HomeMy WebLinkAboutAgenda - 11-11-2014 - 2ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: November 11, 2014
Action Agenda
Item No. 2
SUBJECT: Update on the Ephesus Church Road /Fordham Boulevard Public
Improvements and Request for County Investment in the Project
DEPARTMENT: Finance and Administrative PUBLIC HEARING: (Y /N) No
Services
ATTACHMENT(S): INFORMATION CONTACT:
A) Town of Chapel Hill Presentation
B) Town of Chapel Hill Memo on County
Participation
C) Bond Counsel Memorandum on Tax
Increment Financing
D) County Presentation
Bonnie Hammersley, 919 - 245 -2306
Clarence Grier, 919 - 245 -2453
Craig Benedict, 919 - 245 -2592
Steve Brantley, 919 - 245 -2326
1
PURPOSE: To receive an overview and additional analysis of the County's potential
involvement/investment in the Ephesus Church /Fordham Boulevard (Ephesus Fordham) Public
Improvement Plan.
BACKGROUND: The Town of Chapel Hill, at the March 21, 2014 Joint Meeting with the Board
of County Commissioners, presented an improvement project for the Ephesus Church Road —
Fordham Boulevard area of the Town of Chapel Hill. In order to support the renewal of the
Ephesus Fordham area, the Town of Chapel Hill must make investments in much needed traffic
and stormwater capital improvements. The project would be financed with the use of Tax
Increment Financing. Under this method of financing, economic development projects are
financed by pledging the anticipated incremental growth in tax revenues generated by the
incremental increase in the tax base as a source of repayment for the debt incurred to finance
the economic development project. The basis and theory behind this method of project
financing of economic development projects is that the project being financed is enabling the
tax growth, and therefore the project is, in theory, will be self- financing because if not for the
project, the growth in the tax base and corresponding tax revenues would not have occurred.
The Town of Chapel Hill would like the County to participate in the Ephesus Fordham Renewal
Project by pledging the lesser of 50% of the actual increment property tax revenues received, or
50% of the actual annual debt service cost.
Additionally, the Town of Chapel Hill (Town) is suggesting that the County consider an approach
to investing in the project using mutually agreed upon criteria, which will be tied to the Ephesus
- Fordham project phases of completion and performance. The Town would provide an annual
Ephesus Fordham project performance report during the County's budget deliberations that
would include the following: additions to the tax base, status of public improvements, status of
private improvements, including progress toward meeting affordable housing, energy efficiency
and transportation goals, and economic impact analysis.
The first Ephesus Fordham performance report would be submitted during the first budget cycle
in which an actual tax increment from the project was expected in the next fiscal year. The
County could potentially benefit from participating with the Town of Chapel Hill from increased
property and sales tax revenues.
The County budget would be committing an average contribution for the debt service of
$385,612 over 18 years for a total of $6,941,017 for the project. This also takes in account the
possible impact of adding approximately 284 new students in the Ephesus Fordham area of the
Chapel Hill — Carrboro School District (CHCCS) over an 18 -year period that could increase the
need for a new elementary and /or move up the timeline for Elementary #12 and Middle School
#5 for CHCCS. An interlocal agreement to provide the contribution for the debt service would
not affect the County's bond rating, debt policy or legal debt limit.
Additionally, if a new high school and /or major additions have to be made to one of the existing
CHCCS high schools to accommodate the projected increase in students, the additional debt
service would reduce the net amount of property taxes received as result of the planned project
improvements.
FINANCIAL IMPACT: There is not a financial impact with receiving this information. The
financial impact will occur if the Board of County Commissioners participates in the project.
RECOMMENDATION(S): The Manager recommends that the Board receive the information
and provide feedback to staff.
