Work Session Minutes for 4/27/05 | Town of Chapel Hill

SUMMARY MINUTES OF AN AFFORDABLE HOUSING WORK SESSION

OF THE CHAPEL HILL TOWN COUNCIL

WEDNESDAY, APRIL 27, 2005 AT 4:00 P.M.

Mayor Kevin Foy called the meeting to order at 4:00 p.m.

Council members present were Sally Greene, Ed Harrison, Cam Hill, Mark Kleinschmidt, Bill Strom, Dorothy Verkerk, Jim Ward and Edith Wiggins.

Staff members present were Town Manager Cal Horton, Deputy Town Manager Florentine Miller, Assistant Town Manager Bruce Heflin, Town Attorney Ralph Karpinos, Town Information Officer Catherine Lazorko, Human Resources Director Pam Eastwood, Planning Director Roger Waldon, Senior Long Range Development Coordinator Chris Berndt, Principal Community Development Planner Loryn Barnes Clark, Principal Planner Gene Poveromo, Senior Development Coordinator J.B. Culpepper, Community Development Technician Rae Buckley, and Town Clerk Sabrina Oliver.

Item 1 – Review of Comprehensive Plan Affordable Housing Strategies

Mayor Foy said the purpose of the work session was to investigate whether and to what extent the Council was fulfilling its housing goals under the Comprehensive Plan to include a minimum of 15 percent affordable housing in new developments. Specifically, he said, the Council was to discuss whether they should consider an inclusionary zone which would mandate under local ordinances that all developments should have 15 percent affordability, rather than a voluntary 15 percent.

Affordable Housing Funding Sources

Mr. Horton noted that Chris Berndt would provide information on the successes they had experienced in creating affordable housing in Chapel Hill, and some of the challenges as well. It would take some time to do so, he said, because the techniques used by the Council had varied considerably. He said Ms. Berndt had been leading the housing work for a number of years and had a long institutional memory. Mr. Horton said she was better prepared than anyone to fill in the details as the Council may wish.

Ms. Berndt stated that the work session was called to review the Town’s Comprehensive Plan strategies for affordable housing. She noted that the materials distributed to the Council contained a lot of information, but noted that a key was Chapter 7 of the Comprehensive Plan, titled “Housing.”

Ms. Berndt noted that at the Council’s Planning Session in January they had decided to again review Comprehensive Plan strategies, in particular housing incentives and inclusionary zoning. At the same time, the Council had goals of identifying funding sources and funding of affordable housing. She said they would briefly review current planning regarding housing incentives and inclusionary zoning, and Principal Community Development Planner Loryn Barnes Clark would review funding strategies.

Ms. Berndt noted the current policies the Council used to achieve affordable housing:

· Comprehensive Plan goal, first implemented as early as 1989.

· Council expectations regarding zoning changes, first discussed in late 90s; used for the past five years.

· Land Use Management Ordinance (LUMO) regulations; contains provisions for small houses/size restricted units.

· Modification of regulations in LUMO – additional funding for Special Use Permit (SUP) applications not meeting regulations.

Ms. Berndt noted the results of the Town’s affordable housing policies, adding that Attachment 4 in the materials contained a list of the locations of these housing units:

· 179 affordable housing units approved (67 rental units, 112 homeownership opportunities).

· 162 (91 percent) of these units will be developed by the private sector.

· 22 units less that than 1,350 square feet approved (size restricted).

· Two types of payments: $278,500 to the Revolving Acquisition Fund (to assist Town in recovering homes and resell them for long-term affordability); $73,500 to Orange Community Housing and Land Trust.

Council Member Strom asked if the 179 total units included the recently approved 32 Dobbins Hill development. Ms. Berndt stated that it did not include those units, since that development had just been approved two days ago. She noted with those units, the total would increase from 179 to 211.

Ms. Berndt said one of the questions posed earlier was how was Chapel Hill doing in comparison to other communities in North Carolina. She noted a report on the Town of Davidson had been prepared and distributed to the Council in January regarding their mandatory requirements that were put into place in 2001. Ms. Berndt said she had talked with their Planning Department and received an update on their progress, noting they had 62 affordable units that were both rental and owner-occupied, with another 161 approved but not yet built. She said on many of those 161 approved units, they were still in negotiations on how best to achieve the long-term affordability.

Ms. Berndt said at this point her judgment was that Chapel Hill’s policy had produced more units on the ground since its policy had gone into effect in 2000. She stated that the affordable units approved by Davidson were mainly through Habitat or the Davidson Housing Coalition, adding there were no privately built affordable housing units under their program to date.

Ms. Berndt said the primary affordable housing incentive the Council had used was the affordable housing strategy they developed to obtain housing through the development process, but there were others that the Council had used that were contained in the Comprehensive Plan. She said one was the Residential-Special Standards (R-SS) zoning district that had been used by developers, and another was expedited review of development proposals as in the recent approval of Dobbins Hill. As well, Ms. Berndt said the Council had used fee waivers for affordable housing developments.

