GT Article: Judge Takes Corvallis to Task - April 2, 2024
Nance WDOG
Judge takes Corvallis to task for way it collects developer fees
- Kosiso Ugwuede Apr 2, 2024
One residential developer's challenge of how Corvallis exacted fees from him has fueled a judge's rebuke, who has called into question how the city has been charging developers similarly going back to November 2000.
The opinion letter could cost the city hundreds of thousands of dollars after a Benton County Circuit Court judge recommended an independent audit to determine the scope of likely errors and to consider refunds.
Developer and former planning commissioner Jim Boeder sued the city, focusing on what are called "infrastructure cost recovery fees" billed for his 2-parcel property at 4601 and 4605 SW 47th Place.
Rather than pay for new infrastructure, these fees help cover the initial cost of providing a basic level of public infrastructure and are billed to developers who did not previously pay their share when they apply for connection.
Boeder first appealed his $65,400 fee to then-Public Works Director Mary Steckel, then to City Manager Mark Shepard, both of which were denied, before it came in front of the council during a lengthy and charged Jan. 21, 2020 meeting.
After the council upheld the city manager's decision in an 8-1 vote (Councilor Jan Napack voted "no"), Boeder appealed the council’s decision to the Land Use Board of Appeals.
Arguing the case was not a land use matter, the city moved to quash the appeal. The board agreed that it was not a land use case and moved it to Circuit Court.
In an opinion letter dated Dec. 15, 2023, Judge Joan Demarest nullified the council’s vote that upheld the city manager’s decision and ordered the council to rehear Boeder's appeal.
According to Demarest, not only did the city fail to "follow the plain language" of its own municipal code, which outlines the terms and conditions of the fee, City Council members were not provided enough information at the hearing to determine if Shepard's decision was "arbitrary or capricious."
Appeal
The city law establishing the infrastructure cost recovery fees, Corvallis Municipal Code Chapter 2.18, was adopted in November 2000. The fees help reimburse the costs associated with such infrastructure as water and sewer lines, storm sewers, local streets, sidewalks, curbs, gutters and drainage, street lighting and needed right-of-way.
When Boeder applied to build on his property, the city conducted an assessment and billed him $65,400 in infrastructure cost recovery fees. The amount was applied to street and water improvements that ultimately would serve the development.
In an April 25, 2019 email to then-Public Works Director Steckel appealing the fees and liens placed on the property, Boeder argued that he was being penalized for his property's proximity to Country Club Drive, to which it did not have access and from which it would not "derive any significant benefit."
In his appeal, Boeder said: "The parcels do not connect to, nor have initiated development that requires, extension of public utilities and transportation improvements."
As a collector street, Boeder argued, Country Club Drive buildout, which the city completed in 2007, is more a benefit to the larger community than it is to the immediate neighborhood.
As it was, Boeder said, he already was required to improve the local street, 47th Place's cul de sac, including water, storm and sanitary sewer, along with providing for two new street lights to Country Club Drive.
He added that a requirement to provide a 20-foot easement in front of his property had shrunk the plot planned for two single family homes.
Boeder requested the city reduce the fees by 95%.
In denying the appeal, Steckel told Boeder that the property was similar to a corner lot with two frontages and as such he was "obligated to provide public improvements on both frontages even though they only take direct access and services from one frontage of the corner lot."
Steckel said the appeal did not provide enough evidence to show that the fees had been disproportionately calculated.
"The Country Club Drive improvements were completed in 2007, using Street Fund current revenues and SDCs (system development charges, a separate fee charged for new infrastructure). The city has carried those costs until now," Steckel wrote. And Boeder was obligated to pay his share of those costs, according to Steckel.
On May 10, 2019, Boeder appealed this decision to the city manager.
In his email, Boeder reiterated that the property was not utilizing Country Club Drive infrastructure and that the code limits the infrastructure cost recovery fees apply to local streets. Country Club Drive doesn't count as local for his future homes.
Boeder also raised questions of fairness regarding how the fee was calculated, using "frontage lengths" and not taking into account how the property would in fact be used.
On July 2, 2019, Shepard denied Boeder’s appeal, citing reasons similar to Steckel.
With regards to the code provisions referencing only local streets, Shepard wrote that that the fees were "based on the equivalent of a local street, not a collector."
