Charlotte City Council Transportation & Planning Committee Meeting Summary for March 18, 2013 COMMITTEE AGENDA TOPICS I. Subject: Capital Investment Plan Referrals Action: Passed unanimously II. Subject: Draft FY2014 Focus Area Plan Action: Passed unanimously III. Subject: MPO Update Action: For information only COMMITTEE INFORMATION Present: Time: David Howard, John Autry, Michael Barnes 1:30 pm – 3:00 pm ATTACHMENTS Handouts Agenda DISCUSSION HIGHLIGHTS Committee chair Howard called the meeting to order at 1:30 and asked everyone in the room to introduce themselves. I. Capital Investment Plan Referrals Howard: I would like to spend a little time talking about the financing options that we didn’t get to at the last meeting. Hall: The Cross-Charlotte Trail, NECI, East/Southeast Corridor, and the two bridges in the NE Corridor still await committee action. Assuming the Committee recommends the remaining projects, we will provide summaries for Mr. Howard and the Committee members to have at the workshop on Wednesday. We had discussions at a couple of your earlier committee meetings regarding alternative funding models and how they link to the projects that we discussed. We Transportation & Planning Committee Meeting Summary for March 18, 2013 Page 2 of 8 gave you a narrative form of the models, so we thought to close this discussion, we’d have Mr. Harrington and Mr. Richardson talk about the options in greater detail. Mr. Harrington started the presentation with slide 2. Howard: Why haven't we done a TIF up to now? Hall: TIFs cost more money, are more time consuming and are harder to achieve. The interest rates are higher and it costs more to borrow the money. Howard: So, financing our own projects is better? Hall: Yes. The second issue is time. It takes time to develop the district, put together the development plan, interact with the property owners, and finally to get approval from the Local Government Commission (LGC). Howard: Do the property owners have to vote? Harrington: There is no vote, but it does require quite an extensive development plan that identifies the partners who are going to be involved in the development that gives the LGC the confidence there is going be enough revenue coming in to repay the loan. Hall: The third part is the level of difficulty. There is a rigorous set of conditions to get it approved by the LGC. Howard: Would the 5% cap we put on TIFs fall under this too? Hall: There is currently a 3% City policy on your business investment grants and synthetic TIFs, which has to do with value. This particular 5% is on geography. It’s a different rule required by the local government. Howard: For instance, we have station area plans around each one of the stops, which are defined geographic areas. I’m trying to figure out why we don't even try TIFs around some of our projects like Denver does. Hall: Because their authority to do TIF districts is easier than the authority we have to do TIF districts. They don't have to go through state approval to define their districts. Howard: That makes me think we need to go back to Raleigh for some changes. Hall: Many other cities across the country use charter authority to create financing tools and they are able to have much more flexibility in what they are able to achieve. Howard: If you think about the fact that we have station area plans all the way up the Blue Line Extension now. There is value to be captured from development around those areas that could possibly be used for the NECI improvements at each station. I think we have to be more Transportation & Planning Committee Meeting Summary for March 18, 2013 Page 3 of 8 creative. We’ve been talking about this for a year and we could have had it done by now. We should add this to the legislative agenda to ask for some flexibility. Barnes: The challenge I gleaned from the material with respect to NECI, for example, is once you get into University City, you encounter the university partner MSD, which we wouldn’t want to double or triple tax. Then with regard to that portion of that alignment that’s outside of the UCP MSD, I'm not sure the value is there to do what you talked about. You’d have to get the private sector to build and commit to it in order for it to be taxed under a STIF scenario. I don’t think we get much sympathy from the legislature right now to do a traditional TIF. I don't sense there is any indication that they give us any authority to do anything creative, including saving our own football team. Howard: We can figure out ourselves how to use TIFs, STIFs and TIGs. Barnes: What if a developer said, “Rather than building within a half-mile of the station, I’m going to build a half-mile plus ten feet?” Would there be any incentive for them not to be a part of it as opposed to being a part of it. Howard: I like the idea of TIF areas and I don’t want to let that go. Harrington: The only thing I’ll add is with the STIF, you identify what properties are going to repay the debt, but the city is taking on the debt associated with that project. Under the TIG, you’ve got the developer who is fronting the full cost and risk associated with building the infrastructure, and then the city reimburses a portion of that cost based of the incremental taxes generated from that development. The TIF is its own entity, and the STIF hits on our overall city debt capacity. Brad: You’ll see TIGs as infrastructure reimbursement agreements. Barnes: It doesn’t strike me that staff were suggesting that these alternatives were necessarily good options on the projects for this part of the CIP. Would that be fair to say? Harrington: They are all potentially feasible options, but some have strengths and weaknesses in terms of their application to the project that one makes one option the better fit than another option. Barnes: As you did the analysis, did you have the sense that a STIF, a SAD, a TIG, or a TIF would fit well for any project and be cheaper than the typical historical CIP property tax methodology? Hall: We looked at all of these alternative funding models when we were making recommendations 18-months ago, because they all have really strong ways of putting together combinations. One of the reasons we landed on doing the straight forward property tax increase is it was the cheapest financing method we had available. General obligation debt is the lowest cost debt we could borrow. Secondly it was the fastest, meaning that we could get projects out of the ground the quickest by going forward with that model. That is not to say these options are Transportation & Planning Committee Meeting Summary for March 18, 2013 Page 4 of 8 not viable going forward with another set of projects or another CIP, but our thinking was about the timing of the CIP and being able to do the financing at its lowest cost level. Any of these options, including the SADs and the MSDs just take more time. We can trade that off going forward if the Council wants to. Howard: My concern is that where this may be the easiest from an administrative standpoint, it is not easy politically. It’s hard to explain to the public the difference between the easiest thing to do and the cheapest thing to do. All they see is the tax increase. We should have done a value capture on the baseball stadium, but we didn’t. We just gave them money we had sitting somewhere already because no one wanted to talk property tax while talking about baseball. That wasn’t the cheapest way to do it, but it was easiest politically. The public wants us to try different things. Barnes: What I would say in response to what you just said is that right now police and fire occupy two-thirds of our general fund. There is really no creative way to pay for policemen and firemen other than through property tax. We’ve used the President’s stimulus money over a course of three years to finance fifty positions or so, but it's not a practical source of funding for policemen. From time to time, we use grants for fire items, but it's not a permanent funding source and with regard to the Cross-Charlotte Trail, bridges, or any other hard items in the CIP is really not practical to fund them in any other way than what we proposed because they are essentially hard assets that are being put into the ground and they are there to stay. If you want us to borrow money at a higher rate or to spend more money to save money, we can do that. But the logistics of getting that done complicate the ultimate goal for the general public, which is to have more stuff in their city that makes their city more livable and more enjoyable. Howard: It's hard to hear suggestions that we find multiple funding sources for some projects but not all of them. There is development on either side of the bridges that can help to pay for them. We know that each station will yield development over time to take care of the NECI projects. It’s not the easiest thing, but it’s hard to pick and choose. Barnes: The Ballantyne bridge was something that the Bissell Company wanted to advance quickly. They said we want it now and if the city can pay some money later that will be fine. With the two NECI bridges we’re talking about, the difference is on the Belgate side of I-85, you have what is now a distressed property owned by DDR Company, and on the other side you have undeveloped land behind some CMS property that leads to BECO that was bought in a distressed state. They have not come to us saying they want to advance the bridges. We get potential economic development value from them, especially the north bridge opening up the University Research Park, but none of the private sector land owners have come to us and said they want to advance the project. Mr. Harrington resumed the presentation with slide 5. Howard: How does an MSD get approved? Harrington: Council has the ability to make those decisions. It doesn’t require a vote or a petition from property owners. Transportation & Planning Committee Meeting Summary for March 18, 2013 Page 5 of 8 Howard: How do you backstop it? Harrington: You'd have revenue identified at a particular tax rate for a particular project and you’d calculate a tax rate that would pay for debt service on a particular project or projects. Howard: Do you have the list of projects? Richardson: Yes. It's attached to your agenda on page three of the Q&A from the February 11, 2013 meeting. It does require public input and public hearing and requires staff to develop a plan for the use of funds, and then you have a choice to manage it yourself or outsource it. Mr. Harrington resumed the presentation with slide 5. Howard: Do you have the right to exempt anyone? Harrington: My understanding is that we do not have the ability to exempt. The law doesn’t allow that. Howard: If churches or non-profits are exempt from paying property taxes, would they be exempt from this? Richardson: No. Howard: What is the difference between an MSD and a SAD? Richardson: The prescriptive geography around where you can draw an MSD based upon some things in the legislation is generally carved around commercial uses. SADs are typically for those who benefit directly from the service, such as sidewalks and roads. Hall: There are two other key differences for SAD. Unlike the MSD where the Council can set a district by vote and a public hearing, the SAD is a petition where you have to get signatures from 50% of property owners covering 66% of the assessed value. But the allowable and statutory concepts are broader and are more transit oriented. The SAD legislation expires in July, so this is on your legislative agenda. To your point, Mr. Howard, about creative financing and for your Transit Work Group, the SAD tool is much better suited for transit, so we need that legislation. Howard: Why haven’t we used it? Hall: It is new legislation that was approved 4 or 5 years ago. The other reason is the threshold of the petition process. Harrington: The petition process associated with SAD might involve thousands of properties. It's not insurmountable, but