HomeMy WebLinkAboutAgenda - 11-17-1998 - 10bORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: November 17, 1998
SUBJECT: School Impact Fee Technical Report Update
DEPARTMENT: County Manager/Planning
ATTACHMENT(S):
Report
Action Agenda
Item No. 10.1
PUBLIC HEARING: (Y/N)
BUDGET AMENDMENT: (Y/N)
INFORMATION CONTACT:
Rod Visser, ext 2300
Gene Bell, ext 2592
TELEPHONE NUMBERS:
Hillsborough
732 -8181
Chapel Hill
968 -4501
Durham
688 -7331
Mebane
336- 227 -2031
PURPOSE: To receive an updated technical report on school impact fees.
BACKGROUND: During the past summer, the County contracted with the University's Department of
City and Regional Planning to produce an updated technical report on the County's school impact fees.
These updates are prepared periodically to ensure there is a reasonable basis for the level of impact fees
imposed on each new residential dwelling unit. The work for this project was conducted by Professor
Emil Malizia, and two of his graduate students, Sara Hinkley and Jeremy Klop. Staff will provide a brief
report to the Commissioners on the consultants' findings. The consultants will be available to respond to
any questions.
There is no required Board action at this time, nor any anticipated amenaments to the County's school
impact fee ordinance resulting from the work completed by the consultants. The maximum impact fees
chargeable in the County's two school systems, based on the analysis in the consultants' report, are
$10,320 for the Chapel Hill - Carrboro school district, and $3,474 for the Orange County Schools. The
comparable figures in the previous technical report were $11,593 and $3,404. The current impact fees of
$3,000 and $750 for CHCCS and OCS, respectively, are well supported by the consultants' findings.
RECOMMENDATION(S): The Manager recommends that the Board receive the report for information
only at this time.
2
Technical Report
Calculation of Proportionate Share Impact Fees for
Financing Public School Capital Needs
Orange County, NC
Prepared May, 1993
Updated May, 1995
Updated May, 1996
Updated August, 1998
Technical Report 3
INTRODUCTION
For a number of years, Orange County has pursued an objective of helping to fund school capital
needs created by growth in the county from financial contributions from the owners of development
engendering those capital needs. During the 1987 Session, the General Assembly authorized
Orange County to levy impact fees in its planning jurisdiction for a number of needs, including
school capital [Title VI, Chapter 460, of the 1987 Session Laws].
In 1988 -89, a joint governmental work group investigated the possibilities of levying an impact tax
as opposed to a fee. Subsequently, Orange County proposed legislation in the 1991 Session of the
General Assembly seeking the authority to impose an impact tax for school capital needs in the
county. Although the legislation was withdrawn due to opposition in the legislature, Orange County
did receive authority to impose impact fees for school capital needs throughout the county, not just
within Orange County's planning jurisdiction [Chapter 324 of the 1991 Session Laws].
The purpose of this report is to update the Technical Report initially prepared in June, 1993, which
recommended an impact fee structure for financing school capital needs in Orange County. The
Technical Report was first revised in May, 1995 and 1996 to include new cost data for school
construction. The 1996 report provides updated cost information and incorporates the
recommendations of the School Facility Construction Standards Work Group and the findings of a
graduate student study of student generation rates in new housing built between 1992 and 1994.
This report incorporates new cost information as well as updated revenue projections and benefit
considerations.
The methodology used to calculate the impact fees is based, in part, on similar techniques used by
Anne Arundel County, Maryland and Broward County, Florida, two jurisdictions which have
implemented a system of impact fees for financing school capital needs. These sources and others
used in the preparation of this report include the following:
Snyder, Thomas P., and Michael A. Stegman, Paying For Growth: Using Development
Fees to Finance Infrastructure. Washington, D.C.: The Urban Land Institute, 1987.
Nelson, Arthur C., ed., Development Impact Fees: Policy Rationale, Practice, Theory, and
Issues. Chicago: American Planning Association, 1988.
Nicholas, James C., The Calculation of Proportionate -Share Impact Fees, Planning
Advisory Service Report Number 408. Chicago: American Planning Association, 1988.
School Capital Needs Advisory Committee, Report to Board of County Commissioners.
Hillsborough: Orange County, 1991.
Stroud, Nancy E„ and James C. Nicholas, Impact Fee Summary and Technical Report:
Roads and Schools, Anne Arundel County, Maryland. Annapolis: Anne Arundel County, 1987.
Lighthizer, James, Report of the Study Committee on Bill 27 -87 and Bill 46 -87 Establishing
Impact Fees. Annapolis: Anne Arundel County, 1987.
Technical Report 4
Anne Arundel County, Maryland, Development Impact Fee Ordinance, Bill 50 -87.
Wolf, Audrey L., Broward County Educational Fee: An Evaluation of the Quantitative
Adequacy of the Generation Rates. Fort Lauderdale: Broward County, 1987.
School Board of Broward County, Florida, Recommended Standards and Procedures For
An Educational Impact Fee. Fort Lauderdale: Broward County, 1987.
Broward County, Florida, Land Development Code. Fort Lauderdale: Broward County,
I•:'
Broward County, Florida, Dedication/Payment In Lieu Provisions - School Sites, Ordinance
79 -1.
Clapp- Smith, Merritt, and Karen Kristiansson, A Study of Housing Characteristics and
Student Generation Rates for Orange County, N.C. Hillsborough: Orange County, 1995.
School Facility Construction Standards Work Group, School Facility Construction
Standards Report. Hillsborough: Orange County, 1996.
N.C. Department of Public Instruction, North Carolina Public Schools Facility Standards:
A Guide for Planning School Facilities. Raleigh: N.C. Department of Public Instruction, 1995.
Basis for Impact Fees
Impact fees are generally imposed as a condition for some approval to proceed with development.
The objective of such fees is not to raise money but to insure adequate public facilities. Where such
facilities are inadequate, permitting development runs counter to the responsibility of a local
government to protect public health, safety, and welfare.
If the question is one of adequate public facilities, the issue, then, is who should be financially
responsible for such adequacy? The community and the property owner are the available candidates
to bear such responsibility. It may be argued that the community should alone be financially
responsible for needed facilities because the community benefits from new housing, job creation,
and tax base enhancement. However, it may also be argued that imposing all such costs upon the
community is unfair since many members of the community may receive no direct benefits from
the development of the property.
Increasingly, the answer is that the community need not absorb all costs but may impose a
proportionate, or fair, share of such costs upon new development. Impact fees are the vehicle
through which new development pays a proportionate share of facility costs. Proportionate share is
a financial contribution that would generally be less than total cost.
Technical Report 5
Use of Impact Fees
Impact fees are generally confined to payments for capital facilities and allow the community to
provide the capital facilities that new development will require. Nationwide, impact fees have been
established to pay for capital improvements to the following facilities and services:
Potable Water
Solid Waste
Arterial Roads
Local Roads
Parks
Fire Protection
Public Buildings
Emergency Medical Services
Sewers
Drainage
Collector Roads
Public Schools
Public Libraries
Law Enforcement
Public Cemeteries
Under Title VI, Chapter 460, of the 1987 Session Laws, Orange County may impose impact fees
within its planning jurisdiction for land acquisition for open space and greenways, capital
improvements to public streets, schools, bridges, sidewalks, bikeways, on and off - street surface
water drainage ditches, pipes, culverts, other drainage facilities, water and sewer facilities, and
public recreation facilities. Chapter 324 of the 1991 Session Laws enables Orange County to
impose impact fees for school capital improvements countywide. Chapter 642 of the 1993 Session
Laws enables Orange County to use impact fees to finance debt service payments and payments
under leases.
DETERMINING THE QUANTITY OF NEEDED IMPROVEMENTS
The objective of determining a proportionate share of costs is to ensure fairness in impact fees.
