The Town of Flower Mound , like many cities, had  a perimeter street ordinance requiring developers to reconstruct adjacent streets to city standards. The Town enforced this requirement against Stafford, a developer of a residential subdivision and required a street to be built at a cost of $484,000.  The developer protested in the platting stage, claiming that his subdivision did not create any significant demand for the improved street andit was uncontested that there was an existing asphalt street only a few years old which would have to be destroyed and replaced with a concrete street only to meet coty requirements.  When denied relief, the developer built the street and then sued,  claiming that this requirement constituted a "taking" under the Texas and U.S. Constitutions. In Town of Flower Mound v. Stafford Estates Limited Partnership, (No. 02-0369, Tex. 2004), the Texas Supreme Court affirmed the lower court holding that where the development contributed only 17 % of the traffic on the street, and the requirement that the developer bear 100% of the cost of the street was a taking under  the Texas Constitution.  The award against the city was  affirmed at $425,000.  The only good news was that the developer was denied attorney fees to this point.  The bad news is that a developer can spend the money required as part of the platting process and then sue the city for the cost. 

Although it is clear that the facts of this case are extreme and probably contributed to this outcome, the case is nevertheless a clear precedent that cannot be ignored.  The Supreme Court’s ruling in the Stafford case means that a city cannot require a developer to reconstruct all or a portion of a perimeter street or pay money in lieu thereof unless the city can show that the fees charged or costs of construction are "roughly proportional" to the impact of the subdivision on the street system.  The court was not impressed with public burden arguments, nor with arguments that impact fees are calculated at less than 100% of cost.

This case did not develop in a vacuum; federal cases have clearly stated for some time that cities cannot hold developers feet to the fire to have costs of public improvements constructed without regard to the burden created by the development.  All municipalities need to immediately evaluate their procedures to ensure that they have procedures in place to determine a fair allocation of costs to a developer that approximates the amount of impact that the development has on the city's infrastructure.  Procedures for consideration of such matters and permitting waiver or variance upon request should be formulated and implemented.  It is not sufficient to continue simply because that was the way it has always been done.

We have some ideas about formulating procedures to address the problem, and will be assisting our clients with amendments to subdivision ordinances.