Subdivisions – Recent Developments in Concurrency, Expiration of Approval, Completion and Maintenance of Public Improvements

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Subdivisions – Recent Developments in Concurrency, Expiration of Approval, Completion and Maintenance of Public Improvements

by
Carol A. Morris
Morris Law, P.C.
3304 Rosedale St. N.W., Suite 200
Gig Harbor, WA  98335
(253) 851-5090

I.          Background. 

            Those cities and towns planning under the Growth Management Act

[1] (“GMA”) must have transportation concurrency ordinances which allow the municipality to deny the development (under certain circumstances), based on the traffic generated by the development.[2]  GMA encourages municipalities to adopt concurrency ordinances for other public facilities and services, such as water and sewer.[3]  Both GMA and non-GMA cities also must perform basic concurrency analyses prior to making a final decision on any short or preliminary plat.[4]

“Concurrency” means that adequate public facilities or services are available when the impacts of development occur.[5]  “Available public facilities” means that the facilities or services are in place (or that a financial commitment is in place) to provide the facilities or services within a specified time.[6]  The deadline for availability of transportation facilities for GMA cities is six years from the time of development.[7]  Because there is no requirement under GMA that a municipality adopt concurrency requirements for water or sewer, there is no corresponding deadline in GMA.  However, the need for concurrency ordinances with deadlines addressing water and sewer in all cities and towns, not just cities and towns planning under GMA, is underscored by recent legislation which addresses expiration of final plats and case law.

Subdivision Act.  Cities and towns process subdivision applications under the Subdivision Act and local implementing ordinances.[8]  In many instances, the city or town also is the water purveyor or sewer provider to the property, and will be asked by the developer at the short plat or preliminary plat stage to provide water and sewer to the property and a recommendation for approval on this basis.[9] Once the municipality (usually the public works director) makes a recommendation for approval based on an evaluation of the water and/or sewer that is available to serve the lots in the plat, this recommendation cannot be modified without the consent of the applicant.[10]

The municipality may not approve the short plat or preliminary plat unless it “inquires into the public use and interest,” and “makes written findings” that the short plat or preliminary plat makes “appropriate provision” for “potable water supplies” and “sanitary wastes.”[11] This determination cannot be just a snapshot in time of the availability of water and/or sewer in the municipality on the date of approval.  It must also evaluate whether there is enough water and sewer capacity to serve all of the lots in the preliminary plat until the property owner’s right to build out the plat in accordance with applicable laws in effect at the time of approval expires.[12]  In effect, this is a “concurrency determination,” but in many cities and towns, no one takes the necessary action to reserve the associated water rights or sewer capacity for the lots in an approved plat for the entire vested “life” of the plat.

Once a short plat is approved and recorded, the property owner may apply for building permits to develop the property under the land use and zoning laws in effect on the date of the short plat application.[13]  This right never expires.[14]  Therefore, when a municipality has recommended approval of the short plat based on the municipality’s provision of water/sewer for the plat, and the plat is approved/recorded, the property owner may submit a building permit application requesting such service/connection at any time in the future.

After approval of the preliminary plat, the property owner must submit a final plat application to the municipality within seven years of the date of preliminary plat approval is on or before December 31, 2014, and within five years of the date of preliminary plat approval if the date of preliminary plat approval is on or after January 1, 2015.[15]  For those final plats that are within city limits, not subject to requirements adopted under chapter 90.58 RCW [the Shoreline Management Act] and the date of preliminary plat approval is on or before December 31, 2007, a final plat application must be submitted to the municipality within nine years of the date of preliminary plat approval.  After that point, the municipality has thirty (30) days to issue a final decision on the complete final plat application.[16]

If the final plat is approved and recorded, the lots in the plat are “a valid land use notwithstanding any change in zoning laws” for a period of seven years if the date of filing is on or before December 31, 2014, and for a period of five years from the date of filing if the date of filing is on or after January 1, 2015.  In addition, any lots in a final plat filed for record shall be a valid land use notwithstanding any change in zoning laws for a period of nine years from the date of filing if the project is within city limits, not subject to the requirements adopted under chapter 90.58 RCW [the Shoreline Management Act], and the date of filing is on or before December 31, 2007.[17] 

Therefore, if the municipality approved a final plat with the condition that it would provide water/sewer to the lots in the plat, the property owner may submit a building permit application at any time during the above time periods (ranging between 7 to 9 years after final plat approval).  In order for the municipality to issue the building permit, water and sewer must be available.

