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HomeMy WebLinkAboutAgenda - 10-13-2015 - 2 - Discussion on Using a County Water and Sewer District as a Mechanism to Provide a Tool to Finance Expenditures in the Rogers Road Area ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: October 13, 201 ► Action Agenda Item No. 2 SUBJECT: Discussion on Using a County Water and Sewer District as a Mechanism to Provide a Tool to Finance Expenditures in the Rogers Road Area DEPARTMENT: County Manager PUBLIC HEARING: (Y/N No ATTACHMENT(S): INFORMATION CONTACT. A. Memo Regarding Rogers Road Water and Sewer District Bonnie Hammersley, 919-245-2300 Proposal B. Procedure for Creating a County Water and Sewer District PURPOSE: To discuss creating a county water and sewer district as a mechanism to provide a tool to finance expenditures in the Rogers Road area. BACKGROUND,-.! The final report of the Historic Rogers Road Neighborhood Task Force dated September 17, 2013 contemplated the creation of a water and sewer district and directed the managers to explore the creation of such a district using a collaborative approach. As part of this process, the managers from each jurisdiction developed a recommendation to, provide service through a County water and sewer district. (Attachment A) A "county water and sewer district" is a type of governmental entity authorized by North Carolina law. Many counties across the State form these districts as a tool to provide utility service in areas that cannot be conveniently served by existing utility providers. Some counties have had more than five districts within: their boundaries. These districts are often created to, serve isolated or amore sparsely-settled areas, but the vehicle provides flexibility to serve any defined area within a single county. Differences Creating a county water and sewer district offers certain flexibilities compared to extending service using current policies and procedures. 1. The District would be able to implement a schedule of rates, fees, and charges independent of' orange Water and Sewer Authority's (OWASA) schedule, which can therefore be tailored to the special characteristics of the District. For example, a District could establish a fee to recover primary infrastructure costs as properties are developed or redeveloped in the future. Similarly, the Diistrict 2 could make use of unique technologies and design features that OWASA might not choose to use on a system-wide basis, but might be appropriate for a smaller area. 2. The District may be able to obtain loans and grants for which Chapel Hill, Carrboro, and Orange County are not eligiible. This would include loans and grants from traditional water and sewer funders, but also from funders more interested in the social justice aspects of the project. I Although the District would not have its own planning authority; having the District defined as a separate entity may facilitate coordinated planning and other land use discussions among the relevant governments. Governance, Management, and Constructimon By law, the Board of County Commissioners serves as the District's governing body. Existing law allows for no alternatives to this governing structure. Although the District could bid and supervise the system's construction itself, staff has contemplated that the District would contract,with OWASA to supervise and manage the construction of the system. The District could also contract with OWASA to manage the provision of utility service where OWASA would be responsible for monitoring and maintaining the system and for billing and collecting from customers. Procedure to Create the District Creating the District is not procedurally complex. The District could be fully established within 60 days of the Board's determination of the geographic boundaries of the District. Attachment B outlines the procedure for creating the District. Carrboro would need to consent to including within the District any property that is wit in Carrboro town limits. F*Inanci*n There are a variety of options for financing the construction of the system and for recovering any loans made to the District. This discussion sets aside the possibility of external grant funding and does not address the on-going fee structure that would be used to pay for regular operations and maintenance. These available tools can be used in combination. Initial Financing 1. The governmental partners could lend or grant money to the District to fund construction. a. The terms of loan repayment, if any; could include provisions for the District to pay interest or for portions of the loan to be forgiven upon defined conditions. b. There are ways that a local government partner could borrow money to be loaned or granted to the District if a partner wanted to explore that option. 3 c. Funds could be either paid to the District up front, or on an as-needed basis over the project construction period. 2. The District could borrow money from a third-party, lender. a. The District could use most of the tools, regularly available to, North Carolina local governments, including general obligation bonds, (subject to a vote of the residents of the District), non-voted installment financing (which uses the financed assets as collateral for the loan), or revenue bonds (which pledges net operating revenues of the system as security for the loan). b. Because the District will be a new operating entity with a small scope, a private lender might well ask one or more of the governmental partners to, provide "moral obligation" backing to a District loan which is a promise to, consider funding a loan payment that the District could not otherwise pay. This would be an annual, "subject to appropriation9i promise similar to the County's commitment to its installment financings and limited obligation bonds. Cost Recovery The District would have most of the same tools to raise revenue as other general purpose local governments. • Property tax — a rate would be established annually by the Board of Commissioners. There is no obligation to levy a separate property, tax within the District. • Water and sewer rates, fees and charges including usage fees and availability fees, as well as capital charges for new service • Special assessments against benefitted properties — allows the District to collect funds over a ten-year period. Please note that special assessments can be assessed to recover less than all of the costs of a project, and that installments can, but are not required to, include a component of interest over time. Sales taxes — the District would not share in sales tax distributions FINANCIAL IMPACT: There is no immediate financial impact related to this discussion. SOCIAL JUSTICE, IMPACT: The following Orange County Social Justice Goal is applicable to this agenda item: GOAL: ENABLE FULL CIVIC PARTICIPATION Ensure that Orange County residents are able to engage government through voting and volunteering by eliminating disparities in participation and barriers to participation. RECOMMENDATION(S): The Manager recommends that the Board receive this