In order to fund the hundreds of millions of dollars' worth of roads and schools needed to sweeten their applications to build thousands of homes, developers Greenvest LC and Toll Brothers Inc. need Loudoun County to craft an unprecedented financing policy.
Community Development Authorities, or CDAs, are special districts that allow property owners to pay for infrastructure improvements in a single payment or over time.
Loudoun County used a CDA in the development of Dulles Town Center — the state's first — and a similar special tax district for the Route 28 improvements, but it has never attempted anything to the scope requested by the developers.
The county also has never used CDAs on residential property owners, only commercial. And using CDAs to build schools is unknown territory.
"The whole concept of schools is a nebulous one," said Ben Mays, the county's budget officer. "It hasn't been done in Virginia as far as I know."
Greenvest wants to use $462 million in CDAs to build six schools, a regional park and a road network. Toll Brothers has not provided details of its application to the county.
Essentially, a CDA means the cost of improvements will be passed on to new homeowners in Greenvest's and Toll Brothers' subdivisions.
THE DEVELOPERS assembled a top-notch panel of experts to advise the Board of Supervisors about CDAs at Monday's Finance/Government Services Committee meeting.
The panel included Keenan Rice, president of financing firm MuniCap Inc., who has assisted with every CDA bond issued in Virginia and Maryland, and Nathan D. Betnun, chief banker on the Dulles Town Center CDA.
"What a CDA does is require each property owner to pay for his share of improvements," Rice said. "With CDAs, the county is able to obtain additional improvement compared to what would be made with proffers and by by-right development."
Rice further argued that CDAs allowed improvements to happen faster and in a more systemic manner. State funding for roads is famously slim, and proffers offer results in roads, like Claiborne Parkway in Ashburn, ending abruptly at the edge of a developer's property.
But Supervisor Jim Burton (I-Blue Ridge) wasn't impressed by CDAs as a cure-all for infrastructure needs. With proffers, developers in Loudoun are required to pay the money up-front for transportation improvements, where a CDA might be paid over 15 to 20 years.
Developers pass the cost of proffers onto homeowners by tacking them onto home prices. Burton said that a CDA might allow the developers to remove that proffer tack on — which could be tens of thousands of dollars — and undercut the competition.
"Isn't this really a scheme to allow Greenvest and Toll Brothers to realize several hundred million dollars of extra profit by transferring an additional price they'd have to add onto the price of the house spread out over 20 or 30 years?" Burton said. "This really appears to be a very, very beneficial for the developer."
THERE WAS also the question of debt and the county's bond rating. Last year, Loudoun received its first-ever AAA bond rating from Moody's. According to the county's financial advisor, David Rose of Davenport & Co., AAA ratings from another top two rating agencies, Standard & Poor's and Fitch, are on the horizon as well.
But Greenvest and Toll Brothers are requesting that Loudoun County take on twice as much debt as it currently holds to make the CDAs work — a billion dollars' worth of CDA debt alone.
There was a difference of opinion between supervisors and the developers' panelists about whether conversations with the bond agencies resulted in the conclusion that the county would or would not be responsible to cure a defaulting CDA.
The panelists held that bond agencies wouldn't require the county to cure a default, but Vice Chairman Bruce Tulloch (R-Potomac) heard a different message during his meetings with the agencies.
"It was made pretty clear to us that ... they would hope we would pick up the default," Tulloch said in an interview.
"You guys are passionate about your product," Tulloch told the panelists. "That's great, but is it great for Loudoun County?"