Managing Escrow Accounts for Land Development Applications

Transcription

1 Managing Escrow Accounts for Land Development Applications December 4, 2015 Co-sponsored by: The NJ State League of Municipalities and The NJ Association of Planning and Zoning Administrators

2 Presenters:

3 BRIEF OVERVIEW

4 What are escrow accounts? They are the fees deposited by a developer to pay for municipal expenses incurred in: the review of a development application the inspection of a project under development The Municipal Land Use Law (MLUL) in NJSA 40:55D-53.1 et seq. established the accounting procedures required to track expenditures. NJSA stands for New Jersey Statutes Annotated

5 Who is considered a developer? A developer is any applicant on any type of development project before the: Planning Board Zoning Board of Adjustment Historic Preservation Commission/Committee

6 Who is considered a professional? Professionals refers to those municipal employees who are directly involved in the development application review and inspection functions. Outside consultants may be used when the municipality does not have these individuals on staff or when an application involves issues beyond the expertise of the employees.

7 Who is considered a professional? (cont d) Typically, the professionals are planners, attorneys, engineers and traffic specialists, but other technical experts, such as architects and biologists, can be covered as well

8 THE MUNICIPAL FRAMEWORK

9 The role of the Governing Body Adopts a resolution setting professional charges and fee schedule Adopts an ordinance setting initial escrow deposit amounts Adopts an ordinance setting application fees (to cover other municipal application processing and administrative costs)

10 The role of the Boards Passes a resolution setting professional charges Passes a resolution requesting the governing body to enter into agreement(s) with the board s professionals (Professional Service Agreement)

11 The role of the CFO Establishes the schedules, procedures and forms for processing purchase orders and vouchers Makes all payments to the professionals Monitors the escrow account to ensure that sufficient funds are maintained to pay for the charges* *this function is a partnership with the Planning/Zoning Office

12 The role of the CFO (cont d) Sends fund status reports to the applicant Closes out an account upon completion of a development project Prepares bank reconciliations for subaccounts by developer

13 Role of the Board Secretary Serves as the first point of contact with developers/applicants and explains the escrow requirements May be responsible for completeness review, including verification of the submission of required escrow funds

14 Role of the Board Secretary (cont d) May send out requests for estimates to the professional consultants on scope of work to determine if sufficient escrow has been received or more is needed Reviews the vouchers submitted by professionals for accuracy and reasonableness

15 FEES AND CHARGES

16 The Escrow Ordinance If a municipality opts to charge applicants escrow and inspection fees, the fees to be charged MUST be established by ordinance. The amount of the initial deposit must be reasonable based on the scale and complexity of the development project.

17 The escrow ordinance (cont d) For subdivisions, the amount of the initial escrow deposit must be based on the number of lots For site plans, the amount may be based on: The total area of the site The sq. footage of the proposed buildings Circulation intensity

18 The escrow ordinance (cont d) Inspection fee deposits: Cannot exceed the greater of $500 or 5% of the cost of improvements, based upon an estimate provided by the municipal engineer. May be paid in 2 installments when the total owed is less than $10,000. The initial deposit must be 50% of the total calculated inspection fee.

19 GENERAL ACCOUNTING PROCEDURES

20 Establishing the accounts The escrow funds must be deposited in a federally insured bank or savings and loan in NJ or in another fund or depository approved by the State The account in which the funds are deposited must be interest bearing at the minimum rate paid on time or savings deposits

21 Establishing the accounts (cont d) The municipality must notify the applicant in writing with the name and address of the institution or depository and the amount of the deposit.