Proportionality calculations begin with a determination of physical quantities of facilities that new
development will require. The need for such facilities can be expressed mathematically in terms of
demand units and standards of service:
Needed Improvements = Demand Unit x Service Standard
Demand Units
A "demand unit" is a unit associated with new development that generates the need for
improvements in public facilities. For purposes of identifying school capital outlay needs, the
demand unit most often used is the average number of school -age children per residential housing
unit, commonly referred to as a "student generation rate ".
In previous reports, student generation rates were calculated using 1990 census data. In 1994,
however, a survey in the Carrboro area suggested that the use of student generation rates based on
1990 household data could be resulting in lower impact fees than justified. The survey of six single -
family residential subdivisions revealed an average of 0.68 pupils per dwelling. That number was
over twice the 1990 Census figure of 0.29 school age children per household in Chapel Hill
Township.
TABLE 1
SUMMARY STATISTICS FOR NEW HOUSING UNITS
1992 THROUGH 1994
Housin Units b School District and Dwellin T e
School Attendance Characteristics Oran e Count School District Cha el Hili-Carrboro School District
SF MH Mod A t Town Du I All SF MH Mod A t Town Du 1 All
Total Units 539 508 25 35 0 6 1113 926 19 1 55 6 61 1068
Without School Age Children 413 400 18 20 0 6 857 524 15 1 29 5 57 631
With School Age Children 126 108 7 15 0 0 256 402 4 0 26 1 4 437
Number of School Age Chtldren 170 152 12 30 0 0 364 622 4 0 44 1 4 675
Elementary School 112 94 7 20 0 0 233 350 2 0 31 1 0 384
Middle School 25 29 3 5 0 0 62 138 1 0 7 0 0 146
High School 33 29 2 5 0 0 69 134 1 0 6 0 4 145
Percent Units With School Age Children 23% 21% 28% 43% 0% 0% 23% 43% 21% 0% 47% 17% 7% 41%
Percent Student Distribution
Elementary School 66% 62% 58% 67% 0% 0% 64% 56% 50% 0% 70% 100% 0% 57%
Middle School 15% 19% 25% 17°/a 0°/a 0% 17% 22% 25% 0% 16% 0% 0% 22%
Hi h School 19% 19% 17% 17% 0% 0% 19% 22% 25% 0% 14% 0% 100% 21%
Housin Units b School District and Dwellin T e
Student Generation Rates Oran e Count School District Cha el Hill-Carrboro School District
SF MH Mod A t Town Du I All SF MH Mod A t Town Du I All
All Schools 0.32 0.30 0.48 0.86 0.00 0.00 0.33 0.67 0.21 0.00 0.80 0.17 0.07 0.64
Elementary School 0.21 0.19 0.28 0.57 0.00 0.00 0.21 0.38 0.11 0.00 0.56 0.17 0.00 0.36
Middle School 0.05 0.06 0.12 0.14 0.00 0.00 0.06 0.15 0.05 0.00 0.13 0.00 0.00 0.14
Hi h School 0.06 0.06 0.08 0.14 0.00 0.00 0.06 0.14 0.05 0.00 0.11 0.00 0.07 0.14
Source:A Study of Housing Characteristics and Student Generation Rates for Orange County, N.C.
Legend: SF Single-Family APT Apartment MH Mobile Home
TOWN Townhouse MOD Modular Home DUPL Duplex
o�
Technical Report
7
During the Summer of 1995, two graduate students from the Department of City and Regional
Planning at the University of North Carolina were employed by Orange County to collect data
through which to calculate updated student generation rates. Data for the study was collected for all
new housing units which received a certificate of occupancy between January 1, 1992 and
December 31, 1994. Spring 1995 enrollment information for public school students was also
collected and matched to the housing unit data. The result was a data set containing a list of all new
housing units in the county, their characteristics, and the number of public school children in each
housing unit. Two separate data sets, one for the Chapel Hill - Carrboro School District and one for
the Orange County School District, were created in this way.
Shown in Table 1 are summary statistics from that study. One of the most surprising results is that
fewer than 50% of new housing units in both school districts are occupied by families with children
currently in the public school system. In addition, the percentage of units with children varies
among the two school districts, with the percentage of units with children markedly higher in the
Chapel Hill- Carrboro School District (41 %) than in the Orange County School District (23 %).
Most of the public school children in new housing units are elementary school children, with
smaller numbers in middle school and high school. Compared with the distribution of all public
school children in the 1994 -95 school year, new housing units have a greater proportion of
elementary school students than the population at large. This comparison is shown in Table 2
below.
TABLE 2
COMPARISON OF STUDENT DISTRIBUTION BY SCHOOL TYPE AND SCHOOL DISTRICT
1994 -95 SCHOOL YEAR AND 1992 -94 HOUSING UNITS
Source: A Study of Housing Characteristics and Student Generation Rates for Orange County, N.C.
In terms of student generation rates, the 1995 study confirmed the results of the 1994 Carrboro
study but produced another surprising result. In spite of the large number of families in new housing
units without children, there is still a high student generation rate for new housing units in the
Chapel Hill - Carrboro School District - 0.64 students per unit. As shown in Table 3 on the following
page, the overall student generation rate for new housing in the Chapel Hill- Carrboro School
District is substantially higher than the estimate of 0.29 students per unit used in the 1995 Technical
Report. The difference is due in part to the fact that the 1995 Technical Report relied on available
1990 Census data. Another reason may be changes in the type of housing units being constructed as
well as birth rates in new families.
In contrast to the Chapel Hill - Carrboro School District, the Orange County School District has a
much lower student generation rate for new housing - 0.33 students per unit. This number is lower
School District
Orange County Chapel Hill
- Carrboro
School Type
1992 -94
1994 -95
1992 -94
1994 -95
Housing Units
School Year
Housing Units
School Year
Elementary
64%
50%
57%
48%
Middle School
17%
23%
22%
24%
High School
19%
270/o
21%
28%
Source: A Study of Housing Characteristics and Student Generation Rates for Orange County, N.C.
In terms of student generation rates, the 1995 study confirmed the results of the 1994 Carrboro
study but produced another surprising result. In spite of the large number of families in new housing
units without children, there is still a high student generation rate for new housing units in the
Chapel Hill - Carrboro School District - 0.64 students per unit. As shown in Table 3 on the following
page, the overall student generation rate for new housing in the Chapel Hill- Carrboro School
District is substantially higher than the estimate of 0.29 students per unit used in the 1995 Technical
Report. The difference is due in part to the fact that the 1995 Technical Report relied on available
1990 Census data. Another reason may be changes in the type of housing units being constructed as
well as birth rates in new families.
In contrast to the Chapel Hill - Carrboro School District, the Orange County School District has a
much lower student generation rate for new housing - 0.33 students per unit. This number is lower
Technical Report 8
than the 1995 Technical Report estimate based on 1990 Census data - 0.45 students per housing
unit - and may be due to lower birth rates in new families in rural portions of the county.
TABLE 3
COMPARISON OF STUDENT GENRATION RATES BY SCHOOL TYPE AND SCHOOL DISTRICT
1994 -95 SCHOOL YEAR AND 1992 -94 HOUSING UNITS
Source: A Study of Housing Characteristics and Student Generation Rates for Orange County, N.C. and 1995
Technical Report.
Support for such trends exists in the form of student enrollment numbers. As shown in the graphs in
Table 4, average daily memberships in elementary, middle, and high schools in the Chapel Hill -
Carrboro School District have increased at higher rates than those in the Orange County School
District, a trend which reflects the higher student generation rates in the district. For this reason, the
1995 student generation rates are used as the basis for calculating impact fees in this report.
Service Standards
A "service standard" is generally expressed in terms related to land development. For example, a
service standard for schools might be expressed in terms of square feet of building [or land] area
per student. Standards used in determining need are best established within the comprehensive plan.
In the absence of such standards, those recommended by state agencies may be used. In North
Carolina, minimum service standards for public schools are set by the N.C. Department of Public
Instruction. These standards are contained in the 1995 publication, North Carolina Public Schools
Facility Standards: A Guide for Planning School Facilities.