it’s one of the challenges associated with the tool. Barnes: When we extended the Center City Partners boundaries down to the South End, we Transportation & Planning Committee Meeting Summary for March 18, 2013 Page 6 of 8 initially included some single family homes at the southern end. We got a lot of push back so we drew the boundaries back up because people didn’t want to be included. The impression I got from feedback from staff was that none of the people along the alignment were interested in being part of the SAD. Mr. Richardson resumed the presentation with slide 7. Howard: Which tool is less risky to the City? Harrington: The TIG is less risky. Mr. Richardson continued the presentation with slide 8. Howard: Could we have used any of the tools if raising property taxes were not an option? Hall: The instruments that match up best with the transit oriented things are the SAD and the STIF, but those financing tools cannot fund the projects that are in the CIP. You could draw a boundary around a corridor and by policy, take that increment, set it aside and put it toward projects in the future. You couldn’t use that revenue to front the money to pay the debt right away because the increment would not have occurred yet; but you could bank it for later. Howard: You'd have to do it that way if you couldn’t raise the taxes to pay for it. Hall: You would have to raise the property tax rate in order to borrow the debt and put it on the bonds to build that investment. You can capture that value and set it aside for future projects later by policy. Looking at the new SAD particularly as it relates to transit corridors makes the most sense assuming we can get an extension of the legislation. Both instruments just take more time. Howard: If you can't get it done, you'll have the time anyway. Hall: Could we vote on the remaining four projects? Howard: That would be the Cross-Charlotte Trail, NECI, East/Southeast Corridor, and the two bridges in the NE Corridor. Barnes: I would like to make a motion that we recommend to the full Council for inclusion in the CIP this year the Cross-Charlotte Trail, NECI, East/Southeast, and the NE corridor bridges. Committee Member Autry seconded the motion. The motion carried unanimously. Transportation & Planning Committee Meeting Summary for March 18, 2013 Page 7 of 8 II. Draft FY2014 Focus Area Plan Hall: There was a lot of good discussion at the last committee meeting, particularly as it relates to how we’re looking at some of our measures going forward. I’ll turn it over to Debra Campbell and Danny Pleasant for any comments. Mr. Pleasant began walking through the Focus Area Plan (FAP) comparing 2013 to 2014 (see attachment DRAFT – FY2014 Strategic focus Area Plan. Autry: We heard Washington’s Mayor Gray speak to us last week about their city’s sustainability plan. What struck me were his comments about mode share and what they were looking for in implementing that within the city. He actually set out percentages of using other modes of transportation with aspiration for the citizenry. Is that something we could look at here in Charlotte? Pleasant: I think we can. Our staff does your travel demand forecasting and we make some assumptions about mode share. We glean some of that information from actual surveys and behavior of the transportation system that we know about. I believe your Transit System Plan assumes that mode share in the Center City will be about 25% at some point as the system builds out. We have those kinds of goals already built in and we can certainly bring them into a focus area environment. We’ll see if we can bring that in to the FAP and the Transportation Action Plan (TAP) for the next cycle. The FAP is derived and linked very closely to the TAP that you readopted at its 5-year increment last year. Autry: Is this an area to set aside for the sustainability plan? Hall: You can certainly talk about that. The Environment Committee talked about the Community Sustainability Plan and how you have framework of the TAP, which has a lot more quantitative and programmatic things in it and that links to your FAP. The Community Sustainability Plan could be similar to the TAP in terms of laying out some of the programs and initiatives that the community would like to go forward with. Transportation and modes of transportation are part of the framework of what you’re talking about regarding sustainability for the community. Autry: Thank you. Barnes: I move to approve the FAP by the Transportation & Planning Committee and that it be submitted for approval by the full Council. Committee Member Autry seconded the motion. The motion passed unanimously. Transportation & Planning Committee Meeting Summary for March 18, 2013 Page 8 of 8 III. MPO Update Cook: This is on agenda for the MOU subcommittee for discussion. The subcommittee asked that we provide some accounting of how much money the MPO puts out and how much the City subsidizes the MPO for its activities. There is no action being requested Wednesday night. Hall: We will have to figure out how to get the directed vote. Howard: When is the next meeting? Hall: March 28. We’ll be talking about the Blue Line Extension Area Plan, Parking and Housing near Colleges and Universities, and the Park Woodlawn Area Plan. The meeting adjourned at 2:38 Transportation & Planning Committee Alternative Financing Tools March 18, 2013 Overview 1. Summarize and define alternative revenue options: – – – – – Tax Increment Financing (TIF) Synthetic Tax Increment Financing (STIF) Tax Increment Grants (TIG) Municipal Service Districts (MSD) Special Assessments Districts (SAD) 2. Outline feasibility for use of alternative revenue options on following projects: – – – – Cross Charlotte Trail East/Southeast Corridor Northeast Bridges Northeast Corridor Improvement Program (NECI) 1 Summary & Definitions • Tax Increment Financing (TIF) – City borrows money to fund public improvements with the purpose of attracting private investment in a designated