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As illustrated by the state supreme court opinion described herein, the U.S. Constitution requires parkland dedication laws and ordinances found in most jurisdictions to demonstrate “rough proportionality” between the required dedication and the increased need for public open space generated by a proposed development.

In the case of Puce v. City of Burnsville, 997 N.W.2d 49 (Minn. 9/28/2023), the issue before the Minnesota state supreme court was whether the imposition of a park dedication fee by the Defendant City of Burnsville (the City) on Plaintiff Almir Puce’s development application was consistent with state law and U.S. Supreme Court precedent governing such subdivision regulations and park dedication fees.

Facts of the Case

In 2015, Puce purchased an undeveloped parcel zoned for commercial use, but it had a legal nonconforming single-family home, where Puce lived until 2017. In 2018, Puce began the application process with the City to develop his parcel for commercial use. He planned to develop the parcel in two to three phases: phase one involved an auto dealership and bakery/coffee shop, phase two involved an auto repair shop, and a potential phase three involved an outdoor storage facility.

Puce sought City approval of a plat, a minor portion of ground, for his development property. Puce objected to any imposition of a park dedication fee, arguing that “no need whatsoever will be created for parks by this proposed development.”

The city planning commission recommended that the city council approve the plat, including a recommendation that Puce be required to pay a park dedication fee of $37,804. Puce opposed the park dedication fee because there was “nothing this particular project is going to do to increase the need for parks.” In so doing, Puce claimed a park dedication fee is proper only when there is a “direct link that the subdivision is the cause of needing more parks.”

In response, the City maintained “there’s a need for open space created any time that open land is developed or redeveloped and used at a higher intensity than previously used.”

The City later recalculated and reduced the fee to $11,700 because Puce’s land value was less than the commercial property average. The City typically used average commercial property values to calculate park dedication fees. Based upon Burnsville, Minn., Code § 11-4-8.E, the City had reduced the fee to reflect “the scope of the development, the needs of the City.”

Reserve Available Green Space

At a subsequent city council meeting, Puce requested a waiver of the reduced park dedication fee. When asked by a council member where a new park would be designated, the city attorney conceded there was no planned “actual land acquisition” at the time.

The city attorney, however, pointed out that the addition of “a substantial amount of building structure, 7,254 additional square feet, and a substantial amount of impervious surface parking lot area” would eliminate much of the green space of the property. As characterized by the city attorney, the City’s park dedication formula was intended to “reserve green space and parkland and have amenities available.”

While acknowledging the park dedication funds cannot be used for maintenance, the city attorney claimed the City was seeking to expand and fix a gap in its regional trail system near the proposed development. The city attorney went on to note that “many residents” could use these trails, including users of Puce’s development. In response, Puce argued that the City’s proposed expansion was not a permissible use of the park dedication fee because these trail plans existed before Puce’s proposed development.

The city council ultimately approved Puce’s plat and conditional use permit, including the $11,700 park dedication fee. Puce challenged the imposition of this park dedication fee in state district court.

Park Dedication Fee Lawsuit

The state district court held a trial and found that the park dedication fee was lawful. In so doing, the court found that there was “an essential nexus between the fee imposed and the City’s purpose of imposing the fee” because “the City planned to build a trail next to the property and Puce’s development would draw more traffic to nearby parks and trails.” Puce appealed.

The issue before the state court of appeals was “whether the imposition of the $11,700 park dedication fee violated Minnesota Statutes section 462.358, subdivisions 2b(e).” As cited by the court, Subdivision 2b(e) provided:

[T]he municipality must reasonably determine that it will need to acquire that portion of land for the purposes stated in this subdivision as a result of approval of the subdivision.

The court of appeals reversed the district court because the City’s imposition of a park dedication fee on Puce’s application violated state law. While acknowledging there was an “essential nexus” between the park dedication fee and the City’s purpose for imposing the fee, the appeals court held the City’s decision to “impose a park dedication fee did not have a sufficient legal or factual basis.”