Care should be taken when using such standards for they would still have to be compared with the
existing community standard. Moreover, such standards should relate to both existing
developments and new developments. The application of the same standard to both components of
the community means that new development cannot be required to raise the standard. If the
community wants to raise the existing standard of service, it must identify the existing deficiency
and make provisions to eliminate those deficiencies by means other than impact fees.
In reports prior to 1996, service standards for the purpose of calculating public school impact fees
were based on a comparison of the minimum state standards with existing community standards;
e.g., "local averages" based on a survey of all public schools in the county. This methodology was
used
School District
Orange County Chapel Hill-
Carrboro
1990
1995
1990
1995
School Type
Census
Housing Study
Census
Housing Stud
All Schools
0.45
0.33
0.29
0.64
Elementary
0.22
0.21
0.14
0.36
Middle School
0.10
0.06
0.07
0.14
High School
0.12
0.06
0.08
1 0.14
Source: A Study of Housing Characteristics and Student Generation Rates for Orange County, N.C. and 1995
Technical Report.
Support for such trends exists in the form of student enrollment numbers. As shown in the graphs in
Table 4, average daily memberships in elementary, middle, and high schools in the Chapel Hill -
Carrboro School District have increased at higher rates than those in the Orange County School
District, a trend which reflects the higher student generation rates in the district. For this reason, the
1995 student generation rates are used as the basis for calculating impact fees in this report.
Service Standards
A "service standard" is generally expressed in terms related to land development. For example, a
service standard for schools might be expressed in terms of square feet of building [or land] area
per student. Standards used in determining need are best established within the comprehensive plan.
In the absence of such standards, those recommended by state agencies may be used. In North
Carolina, minimum service standards for public schools are set by the N.C. Department of Public
Instruction. These standards are contained in the 1995 publication, North Carolina Public Schools
Facility Standards: A Guide for Planning School Facilities.
Care should be taken when using such standards for they would still have to be compared with the
existing community standard. Moreover, such standards should relate to both existing
developments and new developments. The application of the same standard to both components of
the community means that new development cannot be required to raise the standard. If the
community wants to raise the existing standard of service, it must identify the existing deficiency
and make provisions to eliminate those deficiencies by means other than impact fees.
In reports prior to 1996, service standards for the purpose of calculating public school impact fees
were based on a comparison of the minimum state standards with existing community standards;
e.g., "local averages" based on a survey of all public schools in the county. This methodology was
used
TABLE 4
COMPARISON OF STUDENT ENROLLMENT
BY SCHOOL TYPE AND SCHOOL DISTRICT
1989 -90 TO 1997 -98
Chapel Orange
Hill /Carrboro County
89 -90
2797
2428
90 -91
2872
2432
91 -92
3054
2500
92 -93
3273
2549
93 -94
3469
2592
94 -95
3651
3088
95 -96
3814
2782
96 -97
3850
3043
97 -98
3875
3087
Chapel Orange
HiIVCarrboro County
89 -90
1285
1179
90 -91
1430
1186
91 -92
1519
1196
92 -93
1601
1257
93 -94
1651
1255
94 -95
1747
1239
95 -96
1877
1243
96 -97
1969
1330
97 -98
2012
1387
Chapel Orange
Hill/Carrboro County
89 -90
1572
1325
90 -91
1576
1313
91 -92
1636
1331
92 -93
1801
1380
93 -94
1880
1379
94 -95
1998
1396
95 -96
2087
1455
96 -97
2230
1545
97 -98
2294
1519
Source: NC Department of Public Instruction
l
School wear
01
Technical Report
10
since locally adopted service standards for public schools did not exist, and the use of "local
averages" was a case of historical circumstance rather than a clear decision on what standards were
best for the county.
In May 1995, an eight member group known as the School Facility Construction Standards Work
Group began work on developing school construction standards for both school districts.
Comprised of two representatives from the Board of County Commissioners, two representatives
from each of the two School Boards, and two parent representatives, the Work Group sponsored a
workshop in October 1995 to educate its members and the general public on school construction
issues, including education program requirements, state facility standards, facilities management
cost, and effective school design.
Following the workshop, the two school systems, working together and with their architects,
proposed elementary and middle school facilities based on recently constructed projects. These
facilities were compared to the N.C. Department of Public Instruction guidelines and used to define
a basic school and three tiers. While the basic school standard generally followed the state
guidelines, the three tiers addressed the following concerns:
• Additional staff work space and conference room space (Tier 1);
• Space for after- school programs (Tier 2); and
• Space for additional storage, staff support areas, student common areas, and project/team rooms
(Tier 3).
In January 1996, a public hearing was held on the basic school and additional tiers. Subsequently,
the Work Group adopted the standards for the Middle School, including all space through Tier
Three, or 132,192 square feet. The standards for the Elementary School included the basic school,
plus additional space for after- school use and storage. The overall size of the facility was reduced
from the original proposal by 4,000 square feet to 95,225 square feet. This reduction was primarily
in space for additional workrooms and conference rooms. Because there are no long -range plans for
the construction of a new high school in the county, the Work Group did not address high school
facility standards.
The report of the School Facilities Construction Standards Work Group was submitted to the
Chapel Hill - Carrboro Board of Education and to the Orange County Board of Education for
comment. Following receipt of their comments and the Work Group's report, the Board of County
Commissioners adopted a slightly modified set of school standards in May, 1996.
The action of the Board of Commissioners combined the Tier 1 standards with those of the "basic
school" to form a new set of basic school standards. Tiers 2 and 3 were retained but labeled Tiers A
and B. The adopted standards are shown in Appendix A.
To determine how the adopted standards compared to existing facilities, all public schools in the
county were surveyed to identify building area, land area, and capacity characteristics. "Local
11
TABLE 5
COMPARISON OF CURRENT SCHOOL DISTRICT FACILITIES
WITH ADOPTED SCHOOL FACILITY CONSTRUCTION STANDARDS STANDARDS
School
Building
Size
(Sq Ft
and
Area
Acres
School
Capacity
Students
Sq Ft Per Student
Building Land
ORANGE COUNTY SCHOOLS
ELEMENTARY
G.A. Brown
74016
20.00
572
129
1523
Cameron Park
70812
20.38
594
119
1495
Central
52492
25.62
506
104
2206
Efland Cheeks
64316
20.22
572
112
1540
New Hope
100164
28.54
594
169
2093
AVERAGE/TOTAL
72360
22.95
568
127
1761
ADOPTED STANDARD
95235
16.00
600
159
1162
MIDDLE
63563
18.80
570
111
1436
A. L. Stanback
137770
34.32
800
172
1869
C.W. Stanford
107620
32.78
726
148
1967
AVERAGE/TOTAL
122695
33.55
763
161
1915
ADOPTED STANDARD
132192
22.00
700
189
1369
Orange High School
213509
65.30
1518
141
1874
ADOPTED STANDARD
NA
NA
NA
NA
NA
CHAPEL HILL - CARRBORO SCHOOLS
ELEMENTARY
Carrboro
67537
20.81
607
111
1493
Ephesus
68661
13.36
546
126
1066
Estes Hills
42468
17.24
522
81
1439
Frank P. Graham
60968
11.24
584
104
838
Glenwood
43435
9.50
475
91
871
Seawell
63873
28.96
608
105
2075
McDougle
98000
11.7
650
151
784
AVERAGE / TOTAL
63563
18.80
570
111
1436
ADOPTED STANDARD
95235
16.00
600
159
1162
MIDDLE
Culbreth
112647
35.66
506
223
3070
Phillips
103251
25.00
726
142
1500
McDougle
136256
40.60
740
184
2390
AVERAGE/TOTAL
117385
33.75
657
179
2237
ADOPTED STANDARD
132192
22.00
700
189
1369
HIGH SCHOOL
Chapel Hill
253926
75.20
1680
151
1950
East Chapel Hill
255948
74.08
1500
171
2151
AVERAGE/TOTAL
254937
74.64
1590
160
2045
ADOPTED STANDARD
NA
NA
NA
NA
NA
Source: Orange County School Board, Chapel Hill - Carrboro School Board, Orange County Land Records
and Appendix A.