Ms. Berndt said there were other strategies listed in the Comprehensive Plan, and those were detailed on page 2 of the Council’s memorandum. She said these strategies were discussed at the time the Comprehensive Plan was adopted, and were the traditional types of methods the Council might consider as more changes to the LUMO, such as relaxing public improvement requirements, reducing parking requirements, and innovative zoning approaches like clustering or zero lot lines.

Ms. Berndt said that brought them to the idea of inclusionary zoning, noting that the Council had considered this in the past, specifically during review of the LUMO. She said it was decided at that time not to include it.

Ms. Berndt said a number of resource materials had been provided to the Council in their materials, and hoped they would serve as a resource as the Council discussed the issue of whether to proceed with inclusionary zoning provisions. She noted that was also a goal in the Town’s Comprehensive Plan.

Council Member Strom said regarding the Town of Davidson, did they have any data on what percentage was representative of the projects that had gone through their system, the 62 already in existence and the 161 in process. Ms. Berndt said their requirement was for 12.5 percent affordable housing in each development, noting that the 62 current units were all built by non-profit groups. She said the total of 161 would be 12.5 percent of the total number of housing units proposed in that community since 2001.

Funding of Affordable Housing Developments

Ms. Clark gave a brief overview of the four main funding sources used by Chapel Hill for affordable housing purposes:

· Community Development Block Grant (CDBG) funds,

· HOME Program,

· Housing Loan Trust Fund, and

· Revolving Acquisition Fund.

Ms. Clark noted that the first two were federal funding sources, and the last two were local funding sources. She said the Community Development funding must be used for three main purposes: to benefit low and moderate income persons; to aid in the elimination of slums and blight; and to treat urgent needs. Ms. Clark said Chapel Hill had received such funds since 1975, and had primarily used those funds to rehabilitate public housing and to refurbish the interior of public housing apartments. She said funds had also been used for affordable housing developments such as Rosemary Place, Legion Road and Rusch Hollow, and for other neighborhood revitalization projects along with EmPOWERment, Inc.

Ms. Clark said funds had been used for community service activities in after-school programs with the YMCA, the Chapel Hill Training and Outreach Program, and the Orange County Literacy Council.

Mayor Foy asked Ms. Clark if she had the numbers associated with these programs. Ms. Clark responded that in the Community Development Program, the current funding level was approximately $711,000. She said the HOME funding was in the $800,000 range.

Mayor Foy asked if that was Chapel Hill’s portion of the funding. Ms. Clark responded that the HOME funding was for the entire County for the current year. She noted that the CDBG funding was just for Chapel Hill, noting the funds had to be used within the Chapel Hill city limits and only to benefit Chapel Hill residents.

Ms. Clark continued her presentation, stating Chapel Hill was a part of the Orange County HOME Consortium along with Orange County, Hillsborough, and Carrboro. She said those funds were distributed throughout the County, and each year they meet to discuss how funds would be allocated, with Orange County serving as the lead agency. Ms. Clark said funds were sometimes used in conjunction with CDBG funds, but were also used for other projects like Project Homestart and special needs housing projects with groups such as Residential Services and the Orange-Person-Chatham (OPC) Mental Health Association.

Ms. Clark said the Housing Loan Trust Fund was a local source of funds to assist low-income families with the purchase of new homes, and funds were used for pre-development costs and the construction of new developments. She said the fund was periodically replenished when they received program income from the resale of homes in the Culbreth Park or the Tandler development. Ms. Clark said the current budget was approximately $98,000.

Ms. Clark said the last source was the Revolving Acquisition Fund, which was also a local funding source. She said the purpose of the fund was to provide local non-profit affordable housing providers with a source of funds that could be accessed quickly to purchase properties that might otherwise be sold to non-low-income households. Ms. Clark added that the main goal of the fund was to preserve owner-occupied housing. She said persons using these funds must agree to use the property as their primary residence, and must provide the Town with the Right of First Refusal on those properties. Ms. Clark said the current balance in that fund was approximately $267,000.

Mayor Foy asked how the Revolving Acquisition Fund was replenished. Ms. Clark replied primarily through payments-in-lieu.

Council Member Strom asked if the balance of $267,000 included the recently approved project, The Condominiums. Ms. Clark said it did not, that those funds had not yet been received. Council Member Strom said he recollected that either $78,000 or $83,000 had been pledged with approval of the Condominiums, so that amount would be added to the $267,000. Ms. Clark said that was correct.

Mayor Foy asked, for example, if EmPOWERment, Inc. bought a house with Revolving Acquisition Funds for $80,000, refurbished it, and resold it for $50,000, did the $50,000 go back into the fund. Ms. Clark responded that this fund worked somewhat differently from other funding sources, noting that in this case of the $80,000 that was used to purchase the home, the entire $80,000 would be returned to the fund. She said if EmPOWERment needed additional funds to reduce the cost to the buyer, then they might use additional funds to provide a second mortgage to that family. Mayor Foy said then that money in the fund was self perpetuating, and was used so that properties could be purchased quickly. Ms. Clark replied that was correct, reiterating that every dollar that was actually loaned out was returned to the fund.

