt to decrease the pressure for high-density development in other parts of the site. Earlier versions of the plan called for “mansion-style development” overlooking the river which would have reflected similar single-family residential communities north of the property along Mississippi River Boulevard. While the plan was approved unanimously, it is far from noncontroversial. The Planning Commission received approximately 400 written comments and nearly 50 people testified at a public hearing in early July. The majority of consternation surrounding the plan – including the concerns of new community organizations like Neighbors for a Livable St. Paul – focuses on the proposed density and the number of new residents expected. City planners expect somewhere between 2,400 and 4,000 new residential units and as many as 7,000 new residents in the area in the next 10-15 years. Critics of the plan have repeatedly expressed concern over increased traffic and congestion. That being said, other segments of the community – including members of the community group Sustain Ward Three – see the increased density as essential to maximizing the taxable value of the property while also creating the kind of pedestrian and bicycle-friendly community new residents are seeking. The St. Paul City Council is expected to hold a public hearing this fall prior to taking up and potentially voting to approve the redevelopment plan. A formal decision on zoning and land use is likely the last obstacle to the Ford Motor Company’s sale of the property to a master developer. With an estimated $1.3 billion in potential investment in the site pending, the development plan will likely loom large on the City Council’s fall agenda. Controversy over the proposed redevelopment plan could also be a factor in St. Paul’s mayoral election this November as at least five candidates vie to replace Mayor Chris Coleman, who is stepping down to run for governor after 12 years in office.

August 24, 2017

Local Government

All Politics are Local When it Comes to Development Moratoria

Ownership of real property is a protected constitutional right. Yet when a local government enacts a development moratorium depriving a landowner of the use of their land for potentially a year or more, the response from public officials is often deafening silence. To make matters worse, cities, counties and townships can enact development moratoria with no advance public notice or opportunity for affected parties to raise objections at a public hearing. It is not unusual for landowners or business owners to read about a new moratorium in the local newspaper or by receiving a phone call advising that their land use application is on hold or been rejected outright due to enactment of a new moratorium. The U.S. Supreme Court and state courts have upheld the constitutionality of development moratoria for a limited duration and for a specific purpose. In California a moratorium up to three years in length was found lawful; counties in Minnesota can enact moratoria that last more than two years. As long as the stated purpose of the moratorium is to allow for a study of applicable land use regulations, and is not being used for a punitive purpose, it is not subject to legal challenge. Cities and counties have learned how to carefully navigate the standard to avoid the allegation they are acting for an unauthorized, i.e. punitive, purpose. So what happens while the moratorium is in effect? Ostensibly, the local government is required to use the “breathing space” created by the moratorium to study its land use regulations to determine if they are appropriate for a given location or type of use. Too often, however, the moratorium is simply a way to block a project through the passage of time, causing the development opportunity to be lost through an expired contract, financing or change in the market. To make matters worse, local governments have unlimited discretion to amend their comprehensive plans and/or zoning ordinances to entirely block a proposed project by rendering it non-compliant. You might be thinking that the affected landowner or business owner has some constitutional protections to ensure just compensation for the loss of use of their land; you would be wrong. Unless there is direct evidence that a moratorium was enacted to specifically block a project (very hard to demonstrate), local governments have virtually unchecked discretion to impose moratoria with no legal exposure. It doesn’t matter that you just acquired property at a premium to construct a new convenience retail use; the use of a moratorium to change the zoning code to preclude or limit the use is not a compensable action. There have been numerous attempts over the years to amend Minnesota’s interim ordinance statute to build in some procedural protections for property owners and others. These efforts are met with fierce opposition by local government representatives who don’t want to be told how to govern their communities. Environmental protection organizations also strongly oppose changes because moratoria are a politically expedient means of preventing land from being developed. And, of course, NIMBYs love moratoria as a way to prevent change from occurring in their back yard. Suffice to say that when state legislators hear from these groups at the “local” level, even the most ardent “property rights” conservative runs for cover; no legislator wants to get crosswise with their local elected officials. The homebuilding industry in Minnesota did recently secure a modest change to the interim ordinance statute by requiring 10-day prior notice and a public hearing before a city enacts a moratorium relating to housing; the thought of extending the elemental due process change to counties or townships was a political virtual non-starter. To add the final piece of salt to the wound, notwithstanding that a moratorium halts the use of affected property, the obligation to pay property taxes based on an assessment of highest and best use remains intact. So, not only does the local government win by enacting a moratorium, it wins twice by collecting property taxes on the same property. Go figure. The old adage about “all politics being local” is especially true with regard to development moratoria; some cities have a philosophical aversion to using them or at least take pains to protect any project that is being actively considered at that time. Unfortunately, not enough communities show this type of consideration.