Technical Report 12
averages" were calculated, including figures for the number of square feet of building and land area
per student, and compared to the adopted standards. The calculations are shown in Table 5.
As evidenced by the comparison, the adopted standards for building size exceed the "local
averages" in the elementary and middle school cases. Since new development cannot be required to
raise the level of service standard, "local averages" must be used in calculating impact fees.
DETERMINING THE COST OF ACCOMMODATING DEVELOPMENT
Once physical quantities are established, costs must be determined. The manner in which cost
information is obtained or expressed is an important factor in establishing standards because the
objective is first to determine capital improvement cost per unit of development and then determine
a proportionate share of those costs. It follows that standards, costs, and shares of costs must be in
consistent units.
The best source of this data are actual local records. Fortunately, such records for new school
construction in Orange County are available. The New Hope Elementary School opened in 1991,
the new A.L. Stanback Middle School in 1995, the McDougle Middle School in 1994, the
McDougle Elementary School in 1996, and the East Chapel Hill High School in 1996. Using cost
data for these projects as well as information from the N.C. Department of Public Instruction and
the architects of the School Boards, the School Facility Constructions Standards Work Group was
able to calculate the estimated cost of new elementary and middle schools. These costs and the
capital cost per student for each type of facility are shown in Table 6. Cost estimates for new high
school facilities are based on the construction costs for East Chapel Hill High School opened in
1996.
As noted previously, there were no long -range plans for the construction of a new high school in the
county in 1995, and the Work Group did not address high school facility standards. However, both
school districts have identified the need for additions to existing high school facilities during the
ten -year school improvement program period and Orange County has identified the need for a new
High School.. Classroom space for an additional 500 students as well as a cultural arts building and
auditorium, a second gymnasium, an infant and pre - school facility, and athletic facilities are needed
at the new East Chapel Hill High School by the year 2002. These facilities are needed to complete
sections of the school that were eliminated during initial construction. The estimated cost for these
additions and the capital cost per student are shown in Table 7.
Multiplying the service provision standards, per demand unit, by the capital cost per unit of service
establishes the capital improvement cost per unit of development. This also may be expressed as a
formula:
Total Cost = Needed Improvements x Cost Per Unit
f
1
TABLE 6
CALCULATION OF NEW SCHOOL FACILITIES CAPITAL COST
BY SCHOOL TYPE AND PER STUDENT
ORANGE COUNTY, N.C.
Elementary Middle
Construction Item School School
Capacity (Students)
Building Area (SgFt) Per Student
Land Area (SgFt) Per Student
Building Area (SgFt)
Site (Acres)
Building Cost Per SgFt
Land Cost Per Acre
Construction Related Costs
Construction
Fees
(10% of Construction & Site Development Costs)
Equipment
(5% of Construction Cost)
Technology
($8.25 Per SgFt of Building Area)
Contingency
(5% of Construction & Site Development Costs)
Start-Up Cost
Total - Construction Related Costs
Land & Site Related Costs
Land Cost
Site Development
(10% of Construction Cost)
Total - Land & Site Related Costs
Total School Cost
Capital Cost Per Student
Construction Related
Land & Site Related
Total Cost Per Student
13
600
700
159
189
1162
1369
95225
132192
16
22
$90
$95
$25,000
$25,000
$8,570,250
$12,558,240
$942,728
$1,381,406
$428,513
$627,912
$785,606
$1,090,584
$471,364
$690,703
$330,000
$350,000
$11,528,460
$16,698,846
$400,000
$550,000
$857,025
$1,255,824
$1,257,025
$1,805,824
$12,785,485
$18,504,670
$19,214
$23,855
$2,095
$2,580
$21,309
$26,435
Source: School Facility Construction Standards Work Group Report
TABLE 7
CALCULATION OF HIGH SCHOOL ADDITION CAPITAL COST
BY SCHOOL AND PER STUDENT
ORANGE COUNTY, N.C.
Construction Item
Capacity (Students)
Building Area (SgFt) Per Student
Land Area (SgFt) Per Student
Building Area (SgFt)
Site (Acres)
Building Cost Per SgFt
Land Cost Per Acre
Construction Related Costs
Construction
Fees
(75% of Construction & Site Development
Equipment
(9.4% of Construction Cost)
General Renovation/Other, Technology
1 (5% of Construction & Site Development Costs)
Start-Up Cost
JTotal - Construction Related Costs
Land & Site Related Costs
Land Cost
Site Development
(Athletic fields, bleachers, tennis courts, etc.)
- Land & Site Related Costs
School Cost
Capital Cost Per Student
Construction Related
Land & Site Related
Cost Per Student
14
East Chapel Hill
East Chapel Hill
Orange
High School
High School
High School
Phase I
Phase II Addition*
Addition*
1000
500
200
170
171
74
3258
NA
NA
170200
85748
14728
74.8
NA
NA
$107
$138
$80
24733
NA
NA
$18,264,500
$11,835,000
$1,183,971
$1,625,000
$875,000
$142,382
$800,000
$940,000
$111,695
NA
NA
$595,381
NA
$400,000
NA
$160,500
NA
NA
$20,850,000
$14,050,000
$2,033,429
$1,850,000
NA
NA
NA
NA
NA
$185,000
NA
NA
$21,035,000
$14,050,000
$2,033,429
$20,850
$28,100
$10,167
$185
NA
NA
$21,035
$28,100
$10,167
Source: Chapel Hill - Carrboro School Board and Orange County School Board
* All costs are estimated
TABLE 8
PUBLIC SCHOOL CAPITAL NEEDS AND COSTS
ORANGE COUNTY, N.C.
Needs/Costs Characteristics
Public School Children Per Dwell
Elementary School
Middle School
High School
Building Area (SgFt) Per Student
Elementary School
Middle School
High School
Land Area (SgFt) Per Student
Elementary School
Middle School
High School
Construction Cost Per Student
Elementary School
Middle School
High School
Site Cost Per Student
Elementary School
Middle School
High School*
Total Capital Cost Per Student
Elementary School
Middle School
High School
Capital Cost Per Dwelling Unit
Elementary School
Middle School
High School
Total
g Un
School District
Orange
County
Chapel Hill-
Carrboro
0.210
0.360
0.060
0.140
0.060
0.140
127
111
161
179
141
160
1761
1436
1915
2237
1874
2045
$19,214
$19,214
$23,855
$23,855
$20,850
$20,850
$2,095
$2,095
$2,580
$2,580
$185
$185
$21,309
$21,309
$26,435
$26,435
$21,035
$21,035
$4,475
$7,671
$1,586
$3,701
$1,262
$2,945
$7,323
$14,317
15
'Site cost reflects land cost only, as site development is included in construction cost for East Chapel Hill HS
Technical Report 16
Detailed calculations of the capital improvement cost associated with each dwelling unit are
presented in Table 8. The costs per dwelling unit are indicative of what impact fees for public
school facilities would be before any adjustments are made.
PROPORTIONATE SHARE OF CAPITAL COSTS
The standard to which impact fees will be held is that the fees not exceed a proportionate share of
the costs that local government will incur to accommodate new development. Normally, new
development will pay towards capital improvements in the form of general taxation, debt service,
and other payments. The task is to calculate how much of capital costs are covered by these
payments. Whatever is not paid could be charged as impact fees.