area; debt incurred is both secured and repaid from the additional property tax revenue resulting from the area’s new private development • Synthetic Tax Increment Financing (STIF) – Works similar to a TIF in that projected incremental property taxes are identified as the source of debt service, but are not what are pledged as security for debt • Tax Increment Grant (TIG) – Developer builds public infrastructure and City reimburses developer for portion of cost based on generation of incremental taxes; developer assumes risk Local Examples TIF – No local examples STIF – Cultural Facilities TIG – Metropolitan 2 Summary & Definitions • Municipal Service District (MSD) – Geographic area created to fund, through additional ad valorem property tax levy, services, facilities or functions in addition to or to a greater extent than provided in other parts of a city • Special Assessment Districts (SAD) – Assessment on property to pay for all or a portion of the cost of public improvements that benefit adjacent properties – Assessments are a lien on the property and may be paid off over an extended period of time Local Examples MSD – University City Partners SAD – Wright Ave. Street Assessment SAD – 3 Feasibility of Financing Tools TIF For All Projects Cross Charlotte Trail East/SE Corridor NE Bridges NECI TIG STIF • Local Gov’t Commission requires detailed development plan • 1-2 yrs. to get approval • Higher interest rates • Limited use across NC • Requires developer to front costs of infrastructure • Low risk to City; Private developer carries debt risk • Requires expected private development to create property tax increment to pay debt service • May not legally qualify • No known developer interest • Only some costs potentially supported • Limited development opportunities due to residential proximity of trail • No known developer interest • Need to identify TIF boundary that can generate sufficient revenue; 5% geography limitation on City • No known developer interest • Need to identify STIF dev. and boundary that can generate sufficient revenue • Strong development opportunities • No known developer interest • Strong development opportunities • Overlaps existing Ikea tax increment boundary, thus limiting revenue for bridges • Strong development opportunities; 5% limit • Overlaps existing Ikea tax increment boundary • No known developer interest • Strong development opportunities Feasibility of Financing Tools MSD For All Projects Cross Charlotte Trail East/SE Corridor NE Bridges • Upfront private investment not required New SAD • Allows assessment on all property owners • Requires initial City funding source • Limited statutory uses • Law currently sunsets July 1, 2013 • Requires approval of over 50% of all property owners who represent at least 66% of all value • Broader uses allowed • Lower commercial component may limit MSD qualification • “Sidewalks” and “Streets” are legal uses; some legal uncertainty for Trail • Likely qualifies under statute, but some legal questions remain • District boundaries may be mostly residential • • Strong revenue ability • Boundaries overlap existing MSD • Boundaries overlap existing MSD • May not meet statutory purpose • May not meet statutory purpose • NECI’s high cost would likely require high assessments • NECI’s high cost would likely require high assessments • Generates revenue immediately • MSD tax rate increase est. at 3 times current rate of 2.79¢ • Strong revenue ability NECI Traditional SAD “Unique benefits” requirement may limit boundaries • “Unique benefits” requirement may limit boundaries 4 Questions 5 Transportation & Planning Committee Monday, March 18, 2013 1:30 – 3:00 p.m. Charlotte-Mecklenburg Government Center Room 280 Committee Members: Staff Resource: David Howard, Chair Michael Barnes, Vice Chair John Autry Warren Cooksey Patsy Kinsey Ruffin Hall, Assistant City Manager AGENDA I. Capital Investment Plan Referrals – 45 minutes Staff Resource: Ruffin Hall Consider a recommendation on CIP Projects referred to the Committee in preparation for the March 20 Council Budget Workshop. Action: Committee Recommendation Attachment: 1. Q&A from the February 11 Committee meeting.doc II. Draft FY2014 Focus Area Plan – 30 minutes Staff Resources: Debra Campbell, Planning Danny Pleasant, Transportation The Committee will review and finalize the Focus Area Plan Action: Committee Recommendation Attachment: 2. Draft-FY2014 Strategic Focus Area Plan.doc III. MPO Update – 15 minutes Staff Resource: Bob Cook, Planning Staff will provide the Committee with the latest updates. Action: For information only Next Scheduled Meeting: Thursday, March 28, 2013 – 12:00 p.m. Future Topics-Blue Line Extension Station Area Plans, Parking and Housing Issues Near Colleges and Universities, Park Woodlawn Area Plan Distribution: Mayor & City Council Transportation Cabinet Robert Cook Julie Burch, Interim City Manager Debra Campbell Leadership Team Danny Pleasant Questions and Answers February 11, 2013 Transportation & Planning Committee Meeting Question 5 (Howard and Cooksey): What are the options for using alternative financing tools such as TIFs, TIGs, STIFs, MSDs, and SADs to fund the Cross-Charlotte Trail, the East/Southeast Corridor, the two bridges in the Northeast Corridor, and NECI? Below are descriptions and staff assessments of each of the alternative financing tools that could be considered for funding the Cross-Charlotte Trail, the East/Southeast Corridor, the two bridges in the Northeast Corridor, and NECI. Staff assessments are based on the authorized use and purpose of these financing tools, as well as on the financial and practical viability of each tool in conjunction with the specific project areas. Tax Increment Financing (TIF) – Tax Increment Financing is a debt-financing tool authorized by a constitutional amendment approved by North Carolina voters in 2004. In a true TIF, a district is legally established, funds are borrowed and used for public improvements in the district, and