Attachment A
Q
Ephesus Fordham Renewal Financing Plan
Kenneth C. Pennoyer
Town of Chapel Hill
Business Management Department
November 2014
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The Town is planning an installment financing to pa5
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for $10 million of Ephesus Fordham public
improvements by combining financing with the Town
Hall Renovation Project
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Synthetic Tax Increment Financing
Funds for repayment of the debt will come from
the additional (incremental) taxes generated
from the redeveloped properties
Total Annual Payments would be about
$800,000 (20 years)
21500,000
21000,000
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500,000
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Expected Development
2..2. Million. Sq. Ft. & $2.6o Million. Value
Years 0 -4
Years 4 -10
Years 10 -20
■ Retail
7
❑ Commercial
❑ Residential
20 Year Cost
Cumulative Debt S
$20,000,000
$18,000,000
$16,000,000
$141000,000
$12,000,000
3 $10,000,000
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( 1 $8,000,000
$6,00%000
$4,000,000
$2,000,000
$0
Debt Service Cost
Benefit Comparison a
ewice &Town Property Tax
Increment
Town Property
Tax Increment
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Fiscal Year
Major Revenues Schools &County 9
County Property Tax
(87.8) $ 1,424,704 $ 154,721 $ 726,694 $ 2,306,120
School Impact Fees
(1 Time) $ 1,286,000 $ 192,900 $ 443,670 $ 1,922,570
Schools Property Tax
(20.84)
338,164 37,095 174,229 549,488
Note: Tax projections based on full phase build -out using current tax rates
10
Proposed County Participation
Lesser of 50 °0 of the actual tax increment or 50 °0
of the actual Debt Service on the $10 million of
public Improvements
Subject to annual appropriation based on
Town progress report on project performance
Maximum Annual Payment would be about
$400,000
11
Annual Reporting
• The Town will provide the County with an
annual project performance report during the
budget cycle that will include:
— Additions to Tax Base
— Public improvement status
— Private improvement status
— Economic impact analysis
Projected County Tax Increment
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$0
Ln w
L.L L.L
N w M O rl N
L.L L.L L.L L.L L.L L.L
❑ Net Increment
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L.L L.L L.L L.L L.L L.L L.L
11 DS Contribution
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20 Year Cost Benefit Comparison 13
Cumulative Debt Service &Town. Property Tax
s20,000,000 Increment plus County Contribution.
$18,000,000
$16,000,000
$14,0001000
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$0
Property
icrement
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LL
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LL
LL
LL
LL
LL
IL
LL
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LL
LL
LL
LL
LL
LL
LL
LL
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Fiscal Year
14
School Generation Numbers
• Difference Between Town and County Student
Growth numbers:
— Based on available (2007) Student Generation
factors for CHCCS for multi - family Housing units
Town calculated 105 new students for 1,495 units
— County
estimated 450 new
students
based on
over -all
student generation
rates (all
housing
types)
Mc
500
M
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I11
100
9
2007 Student Generation Numbers
2007 Multi - Family
T�
2007 All Types
15
County Estimate 450
Town Estimate 105
16
2014 Student Generation Numbers*
• New Student Generation Rates
— Broken out by Sub -Areas (Chapel Hill & ETJ)
— Separate factors for number of bedrooms
• Multifamily: 0 -2 bedrooms, 3+ Bedrooms &Average)
— Based on market demand we believe that student
generation for Ephesus Fordham Development
will be mostly 1 -2 bedroom multi - family units
* Note: Based on preliminary un- adopted student generation rates
1
2014 Student Generation Numbers *'
IR
500
J I I
Mill
ill
100
x
(Chapel Hill and ETJ)
553
2014 Multi -F (1- 2014 Multi -F 2014 All Types
2 B) (Avg B)
Likely range based on 2014
Student Generation Factors
* Note: Based on preliminary un- adopted student generation rates
W
Village Plaza Apartments
• 15t Ephesus Fordham Development Application
— 266 Multi - Family Housing Units (1 -2 bedrooms)
— 15,600 Square Feet of new retail
— Population Estimate: 505 new residents
Multi - Family Housing
Reta i I
Total
ii I fi
Square Footage
15,600
or 321,600
Village Plaza Apartments
Revenue 10=0
Property Tax
Sales Tax
Impact Fees (one -time)
Preliminary Revenues Estimates
Town
$ 354,900
31,100
I
19
Schools
Mr$�5941675 r$ 141,200
75,381 0
0 342,076
100
90
80
70
60
50
40
30
20
10
0
Village Plaza Apartments*
Student Generation Numbers (2014)
32
Multi - Family (1 -2 Bedroom)
Based on 266 one and two
bedroom multi - family units
* Note: Based on preliminary un- adopted student generation rates
20
21
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questions?
22
FROM: Kenneth C. Pennoyer, Business Management Director
SUBJECT: Ephesus Fordham Renewal Information concerning County Participation
DATE: November 3, 2014
Summary
The Town is proposing that the County partner with the Town in the Ephesus Fordham Renewal
Project by pledging support for the project and considering, on an annual basis, financial
participation based on the performance of the project in meeting mutually agreed upon goals.
