Midtown Properties, Llc, V. The City Of Bonney Lake

Court of Appeals of Washington·Decided July 18, 2023·No. 57333-4·Unpublished

Opinion

Filed

Washington State

Court of Appeals

Division Two

July 18, 2023

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

DIVISION II

MIDTOWN PROPERTIES L.L.C., a No. 57333-4-II Washington limited liability company,

Respondent,

v.

UNPUBLISHED OPINION

THE CITY OF BONNEY LAKE, a Washington municipal corporation,

Appellant.

PRICE, J. — This case involves the interpretation of a “Development Agreement” that applies to a large parcel of property located in the city of Bonney Lake (City). Midtown Properties LLC (Midtown) purchased the property with the intention of building 1,100 multifamily attached dwelling units. The City objected to Midtown’s planned development, taking the position that the Development Agreement limited development to about 600 residential units and required a mix of single- and multifamily units. Midtown disagreed and filed a lawsuit, requesting, in part, declaratory judgment for the interpretation of the Development Agreement.

The parties filed cross-motions for summary judgment. The superior court granted summary judgment in favor of Midtown, deciding that Midtown’s planned development was consistent with the Development Agreement. The superior court also decided that Midtown was entitled to rely on a related final environmental impact statement (FEIS). The City appeals.

We reverse and hold Midtown’s current development proposal violates the Development Agreement. The Development Agreement limits the number of units that can be built and requires building single-family units. We remand to the superior court for further proceedings consistent with this opinion and, if necessary, to consider the issue of Midtown’s potential reliance on the FEIS.

FACTS

I. BACKGROUND In 1941, Weyerhaeuser donated 149 acres of forest land in Bonney Lake to Washington State University (WSU). The property was used for research and operated as a “demonstration forest” for decades. Clerk’s Papers (CP) at 106. In the mid-2000’s, WSU discovered that many trees in the forest were sick and closed the demonstration forest. WSU, in concert with Weyerhaeuser (which had retained a reversionary interest), sought to sell the property to generate revenue for its research elsewhere.

In 2009, the property was zoned for public facilities, but WSU sought to rezone the property to make it easier to market.1 As part these efforts, WSU presented a development plan for the city council to consider. WSU’s plan sought to divide the demonstration forest into three parcels—approximately 35 acres for commercial development, 40 acres for a public park, and 60 acres for residential development. The City and WSU began negotiating a Development Agreement to execute the plans WSU had presented.

1 WSU and Weyerhaeuser were both involved in the rezoning and negotiation of the Development Agreement, but we refer to the negotiating party as WSU for simplicity.

A. ENVIRONMENTAL IMPACT STATEMENTS In preparation for the negotiations, the City prepared an environmental review required by the State Environmental Policy Act (SEPA), chapter 43.12C RCW. The City prepared a draft environmental impact statement (DEIS).

The DEIS was based on projected types and numbers of dwelling units and stated that the “Proposed Actions” (the plan of development) would include building 255 single-family detached units, 180 low-rise apartment units, and 155 condominium units (590 units total). The DEIS also stated it was prepared “[b]ased on an assumed 587[ ]residential units on the site under the proposed density range.” CP at 153 n.1.

Following the SEPA review process, the City issued the FEIS. Although the FEIS did not repeat the numeric values for the projected residential units, the FEIS expressly incorporated the DEIS. The FEIS separately addressed an estimated density of dwelling units for the property in the description of the Proposed Actions:

[A] range of residential densities achieving at least 10 units per acre averaged over the residential area including single-family detached homes with fee simple ownership, with or without garages and moderately high density (small and/or ‘cottage homes’, duplexes, townhomes, condominiums, apartments or a combination thereof)[.]

CP at 156.

B. NEGOTIATIONS AND DEVELOPMENT AGREEMENT Over the course of several months, attorneys for the City and WSU negotiated the details of the Development Agreement. Also participating as an agent of WSU was Quadrant Homes, a property development company specializing in single-family residences. Quadrant Homes

planned to purchase the property and build between 500 and 600 housing units as a mix of single-family detached units and multifamily attached units.

An agreement was reached, and on December 22, 2009, the City finalized and adopted the Development Agreement. The Development Agreement is lengthy, but the following provisions are relevant to the parties’ dispute over the number and character of residential units permitted by the Agreement.

1. Parks Impact Fees Waiver The Development Agreement addressed the City’s parks impact fees (PIF). Generally, the City imposes a one-time PIF for the development of residential housing units when a building permit is issued.2 The PIFs raise money for public parks to serve the residents of new housing units.

As part of the negotiations, Quadrant Homes requested a waiver from paying the PIFs in exchange for the donation of 40 acres of the property to the City for a public park. Key to calibrating the size of the property donation in lieu of the PIF was the number of proposed residential units. Quadrant Homes estimated that the 40 acres for a public park would be approximately equivalent to the PIFs that would be typically owed for the size of its proposed development. Quadrant Homes explained that its estimation of 500 to 600 residential units made the proposal a reasonable trade.3

2 Bonnie Lake Municipal Code (BLMC), https://www.codepublishing.com/WA/BonneyLake.

3 Prior to approval, public hearings were held for the community to discuss the proposed plan. During one meeting, a city councilmember asked how the PIF waiver was calculated, and the attorney negotiating for WSU explained that because no more than 600 units were going to be developed, 40 acres of land was a fair exchange for the PIF waiver.

The City agreed to the PIF waiver. Accordingly, the Development Agreement contained the following provision that explained the PIF waiver by estimating the impact of the proposal for 672 units:

3.4.1 The City’s Comprehensive Plan identifies a deficit in the level of service for community parks. To address this deficit, the Comprehensive Plan calls for 1-2 new community parks dispersed throughout the City, each with an acreage of 20 to 30 acres, or one large park of 40 to 50 acres in south or central Bonney Lake.

Dedication of the City Property for recreational purposes shall qualify WSU/WY for a credit against future parks impact fees.

3.4.2 The Parks Element of the Comprehensive Plan values community park property at $50,000/acre. Using this number, the value of the Property dedicated to the City for recreational uses, including the YMCA Property but not including the perimeter trail or Triangle Park, is two million dollars ($2,000,000). The City’s current parks impact is $2,974.00/residential unit. Accordingly, the value of the dedicated property is equivalent to the impact fee for 672 residences, more than the projected number of dwelling units for the Project. The parties agree that dedication of the City Property fully satisfies the parks impact fees that would otherwise be payable by developers of the WSU Property and that no parks impact fees will be due.

CP at 52 (emphasis added).

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Midtown Properties, Llc, V. The City Of Bonney Lake, (Wash. Ct. App. 2023).

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