incremental taxes (i.e., property taxes collected from the district above the amount collected in the area prior to establishment of the district) are pledged as security for the debt. In a TIF, a municipality pledges incremental taxes from an area with multiple property owners, all of whom are impacted somehow by the project financed by the TIF. The City could then issues bonds, typically 20 to 30 years in length of term, backed by the incremental taxes created by the multiple properties. The bonds could be issued before the project occurs and be used to pay for the project up front. TIF Assessment: Transportation infrastructure development is an eligible public use of funds generated by the TIF powers articulated in Chapter 159 of the State General Statutes. NECI, the Northeast Corridor Bridges, the East/Southeast Corridor streetscape and road improvements would likely qualify for TIF financing. The Cross Charlotte Trail may also qualify for a TIF Assessment but staff will need to conduct further research to confirm whether this type of facility is eligible under the current statute. Some considerations for using TIFs for these projects include: • Charlotte has never done a true TIF since interest rates are typically higher than more traditional financing devices (e.g., COPs, GO Bonds, special obligation bonds) due to the speculative nature of incremental taxes. • Because a TIF is subject to oversight from the Local Government Commission (LGC), the State of North Carolina has developed specific rules and limits on a TIF. The most notable is that no more than 5% of a municipality’s land mass can be subject to a TIF. If the 5% land area threshold is neared, the City would be unable to use TIF for other projects until the existing TIF expires. Additionally, the City would be required by the LGC to create a development plan for the TIF district that outlines the planned development and expected incremental valuation growth to repay the debt on the infrastructure investments. • The City would be required to guarantee the bonds from other sources if the project does not generate enough incremental tax revenue to cover bond payments over the life of the bond. Unlike the TIG structure, the City carries the risk for the debt with a TIF. • Implementing a true TIF is a timely process that could take 12 to 24 months to complete. The statutorily defined process includes creating a project development financing plan, establishing the base valuation of the proposed district, providing written public notice to all property owners in the defined district, holding a public hearing, and obtaining approval from the LGC and Secretary of Commerce. Tax Increment Grant (TIG) – is a local funding option Charlotte has used to capture incremental taxes as part of an economic development agreement with a developer or business. Typically the grant is paid over a series of years to either reimburse the developer for constructing public improvements (such as streets) as part of their project, or for creating jobs and increasing the tax base. In this model, the developer or business takes the risk of not being fully reimbursed or compensated if it is not successful in generating sufficient incremental taxes. Examples include reimbursing the developer for the cost of raising and improving Eighth Street as part of the Levine First Ward project, the Ballantyne Road improvements infrastructure reimbursement agreement, and grants made to businesses through the Business Investment Program. TIG Assessment: The City has used TIGs, but only in the context of a reimbursement agreement with a developer or business making a significant private capital investment. The proceeds from the incremental taxes are paid over a series of years to reimburse a developer for their initial investment. Some considerations for using TIGs for these projects include: • A TIG would be a viable financing tool for the transportation CIP projects if a known private developer was willing to front the capital costs and provide additional development whose incremental property tax revenue could be used to reimburse the developer for a portion of the upfront capital costs. • Staff is currently unaware of any developer interest to fund construction of the Cross Charlotte Trail, the East/Southeast Corridor, the two Northeast Corridor Bridges, or NECI. Synthetic Tax Increment Financing (STIF) – Synthetic Tax Increment Financing is a local policy device that mimics a TIF but takes advantage of the lower interest rates of more traditional financing devices. A STIF works similar to a TIF in that the projected incremental taxes are identified as the source of debt service, but are not pledged as security for the debt. An example of a STIF is the cultural arts facilities project where the City financed the acquisition of the four facilities (i.e., Bechtler, Mint, Gantt, and Knight) with COPs, but developed a financing model that uses incremental taxes from the Duke Energy Center tower (guaranteed by Wachovia/ Wells-Fargo) along with funds made available from the vehicle rental tax to service the debt. STIF Assessment: The City has also used STIFs, but as with the TIG, they have so far only been used in the context of a public private partnership with a developer or business making a significant private capital investment to provide sufficient incremental new property taxes to finance the infrastructure cost. However, because STIFs are a City policy device rather than a statutorily regulated financing tool, the City does have more flexibility to initiate a STIF mechanism to fund City infrastructure projects without private investment participation. To be successful, a City-defined STIF district would need to generate significant-enough growth in incremental tax revenues to support the cost of the City’s capital investments. Some considerations for using STIFs for these projects include: • Portions of the Cross-Charlotte Trail, particularly around the potential development nodes, may see