AGENDA #3

MEMORANDUM

TO:                  Mayor and Town Council

FROM:            W. Calvin Horton, Town Manager

SUBJECT:      Public Hearing: Land Use Management Ordinance Text Amendments–Modifications to Payment-in-Lieu of Recreation Area and to Setback Language

DATE:            September 19, 2005

PURPOSE

This Public Hearing has been called to consider the following text amendments to the Land Use Management Ordinance:

1) Payment in Lieu of Recreation Area:  a modification to the method used in calculating payments in lieu of recreation area.  The modification to the calculation method would use a consistent appraisal value for land determined by Orange County and/or Durham County for property tax purposes, and a multiplier established by the Council annually as part of the budget.

2) Setback Language: a modification to the setback language of the Land Use Management Ordinance.  The modification would remove the single use of phrase, “front line setback,” in order to apply consistency to the standard setback language and definitions used throughout the rest of the document.

BACKGROUND AND DISCUSSION

1)  Payment in Lieu of Recreation Area

The Land Use Management Ordinance requires a recreation component for most residential developments.  There are two recreation component types: 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.  The Town currently allows payments in lieu of providing both Recreation Space and Recreation Area. 

Recreation Space à	Multi-Family Developments
Recreation Area   à	Subdivision

Current Method of Calculating Payments in Lieu of Recreation Space: With the enactment of the Land Use Management Ordinance on January 27, 2003, we changed the method of calculating payments in lieu of providing Recreation Space. Prior to enactment 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 a developer may use to calculate payments in lieu. The fee is established each year during the budget process in the Parks and Recreation Department’s User Fee Policy.  Currently developers proposing to use the payment in lieu option for Recreation Space must pay $12 per square foot.

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 major subdivision of land. Section 5.5.2 (d) (1) allows a developer to propose 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 has worked well and 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 recommend that the Council amend 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 and/or Durham 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 have used different methods and made 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.

Process to Establish Multiplier:   The proposed text amendment would establish a new method of calculating payments-in-lieu of providing on-site recreation area in new subdivisions that would use both appraisal values generated by Orange County and/or Durham County for property tax purposes and a multiplier established by the Council annually as part of the budget.   This multiplier has not yet been determined; however a precedent for creating a multiplier was set when the Parks and Recreation Department created the multiplier for the Recreation Space payment-in-lieu procedure.  The process included data collection and analysis of all recent payment-in-lieu cases and collaboration between the Parks and Recreation Department and the Parks and Recreation Commission.  When the two entities agreed on a multiplier, it was instituted on a temporary basis for a year while both parties evaluated its appropriateness.  After a year, both entities agreed that the multiplier was sound and it became a permanent figure, subject to revision during the annual budget process.

The Recreation Area multiplier would also be established annually in the budget process when the Council reviews and adopts the Parks and Recreation User Fee. Currently the square footage fee for Recreation Area is included in the Parks and Recreation User Fee document and is subject to annual review and revision. If the Council enacts the proposed amendment to the Land Use Management Ordinance the Parks and Recreation Commission and the Parks and Recreation Department would work together to recommend an initial multiplier fee. We would report back to the Council at the first opportunity with data and recommendations. 

Summary Benefits:

The main benefits of an amendment to modify the method of calculating recreation area payments would be:

• The multiplier would be a consistent and easy method of calculating the value of the land after it is prepared for development.
• Values for property would be based on the single appraisal method used by Orange County and/or Durham 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.

We recommend consideration of the following adjustment to Section 5.5.2 shown by strikethroughs and underscoring:

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 the 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.”

(6)        In the event that a property owner successfully appeals the County valuation of the property after the Payment in Lieu for Recreation Area is made to the Town, and the resulting change in valuation would have reduced the amount of the Payment in Lieu for Recreation Area, the Town shall reimburse the developer the difference between what was paid and what would have been paid had the revised valuation been used.

2) Setback Language

Section 3.8 of the Land Use Management Ordinance applies dimensional standards for development.  Included in Section 3.8 is the Dimensional Matrix (Table 3.8-1) which summarizes the requirements for the dimensional standards according to zoning districts.  Supplementing the Matrix are the Rules for Interpretation of Table 3.8-1, which provides explanations of how an applicant should interpret and determine the requirements. 