Project Description
The Town has made a commitment to the renewal of the Ephesus Fordham project area and has
begun a process of renewal that addresses many issues and interests, including:
• Stormwater
• The Town is in the process of planning $1.2 million of Town financed
stormwater improvements designed to mitigate longstanding stormwater issues
the area.
• The Town Council has created a Stormwater municipal service district to fund
ongoing costs of stormwater management in and around the district.
• Roadway Improvements
o The Town is in the process of planning $8.8 million of Town financed and much
needed roadway improvements to be completed in 4 phases to correct existing
transportation problems, expand connectivity and minimize impact on future
traffic conditions.
• Affordable Housing
o The Town Council established a public - private partnership and donated 8.5 acres
of land for an affordable housing complex within the Ephesus Fordham project
area.
• Energy Efficiency
o The Town is working on a pilot rebate program that incentivizes developers to
maximize the energy and water efficiency of new buildings.
• Transportation
o This project addresses transportation connectivity and congestion issues that,
according to the Town's most recent Community Survey, represents the area that
should receive the most emphasis over the next two years.
• Rezoning
o The Town Council created the Ephesus /Fordham Form District. The use of form
based zoning provides highly prescriptive requirements that will help to ensure
23
development compatible with community standards and also streamlines the
approval process.
Financing
o In order to Finance this project the Town is using a combination of two - thirds
bonds and an installment financing secured by the Town Hall building. By
combining Ephesus Fordham public improvements with the Town Hall project,
the Town can efficiently use a tax increment financing approach, without going
through the additional cost and time involved with a statutory (Amendment One)
TIF. Although this approach is faster, less expensive and more flexible, it does
by -pass official County approval that would be needed for a statutory TIF.
Project Benefits
Recognizing that the benefits of the project will accrue both to the Town and the County and that
the Town and the County share many of the same interests with regard to the successful
completion of this project, we are seeking County support to solidify the public financial
underpinnings of the renewal process.
Using a TIF approach to financing, with the Town issuing the debt and taking the risk of any tax
increment shortfall, we feel there is opportunity for the County to support the project financially
using only a portion of tax revenues that, if not for the Town's public investment, would not
otherwise exist.
Suggested Approach to County Investment in Project
While the Town is committed to paying for the public improvements, regardless of the outcome
of the project, we believe that the County and Town have shared interests, described above, that
would best be served with a long -term partnership that recognizes both the rewards and costs
associated with an economic development project of this scale.
We understand the multiple demands on new tax dollars and the need to prioritize those demands
on an annual basis through the budget process. Therefore we are suggesting that the County
consider an approach to investment in the Ephesus Fordham project based on project
performance using criteria both the Town and the County agree on. The Town would provide an
annual Ephesus Fordham project performance report during the County's budget deliberations
that would include the following:
• Additions to the tax base
• Status of public improvements
• Status of private improvements, including progress toward meeting affordable housing,
energy efficiency and transportation goals
• Economic impact analysis
The first Ephesus Fordham performance report would be submitted during the first budget cycle
in which an actual tax increment from the project was expected in the next fiscal year. In other
words, we will not ask for funding until the tax benefits become measurable.
/.'
SanfordHolshouser
www.Sanfordholshouserlaw.com
- Memorandum-
To: Ken Pennoyer
Date: November 4, 2014
Re: Ephesus - Fordham —
County- Municipal Agreements To Share Tax Increment
Attachment C
When the Town of Chapel Hill made a presentation last spring to the Orange County Board
of Commissioners on the Ephesus - Fordham project, one Commissioner asked for examples in which
a county and a municipality agreed to share the benefit of a tax increment for the purpose of paying
off a loan. We quickly found two illustrations.
Woodfin — Buncombe County
Buncombe County in 2008 issued approximately $13 million in formal tax increment
financing bonds to pay for improvements in Woodfin, a town within the County. As part of the
financing arrangements, the County and Town each pledged (to each other and to the bondholders)
that the incremental tax revenues generated from taxable improvements in the financing district would
be paid to a central fund and used for debt service on the bonds. This is a binding, long -term agreement
between the two entities that covers 100% of each party's incremental revenues.