Among those factors which should be considered in establishing a proportionate share of capital
costs are the following:
1. The cost of existing facilities;
2. The means by which existing facilities were financed;
3. The extent to which new development has already contributed to the cost of providing
existing facilities;
4. The extent to which new development will, in the future, contribute to the cost of
constructing existing facilities [through debt service or other payments];
S. The extent to which new development should receive credit for providing facilities required
as a condition of development or construction approval;
6 Extraordinary costs in serving the new development, and
7. The time -price differential inherent in fair comparisons of amounts paid at different times.
Payments by New Development Toward Capital Cost
To determine how capital improvements have been financed, the fiscal structuring of the
community must be examined. Each type of facility needs to be analyzed in terms of how it was
financed and also in terms of how new development will contribute toward capital finance in the
future. It would be unfair to require new development to pay some portion of either existing or
future capital improvements and also require them to be totally responsible for the capital
improvement costs that new development will need. Thus, a system of "credits" must be identified
which recognizes the extent to which to which new developments have already contributed to and
will pay for (in the future) the cost of existing capital improvements.
Property Tax Revenues. Bonds, whether general obligation or revenue, are commonly used to
finance infrastructure. Where general obligation bonds are used, the debt incurred by the approval
and issuance of such bonds is generally retired through the use of property tax revenues. For
Technical Report 17
example, of Orange County's outstanding general obligation bonds and Private Placement funds in
FY 1998 -99, $89,209,285 have been issued for public schools. Total debt service payments on
these bonds, including principal and interest, will amount to $9,317,087 in FY 1998 -99. Of that
amount, $6,448,785 is to be paid using property tax revenues. The remainder is paid from sales tax
proceeds [see discussion of "Sales Tax Revenues" below].
The amounts of concern in impact fee calculation are not one -time payments. Rather, the amounts
of concerns are annual payments. This means that there will be a payment in one year, in two years,
in three years, etc. Thus, the time -price differential issue becomes one of how to deal with a stream
of payments over a number of years in the future, resulting in a need to cut off the analysis at some
point. Title VI, Chapter 460, of the 1987 Session Laws establishes a cut off point by requiring
Orange County to "estimate the total cost of improvements ... that will be needed... during a
reasonable planning period not to exceed 20 years." For purposes of this analysis, the cut off point
is ten years, including the five -year period used by Orange County in its annual Capital
Improvements Plan [CIP] for financial planning purposes as well as the ten -year period used by
both school districts for long -range school planning purposes. Finally, it is also the period of time
within which the new school facilities listed below will be needed.
Fiscal Year* School Tyne School Board
FY 1998 -99 Elementary Chapel Hill - Carrboro
FY 1998 -99 Elementary Orange County
FY 1999 -00 High School Orange County
FY 2000 -01 High School Addition Chapel Hill - Carrboro
FY 2000 -01 * Middle School Chapel Hill - Carrboro
FY 2005 -06 High School Addition Orange County
* The identified need for this school is in FY 2000 -01.
Based on the school capital needs above, the task then becomes the provision of fair and reasonable
consideration for annual payments toward capital improvements costs over a period of ten years.
Revenue projections during the capital improvement planning period are shown on Table 9. Debt
service is divided into the principal, interest, and service charges related to the bonds, and the
principal and interest for the Private Placement funds.
In addition to debt service payments, property tax revenues are also used for payments for recurring
capital needs and to a newly created School Capital Projects Reserve Fund. In the FY 1996 -97
budget, $1,624,500 was appropriated to the two school districts for recurring capital, including
vehicle replacement, equipment and furnishings, and site development and building renovations. Of
these items, all but vehicle replacement [$175,000 in 1996 and 23.33% of the total] would be
considered as school building capital needs eligible for impact fee funding. Total appropriations are
$1,245,450 [Total minus 23.33% for vehicle replacement].
TABLE 9
REVENUE SOURCES FOR PUBLIC SCHOOL CAPITAL FUNDING
FY 1996-97 TO FY 2005-06
5-Year
Fiscal Year Annual
Revenue Source 1996-97 1997-98 1998-99 1999-2000 2000-01 Avera e
SALES TAX 7%Annual Growth Rate
All Revenue
Artide 40 1st 1/2 cent $3,555,612 $3,804,505 $4,070,820 $4,355,778 $4,660,682 $4,089,479
Artide 42 1st 1/2 cent $3,539,928 $3,787,723 $4,052,864 $4,336,564 $4,640,123 $4,964,932
Total $7,095,540 $7,592,228 $8,123,684 $8,692,342 $9,300,806 $8,160,920
SchoolRevenue
Artide 40(80%ot 1st 1/2 cent) $2,844,490 $3,043,604 $3,256,656 $3,484,622 $3,728,546 $3,271,583
Artide 42(60%of ist 1/2 cent) $2,123,957 $2,272,634 $2,431,718 $2,601,938 $2,784,074 $2,442,864
Total $4,968,446 $5,316,238 $5,688,374 $6,086,560 $6,512,620 $5,714,448
Population(1.94%Avg Mnual Growth) 109,451 111,686 113,947 116,234 118,545 113,973
Per Ca ita School Revenue $45 $48 $50 $52 $55 $50
PROPERTY TAX 5°/a Annual Growth Rate In Assessed Valuatfon � 98%Collectlon Rate
Assessed Value(100s) $59,932,296 $62,928,911 $66,075,357 $69;379,124 $72,848,081 $66,232,754 !
Debt Service !
Principal-School Bonds $4,285,000 $4,280,000 $4,270,000 $5,265,000 $6,245,000 $4,869,000 �
Interest-SchoolBonds $3,717,900 $3,501,615 $3,285,585 $4,372,715 $5,390,150 $4,053,593
Private Placement-CHCCS Principal $519,058 $469,828 $1,234,360 $1,177,448 $1,167,725 $913,684
Private Placement-CHCCS Interest $442,242 $1,143,532 $1,122,351 $1,179,261 $1,188,987 $1,015,275
Service Charge-Schools $852 $1,000 $1,000 $1,000 $1,000 $970
Recurring Capital $1,624,500 $1,856,528 $1,949,652 $1,921,875 $1,969,920 $1,864,495
School Capital Projects Reserve' $494,442 $618,843 $649,884 $0 $0 $352,634
Total $11,083,994 $11,871,346 $12,512,832 $13,917,299 $15,962,782 $13,069,651
Total Tax Rate Re uirement $0.1849 $0.1886 $0.1894 $0.2006 $0.2191 $0.1965
PUBUC SCHOOL BUILDING FUND State Cor orate Income Tax Refund Estlmates
Amount $455,462 $640,905 $656,449 $694,712 $725,801 $634,666
Average Daily School Attendance 13,967 14,254 14,564 14,802 15,000 14,517
Per St�ent PSBF Revenue $33 $45 $45 $47 $48 $44
TOTAL SCHOOL CAPITAL FUNDS $16,507,902 $17,828,489 $18,857,655 $20,698,571 $23,201,203 $19,418,764
Source: Recommended FY 1998-2008 Capital Improvements Program and Approved FY 1998-99 Budget.
Average daily school attendance based on N.C. Department of Public Instruction projections.