What will happen if, by the time the property owner submits building permit applications under an approved final plat, the city hasn’t reserved the necessary water or sewer for the development?  If the municipality has no water or sewer when the building permit applications are submitted, it will be required to deny the permits on this basis.  The issue is whether the lack of action to encumber the necessary water rights and/or sewer capacity will result in a lawsuit against the municipality, given the short or preliminary plat approval.

Built into state law is a provision that may apply to this situation (for long or formal plats), if the legislative body “finds that a change in conditions creates a serious threat to the public health or safety in the subdivision.”[18] While there is no case law interpreting this language, a good argument could be made that it should absolve the municipality from any alleged responsibility to issue permits, if there is no water or sewer.  This would especially be true if the building permit applications are submitted under a plat that has been given an additional two to four years of vested life by the Legislature in the recent legislative amendments to RCW 58.17.170.[19]

II.        JZ Knight v. Yelm case – water concurrency.

            Developer Terra applied to the City of Yelm for preliminary plat approval to subdivide 32 acres into residential lots.[20]  The water for the subdivision was to be provided by Yelm.  A nearby property owner (Knight) and Yelm both have groundwater rights to draw from the same aquifer.

During the public hearing on the application, Knight argued that Yelm had overcommitted its water supply and that there was not “appropriate provision” made for water to allow approval of the preliminary plat.  The hearing examiner still approved the preliminary plat, finding that the Growth Management Act and the State Subdivision Act both required that the applicant show that “appropriate provision” will be made for water by the time of occupancy, not at the preliminary plat approval stage.  On reconsideration, the hearing examiner added a condition of approval:  “the applicant must provide a potable water supply adequate to serve the development at final plat approval and/or prior to the issuance of any building permit.”  The City Council affirmed the examiner’s decision, finding that there was evidence supporting a reasonable expectation that ample water would be available at the time the water connection is required.

Knight appealed the City’s decision to the Washington Supreme Court.  The Supreme Court found that Yelm was required to determine whether appropriate provision had been made for potable water supplies before it approved the preliminary plat application.  The determination could not be deferred until the final plat or building permit stage.  This is because final plat approval is for the purpose of determining whether the final plat application conforms to applicable law and the preliminary plat conditions,[21] so the city must perform any necessary inquiry into the adequacy of the water supply before approving the preliminary plat.  In addition, the public must have the opportunity to challenge the municipality’s evidence that there are adequate water sources to serve the development – and this could only be done prior to the decision on the preliminary plat (there is no open or closed public hearing after this stage in the process).[22]

III.       How should we address concurrency requirements in our city or town?

            If your city or town provides water and/or sewer to new development, adopt a concurrency ordinance, even if you do not plan under the Growth Management Act.  All cities and towns approve short and long (formal) plats.  If your city or town provides water and/or sewer to new development, then your city or town will be asked to provide water and/or sewer connections to the property in new short or long plats.

Many municipalities are running out of water.  Development of new water sources can take many years.  Capacity in sewage treatment plants is limited.  Sewer plant expansion projects are expensive and may take years to complete.  Evaluations of water availability and sewer capacity for new development must be performed for each application.

If a municipality has no water or sewer capacity to provide to new development and it has no concurrency ordinance addressing these public facilities/services, the municipality will likely be forced to adopt moratoria.  These moratoria will prevent property owners from submitting any new development applications until the municipality has acquired additional water rights or sewer capacity.

