CAO 98-01
CITY OF MIAMI BEACH
OFFICE OF THE CITY ATTORNEY
MEMORANDUM
TO:
Sergio Rodriguez
City Manager
C.M.O. # 1-2/98
C.A.O. # 98-1
FROM: Murray H. Dubbin
City Attorney
Lawrence A. Levy ~
First Assistant City Attorney
SUBJECT: Consolidation of Parking Impact Fee Accounts
DATE: August 24,1998
QUESTION: Whether the twenty-four (24) presently existing parking impact fee accounts may be
combined into three (3) regional accounts for the South Beach, Middle Beach and North
Beach areas.
ANSWER: Florida follows a "dual rational nexus test" with regard to the validity of impact fees. As
more fully discussed below, for impact fees to be valid, the local government imposing them
must demonstrate (1) a reasonable connection (or rational nexus) between the need for
additional capital facilities and the growth in population generated by the specific
development, and (2) a reasonable connection (or rational nexus) between the expenditure
of the funds collected and the benefits accruing to the specific development. The size of the
areas in which the funds are expended is one factor which determines whether the second
prong of the test is satisfied. This is a fact driven determination. While the matter is not
entirely free from doubt, we are of the opinion that consolidation of the existing twenty-four
(24) accounts into three (3) accounts will not cause the second prong of the test to be
violated.
FACTUAL BACKGROUND:
The City of Miami Beach collects parking impact fees pursuant to Section 7-7 of Comprehensive
Zoning Ordinance 89-2665, as amended by Ordinance No, 98-3108 (a copy of which is attached hereto as
Exhibit "A," and is hereinafter referred to as the "Parking Impact Fee Ordinance"). The Parking Impact Fee
Ordinance provides the conditions under which parking impact fees must be paid and the amounts that must
be paid, but it does not specify where the funds collected must be spent, or within what time period they must
be spent. The decision to establish twenty-four (24) separate accounts originated in a memorandum dated
April 30, 1991, from Planning and Zoning Director Dean J. Grandin to Finance Director Robert Nachlinger
(copy attached hereto as Exhibit "B"). We understand that several of the accounts have insufficient funds
to acquire or construct any parking spaces (as a result of the small size of the areas in which they were
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collected), and that the use of twenty-four separate accounts is inefficient in terms of the administration of
the program.
DISCUSSION:
There are two constitutional issues that generally arise in the context of development related
exactions. The first issue is whether an impact fee is an unconstitutional tax upon the developer. In other
words, is there some point at which an impact fee penalizes or taxes the developer for the development of
its land. Although at least one case has held that a developer's voluntary agreement to make off-site
improvements is enforceable, that case contained a dissent which questioned how "voluntary" the agreement
was in the course of the usual development approval process. ~
The other issue that raises a constitutional problem is whether the exaction is in payment for a sale
of the police power, particularly where numerous variances from local zoning and building code
requirements are sought by the developer. In this regard, it is a general rule of common law that States and
their political subdivisions can only act for a public purpose, ~ and that the police power cannot be contracted
away. ~
Florida follows the "dual rational nexus test" in its analysis of the imposition of impact fees. ~ The
first prong of the dual rational nexus test is that there must be a reasonable connection (or rational nexus)
between the need for additional capital facilities and the growth in population generated by the specific
!! County Suoervisors v. Sie-Grav Develooers Inc.. 220 Va. 435, 334 S.E.2d 542, 548 (1985),
~ McQuillan, Municioal Comorations. ~ 10.31 (3rd, Ed.) (hereinafter cited as "McQuillan").
~ lIi. McQuillan, ~24.41.
~ Three major views of the limits for which an impact fee may be exacted have emerged in American law: the
"reasonable relation" test, the "specifical1y and uniquely attributable" test, and the "rational nexus" test, although in
California, one commentator has referred to the last test as the "loosest possible type of nexus" test. See,
Bosselman, Fred P. & Stroud, Nancy E" "Mandatory Tithes: The Legality of Land Development Linkage", 9 Nova
W' 381,397 (1985),(hereinafter cited as "Bosselman & Stroud").
The "reasonable relation" test emerged in the seminal case of AYres v, City Council of Los Anl!:eles, 34
Ca1.2d 31,207 P.2d I (1949), in which it was held that an off.site impact fee for widening of roads was not an
unconstitutional exaction because the benefits accruing to the subdivision were slight when compared to the public
at large. The California Supreme Court reasoned that since the condition for development was not inconsistent with
the relevant statutory provisions, the privilege-benefit doctrine applied and the developer was subject to the impact
fee because it would obtain all of the advantages of the new subdivision, and thus it had the duty of compliance with
reasonable conditions,
The "directly and uniquely attributable" test is the antithesis of the "reasonably related" test and it has not
been applied in California, although its origin is in~. The Supreme Court of Illinois in Pioneer Trust &
Savin is Bank v Villal!:e of Mount Prosoect. 22 III.2d 375, 380, 176 N,E.2d 799,802 (1961), read the ~ decision
as meaning that the exaction can only be upheld if the burden on the subdivider or developer is specifical1y and
uniquely attributable to development activity; otherwise, it would be a confiscation of private property without just
compensation. This reading of ~ sounds more like the treatment of an assessment than of an impact fee. In a
special benefit assessment, the theory on which the governmental unit is al10wed to impose the assessment is that
the land assessed is increased in value by the improvement and is, therefore, special1y benefitted.
