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Which City Should be the Home of your Next Business Venture? Doing Business in Cloquet, Duluth, Hermantown and Superior.

In an election year we tend to look at the national economy and federal regulations on business enterprises. However, state law and local municipal ordinances will likely impact development and business plans much more than the national political climate. Entrepreneurs make their money through diligent planning and understanding the required steps prior to opening for business.

Structuring the Deal

New developers may be surprised to learn they cannot do whatever they want with their newly acquired land. Yes, it is America, but there are still rules. Compliance with local ordinances and coordination with city staff are two of the most important considerations before a land purchase. If a public hearing is required to approve a new development, remember that process may take several months. In the interim, a developer will be making property tax and loan payments on the newly acquired land. Purchase agreements can be structured by your attorney to be contingent on these approvals. County ordinances may apply and when the project is within city limits the local municipal ordinances will apply. Remember that while Superior is only a five minutes drive away, it is a completely different state. This could be favorable or unfavorable depending on the plan.

Local Ordinances and Public Hearings

It is important to research the applicable ordinances or contact an attorney who specializes in project development. Subdividing property may require a plat with approval from the Planning and Zoning Commission. Approval requires a hearing that is usually scheduled at least a month out. Once the resolution with the Planning and Zoning Commission is approved, the next step is a city council meeting where the resolution is approved or denied.

The city council members do not have free reign to deny a project because they do not like it. The city staff, namely the Director of Economic Development, will investigate the project and make a determination of facts related to the use of the property. The staff calculates the impact the proposed development will have on the city. The Economic Development Directors we have in Cloquet, Duluth, Hermantown and Superior are exceptional examples of helpful city staff. They make a recommendation to the city council and the city council regularly votes in accordance with the staff report. In most cities, the city council is required to vote on resolutions within 60 days, otherwise the application is automatically approved. Whether the proposal is for a planned unit development, vacating existing streets or alleys, requesting a zoning change or a zoning code variance, the city council has specific factors to consider when voting. Again, the purpose is not trying to convince the city council to like the project. This is providing factual evidence to the city council that this project meets the requirements of the applicable ordinance. City council members must often vote for a project even if they personally do not support the proposal.

If the city council denies an application they must have a sufficient factual basis, memorialized in writing identifying, the specific reasons for denying the application. The staff report often is the factual basis for approval or denial. Thus, it is an anomaly when the city council denies a proposal that the city staff recommends for approval. However, this does happen. When this happens the applicant can sue the city in District Court asking for a declaratory judgment that the city council exceeded its authority by erroneously denying the request. Lawsuits are expensive. Thus, it is important to consider these complications prior to the date of the city council meeting. One way to avoid this problem is engaging the community to support the proposal.

The Social Permit

The social permit may be the most important permit to get. The social permit is not an actual permit and requires no application. However, it is important to consider the community reaction for a project to gauge the level of support or opposition as the city council meeting. These meetings are public and anyone who lives in the city can show up to speak for or against a resolution. Each city posts the schedule of their meetings and an agenda of the resolutions to be considered at each meeting. Additionally, the city is required to notify neighbors when adjacent landowners seek approval of a resolution. This is a great opportunity to find out about new developments and engage in local government. Participation in these meetings is the most effective way to communicate questions to the city council and to receive a meaningful response. This is also the most effective way for the city council to gauge whether the applicant has the support of the community. Community support is not a requirement to approve a resolution; however, an ordinance will usually require the proposal to serve a public benefit. Projects like low-income housing serve a public benefit but may be met with opposition from members of the public that live in the area. This puts city council members in a conflicted position. It is easier for city council members to approve a proposal that meets the legal requirements when the community is not opposed.

The Members of City Council and Commissions

The city council members are elected positions. They can be placed in a difficult position because they are serving an important role as an elected official as a part-time job. Most city council members have careers outside of the city council. They are active and engaged members of the communities they live in. They are not experts on municipal law. However, they do have the ability to ask the city attorney for help understanding whether the staff reports conflicts with the applicable ordinances. While they have an obligation to approve resolutions that meet the legal requirements of an ordinance they are often called to vote on proposals that they themselves or their family members and friends are personally opposed. It is important for members of our cities to volunteer for planning commissions and run for city council positions. It is not uncommon to have vacancies on the volunteer based commissions. Gaining the support of the community prior to the meeting in which the city council will vote on the resolution is an unnecessary, but helpful step, in getting approval. The city council members may have a legal obligation to approve a resolution because the factual basis supports the project. However, they may still vote against it. The developer may have legal recourse, but the cost and timeline for a legal remedy could be prohibitive.

What you can do

Reach out to legal counsel who specializes in development and engage with the Economic Development Director in your city when you have a business idea that you want to make a reality. Proceeding with a development without understanding the road map is a guaranteed way to incur unexpected delays, costs, fees and penalties. Protect the viability of your business by knowing what is required to open the doors.

Adam Sullivan is an attorney with Fryberger, Buchanan, Smith & Frederick, P.A., practicing in the area of Real Estate, Corporate Law and Employment Law. This article is not intended to provide legal advice. You should always consult with an attorney about your specific circumstances.