'The current commitment for this fund is only through FY 1998-99
�
o�
TABLE 9(CONTINUED)
REVENUE SOURCES FOR PUBLIC SCHOOL CAPITAL FUNDING
FY 1996-97 TO FY 2005-06
10-Year '
Fiscal Year Annual
Revenue Source 2001-02 2002-03 2003-04 2004-OS 2005-06 Avera e
SALES TAX 7%Annual Growth Rate
All Revenue
Article 40 1st 1/2 cent $4,986,930 $5,336,015 $5,709,536 $6,109,203 $6,536,848 $4,912,593
Article 42 1st 1/2 cent $4,964,932 $5,312,477 $5,684,351 $6,082,255 $6,508,013 $4,890,923
Total $9,951,862 $10,648,492 $11,393,887 $12,191,459 $13,044,861 $9,803,516
School Revenue
Article 40(80°/a of 1 st 1/2 cent) $3,989,544 $4,268,812 $4,567,629 $4,887,363 $5,229,478 $3,930,074
Article 42(60%of ist 1/2 cent) $2,978,959 $3,187,486 $3,410,610 $3,649,353 $3,904,808 $2,934,554
Total $6,968,503 $7,456,298 $7,978,239 $8,536,716 $9,134,286 $6,864,628
Population (1.94%Avg Annual Growth) 120,881 123,243 125,630 128,042 130,479 119,814
Per Ca ita School Revenue $58 $61 $64 $67 $70 $57
PROPERTY TAX 5%Annuai Growth Rate in Assessed Valuation � 98%Collection Rate
Assessed Value(100s) $76,490,484.63 $80,315,009 $84,330,759 $88,547,297 $92,974,662 $75,382,198
Debt Service
Principal-School Bonds $7,030,000 $7,030,000 $7,030,000 $7,030,000 $7,030,000 $5,949,500
Interest-School Bonds $6,083,605 $5,901,605 $5,719,605 $5,537,605 $5,455,605 $4,896,599
Private Placement-CHCCS Principal $1,173,287 $1,173,287 $1,173,287 $1,173,287 $1,173,287 $1,043,485
Private Placement-CHCCS Interest $1,183,425 $1,183,425 $1,183,425 $1,183,425 $1,183,425 $1,099,350
Service Charge-Schools $1,000 $1,000 $1,000 $1,000 $1,000 $985
Recurring Capital $2,019,174 $2,069,649 $2,121,390 $2,174,424 $2,228,787 $1,993,590
School Capital Projects Reserve' $0 $0 $0 $0 $0 $176,317
Total $17,490;491 $17,358,966 $17,228,707 $17,099,741 $17,072,104 $15,159,826
Tolal Tax Rate Re uirement $0.2287 $0.2161 $0.2043 $0.1931 $0.1836 $0.2009
PUBLIC SCHOOL BUILDING FUND State Cor orate Income Tax Refund Estimates
Amount $759,281 $793,956 $832,219 $871,678 $911,137 $734,160
Average Daily School Attendance 15,162 15,279 15,313 15,331 15,291 14,896
Per Student PSBF Fievenue $50 $52 $54 $57 $60 $49
TOTAL SCHOOL CAPITAL FUNDS $25,218,275 $25,609,220 $26,039,165 $26,508,135 $27,117,527 $22,758,614
Source:;Recommended FY 1998-2008 Capital Improvements Program and Approved FY 1998-99 Budget.
Average daily school attendance based on N.C. Department of Public Instruction projections.
*The current commitment for this fund is only through FY 1998-99
�
�
Technical Report 20
The School Capital Projects Reserve Fund was created as part of the FY 1995 -96 budget, with
funds being earmarked for land acquisition and other "front -end" costs associated with new school
construction. For FY 1996 -97, $494,442 was appropriated and $618,843 was appropriated in FY
1997 -98. It should be noted that no funds have been expended from this account as of the FY
1998 -99 budget writing and that the initial commitment to the fund was for three years (the FY
1998 -99 Budget extends it for one additional year, and it is assumed that appropriations will not
continue after FY 1998 -99).
Collectively, the average annual tax rate required to generate funding for debt service and capital
needs during the ten -year school improvement program period would be $0.2009 per $100
valuation [needs to be updated]. If applied to a single - family home with an average value of
$150,000, property taxes would amount to $301. However, payments received in the future have a
lower value than in the present. The difference between the future and present value is interest.
Using the current bond interest rate of 5.5 percent, a property tax payment of $301 to be received
one year from now is worth $286 in the present. The method for calculating the present value is to
divide the future amount, $301, by one plus the interest rate (expressed in decimal form), or $301
divided by 1.055 equals $286. The difference, $15, is interest at 5.5 %. The general formulation is
thus:
Present Value = Future Amount
(1 + i) R
where n is the number of years between the present and when the amount is to be received, and i is
the interest rate.
Rather than the calculations above, the present value table shown in Table 10 provides "multipliers"
or "factors" that may be multiplied by the annual payment to arrive at the present value of a stream
of payments. In the example above, in which the interest rate is seven percent and the term is ten
years, the present value factor or multiplier is 7.53763. This means that the annual payment of $301
would be multiplied by 7.53763 to arrive at present value. Thus, the present value of $301 per year
for ten years would be $2,269. From Table 8, the capital cost per dwelling unit for new schools in
the Orange County School District is $7,323. The net cost for new schools would thus be $5,054,
the total capital cost minus the present value of payments toward property taxes for debt service and
capital. For the Chapel Ell- Carrboro School District, the net cost would be $12,048 ($14,317
minus $2,269).
In order to calculate the credit due for debt service payments, it is necessary to have some basis for
estimating the value of dwelling units in Orange County. Using 1995 building permit data, it is
possible to calculate the average value of single - family [e.g., owner - occupied] homes. This
information is shown in Table 11, and the values, by school district, are listed below.
Orange County $114,649
Chapel Hill- Carrboro $175,935
0
Table 10 - Present Value Factors
Pal
Discount Rate
5 Percent 5.5 Percent
6 Percent
7 Percent
Years
0.05
0.055
0.06
0.07
1
0.95238
0.94787
0.94340
0.93458
2
1.85941
1.84632
1.83339
1.80802
3
2.72325
2.69793
2.67301
2.62432
4
3.54595
3.50515
3.46511
3.38721
5
4.32948
4.27028
4.21236
4.10020
6
5.07569
4.99553
4.91732
4.76654
7
5.78637
5.68297
5.58238
5.38929
8
6.46321
6.33457
6.20979
5.97130
9
7.10782
6.95220
6.80169
6.51523
10
7.72173
7.53763
7.36009
7.02358
11
8.30641
8.09254
7.88687
7.49867
12
8.86325
8.61852
8.38384
7.94269
13
9.39357
9.11708
8.85268
8.35765
14
9.89864
9.58965
9.29498
8.74547
15
10.37966
10.03758
9.71225
9.10791
16
10.83777
10.46216
10.10590
9.44665
17
11.27407
10.86461
10.47726
9.76322
18
11.68959
11.24607
10.82760
10.05909
19
12.08532
11.60765
11.15812
10.33560
20
12.46221
11.95038
11.46992
10.59401
21
12.82115
12.27524
11.76408
10.83553
22
13.16300
12.58317
12.04158
11.06124
23
13.48857
12.87504
12.30338
11.27219
24
13.79864
13.15170
12.55036
11.46933
25
14.09394
13.41393
12.78336
11.65358
Pal
II
� TABLE 11
CALCULATION OF AVERAGE VALUE OF RESIDENTIAL UNITS
BY TOWNSHIP AND SCHOOL DISTRICT-ORANGE COUNTY,N.C.