sufficient future growth in incremental taxes to support some of the costs of this project. Other predominantly residential portions of the Trail may not be appropriate for a STIF mechanism, and likely would not generate sufficient incremental tax revenue growth. • There are also potentially significant development opportunities for the properties around the NECI project corridor and the two Northeast Corridor bridges that could ultimately generate sufficient incremental tax revenues to support the cost of constructing these projects. • Incremental taxes from some of the properties around the South Bridge are already dedicated to the City’s IKEA Boulevard infrastructure reimbursement agreement and would not be available for use as tax increment boundaries for any additional project. See Attachment 2 showing the IKEA Blvd tax increment boundaries. • The proceeds from incremental taxes generated by subsequent economic development occurring around the City’s capital investment would not be realized for some time, until after the projects are complete. As a result, initial revenue from the STIF areas would not be sufficient to support the cost of constructing the capital projects nor the initial debt service payments. The City would need to identify another funding source for the initial investment. • One potential hybrid use of a STIF approach could be for the designation of STIF districts around the areas of the proposed capital investments with the incremental property tax revenue “banked” to fund other, future capital investments. • Due to the speculative nature of potential incremental tax growth resulting from the City’s capital investments, debt service on the funds borrowed to pay for these projects would be more costly than traditional financing tools. Municipal Service District (MSD) – As established in NC §160A-536, MSDs may be established by City Council for the purposes of providing one or more of the statutorily authorized services, facilities, or functions in addition to or to a greater extent than provided in the rest of the city: Statutory purposes of an MSD (may provide one or more services/facilities/functions) beach erosion control and flood and hurricane protection works sewage collection and disposal systems downtown revitalization projects drainage projects urban area revitalization projects off-street parking facilities transit-oriented development projects watershed improvement projects Successfully designed MSDs have easily identifiable geographies to generate revenues to finance, provide, enhance, and maintain the economic vitality and quality of life in the central business district or other commercial areas. MSD revenues are generated through an ad valorem property tax paid by the property owners (residential and commercial) in the designated districts and must be spent on programs and services that enhance the quality of the districts. MSD Assessment: Municipal Service Districts can be a viable option for generating revenue to support the cost of City investments in economic and transit-oriented development projects. The City currently has five active MSDs that are successfully supporting and promoting economic development and urban revitalization in Center City, South End, and University City. State statutes define very specific purposes for establishing an MSD, and the proposed CIP projects have varying degrees of eligibility and appropriateness for their use. Some considerations for using MSDs for these projects include: • The City has local authority to create and define the boundaries of an MSD and to set the appropriate ad valorem tax rate through City Council approval. • The statutorily defined process for establishing and implementing an MSD, including notifying affected property owners, obtaining community input, and holding a public hearing, would likely require 12 – 18 months to complete. Once a district is established though, the City could begin collecting MSD tax revenues immediately. • Unlike with tax increment financing tools, MSD revenues can be used to support the cost of the City’s capital investments without the need for upfront private investments. • Based on the defined statutory purposes of an MSD, it is unclear whether the entire Cross-Charlotte Trail would qualify as an urban area revitalization or transitoriented development. Staff would need to conduct a legal assessment to verify the eligibility of funding of the Trail through an MSD. • The East/Southeast Corridor road improvements likely qualify as urban area revitalization and transit-oriented development projects under the MSD statutes, but may not be the best candidates for MSDs due to their proximity to predominantly residential communities, which would bear the brunt of the additional tax assessment. • The two Northeast Corridor Bridges and the NECI project corridor would be ideal candidates for an MSD. However, both bridges and a portion of NECI are already within the existing University City MSD. Properties within this MSD already have a dedicated property tax of 2.79 cents which generates approximately $640,000 annually and is used to fund the operations of University City Partners, Inc. See Attachment 3 showing the current boundaries of the University City MSD. • Increasing the current University City MSD tax rate to support the cost of the NECI and bridge projects would require a higher tax rate on the property owners within the district. For example, in order to pay for the $14.5 million South Bridge from IBM Drive to Ikea Blvd, the tax rate for the University City MSD would need to increase from 2.79 cents to 9.13 cents. This additional 6.34 cent tax rate would cost property owners $63.40 in additional annual taxes for every $100,000 in property value. A property valued at $200,000 would pay $126.80 in additional property tax each year to support the South Bridge project. • A new or expanded MSD boundary could also be established along the remaining NECI project corridor that lies outside the