The Government Shutdown

As of this update, state government is inching closer to a shutdown on July 1st. With no budget solution in place, and the Republican legislative leadership ideologically divided from the DFL Governor on a plan for the next biennium, it may seem premature to provide a report on the 2011 legislative session. 

On Tuesday, Ramsey County District Judge Bruce Christopherson ruled that courts would remain open in the event of a shutdown. He stated in his ruling that the consequences of closing the courts would be “irreparable and inestimable.”

Today, Ramsey County Chief Judge Kathleen Gearin ruled on the Petition of Attorney General Lori Swanson. Judge Gearin’s determination of what is a “core function” of government establishes what portions of government, outside of the courts, will be open during a shutdown.  

In short, Judge Gearin adopted Governor Dayton’s recommendations on services that should be funded during a government shutdown. The governor’s recommendations, which were submitted to the court in response to Attorney General Swanson’s petition, did not include many of the programs and services that were funded during the 2005 shutdown. The decision states that the following are core functions of government that should be funded during a shutdown:

  1. Basic custodial care for residents of state correctional facilities, regional treatment centers, nursing homes, veterans homes, and residential academies and other similar state-operated services.
  2. Maintenance of public safety and immediate public health concerns.
  3. Provision of benefit payments and medical services to individuals.  
  4. Preservation of the essential elements of the financial system of the government. 
  5. Necessary administration and supportive services, including but not limited to computer system maintenance, internet security and issuance of payments.  

Judge Gearin made minimal changes to Governor Dayton’s original document, which can be viewed here.

The Court order states that the negative impact of a government shutdown on numerous programs does not justify a court in over-extending its authority. Judge Gearin commented that some non-profits will not survive without state appropriations, but “neither the good services they provide nor the fact that they may cease to exist without state funding is sufficient to deem their funding to be a critical core function of government.”

The Court order also specifically discusses child care assistance, limiting funding to those that are funded under Temporary Aid to Needy Families (TANF).  In addition, the Court commented on the brief submitted by the Horsemen’s Benevolent and Protective Association, stating that regulating horse racing is not a core function of government.

On infrastructure, the Court states that “any part of a contract which keeps the bridge from collapsing does constitute a critical core function of government. It does not agree that replacement of the bridge” is a core function that needs to be funded.

Finally, the Court agreed with the position of the League of Minnesota Cities and others that funds that have already been lawfully appropriated under Local Government Aid should be paid on schedule. Any previously lawfully appropriated payments to School Districts should also be paid on schedule.

For the full decision, please see: http://www.mncourts.gov/Documents/2/Public/Civil/Executive_findings_of_fact.pdf

There will be more information in the coming days/weeks as budget issues are resolved. There may be other initiatives that are also included in any special session deal, including a Vikings stadium package. However, we can certainly share some insight on legislation that has been enacted to date.

Land Use, Real Estate and Development Legislative Update

The legislature sent a total of 117 chapters of law to Governor Dayton in 2011, and he vetoed 24 of those, including almost all of the major appropriations bills. The Omnibus Agriculture Bill was the only portion of the budget signed by the governor during the regular 2011 session. That bill and others relating to land use, real estate and development are highlighted below. We also give some detail on a few pieces of legislation that either met the veto pen or ultimately were not passed by the House and Senate this year but will likely be back in 2012.

Agriculture

Omnibus Agriculture Budget Bill

Chapter 14 (S.F. 1016/H.F. 1039)

County Land Exchanges

Currently, when acquiring real property for county highway right-of-way, counties are allowed to exchange parcels of real property of substantially similar or equal value without advertising for bids. Minn. Stat. § 373.01, subd. 1(d). The Omnibus Agriculture Budget Bill modifies that language to include acquisitions relating to non-highway rights-of-way. This change is effective on July 1, 2011.

Environment

Environmental Review and Permitting Efficiencies

Chapter 4 (H.F. 1/S.F. 42)

A priority for many legislators this year, and a campaign talking point for Governor Dayton, was creating efficiencies in what many consider a broken system. The issue gained attention as part of the first bill introduced in the Minnesota House this year. Ultimately passed and signed by the governor, the bill makes a number of changes relating to review and permitting.

Many of you are familiar with Minnesota Statutes § 15.99, also known as the 60-day rule, which creates specific timelines for action on land use applications. This legislation, in an attempt to shorten the often lengthy review time for environmental permits, creates a statutory goal of 150 days from the time of the receipt of the application to issuance of the permit. In cases where there is a delay, written summaries must be provided to an applicant. If there are deficiencies in the application, the agency must notify applicants within thirty (30) days or the application is deemed complete. In addition, final decisions on all permits must be made within thirty (30) days after final approval of an EIS.

The legislation also changes the current procedures relating to judicial review. Appeals of local government decisions on environmental review can now go directly to the Minnesota Court of Appeals. Previously, these cases had to start in District Court, which was inefficient and created redundancies in the process.