Shepard advised Boeder he could appeal to the City Council. So he did.
Council hearing
As directed by the City Attorney’s Office, the council was tasked with deciding if Shepard’s decision was "arbitrary and/or capricious," a legal term of art which the attorneys summarized as a decision "that willfully, and without reasoning disregards relevant facts."
It was not a de novo hearing, meaning that it was not to be considered anew and the council's scope was narrow.
Boeder and then-Deputy City Attorney David Coulombe had 10 minutes to present their cases to the council. The record used in the hearing included the correspondences between Boeder, the Public Works director and city manager, infrastructure cost recovery fee spreadsheets, the municipal code chapter in question, a replat decision regarding the property and Boeder's notice of appeal to the council.
At the hearing, Boeder stressed that the cost recovery charges he was being asked to pay were not authorized by the municipal code language because Country Club Drive was a collector and not a local street
Essentially, he was paying fees that would-be developers with direct access to Country Club should.
He again argued that the city shouldn't assess the fee based on street frontages. That calculation was responsible for disproportionate fee.
Boeder is not new to development in Corvallis, but according to him, this is the "first time I’ve encountered a charge that really constitutes something above and beyond the impact from a development per se.
"I would say this is the absolute example of a absolutely inappropriate development fee that has no relation at all to the development that’s occurring," Boeder said via phone Monday, March 25.
At the hearing, Coulombe told the council that there had been public hearings conducted to arrive at the fees' methodology when the infrastructure cost recovery charge was adopted in 2000.
That's not the way Boeder remembers it: "There was absolutely no discussion, deliberations or public comments on it before it was adopted," he said by phone last week.
When contacted, City Engineer Jeff McConnell said he could not speak to the ICR fee calculation, especially as it pertains to Boeder’s property, as this is subject to ongoing litigation.
At the 2020 hearing, Coulombe also argued that Boeder had cited other sections of the municipal code that did not apply, was responsible for the shape of the lots, and that Country Club Drive did serve the property because "drivers could not reach places to the north" without it.
In their deliberation, several councilors expressed support for the city manager’s decision, saying that they trusted he was better versed in the matter and had made the right decision.
Boeder said last week that after the hearing he was "incredibly disappointed in the City Council" because councilors had based their decision on faith in the city manager and not the arguments before them.
Circuit Court opinion
Judge Demarest came to an entirely different conclusion. She said city's staff and administration, the city attorneys and City Council incorrectly interpreted multiple sections of chapter 2.18 of the municipal code. The end result: "the misapplication of over $604,000 in ICR charges to real property along Country Club Drive, a collector street."
Demarest said that according to the code, the cost recovery fees to recoup initial construction costs and installation of basic infrastructure, not the kind of later improvements Country Club Drive saw. But that was for what Boeder was billed.
She also struck down the city's methodology of calculating the fee, saying charging for the "local equivalence" of a collector street using the frontage of the property "clearly violated" the city's own law.
Even if a property ultimately connected to a collector street via a local street, the code doesn't allow such fees to be imposed, the court said.
In another error, Demarest pointed out that the fees are due upon application to connect to public infrastructure, not when development occurs.
Even how the city handled the appeal was wrong, Demarest ruled, saying that staff cited a wrong provision of the code. That ended up restricting the information the council could access in its decision-making.
"City council was instructed to follow the wrong appeal process, which limits the information they can consider to what the City Attorney provides them," Demarest said in the opinion letter.
And what was provided, according to Demarest’s opinion letter, was grossly insufficient to guide the council in the process.
Former city councilor Barbara Bull, who was on the council at the time of the hearing, recalls that this inability to access more information was a concerning factor at the time.
"It seems like as a city council, we should be interested in making the outcome the right outcome, but we were instructed at the time of the hearing, all we’re allowed to decide on is whether the city manager made a defendable decision based on the information in front of him," Bull said by phone, Wednesday, March 27.
"But they say the definition of arbitrary and capricious include whether or not he had competent information in front of him. How can we decide if he had competent information in front of him if we’re not supposed to look outside of the record to understand what other information might enhance his decision?" Bull said.
Bull had hoped the hearing would reveal more, that there would be a staffer present to explain the spreadsheets, she said. But even after the deputy city attorney and appellant made their presentations, it still was not enough information.
