Agenda #4p

AGENDA #4p

MEMORANDUM

TO: Mayor and Town Council

FROM: W. Calvin Horton, Town Manager

SUBJECT: Resolution Calling a Public Hearing on Proposed Modification of the Land Use Management Ordinance Related to Payment in Lieu of Recreation Area

DATE: June 15, 2005

Adoption of the attached resolution would call a Public Hearing for September 19, 2005, to consider a modification to the Land Use Management Ordinance that would change the way that payments in lieu of recreation area are calculated.

BACKGROUND AND DISCUSSION

We currently allow payments in lieu of providing both Recreation Space and Recreation Area. Recreation Space is the amount of land that must be improved for active recreation in multi-family developments. Examples of Recreation Space include provision of tennis courts, play areas, swimming pools, and basketball courts. Recreation Area is the amount of land that must be set aside for the future use of the residents of subdivisions. Recreation Area is not generally improved for active recreation.

New Method of Calculating Payments in Lieu of Recreation Space: With the adoption of the Land Use Management Ordinance we changed the method of calculating payments in lieu of providing Recreation Space. Prior to adoption of the Land Use Management Ordinance we used an appraisal-based methodology to set fees for payments in lieu of providing recreation space. The Land Use Management Ordinance simplified the process by establishing a set fee that the developer can use to calculate payments in lieu. Currently developers choosing to use the payment in lieu option for Recreation Space must pay $12 per square foot. The fee is established each year during the budget process in the Parks and Recreation Department’s User Fee Policy.

Current Method of Calculating Payments in Lieu of Recreation Area: Section 5.5.2 of the Land Use Management Ordinance sets minimum amounts of Recreation Area that must be dedicated with any subdivision of land. Section 5.5.2 (d) (1) allows a developer to make a full or partial payment in lieu of providing recreation area on the site.

If the Council agrees to allow the developer to make a payment in lieu of providing land, the amount of the payment is calculated under the terms of Section 5.5.2 (d) (4). The developer is required to pay an amount that is equal to the fair market value of the entire property, as proposed for development, times the percentage of the property required for recreation area. This requires the developer to hire an appraiser to determine fair market value. The application of this provision has been variable and at times disappointing.

Proposed Method of Calculating Payments in Lieu of Recreation Area: We believe that the method used for payments in lieu of Recreation Space have worked so well that it would make sense to use a variation of the method for Recreation Area as well.

Because State law requires that the value of the payment be in relation to the value of the land, some appraisal method must be used. We believe that both the Town and developers would benefit from a method of calculation that does not rely on privately-generated appraisals.

We believe that the Council should consider changing the Land Use Management Ordinance to establish a new method of calculating payments in lieu of recreation area that would use both appraisal values generated by Orange County for property tax purposes and a multiplier established by the Council annually as part of the budget.

The multiplier would be a consistent, fair, and easy method of calculating the value of the land after it is prepared for development. The current ordinance does this by requiring a new appraisal for each project. Those appraisals use different methods and that makes different assumptions about the value of the land after it is developed, but before homes are built. We believe a consistent multiplier, set by the Council, would be a better way to determine value than utilizing the various appraisal methods developers have used in the recent past.

For example, if Orange County establishes a value of $750,000 for a 250,000 square foot property the value per square foot would be $3. If the developer is required to provide 26,100 square feet of Recreation Area the base value of that recreation area would be $78,300. We would then use a Council approved multiplier to determine the final value of the land as it is developed. In this example we would use 1.25 as the Council approved multiplier: $78,300 X 1.25 = $97,875.

The main benefits of such a change would be:

Values for property would be based on the single appraisal method used by Orange County government. Currently applicants use different methods of appraisal that have resulted in far different values for similar tracts of land. Appraisers generally use the appraisal method that most benefits their customers.
It would become easier and less expensive for the developer to determine the costs of a payment in lieu. Developers would not have to pay to have an appraisal produced for this purpose. The value could be determined quickly at the beginning of the development process.
It would be easier for the Town to evaluate each prospective payment in lieu. Payments could be more predictable and fairly applied among all developers.
The Town would no longer have to decide whether or not to hire an appraiser to challenge the results of the developer’s appraisal.

