Sunday, January 31, 2016

Growth--who pays?

When Goochland was a rural enclave far to the west of Richmond, its population grew by dribs and drabs. Costs attributed to this slow growth were digested by increased property tax revenues.
In the mid- 50’s, a few subdivisions tiptoed into the eastern end. While these new residential enclaves brought more people to Goochland, they had little impact on county services, especially the most expensive—education.

Then regional growth accelerated. Counties in Northern Virginia exploded as the federal government expanded. Localities struggled to keep up with burgeoning demand for services that required new infrastructure, most notably, roads and schools.

(Although Goochland’s population more than doubled—from 10,066 in 1970 to around 22,000, today— it’s still not a lot of people on a land area slightly larger than that of Henrico. Short Pump, by comparison, has about 24,000 people in slightly more than nine square miles.)

The simplest way to cover the cost of growth is an increase in property taxes. As tax hikes are never popular with voters, elected officials searched for another way to cover the cost of growth.
Virginia is a Dillon Rule state, which means that localities have only those powers given to them by the General Assembly, especially taxation. Around the turn of the century, cities and counties overwhelmed by the cost of building new facilities as more people moved in, asked the General Assembly for the power to levy impact fees on developers.

After much wrangling, the GA declined to approve the use of impact fees, but did devise something called “cash proffers” as an alternative. This method of funding growth is peculiar to Virginia.

Cash proffers are one time voluntary monetary commitments made at the time of rezoning to offset the impact of that land use change on capital facilities. Funds collected are intended to represent the fair share of new capital facilities needed to support demand generated by a specific project. They cannot be used for operating expenses. For example, proffer dollars may be used to build a school, but not to pay teachers.

Developers argue that proffers just increase the cost of homes and that accompanying revenues generated by new housing offsets the cost of growth. Localities contend that housing consumes far more than the revenues it generates in cost of services. Still, the cash proffer option was something.

Compared to the net cost of new facilities, a school, for instance, the amounts generated by cash proffers are relatively small. However, as in Goochland’s case, monies generated by cash proffers have enabled “pay as you go” funding for smaller projects, including the “bump out” at the library and improvements to parks, avoiding additional debt.

Goochland County Administrator Rebecca Dickson presented a brief overview of cash proffers to the supervisors at their January 5 meeting. (Listen at the livestream near the end of the afternoon session at the county website

Goochland County adopted a cash proffer policy in 2000, currently $14,250 per home, that applies only to land rezoned for residential use. Commercial rezonings, which tend to have little impact on public facilities other than roads, are not subject to cash proffers.

Each commercial project, Dickson said, is evaluated on its own merits and expected to mitigate its impact on county services in other ways such as building turn lanes, or contributing cash to off-site road improvements. In-kind donations of land; rights of way for future road improvements; or utility upgrades can also put forth as “sweeteners” in the rezoning process.

Apartments in West Creek were made possible by an amendment to existing zoning, so cash proffers were not applicable. However, the owners of West Creek did proffer a site for a fire-rescue station there when the county determines a need for it.

Under current Goochland County policy, the amount of the proffer must be paid when a certificate of occupancy is issued. Proffer funds must be used within twelve years of collection or be refunded.
Since Goochland adopted a cash proffer policy, $17,735,378 has been proffered from 37 rezoning actions. To date, $4,319,141 has been collected, and $2,428,282 has been spent.

Dickson said that the supervisors may change the amount of proffers, if the method used to calculate them is reasonable; leave them as is; or eliminate them. If the board were to decide to do away with cash proffers, unwinding them is possible, but complicated.

She said that staff undertook a detailed investigation of the methodology used to calculate the existing maximum proffer amount and contended that those assumptions “went too far” including items that were on a theoretical wish list instead of limiting factors to the county’s capital improvement plan.

However, a rework of the figures, based on more conservative assumptions, resulted recommending that the existing proffer amount be retained. This calculation used only the inventory of existing capital facilities and capital projects planned over the next five years.

Components used in the revised calculations are: demand generators; service levels; gross cost; credits; and net cost. Credits apply to debt service incurred, for instance, to build a school to avoid double taxation. (See page 120 of the January 5 Board Packet for the breakdown of the calculation of the maximum school proffer.)

The proposed maximum cash proffer amount remains unchanged at $14,250, but reduces the amounts for fire-rescue; parks; and libraries while increasing them for schools and roads.
The supervisors will need to decide how the cash proffer policy will apply to mixed use projects that will all require rezoning.

Board Chair Bob Minnick, District 4, said that the supervisors will look at the subject again, perhaps in another workshop.

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