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Page 2 of 3 Escrow-based Approach Some cities, such as Arden Hills, regularly require escrow payments with land use applications. Other cities require escrows only for large projects. The escrows support costs for the City Attorney, City Engineer, and any outside consultants. Small or rural cities with no on-staff planners usually use escrow to cover costs for planning consultants. During the fee study, two metropolitan cities were identified that use an escrow-based approach for their land use application fees. For both of these cities (Brooklyn Park and Plymouth), administrative fees are generally lower than in other cities. Planning staff hours and hearing notice costs, however, are applied to the escrow in addition to legal, engineering, and consulting costs. How escrows are applied vary between the two cities for planning cases needing multiple land use approvals. In Plymouth, if multiple approvals are sought, only the largest escrow is charged. In Brooklyn Park, an administrative fee and escrow is charged for each land use approval requested. This is similar to how Arden Hills currently charges fees in situations in which multiple land use approvals are requested. Staff contacted both Brooklyn Park and Plymouth to inquire about their experience with the escrow-based approach to application fees. Both cities reported that they had been using the escrow-based approach for several years and had no problems with administration. Developers did not complain about fees and generally understood that they were paying for services used. Staff Recommendation Staff recommends that Arden Hills adopt an escrow-based approach to land use application fees. The advantages of this approach are:  A simplified fee structure is easier for developers to understand and for the City to administer;  Small administrative fees cover overhead and support staff;  Total fees are consistent with the City’s actual costs for review and processing of land use applications;  For straightforward single-family (homeowner initiated) applications, the City Planner may reduce the escrow (not the administrative fee) to prevent upfront costs from being a barrier to reinvestment for residential property owners;  The escrow-based approach provides an incentive for developers to submit complete and accurate application materials as that will limit staff review time;  Fees will largely automatically adjust with inflation as the staff costs charged to escrow accounts will be adjusted annually; and  Because the escrow-based approach fully accounts for City costs in land application review and processing, the same fees can be recommended for the JDA fee schedule. This will create an equitable relationship between TCAAP and non-TCAAP projects. Some challenges are presented by the escrow-based approach, but most can be mitigated or managed:  Planning staff will need to track hours spent on each project. Engineering is already doing this.