Village at Harbor Hill sues Gig Harbor over increased transportation impact fee

Overview of site plan at Village at Harbor Hill in Gig Harbor.
Overview of site plan at Village at Harbor Hill in Gig Harbor.

A developer has sued Gig Harbor, alleging that the City Council improperly raised a fee last month that will add $2 million to the Village at Harbor Hill project.

The city recently raised the fee on developments that helps fund local road improvements over 12 years.

Harbor Hill filed its lawsuit against the city Jan. 8 in Pierce County Superior Court.

“We believe the mayor and most of the council majority made their decision in good faith on behalf of their constituents and certainly did not single out Olympic Property Group,” Jon Rose, president of Olympic Property Group, wrote The News Tribune. “Be that as it may, we disagree with the manner in which the fees were calculated and have turned to the court system to help settle the disagreement.”

The $44 million, 18.5-acre business park project at Borgen Boulevard and Harbor Hill Drive is expected to have a Town & Country Market grocery store, banking, restaurants, shops and medical services.

Construction has been expected to start in spring.

Gig Harbor Mayor Kit Kuhn told The News Tribune this week that the city will not comment on the lawsuit at this time.

Kuhn wrote in a Dec. 7 blog post: “We had not updated our fee structure for over 10 years. Meanwhile we are not getting the necessary funding for our roads and traffic. Our current rate per dwelling is roughly $2100.”

The council raised that fee to $5,071 per vehicle trip, at its Dec. 10 meeting.

“Months ago, a major developer in Gig Harbor even told me they could build and live with $5,500 — and this is less,” the mayor’s blog post reads. “Building will still occur, don’t be fooled into thinking that we will come to a halt.”

Rose said the fee is calculated based on how many new vehicle trips a development is expected to bring to Gig Harbor during evening rush hour on a day in 2030.

The lawsuit argues that some road projects expected to be funded by the fee shouldn’t be there because they represent old problems and are not new projects necessary to accommodate future growth.

“We think they put projects in their wish list that shouldn’t be in there, and that drove the price up beyond what it should be,” Rose said.

The lawsuit asks the court to keep the city from enforcing the fee, which it alleges violates the state’s Growth Management Act, State Environmental Policy Act and the Gig Harbor Municipal Code.

According to the complaint:

The City Council initially proposed in November that developers pay a maximum traffic impact fee of $10,379 per vehicle trip, based on a consultant’s report.

Then they settled on $2,896, by cutting four road projects from the list.

Mayor Kuhn vetoed that and recommended that the council add back two of those projects.

The council agreed Dec. 10, which set the fee at $5,071.

The new fee took effect Dec. 25.

“The cost estimates for the projects on the list are inconsistent in a number of respects with the City’s comprehensive planning documents addressing transportation improvements,” the lawsuit says. “Many of the projects included in the list are far from the Village Project and have no nexus to the Project.”

The lawsuit also says that Olympic Property Group “has made significant contributions to the construction of numerous roadways throughout the area, with past (traffic impact fee) payments and infrastructure investments totaling several millions of dollars.”

The increase, the lawsuit alleges, “could indirectly force changes to the Village Project, which has been subjected to years of public review and city approvals. These changes could include an increase in the portion of residential development implemented at Harbor Hill, reducing the size of the intended commercial development in the Village Project.”

Rose wrote The News Tribune that the fee “adds about $2 million to a project that was already suffering from historic construction price increases. It will be a challenge to keep the Village viable.”

He said the lawsuit is one way his development group is trying to do that. Another, he said, was a brainstorm session with the mayor and his staff about ways to reduce project costs.

“Lastly, we are actively engaging with Town and Country Markets,” Rose said. “... They want to be in the Village, and we very much want to make this work. Both sides are ready to work hard.”

He said they had to terminate their lease with Town & Country last summer.

Rose told The News Tribune in November:

“Prior to the impact fee issue, we had to terminate our lease with Town & Country Markets because we did not get our approvals until too late in the construction season. Then, when we received bids, we found that construction inflation and approval requirements had driven costs more than 30 percent beyond the original estimates when our lease discussions with the market began some years ago.”