AGENDA #4g

MEMORANDUM

TO: Mayor and Town Council

FROM: W. Calvin Horton, Town Manager

SUBJECT: Establishing a Payment in Lieu of Recreation Area Multiplier

DATE: January 9, 2006

PURPOSE

Adoption of the attached Resolution A would establish, as part of the Parks and Recreation User Fee Policy, a Multiplier of 1.55 for calculating payments in lieu of recreation area for subdivisions.

Resolution B would establish a separate Multiplier of -0- for buildings and structures located on affected properties prior to subdivision.

Resolution C would establish a payment in lieu of recreation area Multiplier of -0- for subdivisions of less than 3 lots.

The Manager recommends the adoption of Resolution A only.

BACKGROUND

On October 10, 2005, the Council enacted changes to the Land Use Management Ordinance that changed the method used in calculating payments in lieu of recreation area. The modification required a shift away from private appraisals to values assessed by Orange County and/or Durham County for property tax purposes, and a multiplier established by the Council annually as part of the budget.

DISCUSSION

The new method of calculating the value of recreation area payments in lieu uses the following factors:

Square Foot Value of the Property (X) Number of Square Feet Required for Recreation Area (X) Multiplier = Payment in Lieu of Recreation Area

The square foot value of the property is determined by Orange County and/or Durham County. The number of square feet of recreation area is determined by requirements of the Land Use Management Ordinance and varies depending on the zoning of the property. The Multiplier is to be established annually by the Council.

Provisions for payments in lieu of recreation area under the old Development Ordinance and the Land Use Management Ordinance were intended to reflect the value of the land after it was developed including all streets, utilities and infrastructure, and ready for construction of homes. The intent of the new process for determining value is to provide a fair and consistent method of calculating payments in lieu values.

We have examined past payments in lieu of recreation area and compared the new method with the actual payments received in the past, based on privately generated appraisals. Using that information we believe that a Multiplier in the range of 1.4 to 1.6 would likely achieve a fair representation of the value of raw land that has been improved and ready for construction of homes.

Because the Multiplier would become part of the Parks & Recreation User Fee Policy it would be reviewed each year. If experience indicates that the Multiplier appears to be too low or high it could be adjusted in future years.

ADVISORY BOARD RECOMMENDATIONS

Both the Planning Board and the Parks and Recreation Commission have reviewed this issue and have made the following recommendations:

Establish an initial Multiplier of 1.55. Both Boards felt that the 1.55 Multiplier would be a good initial number to work with based on previous experience.

Staff Comment: We believe that a Multiplier of 1.55 is likely to achieve the result of establishing a payment in lieu that is reflective of the appraised value of the property as it proposed for development.

Provide for annual review of the Multiplier.

Staff Comment: The Council would have the opportunity to review the number annually because the Multiplier would become a component of the Parks and Recreation User Fee Policy. This policy is reviewed and adopted each year as part of the Town’s budget process.

Establish a Multiplier of -0- for buildings and structures that are to remain on the site after the subdivision is complete. The Parks and Recreation Commission and Planning Board have pointed out that the current ordinance requires that the value of buildings and structures be used in calculating payments in lieu. They state that including the value of buildings inflates the cost of payments in lieu beyond what was required in the past. Both boards recommended that the Council establish a separate Multiplier of -0- for buildings and structures in order to neutralize this provision.

Staff Comment: We agree with the Boards that the Multiplier should apply only to raw land and not to buildings and structures. However, after consideration of the issue, we believe that the best way to accomplish this would be to modify the Land Use Management Ordinance. In addition, we believe that the wording of the Land Use Management Ordinance provides for a single Multiplier only and not a chart of Multipliers. A separate item on this evening’s agenda would set a public hearing date to consider a revision to the section of the ordinance dealing with payments in lieu and refer the matter to the Parks and Recreation Commission and Planning Board.

Resolution B would establish a Multiplier of -0- for buildings and structures. The Manager does not recommend the adoption of Resolution B.

Explore the possibility of establishing a Multiplier of -0- for subdivisions of fewer than three lots. The Parks and Recreation Commission and Planning Board expressed concern about the impact of major subdivision rules as they relate to smaller subdivisions.

Staff Comment: As with the question of a separate Multiplier for buildings and structures, we believe that the wording of the Land Use Management Ordinance provides for only a single Multiplier and not a chart of Multipliers. We believe that a better solution would be to work with applicants and find suitable recreation areas on the sites of these smaller subdivisions. We also believe that a change in the Land Use Management Ordinance would be a better way to address the situation if the Council desires to exempt all small subdivisions from the recreation area dedication requirements.

Resolution C would establish a Multiplier of -0- for subdivisions of less than three lots. The Manager does not recommend the adoption of Resolution C.

SUMMARY

The Parks and Recreation Commission, Planning Board and the Manager all recommend that an initial Multiplier of 1.55 be established as part of the Parks and Recreation User Fee Policy. This would apply to all major subdivisions and would include the value of land and structures as required under the current ordinance. This number would be subject to annual review by the Council as part of the budget.

RECOMMENDATION

Parks and Recreation Commission’s Recommendations: The Commission discussed this issue at its October 24, 2005 meeting and voted unanimously (7-0) to recommend that the Council establish a payment in lieu of recreation area Multiplier of 1.55 for the remainder of FY 2005-06 and a process for annual review. On December 7, 2005 the Commission discussed other issues related to the payment in lieu of recreation area and voted unanimously (10-0) to recommend that the Council establish a Multiplier of -0- for structures that are to remain on the site after subdivision of the property and a Multiplier of -0- if there are less than three units in a subdivision.

Planning Board’s Recommendations: The Planning Board met on November 15, 2005 and voted unanimously (7-0) to recommend that the Council establish a Multiplier of 1.55 for payments-in-lieu of recreation area and a multiplier of -0- for structures that are to remain on the site after subdivision of the property. The Board also recommended that the Council consider mitigation for small subdivisions by using a Multiplier of -0- if there are less than three units in a subdivision.

Manager’s Recommendation: We recommend that the Council adopt the attached Resolution A, which would establish a Multiplier of 1.55 for calculating payments in lieu of recreation area for subdivisions.

ATTACHMENTS