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development* In 1975, the Fourth District Court of Appeals set the stage for the "rational nexus" test by
holding that an exaction in the form of an impact fee collected for the purpose of improving or constructing
roads, streets, highways and bridges in the vicinity of a development was not a valid exercise of regulatory
authority in Broward Countv v. Janis Develo,pment. :! The court found that the lack of specificity of use
caused the exaction to be more in the nature of a tax than an assessment, and hence, held it to be
constitutionally impermissible.
In 1978, the City of Dunedin fared better in a test of its impact fee ordinance, in Contractors &
Builders Association v. City of Dunedin, ~ in which the imposition ofa connection fee for payment ofthe
capital costs of a city's water and sewer system was upheld as being constitutionally permissible. The direct
relation between the exaction and the expenditure made it easy for the court to decide the case, even if it
would have imposed the "specifically and uniquely attributable" test. ~
The first Florida case to test the limits of linkage between the exaction and the use of the proceeds
of the exaction was Hollvwood. Inc, v. Broward County, ~ In Hollywood. Inc., Broward County had
imposed a requirement that in order to have a plat approved, a developer had to either dedicate land for a
county park or make a payment in lieu of the dedication, The developer had three choices: (1) dedicate three
acres of land for every 1,000 residents of the new subdivision, (2) pay an amount equal to what the land
would have cost if he had dedicated land, or (3) pay an impact fee specified by a schedule in the ordinance
that required the dedication. The County was able to demonstrate that the requirement of three acres of park
land per 1,000 residents was not unreasonable, that the money would be spent within a reasonable amount
of time and that the expenditure would benefit the residents of the platted area. Thus, Florida effectively
adopted the "rational nexus" test in the Hollywood Inc. case.
In 1983, the Florida courts again faced the issue of impact fees in Home Builders & Contractors
Association v. Board of County Commissioners, '!! which challenged the validity ofa Palm Beach County
ordinance that required any new development to pay a share of the cost of roadway improvements, utilizing
a formula that took into account the cost of road construction and the number of motor vehicle trips that were
likely to be generated by the proposed new development. In addition, the ordinance established forty zones
within Palm Beach County and required that the moneys raised in each zone would be spent only in that
zone, and ifnot spent within six years would be returned to the then present owner of the property, ~ The
~ 311 So.2d 371 (Fla. 4th DCA 1975),
~ 358 So.2d 846 (Fla. 2nd DCA 1978), cert. den. 370 So.2d 458, cert. den. 444 U,S. 867 (1979), (hereinafter
cited as "City of Dunedin").
?! See fit. 4,
~ 431 So.2d 606 (Fla, 4th DCA 1983), cert. den. 440 So.2d 352 (1983).
'!! 446 So.2d 140 (Fla, 4th DCA 1983), cert. den, 451 So,2d 848, appeal dismissed, 409 U.S. 976 (1984).
~ It is interesting to note that the recently adopted Dade County, Florida, Road Impact Fee Ordinance
(hereinafter cited as the "Dade Road Ordinance") is structured along the guidelines established in the Board of
Countv Commissioners case. Briefly, the Dade Road Ordinance contains (1) substantial recitals establishing a
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Palm Beach road impact ordinance was held not to be a tax, since it constituted a permissible regulatory fee.
lt was also held that Palm Beach County had the power to adopt the ordinance even though it was not a
charter county: this holding specifically relied on the conclusion that the impact fee was regulatory in nature
rather than being a tax. In holding that the impact fee was not a tax, the Fourth District Court of Appeal
specifically held that the test articulated in City of Dunedin, IDllIDh had been met with regard to the nexus
between the imposition of the fee and its expenditure and that due process and equal protection concerns had
been addressed because the developer had the opportunity to provide its own independent traffic study to
rebut the data establishing the amount of the exaction. Finally, the Palm Beach ordinance was upheld
because it provided for the moneys exacted to be expended within the "zone" in which they were raised.
In Bavwood Construction Inc. v City ofCa,pe Coral. 111 the Second District Court of Appeal held
that an impact fee ordinance requiring a payment from a developer for water and sewer improvements was
not a zoning ordinance and did not, therefore, have to be adopted in the manner prescribed in Section
166.041(3)(c)(2), Florida Statutes (1979). The holding was based on the proposition that an impact fee
ordinance does not substantially restrict the use of one's property, so it is not a zoning ordinance. The case
does, however, demonstrate the creativity of developers and their counsel in using procedural arguments to
try to avoid having to pay impact fees.
One final Florida case that is worthy of mention here is Lee County v. New Testament Ba,ptist
Church of Fort Mevers. Inc. ~ New Testament Baptist Church is yet another challenge involving the validity
of a road impact fee, and is significant because the Second District Court of Appeal stated flatly that Florida
has adopted the "rational nexus" test as the measure for validating impact fee ordinances, citing Hollywood.
