11-07-2016 Park Commission Packet

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Q MEMORANDUM Subject: Park Fund and Park Dedication Fees History Date: October 31, 2016 The Park Fund was established by Resolution #480 on January 22, 1973 for the purpose of funding land acquisition for neighborhood parks. On April 12, 1976 resolution #675 was passed which required park dedication fees to be deposited into the Park Fund. This resolution expanded the use of the funds to include "whatever purpose the Council deems for park purposes." On February 23, 1981, resolution #1252 listed the allowed use of park dedication fees to be: "for the acquisition, development, or maintenance of public parks, playgrounds, surface water holding areas limited only to ponding areas, and debt retirement in connection with land previously acquired for such public purposes within the City or Orono." At the State level, both the amount of fees collected and the use of the fees has been controversial and has resulted in numerous lawsuits. The state statute relating to park dedication fees (Chapter 462.358) was amended in 2004, 2006, 2007, and 2013. The legal use of the dedication fees is listed in subdivision 2b (g) of the law: Cash payments received must be used only far the acquisition and development or improvement of parks, recreational facilities, playgrounds, trails, wetlands, or open space based on the approved park systems plan. Cash payments must not be used for ongoing operation or maintenance of parks, recreational facilities, playgrounds, trails, wetlands, or open space. In accordance with the statute, park dedication funds have been used by the City to purchase parkland, install playground equipment, and fund other "capital" improvements. The designation of an expenditure as a capital improvement is important because the Statute specifically prohibits use of park dedication funds for ongoing operations or maintenance. If an expenditure cannot be classified as capital, it is classified as a operating expenditure. The City's current threshold for a capital expenditure is $5,000. This means that any expenditure of less than $5,000 cannot be funded by Park Dedication Funds. While an expenditure of less than $5,000 is not to be funded with park funds, an expenditure of over $5,000 is not necessarily an eligible expenditure either. For example, the repair (maintenance) of an existing asset is not eligible for park funds even if it exceeds $5,000. In the past couple of years, the City has used park funds to replace equipment at Bederwood and Crystal Bay Parks. While the original installation of playground equipment clearly qualifies as park development, it is not clear in the statute that replacement of existing equipment qualifies. It is possible that the City could be challenged on this use of funds. However, many cities use park funds in this manner.