existing University City MSD. Special Assessment Districts (SADs) – Similar to MSDs, Special Assessment Districts pay for public improvements that benefit the property affected by the improvement. The City levies a special assessment related to the benefit received by the property owner. There are two types of Special Assessments – Traditional and New. The information below provides further detail on Traditional Special Assessments, New Special Assessments, and the difference between New Special Assessments and MSDs Traditional Special Assessments - As established in NC § 160A-216, these Special Assessments may be approved by City Council for the purposes of providing one or more of the statutorily authorized services or functions in addition to or to a greater extent than provided in the rest of the city. The City must pay for the full costs of the public improvement upfront, and then may recoup costs through the assessment once the project is complete. Statutory purposes of Traditional Special Assessments (may provide one or more services/functions) beach erosion control and flood and hurricane protection works water systems curbs and gutters; streets sewage collection and disposal systems Sidewalks storm sewer and drainage systems New Special Assessments - During the 2008 and 2009 legislative sessions, the General Assembly granted a new level of assessment authority – entitled “special assessments for critical infrastructure needs.” This new assessment authority is effective August 3, 2008 until July 1, 2013. Statutory purposes of New Special Assessments, effective until July 1, 2013 (applies to capital costs) Auditoriums, coliseums, arenas, stadiums, art galleries, museums Public transportation facilities, including equipment, buses, railways, ferries, and garages Housing projects for low to moderate income Sanitary sewer systems On- and off-street parking and parking facilities Streets and sidewalks Other differences between the new special assessment method and traditional special assessment method include: • Requires a petition signed by at least a majority of property owners to be assessed who represent at least 66% of the assessed value • Authorizes borrowing money to front the costs of projects for which assessments may be imposed according to one or more of the following methods: revenue bonds, project development financing debt instruments, general obligation bonds • Allows special assessment before the projects being financed are complete • Does not expressly limit the bases upon which the assessment may be made Instead, leaving the bases of the assessments within the discretion of the governing board, subject to the requirement that the assessments bear some relationship to the amount of benefit that accrues to the assessed property. • Authorizes governing board to allow assessments to be paid in up to 30 annual installments, with interest Key Differences between New Special Assessments and MSDs • Special Assessment projects are typically more focused and specialized in nature; for example, a Special Assessment may fund a sidewalk, while an MSD may fund an urban area revitalization • For a Special Assessment, both private and non-profit entities pay the established assessment rate (with the exception of property owned by the federal government); conversely, for an MSD, non-profit entities such as Presbyterian Healthcare, Johnson & Wales University, and Johnson C. Smith University, would be exempt from paying property taxes • The process for a Special Assessment begins with a petition signed by at least a majority of property owners to be assessed who represent at least 66% of the assessed value; whereas, the MSD process is initiated by a proposal or report from City Council. SAD Assessment: Special Assessment Districts could also be a viable option for generating revenue to support the cost of some transportation capital investments. An advantage of using a SAD is that, unlike MSDs, tax assessments within the district would be applied to all property owners. SADs do not exempt non-profit entities from the tax assessment as MSDs do. With the possible exception of the Cross-Charlotte Trail and the two Northeast Corridor Bridges, Staff believes Special Assessment Districts could be used to support the funding of the proposed transportation-related projects. Some considerations for using a New SAD for these projects include: • The NECI project, which is essentially transportation improvements around the BLE transit station areas including streets, curb and gutter and other road improvements would likely qualify for both a Traditional and a New SAD, but boundaries for a potential SAD district along the NECI corridor would overlap the existing University City MSD, potentially adding to the existing tax burden on property owners in those areas. • Within the East/Southeast Corridor, the Monroe Road Streetscape, Idlewild Road/Monroe Road Intersection, and the Sidewalk and Bikeway Improvement projects would likely qualify for both a Traditional and a New SAD. However, the New SAD regulations limit the district boundaries to property owners which show a unique benefit from the public improvement. With these East/Southeast Corridor projects spread throughout the Corridor, creating a defensible SAD boundary around all of the projects that generates the necessary revenue to pay for them while adhering to the unique benefits requirement would be difficult. • It is unclear whether the Cross-Charlotte Trail or the two Northeast Corridor Bridges would meet the statutorily defined purposes of Traditional or New Special Assessment Districts. Both types of assessment districts allow the use for street and sidewalk projects, and much of the Cross-Charlotte Trail will be comprised of urban trail components such as paved walking trails, which may fall within the allowed uses. However, neither assessment district mentions bridges as an approved purpose for establishing a SAD, but the “public transportation facilities” allowed