To the Editor:
The recently released Beauregard Small Area Plan Draft includes a complicated and risky provision that earmarks the increase in property tax revenue generated in the plan area into a separate fund. The March 27, 202 draft includes a provision that would reduce the growth in General Fund Revenues by as much as $81 million and financially constrain future City Councils’ when considering the City budget and setting property tax rates. It would also pass on increased costs and potential liabilities if various assumptions built into the 30-year projection are delayed.
City officials and developers have tentatively agreed to a list of public amenities and have estimated costs on a planning level basis. As a precaution, the projection in the Draft Plan includes substantial funding for contingencies.
If the developers are successful in getting the densities being requested in the Draft Plan, the developers have tentatively agreed to pay for items characterized as “public benefits”. The so-called public benefits include:
The traffic Ellipse (Seminary Road and North Beauregard);
Transitway for BRT;
Fire station;
Enhanced landscaping on North Beauregard;
Enhanced tree canopy to replace the trees removed as part of construction;
All-purpose athletic field and other recreational facilities; and
Financial contribution towards providing affordable and workforce housing.
The estimated total cost (2011 dollars) of the developer paid amenities is $153.8 million.
The City proposes that a portion of incremental real estate taxes generated by construction be earmarked and set aside to advance construction. Assuming build out of the project in phases and construction of proposed infrastructure, it is estimated the incremental tax revenues collected in the separate fund during the first 12 years would generate over $81 million. The Draft Plan estimates one-third of the $81 million in City tax increment revenues will be reimbursed by developer contributions over the last two decades of the Plan. The Draft Plan also assumes the City would provide $4.0 million in housing trust funds and other monies from other sources.
The revenue stream and payback projections require faith in forecasting the future. To generate the cash flow necessary to start construction of the fire station and other amenities, it would be necessary for the City to “infuse” into the project the incremental real estate tax revenues. The revenues collected would depend on the amount of net new cumulative development measured in square feet. The finance provision does not include other unanticipated costs due to the project such as improving the capacity of the Holmes Run Trunk Sewer Line and maintaining the overflow ponds in the flood plain to be donated to the City.
As an example, the fire station is estimated to cost $10 million and the developer would receive credit (in-kind contribution of $18 million) for dedication of transportation right-of-way and land for the fire station. Using funds from the earmarked fund, the fire station would be built by the City sometime between 2014 and 2016. The developers would reimburse the City during the last 16 years of the projected development build out schedule.
The financing provisions are based on a variety of assumptions over a 30-year period that could dramatically change. Given the City’s dependence on the Federal government, a downturn in the local economy would reduce incoming revenue and lengthen the payback period. In addition the City would be in a subordinate position in relation to the developers and likely have to agree to adjust the plan to minimize losses in revenue. More importantly revenues accumulating in the separate fund could not be used for schools, parks, public safety and other programs supported by general revenues.
The proposed implementation plan is open ended and places added risk to City taxpayers. It also infringes on the budgetary discretion of future City Councils. To better evaluate the consequences, the Beauregard Small Area Plan Draft should include the following:
A legal reference setting the authority for the City Council to make open-ended budgetary commitments in the planning process,
An analysis in the Appendix and include reasonable scenarios (best and worst case), and
A performance based schedule limiting the City’s infusion of tax revenues into the project to commitments of financial resources to begin construction.
Forecasting the financial future is perilous. The so-called “public amenities” should be reevaluated in terms of the potential impacts of redevelopment in the plan area as well as the risk to taxpayers.
Dave Cavanaugh