Item #4

TO:                  Chapel Hill Town Council

                        Board of Trustees/Chancellor

FROM:            David Owens

RE:                  Overview of Joint Staff Working Group (JSWG) Proposed Development Review Process for Carolina North and Development Agreement Basics

DATE:            September 25, 2008

The Joint Staff Working Group met weekly over the summer of 2008 to further develop alternatives for a new Town development review process to be applied to the Carolina North project. The staff work built upon the recommendations of the Horace Williams Citizens Advisory Committee reports, the work of the Leadership Advisory Committee, the technical work and analysis prepared by the University on the Carolina North project, and the prior experience with review of University development proposals.

Principles Guiding Process Design

The key principles used by the staff in developing this proposed process included:

1. Secure broad and multiple opportunities for meaningful public participation and discussion at all phases of the process and allow for adaptation during the review process.

2. Provide for open, transparent negotiations and decision-making.

3. Assure the opportunity for the Town and public to have the University’s broad plans for long-term development of the entire project to provide context for the plans submitted for approval and a context for long-term development and broad community impacts.

4. Have a well defined, discrete portion of the overall project submitted for approval.

5. Provide adequate time for staff, public, and Council review of plans, with predictability regarding process timing.

6. Provide predictability and certainty for both the Town and University for that discrete portion of the project submitted for review, with subsequent effective administrative review of individual development projects that are consistent with the approved plan. Avoid constant necessity of modifications of prior approvals.

7. Provide an ability to craft mitigation measures based on the approved plan, allowing greater flexibility and efficiency than dealing with individual projects on an ad hoc basis.

8. Provide adequate opportunities for monitoring performance and enforcement on an on-going basis.

9. Provide adequate opportunities for adaptation and periodic review and approval of subsequent discrete phases of the project, providing the opportunity to incorporate experience and changing conditions as needed.

10. Assure that the full range of previously identified community, Town, and University concerns are addressed, taking full advantage of the substantial discussions already completed on this project.

After more detailed review and discussion, the JSWG continues to recommend a process that uses a development agreement as the critical organizing tool for Town review of the Carolina North project. To accomplish the above objectives, the JSWG recommends proceeding in three steps:

· First, the University submits a request for ordinance amendments to create this new process, along with its plans and studies regarding Carolina North. The community and Town would review this request over the fall of 2008 and develop specific ordinance text amendments and a draft development agreement.

· Second, the specific text amendment and draft development agreement would be submitted to the Council in January 2009 to allow a second round of public review and comment on these specific proposals. The University and Town would discuss and negotiate specific conditions and provisions in the proposed development agreement over the winter.

· Third, in late spring, all of the modifications and adjustments would be incorporated into a final proposed package of LUMO text amendments, a rezoning, and a development agreement that would be formally submitted for Town action. The Council would then conduct its official hearings and take action on the proposal by June 2009.

More details on these steps and the timing for the overall process are set out later in this memo.

Development Agreements

This section outlines the basic provisions regarding potential use of a development agreement between the Town and University as a tool to manage development of the Carolina North project. It addresses these points:

1. Statutory Authorization and Requirements

2. Steps Necessary to Use

3. Differences and Similarities Relative to Previously Used Tools

4. Some Pros and Cons of Use of Development Agreements

5. Outline of Potential Provisions

Statutory Authorization and Requirements

Prior to 2006, there were three means for a landowner in North Carolina to secure a right to develop property in accordance with the rules in effect at a fixed time (generally referred to as a vested right). First, if the owner had made substantial expenditures in good faith reliance on a valid governmental approval, the courts held under the common law that the owner has a legal right to continue the development under the rules in effect at the time of approval. This test is somewhat imprecise and has been subject to much litigation on each dimension of the test. Second, the legislature in 1985 attempted to simplify matters by adding provisions to the statutes that issuance of a building permit under the state building code establishes a vested right for the work covered by the building permit for the life of that permit. Third, in 1990 the legislature added a broader statutory vesting option -- the site specific development plan vested right. These statutory provisions allow for a vesting of at least two years (but not more than five years) upon local government approval of a site specific development plan. Each local government was given the option of defining for its jurisdiction exactly what constitutes a “site specific development plan.” For both the building permit and site specific development plan vested right, the landowner is not required to make substantial expenditures after approval to become vested as the permit or plan approval itself creates the vested right.