under a New SAD could be interpreted to include bridges. Staff would need to conduct a legal assessment to verify the eligibility of funding of the CrossCharlotte Trail and the two bridges through a SAD. • A significant impediment to the use of a New SAD for any of the CIP projects is that the statutory authorization for creating a New SAD expires July 1, 2013. Extension of the New SAD authorization would require State legislative approval. City Council’s approved 2013 State Legislative Agenda includes a proposal to extend the sunset date of the Special Assessments for Critical Infrastructure Needs Act from July 1, 2013 to July 1, 2018. • Another consideration for use of New Special Assessment Districts is that any assessment must be approved by a majority of the property owners who also represent at least 66% of the proposed district’s assessed value. ´ Attachment 2 IKEA Tax Increment Grant Project Area 500 Feet IB M Dr M 1 6 10 04 7 4 Cla rk B 6 2 12 04 7 2 04 74 6 3 14 04722140 10 2 Brookside L n Ra S ity Bv bC T b I-85 o W 04722127 Cit S I85 y B vx I-85 Ra N Hy NB N I-8 5H y 04 7 4 6 10 6 University Pointe Bv y Cit 85x SB S I v Ra B nS Try o 10 3 14 1 N I8 5 R a SB BvxS 04 72 2 14 2 rS t y C it 85x a NB I N vR B 04 72 2 Bv University City Ty ne City t 04722133 04 74 6 3 72 04 8 10 Ri St et so cfa Ma ne rla Bv Neighborhood & Business Services, February 15, 2013 n Dr Dr v e e rsity Park Dr v 2 72 04 lloug h Un i v Ex ec ut i IK B EA cc u W R ver ocky Rd v Attachment 3 Map of MSD for University City DRAFT - FY2014 Strategic Focus Area Plan “Charlotte will be the premier city in the country for integrating land use and transportation choices.” Safe, convenient, efficient, and sustainable transportation choices are critical to a viable community. The City of Charlotte takes a proactive approach to land use and transportation planning. This can be seen in the Centers, Corridors and Wedges Growth Framework, the Transportation Action Plan and the 2030 Transit Corridor System Plan that provide the context for the Transportation Focus Area Plan. The City’s strategy focuses on integrating land use and transportation choices for motorists, transit users, bicyclists and pedestrians. A combination of sound land use planning and continued transportation investment will be necessary to accommodate Charlotte’s growth, enhance quality of life and support the City’s efforts to attract and retain businesses and jobs. Focus Area Initiative Measure Reduce annual hours of congestion per traveler, as measured by Texas Transportation Institute, for the Charlotte Urban Area compared to top 25 cities Reduce Vehicle Miles Travelled (VMT) per capita Enhance multimodal mobility, environmental quality and long-term sustainability Decrease commute times Accelerate implementation of 2030 Transit Corridor System Plan as conditions allow: 1. LYNX BLE FY 2012 Actual FY 2013 Mid-Year Status .8% increase Charlotte: 0.7% Top 25: .7% Top 25: - 3.4% NA NA 40.8% NA FY2014 Target Any increase will be less than 5-year average of top 25 cities Reduce VMT per capita from prior year Increase the percent of Charlotte commuters with a commute time of less than 20 minutes. DEIS Complete FFGA Approved 1. Begin construction by 6/30/14 2. Streetcar Starter Project PE Complete Construction underway 2. Complete construction by June 30, 2015 3. Transit Ridership 3% Goal 6.4% Actual 0% Goal 0.3% YTD Oct 2012 3. Increase by 2% 4. Red Line Advanced Work Plan NA 4. Participate in NCDOT/NS Corp “O” Line Capacity Study Transportation | 1 Focus Area Initiative Measure Improve Charlotte’s walkability and bicyclefriendliness Promote transportation choices, land use objectives, and transportation investments that improve safety, promote sustainability and livability Communicate land use and transportation objectives as outlined in the Transportation Action Plan (TAP) Seek financial resources, external grants, and funding partnerships necessary to implement transportation programs and services Decrease vehicle accidents per mile traveled by monitoring crashes annually and identifying, analyzing and investigating hazardous locations and concentrating on patterns of correctable crashes Improve City Pavement Condition Survey Rating Increase % of transportation bond road projects completed or forecast to be completed on schedule Complete and present TAP Annual Report to the City Council The City will work with MUMPO to initiate the 2040 Long Range Transportation Plan to help advance economic development and regional land use goals. Collaborate with regional partners on CONNECT, to plan for future growth and development. Work with legislative partners and stakeholders to consider new revenue sources to fund transportation improvements. Develop CIP funding strategy for transportation improvements FY 2012 Actual NA (New) FY 2013 Mid-Year Status NA (New) NA (New) NA (New) NA (New) NA (New) NA (New) 18.8 sidewalk 11.1 bikeways NA (New) 13.4 sidewalk 2.5 bikeways -23.5% NA (Reported at end of year) 88 85.4 Achieve Survey Rating of 90 79% 73% 90% or better Met Met Complete by January 2014 FY2014 Target Increase Charlotte’s walk score relative to peer cities. Increase Charlotte’s walk score in mixed-use activity centers and transit station areas. Complete a scan of City policies and practices impacting walkability and recommend needed improvements by June 2014. Implement 15 or more pedestrian safety and/or crossing projects by June 2014. Implement 10 miles of new sidewalk and 10 miles of new bikeways annually. Decrease vehicle accidents per mile traveled below prior year Complete project ranking by August 2013 N/A N/A MPO approval of 2040 LRTP by March 2014 Collaborate with CONNECT Partners to engage the public in developing a consensus growth scenario by June 2014. N/A (New) N/A (New) Continue to evaluate the legislative environment regarding new revenue sources and lend support to acceptable solutions. N/A (New) N/A (New) Develop project list for CIP bond funding. Transportation | 2