In the opinion of the appeals court, the City had violated state law because there was “no ‘rough proportionality’ between the park dedication fee and the need created by the proposed subdivision or development.” The state supreme court granted the City’s petition to review this decision by the appeals court.

“Collis” Constitutional Test

In the state supreme court, the City argued imposition of a park dedication fee on Puce’s development application was lawful under the “essential nexus” and “rough proportionality” requirements, as well as the “reasonable determination” requirement under state law.

In response, Puce claimed “the City’s use of a percentage-based formula to calculate the fee failed to consider the need, if any, created by his development.” Puce, therefore, claimed the court of appeals had “correctly determined that the imposition of the fee was unlawful” under state law.

Prior to analyzing current state law, the state supreme court found it “helpful to first summarize our precedent on park dedication fees” in order to “capture the evolution of the statute.” Specifically, in the case of Collis v. City of Bloomington, 310 Minn. 5, 246 N.W.2d 19 (Minn. 1976), the state supreme court had “considered a facial challenge to the constitutionality of the then-effective version of Minnesota Statutes section 462.358” to determine “what test should apply when determining whether a park dedication fee is constitutional.”

In upholding the constitutionality of the law at issue (section 462.358), the Collis court had held the statute “constrained municipalities from abusing their police power” because “only a ‘reasonable portion’ of land could be dedicated for the stated purposes” of the statute. In so doing, the Collis decision had “construed the statutory phrase ‘reasonable portion’ to mean that portion of land which the evidence reasonably establishes the municipality will need to acquire for the purposes stated as a result of approval of the subdivision.”

Accordingly, in Collis, the state supreme court would require a “facts-and-circumstances test” that would necessarily consider “the myriad of factors which may bear on a municipality’s needs for certain kinds of facilities and the relationship of a particular subdivision to those needs”:

Although we sought to avoid overly stringent standards for municipalities’ regulations, we also cautioned against arbitrary regulations which could create “substantial” risks to property owners.

We recognized that this valid exercise of municipalities’ police power could become “grand theft” if municipalities used it to impose fees out of proportion to the needs created by a development, forcing individual developers to shoulder burdens that should be shared among all citizens through taxation.

In addition, the Collis decision noted “a percentage requirement could be problematic because it does not consider the relationship between a particular subdivision and recreational need in the community.” The Collis court, however, had found an ordinance that required a 10 percent dedication fee “could be considered reasonable.” In so doing, Collis acknowledged state law would also allow an appeal for developers to dispute “whether the figure was arbitrary as applied to their subdivision.” Minnesota Statutes section 462.361. Accordingly, in Collis, the state supreme court upheld the constitutionality of percentage-based dedication formulas.

“Reasonable Portion” Defined

Since Collis was decided, the state supreme court noted the state legislature had amended state law several times. In particular, Minnesota Statutes section 462.358, subdivision 2b(a) (2022), authorized municipalities to require a “reasonable portion” of buildable land to be dedicated for public use. As described by the state supreme court, a “reasonable portion” had been construed to mean “that portion of land which the evidence reasonably establishes the municipality will need to acquire for the purposes stated as a result of approval of the subdivision.” In 2004, the state legislature had once again amended the 462.358 statute, adding subdivision 2c(a) that specified:

There must be an essential nexus between the fees or dedication imposed under subdivision 2b and the municipal purpose sought to be achieved by the fee or dedication. The fee or dedication must bear a rough proportionality to the need created by the proposed subdivision or development. Minn. Stat. § 462.358, subd. 2c(a).

Because Collis had upheld “percentage-based formulas,” in this particular case, the City claimed the court of appeals had erred “when it determined the City’s imposition of a park dedication fee was unlawful under subdivision 2c(a).”

