Restaurant developers file class-action suit against City of Rochester for Transportation Improvement District fees

Local restaurant owners have brought a class-action lawsuit against the City of Rochester for charging Transportation Improvement District (TID) fees.
The lawsuit, filed Tuesday, Feb. 15, by Tap House Real Estate LLC, requests that the Minnesota court find the fees “illegal, null, void and unenforceable,” and require the city to refund developers.
Tap House Real Estate, LLC “involuntarily” paid $102,500 in transportation improvement district fees “under duress,” in 2019, as part of the general development agreement for the West End location, the civil suit reads.
The city of Rochester has charged TID fees to developers in areas “experiencing or anticipating new growth and substandard streets” since 2004.
The lawsuit alleges that the city was unjustly enriched by the “unconstitutional” fees, and states that the fees were calculated arbitrarily.
The City of Rochester did not respond to the lawsuit by Thursday, Feb. 17.
Tap House Real Estate, LLC paid $102,500 in transportation improvement district fees as part of the general development agreement for the West End location, attorney Andrew Davick of Meshbesher & Spence said.
Davick said the class-action suit represents the interest of multiple developers in 14 transportation improvement districts in Rochester, who have all paid additional fees during their development projects.
He likened the fees to “holding contracts hostage.”
“You can’t move forward with your project (until) it’s paid,” he said.
The City of Rochester’s 2004 ordinance split the costs of street improvements between the city and developers seeking approval in areas where the city streets were considered inadequate.
The lawsuit argues that the city “may not use ‘voluntary’ contracts to strongarm developers into paying unauthorized transportation infrastructure fees.”
The city sends bills for TID fees partway through the development process, when owners have already made significant time and monetary investments – a move the lawsuit calls “particularly coercive.”
Furthermore, failure to pay the TID fee results in an “indefinite development moratorium” until the City deems the public facilities adequate.
“Put differently, the City holds developers’ land hostage until developers agree to fund the City’s wish-list of off-site infrastructure projects,” the suit reads.
The suit cites Harstad v. City of Woodbury, an August 2018 case wherein the Minnesota Supreme Court affirmed that a city cannot impose an infrastructure charge upon developers.
Davick said the city is aware of developers’ complaints and has continued charging the fees, “despite objection.”
The city’s anticipated court response will go through the League of Minnesota Cities John Baker of the Minneapolis-based Greene Espel Law Firm.
Tap House co-owners Christine Stahl and Natalie Victoria declined to comment.