Inc. v. Broward County. ~.
The foregoing cases have all dealt with the first prong of the dual rational nexus test. A review of
the literature in this area does not disclose a "bright line" test with regard to the second part of the test; that
is, there must be a reasonable connection (or rational nexus) between the expenditure of the funds collected
and the benefits accruing to the specific development. The attack on an exaction that is most likely to
succeed is an attack on the first prong of the test (Le., that it is an illegal tax). Thus, the existing case law
tends to focus on the first, rather than the second prong, of the test.
To determine whether a particular impact fee passes muster under the second prong of the dual
rational nexus test, it is necessary to look to cases that are similar, but do not involve impact fees, For
nexus between development and the need for roadway improvements, (2) provision for imposition of the road
impact fee, (3) a formula for determination of the amount of the fee for each proposed development, (4) a fee
computation schedule, (5) an alternative by which the developer can perform its own independent study and propose
and alternative fee, (6) provision for a roadway contribution in lieu of the fee, (7) provisions for establishing
districts and segregated trust accounts so that the money for a particular development is spent in sufficiently close
proximity to establish that the "rational nexus" test is met, and (8) provisions for refund of moneys not expended
and for certain exemptions and credits. In addition, to comport with principles of due process and equal protection,
the Dade Road Ordinance provides for appeals of administrative decisions and the protection of previously vested
rights.
~ 507 So.2d 768 (Fla. 2nd DCA 1987).
!!! 507 So.2d 626 (Fla. 2nd DCA 1987),
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example, in Flores v City of Miami 13/ the Third District Court of Appeal upheld an ordinance that awarded
street vending licenses by lottery and required street vendors to pay a franchise fee. The court specifically
held the fee was for use of the public right of way and did not have to conform to ~166.221, Florida Statutes,
which requires that regulatory fees must be commensurate with the cost of the regulatory activity. Although
the case is not directly on point, it does indicate that the attitude of the court, at least in the Third District,
is to presume the governmental imposition of a fee, and the expenditure of the proceeds thereof, to be valid
in the absence of a clear showing to the contrary.
In a similar situation, the First District Court of Appeal upheld a charge based on a percentage of
gross receipts in Jacksonville Port Authority v. Alamo Rent-a-Car. Inc. ~ In Alamo. the court found the
gross receipts charge against off-airport operators of car rental agencies was an authorized user fee and not
an unlawful tax. One issue in the case was whether the proceeds of the gross receipts charge had to be used
solely for improvements to airport roads and shuttle bus stops. The court held that the fees could be used
for general airport maintenance and operational costs, on the theory that the added burden the off-airport car
rental company places on the airport includes its use ofthe airport roadways and shuttle bus stops; however,
the benefit that the car rental companies receive flow from all phases of the airport operation. The First
District Court of Appeal chose an expansive reading of the resolution imposing the gross receipts fee, rather
than a restrictive reading.
The second prong of the dual rational nexus test provides that the proceeds of the exaction must be
expended on projects that have a rational nexus to the development from which it is exacted. While no cases
have been found that would indicate a "bright-line" test as to the boundaries within which the proceeds of
the parking impact fees must be spent, the ~ and Almn2 cases would indicate that a liberal reading of
the Parking Impact Ordinance would be appropriate in the event that a challenge was brought in a court of
competent jurisdiction.
The Florida cases suggest a five-part test for the validity of impact fee ordinances as follows: (1)
carefully documented estimates of cost of any facilities proposed to be financed with the proceeds of an
impact fee, (2) a reasonable formula for determining the proportionate share that should be attributed to new
development, (3) segregation and earmarking of the proceeds of the impact fee to assure that they are
expended only for the purposes for which they were raised, (4) the expenditure must be localized, and (5)
there must be a time limit on the expenditure and a provision for a refund if the proceeds of the impact fee
are not expended. ~
In summary, the present situation is that parking impact fees are being collected and deposited in
so many accounts that most of the accounts never achieve a balance sufficient to address the goal of
increasing available parking in the area. Development affects parking in the general area, not only the
!!! 681 So.2d 803 (Fla. 3DCA 1996).
~ 600 So.2d 1159 (Fla. 1DCA 1992).
~ Bosselman & Stroud suggest that the more rigorous version of the "rational nexus" test requires a two-part
analysis, First, that there be demonstration of a "need" that the particular development will create and that the
exaction bears some roughly proportional relationship to the share of the overall need that is contributed by the
particular development. The second part of the test requires that the funds extracted be earmarked for expenditure
in a way that "benefits" the development from which the exaction was received. Hosselman & Stroud, at pp.397-98,
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immediate vicinity. Thus, by combining the twenty-four accounts into three (3) accounts, amounts sufficient
to commence parking projects will accrue. Based on the relatively compact nature of the City, the three (3)
proposed areas into which the parking impact fees will be directed would not, in our opinion, violate the
second prong of the two-prong test for determining the validity of impact fees. The willingness of the courts,
in the ~ and Almn2 cases, ~, to read the law expansively in this area would appear to support this
position.
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