“Essential Nexis” and “Rough Proportionality”

In determining whether the City’s imposition of a park dedication fee was lawful under Minnesota Statutes section 462.358, subdivision 2c(a), the state supreme court would interpret the statutory phrases “essential nexus” and “rough proportionality” to “give effect to the intent of the Legislature.” Moreover, in so doing, the state supreme court would adopt precedent from the U.S. Supreme Court, which “had defined these same terms ‘essential nexus’ and ‘rough proportionality’ in the context of federal constitutional takings law as applied to adjudicatory exactions of property.” Dolan v. City of Tigard, 512 U.S. 374, 114 S. Ct. 2309, 129 L. Ed. 2d 304 (1994):

The Supreme Court determined that there must be an “essential nexus” between an imposed condition to a permit approval and the purpose of that condition. Essentially, there must be a connection between the legitimate governmental purpose and the imposed condition intended to achieve that purpose …. [O]nce an essential nexus is found, there must be a “connection between the exactions and the projected impact of the proposed development.”

Further, in determining a “rough proportionality,” the Supreme Court in Dolan would require “some sort of individualized determination that the required dedication is related both in nature and extent to the impact of the proposed development.” While this individualized determination standard under Dolan would not require a “mathematical calculation,” the Supreme Court had held “there must be some effort to quantify its findings in support of the dedication” that is “more than a conclusory statement.”

State Codified “Dolan”

In Dolan, the state supreme court acknowledged the Supreme Court had imposed a constitutional requirement on dedications to demonstrate “rough proportionality” and an “essential nexus” to a proposed development. Accordingly, the state supreme court noted the state legislature had effectively codified Dolan in state law in section 462.358, subdivision 2c(a), by requiring municipalities to establish an essential nexus and a rough proportionality “when evaluating a park dedication fee imposed pursuant to a generally applicable ordinance.”

Having adopted the Supreme Court’s interpretations of “essential nexus” and “rough proportionality” in Minnesota Statutes section 462.358, subdivision 2c(a), the issue before the state supreme court was, therefore, “whether the City met these standards.”

In this particular case, the state supreme court found “an essential nexus, as that term is understood in Dolan, between the fee and the City’s purpose of imposing it”:

The City imposed the fee to fund the acquisition or improvement of open space and parkland following the development of Puce’s property. A connection existed between the fee and the purposes the City sought to achieve, thus, an essential nexus between the two was present.

As a result, the state supreme court held “the court of appeals properly determined that the City satisfied the ‘essential nexus’ requirement.” The state supreme court then considered whether the City had also satisfied the “rough proportionality” requirement between “the imposed fee and the need created by the proposed development” under state law. Minn. Stat. § 462.358, subd. 2c(a).

In so doing, the state supreme court applied “the Supreme Court’s interpretation of ‘rough proportionality’ in Dolan.” Specifically, “the City was required to make an individualized determination that the fee is related both in nature and extent to the impact of the proposed development or subdivision.”

Percentage-Based Formula

As described by the state supreme court, through section 462.358, the Minnesota Legislature had “recognized that municipalities have a great interest in maintaining open spaces in their communities when new developments are approved.” Moreover, in section 462.358, the state supreme court found the Legislature had “contemplated that a city had authority to impose a park dedication fee by formula to achieve that end.” Instead of “determining the proper dedication or fee amount on a case-by-case basis,” the state supreme court further found “percentage-based formulas” had “the benefits of efficiency and treating all development applications equally rather than arbitrarily”:

[Percentage-based formulas] provide developers with predictability of the fees to be assessed on their developments. Indeed, it may be challenging as a practical matter to prove on a case-by-case basis that a single new development (such as the one at issue) will have any demonstrable impact on open space. But a series of single new developments will plainly have such an impact.

Further, in the opinion of the state supreme court, “a park dedication fee derived from a percentage-based formula that applies to all similar properties” could satisfy the “rough proportionality” requirement to “the nature and extent of the impact that a particular proposed development or subdivision will have on a city’s need for green space and parkland”:

A city can justify its imposition of a percentage-based formula on a particular class of properties if it can show that the revenue to be raised from such a fee is reasonably necessary for the development of parks, playgrounds, trails, wetlands, or open space in response to anticipated commercial development in the city.