In theory, Bull said councilors could’ve sought out more information from staff members whom they rely on to explain complex issues, such as the Boeder case. But it may not have made any impact as the hearing itself was very narrow and limited to the shortlist of documents in the record, which the judge now says was insufficient.
Additionally, the Circuit Court raised issue with the City Attorneys serving as both adviser to the council and defendant of the city manager’s and staff’s decision.
"This situation can be likened to the prosecutor in a criminal matter also serving as the judge, with the council serving as jury," Demarest wrote.
"When the City Council is acting in its quasi-judicial role reviewing city staff decisions and the city attorney is advocating for the city staff and/or administrative decision, it would be best for a separate and distinct neutral entity to assemble, control and summarize the content of "The Record" as well as advise the council on law and process," Demarest wrote in her opinion.
She also noted that the council did not have ample time at the hearing to consider the appeal and that several councilmembers expressed "confusion, concern, discomfort, and/or disappointment in the process" as well as the limited information they were presented with to decide on the matter.
"Nothing in her opinion was surprising to me, it reaffirmed my arguments," Boeder said by phone.
"It’s administrative overreach by any stretch of the imagination that you can take the exact language from an ordinance and start reading into it, especially when in the presentation to council of the ordinance itself for adoption, none of that was discussed," Boeder said.
Decision annulled
In its final order, the court annulled the council's decision from the Jan. 21, 2020 hearing, asking the council to conduct a new hearing guided by the provisions of Chapter 2.18 of the municipal code.
The court also ordered the city to refund the cost recovery fees billed to Boeder, plus 9% annual interest.
If a fresh appeal showed that the city manager made the right decision, the court ordered Boeder to pay any amount owed without interest or any late penalty.
The court advised the city to have an independent legal counsel in the new hearing.
"All ICR charges since passage of CMC 2.18 on November 6, 2000 are suspect," the court order said. It suggested the city to conduct independent audits "to determine the scope of the problem and consider refunding improperly collected ICR fees."
Despite it being dated in December, Boeder said both parties were just recently made aware of the opinion letter as the former city attorneys transferred records and cases to the new hires, Beery Elsner & Hammond LLP.
Lawyers for both parties are now working to arrive at a final order for the court.
The opinion letter could cost the city hundreds of thousands of dollars after a Benton County Circuit Court judge recommended an independent audit to determine the scope of likely errors and to consider refunds.
Developer and former planning commissioner Jim Boeder sued the city, focusing on what are called "infrastructure cost recovery fees" billed for his 2-parcel property at 4601 and 4605 SW 47th Place.
Rather than pay for new infrastructure, these fees help cover the initial cost of providing a basic level of public infrastructure and are billed to developers who did not previously pay their share when they apply for connection.
Boeder first appealed his $65,400 fee to then-Public Works Director Mary Steckel, then to City Manager Mark Shepard, both of which were denied, before it came in front of the council during a lengthy and charged Jan. 21, 2020 meeting.
After the council upheld the city manager's decision in an 8-1 vote (Councilor Jan Napack voted "no"), Boeder appealed the council’s decision to the Land Use Board of Appeals.
Arguing the case was not a land use matter, the city moved to quash the appeal. The board agreed that it was not a land use case and moved it to Circuit Court.
In an opinion letter dated Dec. 15, 2023, Judge Joan Demarest nullified the council’s vote that upheld the city manager’s decision and ordered the council to rehear Boeder's appeal.
According to Demarest, not only did the city fail to "follow the plain language" of its own municipal code, which outlines the terms and conditions of the fee, City Council members were not provided enough information at the hearing to determine if Shepard's decision was "arbitrary or capricious."
Appeal
The city law establishing the infrastructure cost recovery fees, Corvallis Municipal Code Chapter 2.18, was adopted in November 2000. The fees help reimburse the costs associated with such infrastructure as water and sewer lines, storm sewers, local streets, sidewalks, curbs, gutters and drainage, street lighting and needed right-of-way.
When Boeder applied to build on his property, the city conducted an assessment and billed him $65,400 in infrastructure cost recovery fees. The amount was applied to street and water improvements that ultimately would serve the development.