July 19, 2017

Local Government

Metropolitan Council Comprehensive Plan Amendments can Contribute to Highest and Best Use of Property

What happens if you are a commercial property owner located in the metropolitan area and you haven’t had a bite on your vacant land for months, maybe even years. Along comes a multifamily buyer who offers you a good price for your property. You might consider multifamily the highest and best use of your property since no one has made an offer based on the commercial designation of your property. Can you simply change the land use designation on your property? Sure, if the city or other local jurisdiction agrees and forwards your request to the Met Council. This process usually takes around 120 days from the time an application is filed with the City – the application is then reviewed by the Planning Commission and City Council and forwarded to the Met Council for final review and action. For the next couple of years, this process is a bit more complicated as cities and other local units of government work on updating their comp plans and particularly, the land use element of the plan. Within the land use plan is the specific designation of each parcel of land in the community for uses such as single family, multifamily, commercial, industrial, institutional, parks and open space. Every ten years, cities, counties, and townships within the seven-county metropolitan region must update their comprehensive plan document. In the current cycle of comp plan updates, the next deadline to submit for review by the Met Council is December 31, 2018. To facilitate this process, the Met Council will stop reviewing individual applications to change the land use designation for specific sites beginning June 30, 2018, until the communities plan is reviewed and completed. This embargo, in effect, creates an incentive for early review and completion of comp plan updates, particularly in growing communities. For our hypothetical multifamily development, there are two potential paths to approval of a land use change. First, the property owner could make application for an amendment of the land use plan prior to the embargo period. If the application is heard and approved before that date, then the change can go into effect prior to other amendments or the update of the entire comp plan document. On the other hand, if the city is unwilling to make the individual change, then the property owner could plan to attend the public hearing on the comp plan update and persuade the City Council to make the change as part of its 10-year update. This will require a great deal more patience because the Met Council is in the process of reviewing plans for almost 200 local units of government. If you would like to know the land use designation of your property or need more information about the comprehensive planning process in the Minneapolis-St. Paul Metropolitan area, please feel free to contact Bill Griffith at 952-896-3290 or wgriffith@larkinhoffman.com.

July 11, 2017

Local Government

How Tall Is Too Tall? A St. Paul Neighborhood Ponders Zoning Changes

  As new housing options and a variety of transit oriented developments pop up throughout the Twin Cities, many communities are struggling to balance their desire for walkable neighborhoods and easy access to amenities with the increased density and population growth that usually comes as part of such development. A primary example of that back-and-forth struggle can be seen along Snelling Avenue in Saint Paul. Snelling Avenue has long been a major arterial street in the Capitol city. Stretching from Rosedale Mall to the north, past the State Fairgrounds, Hamline University, and Macalester College, before ending in West 7th Street on the south, Snelling Avenue provides access to Interstate 94 and the Minneapolis/St. Paul International Airport as well as the University Avenue and Grand Avenue commercial districts. However, with the opening of Metro Transit’s Bus Rapid Transit (BRT) A-Line, there has been significant conversation about whether the city should allow larger scale developments along the Snelling Avenue corridor. In April 2017, the St. Paul Planning Commission released the Snelling Avenue South Zoning Study and began a public dialogue regarding potential rezoning of a number of properties along Snelling Avenue between Interstate 94 and Ford Parkway. Nearly two years in the making, the Zoning Study attracted significant attention and the input of individual residents as well as the Highland Park, Macalester/Groveland, and Union Park District Councils. The Planning Commission held a public hearing on May 19, 2017 to solicit comments, and the combined Comprehensive and Neighborhood Planning Committees reviewed those comments at a meeting on June 13, 2017 before forwarding a revised rezoning proposal to the full Planning Commission on June 30. The proposal would rezone a number of residential, commercial, and industrial properties to “Traditional neighborhoods” (TN) in an attempt to promote more dense mixed-use development along the transit corridor. The St. Paul City Code describes TN districts as being “intended to foster the development and growth of compact, pedestrian-oriented urban villages.” The TN districts are also “intended to encourage a compatible mix of commercial and residential uses within buildings, sites and blocks; new development in proximity to major transit streets and corridors; and additional choices in housing.” However, those “pedestrian-oriented urban villages” are not without their detractors. Many of the comments received by the Planning Commission expressed concern as to the impact increased building height and density would have on nearby single family homes. Reduced parking access, increased vehicle traffic, shade and privacy concerns, and pedestrian safety were all cited as potential negative side-effects of the rezoning plan. One of the major points of contention centers on building height, with particular concern from neighborhood groups focused on buildings of five or more stories. In response to those concerns, the Planning Commission has scaled back portions of the proposal, including the rezoning of properties near the intersection of Snelling and St. Clair Avenues. The city council is expected to take up the rezoning proposal sometime in August. Print: Email this postTweet this postLike this postShare this post on LinkedIn

July 11, 2017

Firm Highlights

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Larkin Hoffman Attorneys Recognized in Legal 500’s Minnesota Elite Guide