Moratoria are frequently subject to legal challenge, especially when they are kept in place for long periods of time.  Moratoria are also politically unpopular.  Many people do not understand the effect of a moratorium – for example, most think that a moratorium stops all development.  In reality, a moratorium can be carefully tailored to only prevent submission of development applications under certain conditions.  For example, a moratorium relating to a water/sewer shortage would only prevent the submission of development applications requiring a water/sewer connection, not all development.  Depending on the level of build-out of your municipality, however, this could still be a significant portion of the development applications coming in the door.

While it may be difficult for a municipality to generally predict the amount of water rights/sewer capacity needed to serve new all development when performing capital facilities planning, one way to lessen the need for adopting a moratorium is to adopt a concurrency ordinance addressing water and sewer facilities for development permits.  Such an ordinance will allow the municipality to deny development applications requiring water/sewer if the municipality will not have adequate water or sewer capacity to serve the development – without a moratorium.  This type of ordinance will also require the municipality to keep track of the water and sewer capacity that has been reserved for approved development.  The Washington Supreme Court has reiterated that for preliminary and short plats, the concurrency determination (whether “appropriate provisions” have been made) is something that must be performed prior to approving the preliminary plat or short plat).  The step not articulated by the Court in this process is the reserving of the water/sewer capacity for the vested life of the individual development approvals.

Because the Legislature has recently lengthened the period by which a long (or formal) plat is “divested” from its vested rights to be a “valid land use notwithstanding any change in zoning laws” from five years to seven years – and in some instances, nine years — a procedure for reserving water and sewer capacity for long periods of time is extremely important.  For example, if a city approved a preliminary plat by agreeing to provide sewer capacity for a 245 lot subdivision on November 15, 2007, the developer may have 9 years to submit a final plat application to the city.  Let’s assume the developer submits the final plat application on December 1, 2014, which is approved on December 15, 2014.  This developer may submit building permit applications which require the reserved sewer capacity beginning on December 16, 2014 through December 16, 2021.  Ultimately, the municipality may be required to reserve water/sewer for this plat for 16 years.  Unless the municipality has a concurrency ordinance in place which reserves the sewer capacity during this period of time, there may not be any capacity when the building permit applications are submitted.

Because there is no expiration on the vesting of short plats, municipalities should already have been reserving water/sewer capacity indefinitely for these plats until the related building permit applications are submitted.  Similarly, municipalities should have been reserving water and/or sewer for preliminary plats according to the previous statutes.  Given the latest amendments to the Subdivision Act which significantly lengthens the deadlines for final plat and building permit applications to be submitted, it is imperative that a concurrency ordinance be adopted.  This ordinance can be drafted to address transportation, water and sewer.  It lessens the possibility that a municipality will be required to adopt a moratorium in the future, and reduces the municipality’s exposure to liability from suit.

Municipalities should review their subdivision ordinances to remove any provisions that allow developers to extend preliminary plat approval beyond what is allowed under state law.  In addition, municipalities should amend their subdivision ordinances to be consistent with the Legislature’s recent amendments extending preliminary plat approval and vesting of a final plat.[23]

IV.       Completion and Maintenance of Subdivision Improvements.

Cities have the authority to require that subdividers install all of the required public improvements (streets, curbs, gutters, sidewalks, stormwater drainage facilities, etc.) before a subdivision final plat is approved and recorded.[24]  The preliminary plat or short plat must include the requirement to complete such improvements prior to final plat (or recording of the short plat).[25]  However, requiring that the improvements be completed prior to final plat approval could cause long delays and expense to the subdivider, who can’t sell the lots or begin the construction of homes until the plat is recorded.[26]  How do cities ensure that the subdivider completes the improvements prior to approval of final plat?

