AGENDA #1a

BUDGET WORKING PAPER

TO:                  W. Calvin Horton, Town Manager

FROM:            Kay Johnson, Finance Director

SUBJECT:      Downtown Service District

DATE:            April 5, 2006

This Budget Working Papers reviews the purpose of the Downtown Service District, the reasons and steps necessary for revising the boundaries of the District, and a discussion of the District tax rate.

BACKGROUND

The Downtown Service District was established in June 12, 1989 under the provisions of State Statute Chapter 160A, Article 23 in order to provide improved services to the District.  The Statues require that a district is in need of services to a “demonstrably greater extent than the remainder of the city”.  Such services can include physical improvements such as sidewalks, parking, lighting, as well as other improvements intended to promote development, general economic welfare, safety, health and other services for the convenience for the district. 

The District boundaries have remained unchanged since 2003.  Historically, the Downtown Service District boundaries were designed to include properties that were predominantly commercial and to exclude properties that were predominantly residential.  Over time, the predominant use of properties can change, so some buildings that had residential uses in 2003 now have commercial uses.  

In addition to the changes in use since 2003, additional changes in the District are anticipated based on current building proposals for mixed-use developments.  The Council could continue the policy of determining whether a structure is included within the District based on the primary purpose of the structure (commercial or residential) or could modify the criteria for inclusion.  The criteria need to take into account the primary beneficiaries of the District tax.  For example, if the District funds are used only for commercial development, then residential properties would be less likely to be the primary beneficiaries than if the funds were used for public safety.

The current Downtown Service District tax rate is 5.3 cents and the assessed value of the Downtown District property is $151 million as of March 1, 2006.  One cent on the tax rate currently yields approximately $14,700 in revenue, and the total revenue for 2005-06 is expected to be $77,000.  Currently, there is a fund balance of $11,000.

DISCUSSION

We will be reviewing the boundaries of the Downtown Service District and on April 24^th will bring the Council a recommendation on redefining the District based on the current practice of including properties that are primarily commercial.  If the Council adopts a resolution to consider changing the boundaries, we would notify potentially affected property owners.  As required by statute, in order to change the boundaries, we need to provide public notice at least four weeks in advance of holding a public hearing.  Any changes could be made effective July 1.

The Council could consider a change in the tax rate for the District and could adopt a change at the same time as the rate is established for the Town as a whole.

RECOMMENDATION

We recommend that the Council plan to review the Downtown Service District boundaries and hold public hearings on any potential changes on May 10 and May 22.