22 Account interest Interest is shared with the applicant when the deposit is over $5,000 The municipality is allowed to retain interest paid on the deposit < $100/yr. Interest >$100 per year must be refunded to the applicant annually or at the time of closeout and reported on an IRS 1099 form in the applicant s name. The municipality may retain up to 1/3 of the interest for administrative expenses

23 Replenishing an account The CFO should work with the LUA or board secretary to monitor account balances and ensure sufficient funds to pay professionals The CFO is responsible for sending any notices of insufficient funds to the developer/applicant

24 Replenishing an account (cont d) The amount of the supplemental deposit should be based on the remaining work and must be agreed upon by the municipality and the developer/applicant A negative balance is permitted if health and safety inspections are required during any period of insufficiency

25 BILLABLE COSTS

26 What can be charged to escrows? Reasonable and necessary time spent in: reviewing a pending application reviewing and preparing documents reviewing compliance with conditions of approval Reviewing requests for amendments or modifications Inspecting the quality and progress of work actually shown on the plans Out-of-pocket expenses, including travel

27 How are the charges to be calculated? The charges must be in accordance with a fee schedule adopted by resolution. For a professional employed by the municipality, the charge cannot exceed: hourly base rate x hrs. spent x 2.0 (Established by ord.)

28 How are the charges to be calculated? (cont d) For outside professionals, the charge must be at the same rate as other work of the same nature done for the municipality.

29 What cannot be charged to escrow? Time land use administrators or board secretaries spend on the application Making new professionals familiar with the application if there is a change midapplication Time professionals spend reviewing components covered by State regulations unless state approvals have a critical impact Meeting room charges Overhead expenses (utilities, custodial, etc.)

30 What might be charged, depending? Stenographer/court reporter to transcribe minutes at a special meeting for the particular application Time spent by a professional on an application at special meetings Ancillary travel costs related to a professional s attendance at a special meeting

31 BILLING PRACTICES

32 The professionals requirements Outside professionals must submit vouchers on a monthly basis to the CFO. Municipal employees must submit a statement (with comparable information). Informational copies of the vouchers/statements, clearly labeled as such, must be sent to the applicant simultaneously.

33 Voucher contents Every voucher must: Identify the personnel performing the service Identify the hours spent by date in quarter-hour increments Identify the hourly rate Identify expenses incurred for which reimbursement is being sought.

34 The CFO s responsibilities Prepare and send statements to the applicant that lists: All deposits Interest earnings Disbursements Cumulative balance Quarterly for mo. charges <$1,000 Monthly for mo. charges >$1,000

35 APPEALS 40:55D-53.2A

36 The applicant s options A developer may dispute individual charges or claim a pattern of excessive or inaccurate charges (not exceeding six months) The developer must notify the governing body of the disputed charges in writing A dispute that is not resolved to the developer s satisfaction may be appealed to the County Construction Board of Appeals

37 The applicant s options (cont d) A dispute that is denied by the CCBA may be appealed to a court of competent jurisdiction

38 The dispute resolution timeline The municipal governing body must attempt to resolve the dispute within a reasonable time period. The applicant has 45 days from the receipt of a copy of the professional s voucher to file an official appeal with the CCBA The CCBA has 10 business days to hear an appeal, render a decision, and file it with the municipality

39 The role of the CCBA The County Construction Board of Appeals must hear the appeal, render a decision and file its decision with the municipality A copy of the decision must be sent by certified or registered mail to the applicant, the municipality, the approving authority, and the professional whose charges are disputed. Failure of the CCBA to hear an appeal and render and file a decision within the time limit is deemed a denial.

40 CLOSE OUT PROCEDURES

41 Closeout triggers For application review escrows, a subdivision or site plan receives final approval and is signed For inspection escrows and deposits, the improvements are approved in accordance with 40:55D-53.

42 Closeout steps 1. The applicant/developer sends a written notice of completion by certified mail to: the CFO the approving authority the relevant municipal professionals 2. The professional(s) submit a final bill to the CFO within 30 days and cc: the applicant.

43 Closeout steps (cont d) 3. The CFO prepares a final written accounting of the escrow funds within 45 days. 3. Any remaining balance in the escrow account, including interest, is refunded to the applicant/developer along with the final accounting.

44 FINAL COMMENTS

45 Cooperation is key For the management of escrow accounts to run smoothly, good communication and complete cooperation between the Chief Financial Officer and the Land Use Office is critical.