First, cities should adopt regulations which provide that in lieu of completion of the actual construction of the required improvements prior to final plat approval; a bond may be accepted “in an amount and with surety and conditions satisfactory to it, or other secure method,” which will ensure completion within a specific time period.[27]  In addition, cities should adopt regulations which require the developer to post a bond for the successful operation of the improvements (a maintenance bond) for a period of time up to two years after final approval.[28]  Keep in mind that nothing requires a city to accept a bond or other form of security in lieu of completion of the improvements,[29] and there may be unique situations where completion should be required before final plat approval is given.

If the city decides to accept a bond or other security, the city should determine the amount based on a cost estimate of the required improvements (from the subdivider and confirmed by the city engineer), which may include an additional amount for inflation or error (such as 120% of the estimate of the cost of the required improvements).  The most common forms of security are bonds, cash escrows and cash set asides.[30]

1.         Surety Bond.  To obtain a surety bond, the subdivider has paid a fee to a corporate surety in consideration for the surety’s promise to guarantee the completion of the improvements for the benefit of the city.  The surety bond is a three-party instrument, which includes a joint and several promise by the subdivider (principal) and the surety (obligor) to pay a certain amount to the city (the oblige).  The bond requires that the subdivider perform as required by the approvals issued by the city.

In the event of a subdivider’s default, the city will demand the surety’s performance of the obligation under the bond.  At this point, the surety will have a number of options.  If the project is close to completion, the surety might advance necessary funds directly to the defaulting subdivider.  Or, the surety may decide to undertake the actual completion of the improvements, either by providing financing to the subdivider or hiring a new contractor.  Most often, sureties decide to pay damages up to the stated amount in the bond, but this option may generate major litigation.

2.         Cash Escrow or Cash Set Aside.  A cash escrow is created by agreement, and is the subdivider’s deposit of an estimated cost of the improvements with an escrow agent.  If the improvements are completed by the subdivider and accepted by the city, the agent releases the escrowed funds to the subdivider.  If the subdivider fails to complete the improvements as required, the agent releases the funds to the city.

In one variation – the cash set aside agreement – a bank may agree to segregate or set aside funds (either from the subdivider’s loan or the subdivider’s own account) in an amount sufficient to complete the required improvements.  The set aside agreement describes the bank’s agreement to segregate the funds and to disburse the funds only after the subdivider has completed the improvements and the city has inspected, approved and accepted them.  The bank’s premature release of funds prior to the city’s approval of the release could result in the subdivider’s liability to the city (in the event of the subdivider’s default).

Where the subdivider is required to construct public improvements as part of the subdivision approval, both the code and preliminary plat approval should require dedication of the improvements benefitting the public to the city for ownership, maintenance, repair and operation.  The city should not rely upon the recordation of the plat showing public streets to dedicate the streets to the city.  Instead, the city should require that the subdivider formally dedicate the improvements.  This ensures that the city is not immediately responsible for the provision of services or maintenance until the subdivider has completed the improvements, the improvements have been inspected, approved by the public works department, and the subdivider has provided assurance that there are no liens or other encumbrances on the improvements.

CONCLUSION

If your city does not use these methods to guarantee completion of subdivision improvements, or if you would like to obtain copies of forms, contact the author of this article, Carol A. Morris of Morris Law, P.C. at 360-830-0328 or on the Association of Washington Cities Risk Management Services Agency (AWC-RMSA) Land Use toll-free Hotline at 877-284-9870.


[1]   Chapter 36.70A RCW.

[2]   Under RCW 36.70A.070(6)(b):

After adoption of the comprehensive plan by jurisdictions required to plan or who choose to plan under RCW 36.70A.040, local jurisdictions must adopt and enforce ordinances which prohibit development approval if the development causes the level of service on a locally owned transportation facility to decline below the standards adopted in the transportation element of the comprehensive plan, unless transportation improvements or strategies to accommodate the impacts of development are made concurrent with the development.

[3]   WAC 365-195-510.