information and provide direction to Staff as appropriate, especially as to whether the Board wants staff to pursue the approach of a water and sewer district. Attachment A— Memo Regarding e ers Feed Water and Sever District Fire To: Town of Carrboro Alderman Town of Chapel Mill Council. Board of Orange County Commissioners FROM David.Andrews, Town of Carrboro Manager Bonnie Hammersley, orange County Manager Roger Stancil, Town of Chapel.Hill Manager RE Rogers Road water and Sewer District Proposal The final report of the Historic Rogers Road Neighborhood Task Force, September 1.7, 2013 included recommendations to proceed with the Rogers Road Sewer project. The task force also contemplated the creation of a water and sewer district and directed the managers to explore the creation of such a district using a collaborative approach. The purpose of this memorandum is to inform our Boards of a joint recommendation for the creation, financing and development of a Rogers Road water and Sewer District (District) which is further explained below. The Managers have discussed this recommendation with Ed Derwin, owASA Executive Director for technical support, Bob Jessup, Bond Counsel for legal, procedural issues, and the Rogers bead.. Eubanks Neighborhood Association (RE NA) representatives David Caldwell and Reverend Campbell for the community perspective. The conversations have been well received and we anticipate working closely with these stakeholders as the recommendation matures. The commiftment to extend the sewer system to the 86 owners of properties within the Is Historic Rogers Road neighborhood has been and will remain the priority throughout the consideration of a proposed Rogers Road Water and Sewer District. 'Objective The objective of creating a Water and Sewer district is to provide a tool to finance expenditures in the District. To accomplish this goal, staff recommends that orange County create the Rogers Road water and Sewer District. The Managers' are recommending this course because a the District would be able to implement a schedule of rates, fees, and charges independent of owASA's schedule, which can therefore be tailored to the special characteristics of the District, and b the District may be able to obtain loans and grants that Chapel Hill, Carrboro, and orange County are not eligible for (such as funds from social justice agencies or funds from water and sewer infrastructure grant programs). In addition, the District will not have its own planning authority and can serve as a focus for joint planning of the area by the three jurisdictions. Procedure The creation of the District is not procedurally complex all that is needed is a a public bearing (preceded by published and posted notice) and b a simple resolution enacted by the Board. of County Commissioners stating that the District's residents will benefit from the District's establishment. The entire process of creating the District can be completed as quickly as 60 days from publishing the notice of public hearing. By law, the Board of County Commissioners serves as the District's governing body.. The District would contract with OWASA to manage the provision of eater and suer services within the District. The Town of Carrboro would need to consent through resolution to including any portion of the District lying within Carrboro town limps as pat of the District. Debt financing would be used to extend service to the District's residents. District construction. costs would be funded by either a the District borrowing from private sources or b the three governments advancing funds to the District from borrowed funds or cash on land.. • Legally available methods for the District to borrow money on its own would include general obligation bonds (after approval by voters within the District), revenue bonds and installment financing. because of the limited asset base and cash-flow of the District, however, Chapel Hill, t arrboro, and Orange County in some combination) would likely be asked to commit mit to a "moral obligation" to provide funds to bridge any gaps in debt service payments. • If the three governments anal/ r OWASA advance finds to the District, the funding p artners would either a p a cash into a ce .tra. fun upfront for construction costs, pay vAASAA as requested., or c a combination of the two. Any partner could borrow its contribution, and the District's repayment obligation to the partner could bear interest.. The District would use some combination of several available revenue streams to repay the debt, whether to a third-party lender or back to the funding partners. The District could use its net operating revenues as the primary source of repayment.. The capital charges could be levied, such as development fees for currently open space. The District would have its own taxing authority (via a separate rate set by the County Commissioners should they choose to levy are additional. tax) and could levy special assessments, The Managers' will present this recommendation to their respective Boards independently for feedback and consideration in October at a regularly scheduled meeting.. If you have any questions in the meantime, please do not hesitate to contact us. 6 Attachment B — Procedure for Cry atin a Water and Sewer C istrict 1 County Board determines the proposed boundaries of the District,, and directs staff to proceed with the subsequent steps. As the process develops the Board can delete propert,ies from the District (the District, need not be completely contiguous), but cannot add parcels without restarting the process. The boundaries can include territory within Carrboro, subject to Carrbolro's consent (which would have to, occur before Step 4). The boundaries have to be sufficiently defined to allow the later assessment of taxes within the District if that taxation comes to pass. 2 County provides notice of public hearing. The notice must be published once a week for three consecutive weeks within the District, and posted at three or more public places within the District. The hearing must be at least 20 days after the first posting or publishing. 3 County Board conducts public hearing. 4 County Board adopts resolution creating the District,. This action can immediately follow the hearing, or come later. In the resolution, the Board must find that (a) the proposed district needs the service, (b) the residents of the proposed district will benefit from the district's creation, and (c) it is economically feasible to provide service within the district without unreasonable or burdensome tax levies. 5 County publishes notice of the District's creation. This is only published notice, not posted notice. The notice must be published in two successive wee.. s in the same newspaper as carried the hearing notices. The statutes set out a form for this notice. The publication triggers a 30-day period during which any procedural challenges to the District's formation must be started. This is only published notice, not posted notice. The District boundaries may later be extended by a similar notice and hearing process.