In an April 25, 2019 email to then-Public Works Director Steckel appealing the fees and liens placed on the property, Boeder argued that he was being penalized for his property's proximity to Country Club Drive, to which it did not have access and from which it would not "derive any significant benefit."
In his appeal, Boeder said: "The parcels do not connect to, nor have initiated development that requires, extension of public utilities and transportation improvements."
As a collector street, Boeder argued, Country Club Drive buildout, which the city completed in 2007, is more a benefit to the larger community than it is to the immediate neighborhood.
As it was, Boeder said, he already was required to improve the local street, 47th Place's cul de sac, including water, storm and sanitary sewer, along with providing for two new street lights to Country Club Drive.
He added that a requirement to provide a 20-foot easement in front of his property had shrunk the plot planned for two single family homes.
Boeder requested the city reduce the fees by 95%.
In denying the appeal, Steckel told Boeder that the property was similar to a corner lot with two frontages and as such he was "obligated to provide public improvements on both frontages even though they only take direct access and services from one frontage of the corner lot."
Steckel said the appeal did not provide enough evidence to show that the fees had been disproportionately calculated.
"The Country Club Drive improvements were completed in 2007, using Street Fund current revenues and SDCs (system development charges, a separate fee charged for new infrastructure). The city has carried those costs until now," Steckel wrote. And Boeder was obligated to pay his share of those costs, according to Steckel.
On May 10, 2019, Boeder appealed this decision to the city manager.
In his email, Boeder reiterated that the property was not utilizing Country Club Drive infrastructure and that the code limits the infrastructure cost recovery fees apply to local streets. Country Club Drive doesn't count as local for his future homes.
Boeder also raised questions of fairness regarding how the fee was calculated, using "frontage lengths" and not taking into account how the property would in fact be used.
On July 2, 2019, Shepard denied Boeder’s appeal, citing reasons similar to Steckel.
With regards to the code provisions referencing only local streets, Shepard wrote that that the fees were "based on the equivalent of a local street, not a collector."
Shepard advised Boeder he could appeal to the City Council. So he did.
Council hearing
As directed by the City Attorney’s Office, the council was tasked with deciding if Shepard’s decision was "arbitrary and/or capricious," a legal term of art which the attorneys summarized as a decision "that willfully, and without reasoning disregards relevant facts."
It was not a de novo hearing, meaning that it was not to be considered anew and the council's scope was narrow.
Boeder and then-Deputy City Attorney David Coulombe had 10 minutes to present their cases to the council. The record used in the hearing included the correspondences between Boeder, the Public Works director and city manager, infrastructure cost recovery fee spreadsheets, the municipal code chapter in question, a replat decision regarding the property and Boeder's notice of appeal to the council.
At the hearing, Boeder stressed that the cost recovery charges he was being asked to pay were not authorized by the municipal code language because Country Club Drive was a collector and not a local street
Essentially, he was paying fees that would-be developers with direct access to Country Club should.
He again argued that the city shouldn't assess the fee based on street frontages. That calculation was responsible for disproportionate fee.
Boeder is not new to development in Corvallis, but according to him, this is the "first time I’ve encountered a charge that really constitutes something above and beyond the impact from a development per se.
"I would say this is the absolute example of a absolutely inappropriate development fee that has no relation at all to the development that’s occurring," Boeder said via phone Monday, March 25.
At the hearing, Coulombe told the council that there had been public hearings conducted to arrive at the fees' methodology when the infrastructure cost recovery charge was adopted in 2000.
That's not the way Boeder remembers it: "There was absolutely no discussion, deliberations or public comments on it before it was adopted," he said by phone last week.
When contacted, City Engineer Jeff McConnell said he could not speak to the ICR fee calculation, especially as it pertains to Boeder’s property, as this is subject to ongoing litigation.
At the 2020 hearing, Coulombe also argued that Boeder had cited other sections of the municipal code that did not apply, was responsible for the shape of the lots, and that Country Club Drive did serve the property because "drivers could not reach places to the north" without it.
In their deliberation, several councilors expressed support for the city manager’s decision, saying that they trusted he was better versed in the matter and had made the right decision.
Boeder said last week that after the hearing he was "incredibly disappointed in the City Council" because councilors had based their decision on faith in the city manager and not the arguments before them.