Calendar Year 1996
Sin le-Famii Multi-Famil Mobile Homes Total
Average Average Average Average
Value Value Value Value Value
Townshi Units Value Per Unit Units Value Per Unit Units Value Per Unit Units SF+MF SF+MF
ORANGE COUNTY-TOTAL ***** ****** ****** *****
Bingham 64 $8,238,463 $128,726 0 $0 $0 11 xxxxxxx xxxxxxx 75 $8,238,463 $109,846
CedarGrove 55 $5,946,687 $108,122 0 $0 $0 31 xxxxxxx xxxxxxx 86 $5,946,687 $69,148
Chapel Hill 414 $73,276,743 $176,997 253 $12,589,156 $49,760 7 xxxxxxx xxxxxxx 674 $85,865,899 $127,397
Chapel Hill 227 $39,604,463 $174,469 14 $�72,086 $55,149 0 xxxxxxx xxxxxxx 241 $40,376,549 $167,538
Carrboro 108 $17,792,136 $164,742 239 $11,817,070 $39,259 3 xxxxxxx xxxxxxx 350 $29,609,206 $84,598
Remainder 79 $15,880,144 $201,014 0 $0 $0 4 xxxxxxx xxxxxxx 83 $15,880,144 $191,327
Cheeks 69 $5,340,333 $77,396 0 $0 $0 21 xxxxxxx xxxxxxx 90 $5,340,333 $59,337
Mebane 6 $492,000 $82,000 0 $0 $0 0 xxxxxxx xxxxxxx 6 $492,000 $82,000
Remainder 63 $4,948,313 $78,545 0 $0 $0 21 xxxxxxx xxxxxxx 84 $4,948,313 $58,908
Eno 55 $7,837,120 $142,493 0 $0 $0 19 xxxxxxx xxxxxxx 74 $7,837,120 $105,907
Hillsborough 61 $5,534,142 $90,724 0 $0 $0 5 xxxxxxx xxxxxxx 66 $5,534,142 $83,851
Hilsborough 41 $2,974,640 $72,552 0 $0 $0 3 xxxxxxx xxxxxxx 44 $2,974,640 $67,605
Remainder 20 $2,518,346 $125,917 0 $0 $0 2 xxxxxxx xxxxxxx 22 $2,518,346 $114,470
Little River 37 $3,613,904 $97,673 0 $0 $0 30 xxxxxxx xxxxxxx 67 $3,613,904 $53,939
TOTAL 755 $109,787,392 $145,414 253 $12,589,156 $49,760 124 xxxxxxx xxxxxxx 1132 $122,376,548 $108,106
CHAPEL HILL-CARRBORO SCHOOL DISTRICT
Cha lHill 379 $66,679,505 $175,935 253 $12,589,156 $49,760 3 xxxxxxx 674 $79,268,661 $117,609
ORANGE COUNTY SCHOOL DISTRICT
Remainder 376 $43,107,887 $114,649 0 $0 121 458 $43,107,887 $114,649
Source:Orange County Planning&Inspections Department,7/31/98
N
N
Technical Report 23
By multiplying that portion of the tax rate [$0.2009 per $100 valuation] to be used for debt service
and capital by the average value of each housing type, it is possible to identify the amount of credit
to be given to each type of housing unit. These calculations are shown on Table 12.
Sales Tax Revenues. Owners of undeveloped land do not pay sales taxes on that land. However,
they do pay property taxes. If property taxes have financed facilities, even in part, local
governments should determine the value of those payments [see discussion of "Property Tax
Revenues" above]. On the other hand, if payments for facilities came from State sales tax rebates,
they probably cannot be attributed to vacant land prior to development.
Orange County presents a somewhat different situation. In 1984, the Board of County
Commissioners adopted a one -half cent local option sales tax based on the provisions of Article 40
of G.S. 105. Although the statute indicated that 40 percent of the proceeds from the sales tax could
be used to finance public school capital projects and/or retire debt on such projects carried out
within the five preceding years, Orange County elected to use 80 percent of the proceeds for these
purposes. Two years later, in 1986, another one -half cent sales tax was adopted based on the
provisions of Article 41 of G.S. 105. Under the statute and the approved local option, 60 percent of
the proceeds could be used to finance public school capital projects and/or retire debt.
As shown in Table 9, Orange County expects to receive an average annual payment of $3,930,074
in Article 40 sales tax revenues from FY 1996 -97 to FY 2005 -06, the school improvement program
period. In addition, Article 42 average annual payments of $2,934,544 are anticipated. Combined,
the average annual amount of sales tax revenues that can be used for public school capital needs is
$6,864,628. Although Orange County does use a portion of these funds for debt service payments
and the remainder for capital needs, such distinctions are not considered in calculating the "credit"
to be given for sales tax payments.
To obtain projections of Orange County's population, long -term growth trends (1940 to 1990) were
analyzed using the CAPP [Community Analysis & Planning Projections] computer model. Shown
on Table 9 are the projections of the number of persons residing in the county during the FY 1996-
97 to FY 2005 -2006 period. For the ten -year period, the average annual population is 115,792. If
the average annual sales tax revenue for public school capital needs ($6,864,628) is divided by this
figure (119,814), the estimate of per capita sales tax revenue is $57.
To calculate the present value of the per capita revenues, assumptions regarding the interest rate and
term must be made. The current 5.5 percent interest rate on bonds is used, since almost half of the
sales tax revenues are used to pay debt service on school capital needs. A ten -year term is used,
matching the school improvement planning period and the time frame within which new school
facilities are needed. The present value table in Table 10 indicates that the multiplier would be
7.53763. This means that.the present value of the $57 annual per capita sales tax payment for ten
years would be $430 ($57 x 7.53763).
The per capita figure of $430 is of little use by itself. It must be converted to a per household figure,
permitting it to be deducted from the total capital cost per student for school capital needs. Using
1990 Census information from the N.C. State Data Center, it is possible to calculate the average
number of persons per household, by housing type. However, the use of the 1990 data may be
Technical Report 24
inaccurate, based on the updated student generation rates obtained in the 1995 Study of Housing
Characteristics and Student Generation Rates for Orange County. One way to account for these
differences is to subtract the number of school age children per household from the number of
persons per household using 1990 Census data. As shown below, the difference between the two
figures is approximately 2.0 persons per household.
Persons School Age Children
School District Per Household Per Household Difference
Orange County 2.59 0.45 2.14
Chapel Hill - Carrboro 2.22 0.29 1.93
To obtain estimates of the number of persons per household, the updated student generation rates
are added to the "differences" above. For the Orange County School District, the estimated number
of persons per household is 2.47 (2.14 + 0.33). For the Chapel Hill- Carrboro School District, the
estimate is 2.56 persons per household (1.93 + 0.63).
By multiplying the per capita figure of $430 by the number of persons per household, it is possible
to identify the amount of credit to be given to each new housing unit for payment of sales taxes. As
an example, the estimated number of persons per household in the Orange County School District
is 2.47. Multiplied by the per capita figure of $430, a household would be expected to contribute
$1,061 in sales tax revenues toward the construction of new schools. If the total capital cost per
household for new public school needs is $7,323, the family would be credited with the payment of
$1,061, thus reducing the impact fee to $6,261. The calculation of "credits" for sales tax
contributions is shown on Table 12.
Grants. Grants from the State are provided to local governments in the form of Public School
Building Funds. These funds come from corporate income taxes, a portion of which is returned to
counties for school construction purposes. As shown in Table 9, Orange County expects to receive
an annual average grant of $734,160 from FY 1996 -97 to FY 2005 -06, the school improvement
program period. For the same ten -year period, the average daily school attendance in both school
systems is expected to be 14,896 students. This figure is based on annual daily school membership
projections by the N.C. Department of Public Instruction and means that the average per student
revenue anticipated from this source during the school improvement program period is $49.
To calculate the present value of the per student revenues, the same assumptions regarding interest
rate and term are used as employed for sales tax revenues; i.e., a 5.5 percent interest rate and ten -
year term. The multiplier from the present value table in Table 10 would again be 7.53763,
resulting in a present value for the $49 annual per capita sales tax payment for 10 years of $369
($49 x 7.53763).
The per capita figure of $369 can be converted to a per household figure by use of the student
generation rates from Table 1. As an example, the number of students per household expected in
the Orange County School District is 0.33. Multiplied by the per capita figure of $369, a household
would be expected to generate $122 in Public School Building Fund revenues. If the total capital
cost per household for new public school needs is $7,323, the family would be credited with the
Technical Report 25
payment of $122, thus reducing the impact fee to $7,201. The calculation of "credits" for Public
School Building Fund revenues by school district is shown on Table 12.
Projected Impact Fee Amounts
Based on the foregoing analysis, it is possible to calculate projected impact fees for different
housing types in Orange County. These calculations are shown on Table 13 and simply involve
subtracting credits for property tax, sales tax, and Public School Building Fund contributions from
the total capital cost, per dwelling unit, of needed school improvements. The projected impact fees,
by dwelling unit, are as follows:
Orange County $4,404
Chapel Hill- Carrboro $10,320
In the sections that follow, final adjustments will be made to the fees, based on the benefit received
by new development and credits to the developer for constructing capital improvements.
BENEFIT CONSIDERATIONS
The amount of an impact fee is only one factor considered in terms of the legality of any impact fee
program. The sufficiency of the benefits that are received by fee payers is another criterion for
determining the reasonableness of an impact fee.
