Setting the bar to build: Jamestown sets requirements for real estate developers similar to other cities

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Homes are going up at this real estate development in northwest Jamestown.

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Real estate developers in Jamestown face several requirements for paying for infrastructure up front, but the requirements aren’t unusual compared to other North Dakota cities.

“Everybody is doing their own thing based on past experience,” said Jerry Hjelmstad, deputy director for the North Dakota League of Cities. “Out west where there have been some failures the governments require more up-front money.”

The Jamestown City Council took comments from the public concerning plans to reduce the amount developers would have to cover when creating new residential subdivisions during an Aug. 21, Building Planning and Zoning Committee meeting.

“It’s more of a question,” said Dave Hillerud, owner of Hillerud Construction, during an interview Thursday. “If other cities assist the developer, why shouldn’t we? Leave the developer some money to go to spec homes to make it easier to sell.”

Hillerud said he had not researched how other cities handle new residential developments.

“There is a void of houses in the right price range in Jamestown,” he said. “Is it because of developer costs?”

Jamestown, like some other communities, currently requires developers to cover some costs up front.

When a new residential subdivision is platted, the developer must pay the cost of the water and sewer infrastructure, according to Jeff Fuchs, city administrator. The developer is also required to bring the streets to the proper grade and gravel the surface. Curb, gutter and pavement, if built, are paid by the city with the costs recovered by special assessments on the property in the subdivision.

This policy came as a response to problems Jamestown faced in the 1980s, Fuchs said. At that time the city covered all the infrastructure costs in new developments and added the costs as special assessments on the property. When the lots did not sell the developers stopped paying property taxes. Ultimately, between 600 and 700 lots went back to the city for back taxes.

“We had no revenue from those lots for years,” Fuchs said. “The city had to place a special assessment deficiency levy to cover the costs.”

The city used a citywide levy to make the payments on the bonds issued to finance the infrastructure in those new subdivisions. Taxpayers paid the deficiency levy from 1980 to 1988. The tax averaged about 9.5 mills per year and generated a total of $1.3 million.

Fuchs said the city still owns some of those same lots from the 1980s, although most were sold for development about a decade ago.

Bismarck and Mandan handle infrastructure costs much the same as Jamestown.

“In normal residential developments the developer has to put in the water and sewer at their cost unless those utilities benefit areas outside the development,” said Jim Neubauer, Mandan city administrator. “We don’t see it deterring developers.”

Neubauer said the city then covers the cost of curb, gutter, streets and street lights as special assessments.

Bismarck has a similar policy.

“Pavement, gutter, storm sewers and street lights can be special assessed,” said Kathy Feist, special assessment analyst for Bismarck. “Water and sewer would have to be prepaid by the developer.”

Neubauer said Mandan is considering increasing the requirements on property developers.

“We may ask the developer to put up a bond or letter of credit for the specials on the streets,” he said. “As the lots are sold we could release part of the bond.”

Farther west, Dickinson places all the costs of infrastructure on the developer.

“We don’t special (assessment) anything,” said Shawn Kessel, Dickinson city administrator. “The developer pays for everything.”

Kessel said Dickinson adopted this policy about two years ago.

“Prior to that we had a program where the city covered up to 50 percent or $300,000 of development costs and the developer had to pay the rest,” he said.

Dickinson also looks at new subdivisions on a case-by-case basis and may require additional commitments from a developer. The developer of a recent 400-acre subdivision was required to commit to handling all snow removal for three years and build a fire station as part of the development agreement, Kessel said.

Eastern North Dakota cities have other policies.

“New plats are city-led and partially subsidized,” said Jane Priebe, special assessment coordinator at Wahpeton. “The local community development corporation partners with the city.”

Priebe said this limits the city’s exposure for infrastructure costs.

“There is such a risk in putting in improvements,” she said.

Wahpeton uses a half-cent sales tax for infrastructure that serves the entire community but does not apply it to projects that benefit limited areas.

West Fargo pays all the costs of infrastructure on new developments but requires the developer to post a bond equal to the cost of the infrastructure, according to Larry Weil, planning director.

“The developer has to pledge assets not already obligated,” he said. “This usually limits the size of projects.”

Weil said the pledge is released when enough lots in the subdivision have been developed with homes to eliminate risk to the city.

The topic is anticipated to be on the Sept. 18 Building, Planning and Zoning Committee meeting agenda Fuchs said. That committee could recommend changes in the policy to the full City Council for its October meeting.

Sun Reporter Keith Norman can be reached at 701-952-8452 or by email at knorman@jamestownsun.com

Tags: local news, news, development