If the Council agrees, we would schedule a Public Hearing for September 19, 2005 to consider changes to the Land Use Management Ordinance related to establishing a fee for payments in lieu of providing Recreation Area through the subdivision process. Proposed changes to the ordinance are shown in Attachment A.

RECOMMENDATION

We recommend that the Council adopt the attached resolution to call a Public Hearing for September 19, 2005, to consider adjustment to Section 5.5 of the Land Use Management Ordinance related to the method for determining the price of payments in lieu of providing recreation area.

ATTACHMENTS

Proposed change to Section 5.5 of the Town of Chapel Hill Land Use Management Ordinance (p. 5).

A RESOLUTION CALLING A PUBLIC HEARING TO CONSIDER CHANGES TO THE PAYMENT IN LIEU OF PROVIDING RECREATION AREA PROVISIONS OF THE LAND USE MANAGEMENT ORDINANCE (2005-06-15/R-13)

NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Council calls a Public Hearing for 7:00 pm on Monday, September 19, 2005, in the Chapel Hill Town Hall, to consider amending Section 5.5.2 (d) of the Land Use Management Ordinance and refers the proposed amendment to the Town Manager, Parks and Recreation Commission, Greenways Commission, and the Planning Board for an opportunity to comment and make recommendations.

This the 15^th day of June, 2005.

ATTACHMENT 1

Proposed changes to the Land Use Management Ordinance

5.5 Parks and Open Space

5.5.2 Minimum Recreation Area and Recreation Space

(d) Payments in Lieu of Provision or Dedication

(1) In lieu of providing or dedicating parks and open space area required pursuant to this Section, a developer of a subdivision may, with the approval of the Town Council, make a payment to the Town whereby the Town may acquire or develop recreation land to serve the subdivision. A developer may make a partial payment in combination with the partial provision of recreation area if the Town Council determines that the combination is in the best interests of the citizens of the area to be served.

(2) The Town Council may require a payment to the Town in lieu of providing or dedicating recreation area required pursuant to this Section where the minimum recreation area required by this Section equals two (2) acres or less.

(3) The Town shall use such payment only for the acquisition or development of recreation, park, or open space sites, as allowed by law.

(4) The amount of the payment shall be the product of the minimum amount of recreation area required multiplied by the fair market value of the land being subdivided. The fair market value of the land being subdivided (including streets, utilities, and other related improvements) shall be the expected fair market value of the land after it is subdivided in the manner proposed by the developer and approved by the Town. The costs associated with appraisal of the fair market value of the land shall be borne by the developer.

(5) If the Town disagrees with the developer's appraisal of the land's fair market value, fair market value shall be determined by a special appraisal committee made up of one professional appraiser appointed by the developer, one professional appraiser appointed by the Town Council, and one professional appraiser appointed by the initial two committee members. The committee shall view the land and hear the contentions of both the Town and the developer. The committee shall determine its findings by majority vote and shall certify them to Town Council within thirty (30) days of the time of the third member's appointment. The costs of the committee shall be borne by the developer.

(4) Payments In Lieu of Recreation Area shall be determined by the following formula:

A per square foot value of the property shall be determined, as established by Orange County for real estate tax purposes, including land value and the value of all existing structures and improvements. The square foot value shall be multiplied by the number of square feet of Recreation Area required for the development to arrive at a Base Value. The Base Value shall be multiplied by a Recreation Area Payment in Lieu Multiplier to determine the required amount of payment in lieu of Recreation.

The Payment in Lieu Multiplier for Recreation Area shall be established by the Town Council annually as part of the budget process.

~~(6)~~ (5) The developer shall make the payment before approval of a final plat for the subdivision, provided, however, that the Town Manager may allow phasing of payments consistent with the approved phasing of the subdivision.