There are three standards that may be used in determining sufficiency of benefit. The main
difference among these standards is just who will benefit from (make use of) the facilities to be
financed, in whole or in part, with the impact fees. The first standard is exclusive benefit, the
second is substantial benefit, and the third is reasonable benefit. In practice, the methods of
implementing the latter two are almost identical.
A benefit would be exclusive if no one other than the occupants of the development that paid the
impact fee could use the facilities provided with those fees. Complying with this standard would
imply that the improvements be on -site or in close proximity to the development. Minimal distance
between facility and development becomes the indicator of the degree of benefit to the individuals
in that development as opposed to those in other developments.
When facilities such as public schools are provided, it is impossible to see how use could be
confined to individual developments. To a great extent, the provision of exclusive benefit and
impact fees are not compatible. However, few jurisdictions employ a strict exclusive benefit rule.
Rather, the standard is what may be considered to be a preponderance of benefit going to the
development paying the fees. In such cases, consideration should be given to the use of relatively
small geographic areas for both the collection and expenditure of impact fees. Such small areas
would be the evidence of benefit (use). This would involve identifying a number of subareas of the
community and establishing impact fee trust funds for each subarea. All receipts coming from such
subareas would be spent within those areas.
26
TABLE 12
PUBLIC SCHOOL CAPITAL NEEDS, COSTS, AND IMPACT FEES
ORANGE COUNTY, N.C.
School District
Needs /Costs Characteristics Orange Chapel Hill-
County Carrboro
CAPITAL COSTS
Capital Cost Per Dwelling Unit
Elementary School
$4,475
$7,671
Middle School
$1,586
$3,701
High School
$1,262
$2,945
Total
$7,323
$14,317
ADJUSTMENTS TO CAPITAL COSTS
Property Tax Contributions
Average Single - Family Home Value
$114,649
$175,935
Tax Rate Per $100
$0.2009
$0.2009
Tax Per Unit
$230
$353
Present Value Factor
7.53763
7.53763
Term (Years)
10
10
Interest Rate
5.5%
5.5%
Property Tax Credit
$1,736
$2,664
Sales Tax Contributions
$503
$822
Persons Per Household
2.47
2.56
Per Capita Payment
$57
$57
Present Value Factor
7.53763
7.53763
Term (Years)
10
10
Interest Rate
5.5%
5.5%
Per Capita Credit
$430
$430
Per Household Credit
$1,061
$1,100
Public School Building Fund Contributions
Students Per Household
0.33
0.63
Per Student Payment
$49
$49
Present Value Factor
7.53763
7.53763
Term (Years)
10
10
Interest Rate
5.5%
5.5%
PSBF Credit
$122
$233
Total Credits
$2,919
$3,997
IMPACT FEES: CAPITAL COSTS LESS ADJUSTMENTS
Capital Cost Per Dwelling Unit
Elementary School
$4,475
$7,671
Middle School
$1,586
$3,701
High School
$1,262
$2,945
TOTAL
$7,323
$14,317
Adjustments Per Dwelling Unit
Elementary School
$1,784
$2,142
Middle School
$632
$1,033
High School
$503
$822
TOTAL
$2,919
$3,997
,Impact Fees Per Dwelling Unit
$4,404
- $10,320
Technical Report 2
Title VI, Chapter 460, of the 1987 Session Laws addresses the issue of benefits and subareas
through the following provision:
'7n order to insure that impact fees paid by a particular development are expended on capital
improvements that benefit that development, the County may establish for each category of capital
improvement for which it collects an impact fee at least two geographical districts or zones, and
impact fees generated by developments within those districts or zones must be spent on
improvements that are located within or that benefit property located within those districts or
zones. "
All the benefit tests look for is a rationale that establishes how the benefit is to be received. The
greater the distance between the point of collection and the point of expenditure, the greater the
chance that insufficient benefit will be found. Having improvements that are needed set forth in a
capital improvements program is the best demonstration of benefit.
Another benefit criterion is the timing of improvements. Expected use is the overwhelming
criterion in matters of benefit. If improvements are in the remote future, benefits will be lessened
and perhaps insufficient. The benefit from improvements declines exponentially with respect to
time.
Facilities improvements usually require large expenditures that can only be met through gradual
accumulation of funding resources. In small jurisdictions and those experiencing modest growth,
the period of time may be substantial. Most impact fee ordinances have provisions that stipulate the
maximum period of time within which the fees must be spent on facilities that benefit the particular
development. Once this maximum period is reached, the fees would have to be refunded with
interest to the fee payer or successor in title. The most common period is six years, which is based
on the normal five -year capital improvements cycle, plus one year to integrate the receipts into the
capital improvements program.
For public schools in Orange County, geographic districts or zones already exist in the form of the
Chapel Hill - Carrboro School District and the Orange County School District. In addition, the need
for new school facilities has been identified as part of County's Capital Improvements Plan. In
addition, both school districts have prepared ten -year school improvement planning programs
which identify new public schools needed within the next 10 years to meet projected student
enrollments. Excluding those schools constructed or under construction, a new elementary school, a
new middle school, and expansion of the new high school are needed to serve future growth in the
Chapel Hill - Carrboro school system. For the Orange County school system, a new elementary
school, a new high school, and an addition to the existing high school are needed.
Clearly, applying the system of impact fees in Table 12 would be unreasonable in view of the
differing needs of each school district. For example, the identified needs in the Orange County
school system do not include a middle school. To impose an impact fee which included the capital
cost for a middle school would violate the benefit test. Likewise, school districts may vary in the
number of persons per household, students per household, and cost of housing. Unless such
differences are addressed, the residents of one school district may be paying impact fees for
facilities they will never use or paying a higher proportion of impact fees than conditions warrant.
Technical Report 28
To address this concern, the capital costs and adjustments for a middle school must be eliminated in
determining the total amount of impact fees to be charged in the Orange County school district
Another concern is that school districts vary in the number of persons per household, students per
household, and cost of housing. Unless such differences are addressed, the residents of one school
district may be paying impact fees for facilities they will never use or paying a higher proportion of
impact fees than conditions warrant. To address this concern, separate impact fees for the Chapel
Hill - Carrboro School District and the Orange County School District have been tabulated.
One final adjustment is necessary to address benefit considerations. The adjustments [credits]
identified in Table 12 reflect adjustments based on revenue sources. The sum of these adjustments
must be allocated to individual school types. This was accomplished by allocating revenue based on
the distribution of attendance by school type in FY 1996 -97.
The resulting impact fee calculations are shown on Table 13 for the Chapel Hill- Carrboro and
Orange County School Districts. The fees are summarized below and represent the maximum
amounts that can be reasonably be charged given the preceding analysis.
Orange County $3,474
Chapel Hill- Carrboro $10,320
29
TABLE 13
PUBLIC SCHOOL CAPITAL NEEDS, COSTS, AND IMPACT FEES
ORANGE COUNTY, N.C.
IMPACT FEES: CAPITAL COSTS LESS ADJUSTMENTS
Costs/Adjustments
School District
Orange
County
Chapel Hill-
Carrboro
Capital Cost Per Dwelling Unit
Elementary School
$4,475
$7,671
Middle School
$1,586
$3,701
High School
$1,262
$2,945
Total
$7,323
$14,317
Adjustments Per Dwelling Unit
Property Tax
$1,736
$2,664
Sales Tax
$1,061
$1,100
PSBF Funds
$122
$233
Total
$2,919
$3,997
Adjustment Allocation By School Type
Elementary School
$1,501.12
$1,911.89
Middle School
$656.09
$977.80
High School
$762.15
$1,107.41
Total
$2,919
$3,997
Impact Fees - All School Types
Elementary School
$2,974
$5,759
Middle School
$930
$2,723
High School
$500
$1,837
Total
$4,404
$10,320
Impact Fees - Identified Need
Elementary School
$2,974
$5,759
Middle School
$2,723
High School
$500
$1,837
Total
$3,474
$10,320