In 2005 the legislature made a fourth option available in North Carolina – a development agreement. The concept of using a binding development agreement to establish respective landowner and local government responsibilities and obligations originated in California several decades ago. California land use law, like North Carolina, has long provided for common law vested rights. However, the California court in 1976 held in a high profile case involving a very large planned community that there could be no common law vesting prior to securing building permits for individual structures. In that case the owner had secured all required zoning and subdivision approvals, obtained grading permits, and spent millions of dollars on roads and utilities. But the owner had not reached the stage of constructing individual buildings so there were no building permits yet issued when new regulations were adopted significantly reducing allowed densities in part of the project land. The California court found no vested rights. Following considerable public debate about the issue, the California legislature in 1979 created the opportunity for willing local governments and land owners to enter into development agreements that create broader vesting possibilities. The purpose of the agreement is to allow large-scale developments to be reviewed and, if approved, secure vesting of their rights at the time the development agreement is executed rather than after building permits are issued. Some fifteen states have now enacted similar legislation, most modeled largely after the California statute.

North Carolina joined this trend in 2005 by enacting statutory authority for both cities and counties to enter development agreements. G.S. 160A-400.20 to –400.32, attached as Appendix A, provides the authority for cities and sets the basic requirements for the use of development agreements.

The basic concept of a development agreement is straightforward. A landowner proposes a large scale development and presents a fairly detailed plan for that development. The project may provide for public or private provision of supporting infrastructure. If the local government and land owner reach agreement about the development and infrastructure, they enter into a development agreement that binds each to the agreement for an agreed upon time.

The statute sets several bounds on the use of development agreements. The property subject to a development agreement must be at least 25 acres in size. The agreements may last no more than 20 years. The agreements must be adopted by ordinance by the town council. A public hearing requirement on the proposed adoption must be held by the council following the same public notice requirements applicable to zoning text amendments. Once executed by both parties, the agreement must be recorded and binds subsequent owners of affected land as well the current owner.

The statute provides a list of items that must be included in each development agreement. These include:

1. A legal description of the property subject to the agreement and the names of its legal and equitable property owners.

2. The duration of the agreement.

3. The development uses permitted on the property, including population densities and building types, intensities, placement on the site, and design.

4. A description of public facilities that will service the development, including who provides the facilities, the date any new public facilities, if needed, will be constructed, and a schedule to assure public facilities are available concurrent with the impacts of the development.

5. A description, where appropriate, of any reservation or dedication of land for public purposes and any provisions to protect environmentally sensitive property.

6. A description of all local development permits approved or needed to be approved for the development of the property together with a statement indicating that the failure of the agreement to address a particular permit, condition, term, or restriction does not relieve the developer of the necessity of complying with the law governing their permitting requirements, conditions, terms, or restrictions.

7. A description of any conditions, terms, restrictions, or other requirements determined to be necessary by the local government for the public health, safety, or welfare of its citizens.

8. A description, where appropriate, of any provisions for the preservation and restoration of historic structures.

9. A development schedule, including commencement dates and interim completion dates at no greater than five year intervals.

The statute also places several limits on development agreements. A local government may not impose a tax or a fee or exercise any authority that is not otherwise allowed by law. The development agreement must be consistent with the ordinances in effect when the agreement is approved. This is a significant difference in the North Carolina statute relative to the California statute and those used by many other states, including South Carolina. In those other states, the development agreement may establish standards different from and contrary to the existing zoning. In North Carolina, if the agreement calls for something different from the existing zoning, the zoning ordinance must be amended prior to or contemporaneously with the adoption of the development agreement.

The agreement may specify that the developer furnish certain public facilities, but it must also provide that the delivery date of these facilities is tied to successful performance by the developer in completing the private portion of the development. This feature is designed to protect developers from having to complete public facilities in circumstances where progress in build-out may not generate the need for the facilities. While the town ordinances in effect when the agreement is executed do remain in effect for the life of the agreement, the development is not immune from changes in state and federal law or changes necessary to deal with threats to public health and safety. 