In addition, the state supreme court held a permissible dedication fee could be based upon “an appropriate percentage at a level of generality higher than each individual property,” as long as the fee is “roughly proportional to the amount necessary to counter the impact of the expected developments.”

Individualized Open Space Determination

As noted by the state supreme court, rough proportionality could be demonstrated by “a comprehensive study that accounts for projected population and employment growth, existing and future need for open space, and intensity of use.” In particular, the state supreme found a “percentage-based fee should then be calculated based on the assessed value of the land that would have been dedicated”:

For example, if a city determines based on its broader analysis that serving the park and greenspace needs of the community reasonably requires that 5 percent of proposed commercial developments be dedicated to parks and greenspace, and applies the 5 percent figure to the actual assessed value of the gross area of the applicant’s proposed subdivision, the municipality’s fee would satisfy the individualized determination required by the rough proportionality provision in Minn. Stat. § 462.358, subd. 2c(a).

While the park dedication fee of $37,804 in this case was based upon a 5 percent dedication formula found in the City’s ordinance (Burnsville City Code section 11-4-8.E), the state supreme court found “the dedication formula itself does not relate the fee to the value of the specific land that would have been dedicated” as required in an “individualized determination” under subdivision 2c(a). Accordingly, the state supreme court found “the City needed to make further findings to satisfy the individualized determination requirement.” The state supreme court acknowledged “the City took additional steps”:

The city attorney and other staff members later met and agreed to reduce the park dedication fee from $37,804 to $11,700, because, as noted above, section 11-4-8.E uses average commercial values to calculate the park dedication fee and the value of Puce’s property is “less than what the City uses for commercial property average.”

In addition, the state supreme court noted Puce himself had conceded “the City recalculated the fee amount using the fair market value of his property, which was a more accurate, current, and individualized figure.”

Since the City had “made an individualized determination and complied with the ‘rough proportionality’ requirement of subdivision 2c(a),” the state supreme court held: “The City’s imposition of a park dedication fee had a sufficient legal and factual basis, and therefore, it was not unreasonable, arbitrary, or capricious.”

Reasonable 5 Percent Dedication?

In this particular instance, the state supreme court also found the City had complied with the subdivision. Specifically, “the City was required to show that it reasonably determined that it needed 5 percent of the gross land area of the development to be dedicated as a result of the approval of Puce’s subdivision.” In the opinion of the state supreme court, the City had indeed presented “evidence that it reasonably requires 5 percent of newly developed land to maintain open space based on its 2040 comprehensive plan”:

[T]he comprehensive plan set the goal of maintaining “a minimum of 2 acres of public open space for every 1,000 persons,” and projected that the population of Burnsville will grow by 6,592 people by the year 2040.…

The City pointed to population, job growth, and development projections to support its determination that 5 percent was a reasonable amount of gross land area to require be dedicated through its ordinance in an effort to maintain open space in proportion to these projections.

Accordingly, in the opinion of the state supreme court, the City had “reasonably determined that it would need 5 percent of Puce’s land, or the monetary equivalent, as a result of the approval of his subdivision.”

Conclusion

The state supreme court, therefore, held state law and Collis provided a “sufficient legal and factual basis” for the City’s park dedication fee. As a result, the state supreme court reversed the decision of the state appeals court and remanded (i.e., sent back) the case back to the state district court for further proceedings and enter judgment consistent with this state supreme court opinion.

SEE ALSO: “Developers Challenge Fee for Parks & Recreation,” James C. Kozlowski, Parks & Recreation, Sep. 2003, Vol. 38, Iss. 9; “Constitutional Greenway Dedication Requires ‘Rough Proportionality’ to Development’s Impact,” James C. Kozlowski, Parks & Recreation, Sep. 1994, Vol. 29, Iss. 9.

James C. Kozlowski, J.D., Ph.D., is an Attorney and Emeritus Associate Professor in the School of Sport, Recreation and Tourism Management at George Mason University. Archive of articles (1982 to present).