Another significant result of passage of this bill impacts the Pollution Control Agency (“PCA”). As of the law’s effective date, March 4, 2011, if the PCA wishes to promulgate new rules, it must include a comparison of its proposed standard with existing standards in neighboring states, within EPA Region 5, and at the federal level. If the proposed standard is a deviation from the region or the federal standard, the PCA must provide justification for a different standard.

Land Use

Local variance authority

Chapter 19 (H.F. 52/S.F.13)

On May 5, Governor Dayton signed legislation relating to municipal variance authority as a response to Krummenacher v. City of Minnetonka, 783 N.W.2d 721 (Minn. June 24, 2010). Krummenacher had caused a virtual halt to the issuance of variances by cities in Minnesota.

In Krummenacher, the Minnesota Supreme Court narrowly interpreted the statutory definition of “undue hardship” and held that the “reasonable use” prong of the “undue hardship” test is not whether the proposed use is reasonable, but rather whether there is any reasonable use for the property in the absence of the variance. Because there are very few situations where there is no other reasonable use of a property without a variance, cities had virtually no authority to issue variances over the past 11 months. Property owners have had their hands tied, as well, and project proposers and cities have had to get creative to find workable solutions.

The new law changes the test back to the “reasonable manner” understanding that had been used by lower courts for approximately twenty years prior to the Krummenacher ruling. It also makes the language in both the city and county statutes the same – the standard for both is now “practical difficulties” rather than “undue hardship.” The remaining factors of the test remain the same: (1) reasonableness; (2) unique circumstances of the property not created by the landowner; and (3) impact to the essential character of the neighborhood or locality. Also included is a sentence new to city variance authority that was already in the county statutes: “Variances shall only be permitted when they are in harmony with the general purposes and intent of the ordinance and when the terms of the variance are consistent with the comprehensive plan.” Finally, the new law clarifies that conditions may be imposed on the granting of a variance if the conditions are directly related to and bear a rough proportionality to the impact created by the variance.

The new law was effective on May 6, the day following the governor’s approval.  

Ultimately, this law really allows cities to go back to what they were doing before Krummenacher, which is assessing a variance based on whether it is a reasonable use of a property.  

Concurrent Detachment of Parcels Between Cities

Chapter 115 (H.F. 753/S.F. 792)  

A couple of years ago, the state’s annexation working group made a recommendation to amend Minnesota Statutes, Section 414.061. In effect, the recommendation would revert the state law relating to concurrent detachments back to pre-2006 language.

Before 2006, if a property owner wanted to leave City A and become a part of City B, all it would take is a petition of the property owner and at least one of the cities involved in the boundary adjustment. In 2006, the legislature changed the standard to require that both cities approve the change. This obviously created some heartburn – not a lot of cities are itching to lose property tax revenue to their neighbor. As of August 1st of this year, the law reverts back to the one property owner, one city rule.

Vacation Rentals (Did not pass)

H.F. 1523/S.F. 1190

For several years, the legislature has been trying to figure out how to regulate the private rental of a home on a short-term basis, or vacation rentals. With the explosion of websites dedicated to vacation home rentals, what used to happen with more subtlety is now out in the open. The Minnesota Department of Health has been asserting its authority to license private homes as hotels and motels. The Minnesota Vacation Rental Association has been trying to limit state government’s involvement in what many argue is a private rental transaction that should not be treated differently from long-term rentals.

This year, legislation was introduced that would require that municipalities allow vacation rentals as a permitted use in residentially-zoned areas. Local governments would be allowed to create a local licensing program for the use or require registration, but it would have prevented state licensing as a hotel. It would also prevent local governments from prohibiting this type of use or requiring unreasonable conditions. The bill moved quickly in the Senate but was laid over by the House author in an attempt to work out the differences between the bill advocates and opponents for resolution next year.

Interim Use Ordinances/Development Agreements (Did not pass)

H.F. 389/S.F. 270

Bill language introduced this session would have established a grandfather right for completed development applications when a local government authorizes a temporary moratorium. This would ensure that applicants would receive an up or down vote based on the current regulations at the time a complete application was filed. It would have also prevented local governments from imposing a development moratorium in response to a completed application that the local government did not like. Cities were concerned that the language would apply to incomplete applications and that there was not enough protection for cities and other local governments who get a surprise application for a use that was not contemplated in the zoning ordinance.

The bill also attempted to address an ongoing issue for developers. Some cities utilize development agreements to exact additional funds for projects in areas not directly associated with the development itself. The proposed language would have limited a city’s ability to require conditions or fees that are not expressly authorized by statute or mutually agreed upon by all parties. The language also tied the amount of financial security a city can require as a part of the development agreement to what is direct and proportional to the work that will be completed. Finally, the language establishes a minimum notice period to ensure that the applicant has a chance to review the proposed contract before it is approved.

Both of these have been ongoing topics at the legislature and will be expected to return in some form next year.

For a full list of legislation acted on by Governor Dayton during the 2011 Regular Session, please go to: http://mn.gov/governor/policy/legislation/index.jsp