By Dennis Box and Sarah Brenden
After nearly two years the parties sign a new interlocal agreement
A contentious tug of war between the city of Covington and the Kent School District over school impact fees has come to a close.
The disagreement began in May 2014 and flared into a legal stare down with the school district filing a lawsuit and the City Council passing an ordinance ending the collection of school impact fees.
After drawing legal lines in the sand, the attorneys for the city and school district came together and decided blowing money in court with an uncertain outcome was not the best use of public money. A new interlocal agreement was negotiated that ironed out a number of procedural wrinkles and provides a series of dispute resolutions to keep the two sides from jumping into the deep-end of the court pool in the future.
Timeline of Trouble
Trouble in paradise began in 2014 when a developer, Inland Real Estate Group of Companies, Inc., asked for an exemption from school impact fees for a low-income apartment complex planned for the city’s Town Center.
The city officials stated it notified the district of the request and its preliminary decision to grant an exemption in May 2014.
The district notified the city of its objection to the exemption in September 2014.
In October of 2014 the city officially granted the developer an 80 percent exemption. The full fee would have been about $700,000 and an 80 percent exemption brought the fee to $135,120, which Inland paid to the district.
The city’s position was an 80 percent exemption was necessary for the development to be built. According to city officials, state law determines the cost of low income housing. Without the exemption the project would not pencil out financially for the developer because the cost of the impact fees could not be passed onto the buyer. City documents noted low-income housing was an, “…important public need governed and required to be provided for by state growth management regulations….”
The crux of the legal dispute centered on whether the city had the authority to grant the exemption over the objection of the district.
The school district’s position was the city did not have legal standing to decide whether an exemption could be granted. The district contended state law did not give the city the authority to approve the exemption without approval from the district.
Covington’s position was the 1999 interlocal agreement gave the authority to the city’s community development director to make the impact fee determination.
With the two sides unable to come to an amiable agreement, the district filed a lawsuit in Superior Court in June 2015 asking for a declaratory judgment that the city must seek approval from the district before granting an exemption.
The city filed a motion to dismiss the lawsuit stating the exemption is a land-use decision and the district should have filed a Land Use Petition Act or LUPA appeal within 21 days of the exemption decision by the city.
In October 2015 the City Council approved the ordinance terminating collection of school impact fees. The ordinance documents stated the city was taking the action to stop the spending of public money and make the district declaratory judgment lawsuit a moot case.
The district filed an amendment to its lawsuit Nov. 23 asking the judge to find the ordinance invalid.
A New Day
Despite circling the wagons, the sides continued to talk and finally were able to settle their differences outside of the judge’s chambers.
In the Superior Court’s final order ending the lawsuit the judge wrote, “This Court is expressly not entering or declaring any legal findings or conclusions of law as the basis of the above orders. Accordingly, it is further ordered that the above orders shall not establish legal precedent for any future legal action.”
The judge wrote no attorney fees were awarded to either side and, “The parties further stipulate and agree that the preceding stipulations are made without comment or concession regarding the legal merits of either party’s position(s) and are not intended to and do not establish legal precedent for any future legal actions of the parties.”
The city and district agreed to replace the 1999 interlocal agreement with a new contract outlining the responsibilities for each side in the, “collection, distribution and expenditure of school impact fees”. In the agreement the city collects the fees and deposits the funds within 30 days to the district’s impact fee account. The city is due an administrative fee for the cost of collection and disbursement.
The district is to submit a six-year capital facilities plan or update each year to the city and it must, “Prepare an annual report showing the system improvements that were financed in whole or in part by impact fees and the amount of funds expended.”
The city and district listed a series of developments exempt from school impact fees including all senior housing, remodels of existing units and certain types of shelters.
The section on low-income housing states, “The City and the District each acknowledge and agree that RCW 82.02.060(3) currently requires the District to provide its approval for exemptions from the application of school impact fees for low-income housing and other development activities with broad public purposes sought under the authority of RCW 82.02.060(2) and (3)…. The City and the District each fully reserve any and all of their respective rights and authority to approve low-income housing and other broad public purpose exemptions from school impact fees.”
Following the low-income housing section is a statement that if there is another dispute over an exemption there is a dispute resolution process.
Dispute Resolution
The process to resolve a dispute has three levels, which can be triggered by either the district or city.
For level one a city and district staff representative meets and within 14 days they try to resolve the problem.
Level two brings the city’s community development director and the district chief business officer together to try to find a solution – again within 14 days.
Level three is when the city manager and district superintendent join the fray and work for another 14 days to get the two sides to play nice. At level three the sides can bring in the attorneys.
If after all three levels the issue continues to boil, then either party can request mediation or another method of dispute resolution.
The document also notes the sides may head back to court if the three levels of dispute resolution fail.
The new interlocal agreement signed by City Attorney Sara Springer and the district’s attorney Kristine R. Wilson with the Seattle firm Perkins Coie attempts to address the core of the disagreement and put some remedies in place for the parties to use in the event of another crises.
The two sides released a joint statement following the approval of the new agreement:
“Kent School District and the City of Covington have worked together to mutually agree upon and adopt a new interlocal agreement for the collection of school impact fees, and which specifically includes formal procedures for the consideration and approval of applications for exemption from school impact fees. The District and the City have also committed to work together to administer and annually review the school impact fee collection program to ensure that the program continues to address the needs and interests of both parties. Accordingly, the City and the District have voluntarily reinstated the City’s school impact fee collection program and dismissed the declaratory judgment action it filed in King County Superior Court regarding the approval of school impact fee exemptions for low-income housing developments.
The District and the City greatly value maintaining their positive and productive working relationship and look forward to continuing to grow and strengthen their relationship to best serve the District and Covington’s students and families.”