Circuit Court opinion
Judge Demarest came to an entirely different conclusion. She said city's staff and administration, the city attorneys and City Council incorrectly interpreted multiple sections of chapter 2.18 of the municipal code. The end result: "the misapplication of over $604,000 in ICR charges to real property along Country Club Drive, a collector street."
Demarest said that according to the code, the cost recovery fees to recoup initial construction costs and installation of basic infrastructure, not the kind of later improvements Country Club Drive saw. But that was for what Boeder was billed.
She also struck down the city's methodology of calculating the fee, saying charging for the "local equivalence" of a collector street using the frontage of the property "clearly violated" the city's own law.
Even if a property ultimately connected to a collector street via a local street, the code doesn't allow such fees to be imposed, the court said.
In another error, Demarest pointed out that the fees are due upon application to connect to public infrastructure, not when development occurs.
Even how the city handled the appeal was wrong, Demarest ruled, saying that staff cited a wrong provision of the code. That ended up restricting the information the council could access in its decision-making.
"City council was instructed to follow the wrong appeal process, which limits the information they can consider to what the City Attorney provides them," Demarest said in the opinion letter.
And what was provided, according to Demarest’s opinion letter, was grossly insufficient to guide the council in the process.
Former city councilor Barbara Bull, who was on the council at the time of the hearing, recalls that this inability to access more information was a concerning factor at the time.
"It seems like as a city council, we should be interested in making the outcome the right outcome, but we were instructed at the time of the hearing, all we’re allowed to decide on is whether the city manager made a defendable decision based on the information in front of him," Bull said by phone, Wednesday, March 27.
"But they say the definition of arbitrary and capricious include whether or not he had competent information in front of him. How can we decide if he had competent information in front of him if we’re not supposed to look outside of the record to understand what other information might enhance his decision?" Bull said.
Bull had hoped the hearing would reveal more, that there would be a staffer present to explain the spreadsheets, she said. But even after the deputy city attorney and appellant made their presentations, it still was not enough information.
In theory, Bull said councilors could’ve sought out more information from staff members whom they rely on to explain complex issues, such as the Boeder case. But it may not have made any impact as the hearing itself was very narrow and limited to the shortlist of documents in the record, which the judge now says was insufficient.
Additionally, the Circuit Court raised issue with the City Attorneys serving as both adviser to the council and defendant of the city manager’s and staff’s decision.
"This situation can be likened to the prosecutor in a criminal matter also serving as the judge, with the council serving as jury," Demarest wrote.
"When the City Council is acting in its quasi-judicial role reviewing city staff decisions and the city attorney is advocating for the city staff and/or administrative decision, it would be best for a separate and distinct neutral entity to assemble, control and summarize the content of "The Record" as well as advise the council on law and process," Demarest wrote in her opinion.
She also noted that the council did not have ample time at the hearing to consider the appeal and that several councilmembers expressed "confusion, concern, discomfort, and/or disappointment in the process" as well as the limited information they were presented with to decide on the matter.
"Nothing in her opinion was surprising to me, it reaffirmed my arguments," Boeder said by phone.
"It’s administrative overreach by any stretch of the imagination that you can take the exact language from an ordinance and start reading into it, especially when in the presentation to council of the ordinance itself for adoption, none of that was discussed," Boeder said.
Decision annulled
In its final order, the court annulled the council's decision from the Jan. 21, 2020 hearing, asking the council to conduct a new hearing guided by the provisions of Chapter 2.18 of the municipal code.
The court also ordered the city to refund the cost recovery fees billed to Boeder, plus 9% annual interest.
If a fresh appeal showed that the city manager made the right decision, the court ordered Boeder to pay any amount owed without interest or any late penalty.
The court advised the city to have an independent legal counsel in the new hearing.
"All ICR charges since passage of CMC 2.18 on November 6, 2000 are suspect," the court order said. It suggested the city to conduct independent audits "to determine the scope of the problem and consider refunding improperly collected ICR fees."
Despite it being dated in December, Boeder said both parties were just recently made aware of the opinion letter as the former city attorneys transferred records and cases to the new hires, Beery Elsner & Hammond LLP.
Lawyers for both parties are now working to arrive at a final order for the court.