Fayetteville — Cumberland County
Fayetteville and the County, along with the City's Public Works Commission, entered into a
2010 agreement to finance and develop a parking garage in the City's downtown. The City and
County each agreed that 100% of the incremental tax revenues in a defined municipal service district
would be used to make payments on the City's financing for the parking deck. This arrangement is in
support of an installment financing and not a formal tax increment financing, and so is closer to the
arrangement proposed for Ephesus - Fordham improvements.
********* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * **
We would be happy to look for additional examples at the Town's or the County's request.
Please let us know if you have any questions about this material or if we can otherwise be of any help.
-- Bob Jessup -- Adam Parker
Attachment D 25
Ephesus Fordham Renewal
Potential Economic Development for Orange County
The proposed redevelopment of Chapel Hill's Ephesus Church — Fordham
Boulevard district offers several realistic economic development benefits:
• Significantly greater property tax valuation is created, per acre, due to the
higher density allowed by the proposed redevelopment.
• Retail sales tax potential will reduce our local sales tax leakage, and help
retain wealth currently flowing out of Orange County and into our
neighboring counties. Although Orange County ranks #1 in N.C. for
highest per capita income, we rank 81St among all 100 N.C. counties in
retail sales tax collected per capita.
• The inventory of available commercial office locations will grow, thereby
making Orange County & Chapel Hill more competitive to recruit new and
expanding corporate headquarters site search projects. Currently, larger
office headquarters projects are able to find suitable commercial space in
Durham County & Wake County that is not available in Orange County.
26
Ephesus Fordham Renewal
Potential Economic Development for Orange County
• Promotes a new and exciting destination for tourism.
• Generates opportunity to attract more affordable housing options.
• Creates more shopping, dining & employment opportunities here at
home, which reduces transportation & out - migration to adjacent counties.
• Identifies and improves critical infrastructure needs such as road
improvements, mass transit and storm water systems.
• Synthetic Tax Increment Financing (TIF) is a commonly used &successful
financial tool that regularly assists other North Carolina communities
promote local economic development and land use goals.
• Economic development offices with the Town and County should
collaborate on the recruitment of active investment clients and prospects.
27
Ephesus Fordham Renewal
Potential Economic Development for Orange County
• The Ephesus Fordham Renewal Planning incorporates consultant
recommendations made in 2013 by Urban3, LLC which created a 3 -D
visualization map showing property tax revenue per acre throughout
Orange County. The report's visualization tool showed where the County's
property tax revenues are derived, where property values are highest, the
link between higher density development and increased property tax
generation, and the positive economic potential of redevelopment of
mixed use projects. Higher density generally yields higher real estate
market values and property taxes.
• Urban3 LLC's study was jointly funded in a partnership between the Town
of Chapel Hill, Orange County (Economic Development), the Chapel
Hill /Carrboro Chamber of Commerce, area developers (East West
Partners) and local real estate firms.
Per Capita Income in North Carolina
Orange County &Adjacent Counties - 2012
61111I1I11
#1 $51,702
30000
10000
$37,910 average for
all 100 N.C. counties
#2 $50,697
#6 $44,839
Durham County
#11 $40,963
F
r ,�
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U.S. Department of Commerce
Bureau of Economic Analysis (2012)
a� aF
G
oa
.�
�S
o
4
roc
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r -rya
Jc of c
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= 3
m
$37,910 average for
all 100 N.C. counties
#2 $50,697
#6 $44,839
Durham County
#11 $40,963
F
r ,�
¢' 2° �a , F c m a° ,� Q o �° C' �� a`.
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U.S. Department of Commerce
Bureau of Economic Analysis (2012)
$200.00
$180.00
$160.00
$140.00
$120.00
$100.00
$80.00
Annual Retail Sales Tax Per Capita
Orange County &Adjacent Counties - 2012
$106.65
Orange Alamance
$188.65
$126.88
Chatham Durham
N. C. Department of Revenue (2012)
29
$123.81
Wake
Retail Sales Taxes Per Capita
Orange County vs. Durham County - 2012
90 80 70 60
I
+ Per Capita Income liank
i Percapital Retail Sales
Rank
1st
50 40 30 20 10
LM
N. C. Department of Revenue (2012)
9th
10th
1st
0
30
Durham
Orange
Retail Sales Tax Leakage - 2012
Orange County vs. Alamance &Chatham Counties
($250.0) ($200.0) ($150.0) ($100.0) ($50.0) $0.0 $50.0 $100.0 $150.0
31
Chatham
Alamance
Orange