[4]   Short plats:  see, RCW 58.17.060, which requires that a short plat cannot be approved unless the appropriate written findings, as provided in RCW 58.17.110, are made.  Short and Preliminary Plats:  see, RCW 58.17.110, which requires the municipality to “inquire into” and make written findings that “appropriate provisions have been made for a number of elements, including potable water supplies, sanitary wastes and streets, roads alleys and other public ways.

[5]   WAC 365-195-210.

[6]   Id.

[7]   RCW 36.70A.070(6)(b):  “For the purposes of this subsection (6), ‘concurrent with development’ means that the improvements or strategies are in place at the time of development, or that a financial commitment is in place to complete the improvements or strategies within six years.”

[8]   Chapter 58.17 RCW.

[9]   RCW 58.17.150(1).  Note that in at least one old case, the Washington court did not interpreted this statute to apply prior to preliminary plat approval and instead held that the recommendation is provided prior to final plat approval.  Norco Construction Inc. v. King County, 97 Wn.2d 680, 649 P.2d 103 (1982).  This interpretation would be inconsistent with JZ Knight v. Yelm, which is summarized in this article, and most, if not all, concurrency ordinances.

[10]   RCW 58.17.150.

[11]   RCW 58.17.110, RCW 58.17.060.

[12]   See, RCW 58.17.033 and RCW 58.17.170 for further detail.  This is meant to be a summary.

[13]   RCW 58.17.033, Noble Manor v. Pierce County, 133 Wn.2d 269, 943 P.2d 1378 (1997).

[14]  See, Noble Manor v. Pierce County, 133 Wn.2d at 282-82, (the court held that RCW 58.17.170 (which at that time operated to “divest” vested rights for a period of five years after final plat approval), did not apply to short plats).

[15]   This change was adopted on March 1, 2012 by the Washington State Legislature, amending RCW 58.17.140 and RCW 58.17.170.  Please review the exact language of the statute to determine compliance.

[16]   RCW 58.17.140.

[17]   This change was adopted on March 1, 2012 by the Washington State Legislature, amending RCW 58.17.140 and RCW 58.17.170.  Please review the exact language of the statute to determine compliance.

[18]   RCW 58.17.170.

[19]   For obvious reasons, all of the different liability scenarios and municipal defenses are not presented here.

[20]   This is a short summary of the most important facts of the case relevant to this article.  JZ Knight v. Yelm, 173 Wn.2d 325, 267 P.2d 325 (2011).

[21]   See, RCW 58.17.170.

[22]   See, RCW 58.17.170.  No public hearing is required by state law for a decision on a final plat.

[23]   Amendments should be made consistent with RCW 58.17.140 and RCW 58.17.180, as adopted by the Legislature on March 1, 2012.

[23]  See, RCW 58.17.200, .205 and .210.

[24] RCW 58.17.170:  “When the legislative body of the city, town or county finds that the subdivision proposed for final approval conforms to all terms of the preliminary plat approval . . . it shall suitably inscribe and execute its final approval on the face of the plat.”

[25]  Id.

[26]  See, RCW 58.17.200, .205 and .210.

[27]  RCW 58.17.130.

[28]  Id.

[29]  The language in RCW 58.17.130 is discretionary.  In addition, the statutes cited above allow the municipality the discretion to determine the amount of the bond and the form of the bond (which should be approved by the city attorney).

[30]  There are other types of security, such as letters of credit, standby letters of credit, etc.  However, these types of security devices are difficult for most small jurisdictions to administer because of the complexity of the language in the instrument.  The most frequently encountered problem with this and all other methods of security is the subdivider’s attempt to change the language of the instrument creating the security, and in some instances, the city’s decision to allow such changes.  All instruments creating security for the city must be carefully drafted and closely monitored to prevent amendments which may negatively affect the city’s enforcement abilities.

2017-01-12T22:43:41+00:00 June 26th, 2013|Land Use Law|0 Comments

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