It has been brought to the staff’s attention that the explanation for columns (F) and (G) in the Rules for Interpretation of Table 3.8-1 contains the phrase, “front setback line.” This is the only time the phrase “front setback line” is used throughout the entire document.  Instead, the Land Use Management Ordinance consistently uses three terms with regard to setbacks: “interior setbacks”, “solar setbacks” and “street setbacks.” 

We believe the Land Use Management Ordinance consultant may have added “front setback line” to the Rules for Interpretation of Table 3.8-1 in error.  This phrase is commonly used in other jurisdictions, so we assume it was “cut and pasted” from another document during the writing process and the mistake was not corrected during our editing process.  Since the term has recently caused some confusion for an applicant, resulting in a subsequent setback variance request, we recommend changing the language to be consistent with the terminology used throughout the rest of the document. 

We recommend consideration of the following adjustment to the Rules for Interpretation of Table 3.8-1 shown by strikethroughs and underscoring:

Table 3.8-1: Dimensional Matrix

Rules for Interpretation of Table 3.8-1:

Columns (F) & (G): (Note definition of “Building Envelope” in Appendix A).  Building Height is expressed in feet.  Column (F) refers to height at the front setback line setback lines.

ISSUES RAISED

Three issues were raised during the Planning Board review of the text amendments regarding modification to payment-in-lieu of recreation area.  These issues, listed in the attached Summary of Planning Board Action, are addressed here:

Amount During Appeal of Value:  A Planning Board member asked how the recreation area payment-in-lieu amount would be handled if a property owner was in the process of appealing the County assessed value of the property.

Comment:  The Town will use the current Orange County and/or Durham County value.  If the appeal is won by the developer, the Town will reimburse the developer the difference between what was paid and what would have been paid had the revised valuation been used.  This stipulation is now included in the attached Ordinance. 

Clarification of County References: The Planning Board noted that the proposed Ordinance should mention both Orange County and Durham County when referring to a County.

Comment:  This clarification is appreciated and has been made throughout this memo and the attached Ordinance.

Establishment of a Multiplier: Board members raised questions about how the multiplier amount would be established by the Town Council.  Board members suggested that the process of establishing the multiplier be better described as this proposal goes forward to Public Hearing.

Comment:  A section entitled, “Process to Establish Multiplier” is provided in the Background and Discussion portion of this memo to address how the multiplier amount would be established.  In summary, the Parks and Recreation Department and the Parks and Recreation Commission would collaborate on creating the multiplier based on data collection and assessment of past Recreation Area payment-in-lieu cases.  The multiplier would be included in the Parks and Recreation Fees and Charges Policy document, which is subject to an annual review and revision by the Town Council.

RECOMMENDATIONS

Planning Board Recommendation:  On August 2, 2005, the Planning Board voted 7-0 to recommend enactment of the attached Ordinance A.  Please refer to the attached Summary of Planning Board Action.  Ordinance A, Section (d) (6), addresses the Planning Board concern about how the recreation area payment-in-lieu amount would be handled if a property owner was in the process of appealing the County assessed value of the property.

Parks and Recreation Commission Recommendation:  On August 18, 2005, the Commission voted 7-0 to recommend enactment of the attached Ordinance A.  Please refer to the attached Parks and Recreation Commission Memo regarding Recommendation for Proposed Land Use Management Ordinance Text Amendments.

Greenways Commission Recommendation:  On June 22, 2005 the Commission voted 5-0 to recommend approval of the Land Use Management Ordinance Text Amendment to modify the payment in lieu of recreation area.

Manager’s Preliminary Recommendation:  We recommend that the Council enact the attached Ordinance A to amend the Land Use Management Ordinance provisions regarding modifications to payment in lieu of recreation area and to setback language.

ATTACHMENTS

1. Draft Ordinance (p. 8).
2. Parks and Recreation Commission Memorandum regarding Recommendations for Proposed Land Use Management Ordinance Text Amendments (p. 10).
3. Summary of Planning Board Action (p. 11).