A development agreement may specify that the project be commenced or completed within a certain period of time. It must provide a development schedule and include commencement dates and interim completion dates for intervals no greater than five years. An annual review of progress is mandated and if there is a material breach of the agreement the town can cancel the agreement. The parties can at any time amend the agreement by mutual consent.

Unlike the California and some other state statues, the North Carolina development agreement statute does not have a specific provision on enforceability. It does include a provision allowing for cancellation of the agreement in the event the developer materially breaches the agreement and fails to cure the breach.

Steps Necessary for Use

The development authorized in a development agreement must be consistent with the zoning regulations applicable to the land involved at the time of approval of the development agreement. Thus the LUMO would be amended to create a new zoning district to be applicable to the property covered by the development agreement. The new district would authorize and set the procedural and substantive requirements for a development agreement to carry out the development proposed in an approved plan. This new zoning district would be created specifically for and applicable only to the Horace Williams property.

The current assumption is that a LUMO text amendment to create this district, the rezoning of the land to the new district, the plan for the development covered by the agreement, and the development agreement itself would be processed by the Town concurrently. The University would also submit for informational purposes a context plan showing it current intentions regarding a fifty-year plan for the entire Horace Williams property. The text amendment and rezoning would only be approved if the Town and University also reach agreement on a specific plan for a defined portion of the Carolina North project and a development agreement covering that portion of the project.

All of the public notice and hearing requirements, as well as mandatory referral to the planning board, that are required for LUMO text amendments would have to be followed to act on the proposed development agreement.

Differences and Similarities to Previously Used Tools

The use of a development agreement that is based on a rezoning and approval of a plan for a portion of the Carolina North project has some similarities to the current provisions of the LUMO for approval of a master land use plan with subsequent administrative approval of site plans for individual buildings consistent with the master plan. The Town has the ability to see and consider the conceptual plans for an overall project and to review and approve a specific portion or phase of the project. This allows consideration of a broad range of potential impacts and the requirement of comprehensive mitigation measures. It also allows consideration of the interrelations between individual projects and how they will fit into the broader community.

There are, however, several very important differences. With the development agreement, the entire process of town review and approval is legislative. There are no quasi-judicial decisions involved as is now the case with master land use plans and special use permits. This results in several important differences:

1. Degree of discretion. The Council retains more discretion as to whether the project is approved since the decision is based on whether the Council concludes the agreement is generally in the public interest as opposed to whether the evidence supports a conclusion that the project meets pre-determined standards. Of course, University concurrence with the agreement is also necessary.

2. Process. The Council has more flexibility in the process. With quasi-judicial decisions the public hearing must be an evidentiary one – witnesses are testifying under oath as to whether the standards are met, no ex parte communication is allowed, formal findings must be adopted, and so forth. With the development agreement approach, the Council is free to create multiple venues for public comment. Citizens can still offer factual evidence about the project, but they are also free to offer broad comments and opinions about the terms of the agreement as well as its approval or rejection.

3. Scope. Mutually agreed upon conditions need not be limited to those necessary to bring the project into compliance with pre-set standards, as would be the case with a quasi-judicial decision. The length of the agreement, the physical area covered, provisions regarding the specific amount and type of development covered, and mitigation measures are all subject to negotiation. To the extent the Council and the University agree, the agreement can include specific sections that address each of the issues raised in the Horace Williams Citizen Advisory Committee reports and the Leadership Advisory Committee report.

Some Pros and Cons of Use of Development Agreements

Whether or not the development agreement tool is appropriate for the Carolina North project is of course a policy choice for the Council and the University. Experience in other states indicates local governments, land owners, and the public have found several positive dimensions for development agreements. These include:

· An ability to review and consider a large project as a whole rather than dealing piecemeal with individual permit applications for individual components of the project.

· An ability to consider a wider range of mitigation alternatives, to tailor conditions of approval, to secure binding developer commitment to the mitigation measures, and to assure compliance with the measures through regular periodic reviews mandated by the agreement.

· Greater flexibility and creativity in addressing community concerns given the broader context in which the projects are reviewed

· Longer term certainty and predictability for both the local government and the landowner.

· More flexible opportunities for community participation and open negotiation of conditions.

There are also a variety of potential drawbacks that should be considered. Among these:

· Once approved, both the local government and developer are locked into the terms of the agreement for its duration unless both mutually agree to amendments, thereby reducing flexibility to respond to changing policies, preferences, or needs. While there are exceptions to this rule for changing state and federal law and serious threats to public health and safety, they are strictly limited unless both parties consent.

· The up-front planning, technical analysis, and community participation can require considerable expenditure of developer and governmental time, funds, and effort.

· There is the possibility for ad hoc decision-making that does not take into account the comprehensive plan or a sufficiently broad community context.

Illustrative Outline of Potential Provisions

The development agreement itself is a formal legal document that is often rather lengthy. Most run at least twenty to thirty pages (and many are much longer) and they often have even more detailed plans, provisions, and documents incorporated by reference.

The development agreement must include the statutorily mandated provisions noted above and such other provisions as the parties deem appropriate. An outline of potential provisions is attached for illustrative purposes as Appendix B. This outline was prepared by JSWG members Ralph Karpinos and Pat Crawford, attorneys for the Town and University respectively.

Timing for the Review Process

The sequence of activity needed to carry out this general framework of review, with recommended time frames, is set out below.

September 25, 2008

Council and Trustees meet, receive briefing on staff work over the summer, general outline of proposed process for proceeding, tools that are proposed for use, and a preliminary outline of the timing of the process. Council and trustees agree on framework and timing of the process for moving forward.

October 2008

University submits petition developed by the joint University/Town staff work group proposing that a text amendment and map amendment for the Horace Williams property be developed.  University and Town staff work group present joint proposal for negotiation of a Development Agreement. University includes as supporting information the adopted overall context plan for Carolina North for information, a specific phase plan for a discrete portion of the project for eventual approval, and existing background analysis (environmental studies, fiscal impact analysis, transportation analysis, design guidelines, etc.).

Council receives the University petition. Council refers petition to its staff and directs staff to:

· Meet as needed with public and town appointed boards to secure advisory board and  public comments on the issues to be addressed, standards to be applied, and potential specific conditions on approval;

· Consult with the University staff on an on-going basis, continuing the JSWG process; and,

· Report back to the Council with a staff analysis of the University proposal, draft ordinance text and map amendments, and a preliminary draft development agreement by January __, 2009.

Council and trustees begin a regular schedule of continuing working meetings and to invite public comment on the issues to be addressed, standards to be applied, and potential specific conditions on approval.

November-December 2008

Council/Trustee group conducts public meetings on proposed text amendment and development agreement, including opportunities to receive public comment on overall project and key specific issues (transportation, housing, environmental impacts, fiscal impacts, etc.).

Advisory board meetings as needed.

University board of trustees updated on process and submission of plans, petitions, and development agreement.

January 2009

Text amendment, based on the joint work of the Council/Trustee working group and the staff working group, is submitted by Town staff to the Town Council for processing under the procedures provided for in the Town’s LUMO. 

University submits formal application for Zoning Atlas Amendment to proposed new zoning district. 

Draft development agreement, based on the joint work of the Council/Trustee working group and the joint staff working group, is submitted for processing under procedure proposed by text amendment.

Council accepts text and map amendment proposals and proposed development agreement and initiates steps for formal review of each.

February-March 2009

Joint staff working group directed public information/education meetings on proposed text and map amendments and development agreement (perhaps organized with individual meetings focused on key topics)

Council-trustee meetings held as needed to address issues.

April 2009

University and Town staff submit further proposed amendments or revisions to phase plan, text and map amendments and development agreement

Council accepts final proposal package for formal public hearings.

May 2009

Planning board makes recommendation on package.

Council holds formal public hearings on package.

June 2009

Council takes action on text and map amendment, phase plan, and development agreement.

If approved, University ratifies and records development agreement.

[Appendix A- State Statutes on Development Agreements]

[Appendix B- Illustrative Outline of Development Agreement Provisions]