Mayor pro tem Wiggins said that the conditions for receiving that money were that the users had to agree to use the property as their primary residence, and must provide the Town with the Right of First Refusal on those properties. Ms. Clark responded that was correct, but noted there were also some conditions that applied to the agency that borrowed the funds for example, the funds must be returned within six months, and only one loan was provided to a given agency at any one time. Ms. Clark noted that the persons receiving the loan must also be below 80 percent of the median income to qualify.

Council Member Strom said in the last year or two the Council had given a one-time operating grant to Affordable Rentals, Inc., and asked where those funds had come from. Ms. Clark said those funds had come from the General Fund. Council Member Strom said in the future if they wanted to make limited amounts of grants to agencies for operating funds and wanted to make Revolving Acquisition Funds as the source, it would require a change in policy for that fund. Ms. Clark said that was correct.

Council Member Strom commented that a chronic problem of not-for-profit agencies in the community was operating funds, and at some point he believed the Council should consider these local funds as a source to help with that problem. He said particularly, it was a real challenge for small agencies to manage rental units that were serving the 50 percent and lower of median income population, and actually pay for the staff that administered those projects successfully. Council Member Strom stated that the client population was full of challenges and would become difficult to manage.

Council Member Verkerk said in the Revolving Acquisition Fund, that the $83,000 pledged by The Condominiums would be added to the current $267,000 for a balance of $350,000. She said that fund could actually keep growing, meaning they would have money “just sitting around.” Ms. Clark said that was correct, unless it was being used by agencies. Council Member Verkerk asked if they had experienced a situation where they had almost hit a zero balance. Ms. Clark said there had been one instance where the balance was $150,000 and it was out on loan, but there was no competing interest at that time. Council Member Verkerk said her point was that this was a pot of money that could be put to use, and did not want it to remain fallow.

Council Member Harrison asked if either of these local funds used the General Fund as a funding source. Ms. Clark responded she did not believe so. Mr. Horton added that he believed Ms. Clark was correct, that the initial funding for the Housing Loan Trust Fund did not use a contribution from the General Fund. He added that he believed the amount pledged by the developer of The Condominiums was $72,000 rather than the $78,000 or $83,000 previously mentioned.

Council Member Harrison asked if the Revolving Acquisition Fund was funded primarily through such payments-in-lieu, or were there other sources. Mr. Horton responded there were no other sources.

Council Member Harrison asked what the funding source was for the Housing Loan Trust Fund. Ms. Berndt said when the fund was originally set up in the early 1970s, the funds were called General Revenue Sharing, which was a federal grant to local governments. She said the Council at that time decided to take the entire amount and capitalize a Housing Loan Trust Fund for the Town, with the initial amount of around $300,000 to $350,000, somewhere in that range. Ms. Berndt said the fund grew over time through investments and earnings and was used to provide loans for Culbreth Park and Tandler which in turn those loans had interest or shares of appreciation that were then returned to the Town as program income. She reiterated that the original funding came from the federal government to the local government through Revenue Sharing.

Council Member Harrison said it sounded like neither of these local funds were reflected in the tax rate. Mr. Horton replied that was correct, because they were not funded through the General Fund.

Ms. Berndt said to begin funding of the Revolving Acquisition Fund, the Council took $150,000 from the Housing Loan Trust Fund, so that fund was capitalized from the Revolving Acquisition Fund which in turn was capitalized from federal Revenue Sharing funds, so no General Fund monies were used. She said that was done to meet a Council goal that was in the 2000 Comprehensive Plan, which was then called a First Option fund, and was eventually renamed the Revolving Acquisition Fund. Ms. Berndt noted it was created to buy and sell property specifically as part of our neighborhood conservation/neighborhood protection strategies.

Mayor pro tem Wiggins said she was interested in how the Revolving Acquisition Fund and the Housing Loan Trust Fund could be used in some additional ways that may require Council policy attention. She said a citizen in the Northside neighborhood had called her last week and expressed concern that her property valuation had been increased from $96,000 to $136,000, and her property tax bill had been increased by $400. Mayor pro tem Wiggins said the home had been left to that citizen by her father, with no mortgage. She added the citizen had a salary of $20,000 annually, and could not afford the additional $400, adding the citizen had said she might have to sell her home.

Mayor pro tem Wiggins said she had advised the citizen to appeal the revaluation, and invited her to come before the Council and express why the tax rate needed to be kept as low as possible. She said she believed it would be “good” to have a fund established for persons below a certain income level and owned their property to be used to keep their property affordable. Mayor pro tem Wiggins said such a fund could have conditions placed on it, such as the Right of First Refusal to the Town, or that the home remain owner-occupied. She said such a fund would assist a homeowner who had a very modest income to remain in their homes, and would give the Town some expectation that in the future those funds could be recovered. Mayor pro tem Wiggins said otherwise, if that home did not go to one of the non-profit agencies the Town worked with it may eventually be sold to a private developer.

Mayor pro tem Wiggins said this citizen was “barely hanging on,” and she had mentioned that there were others in similar predicaments in that their property taxes had risen by 40 percent or more. She said those citizens were trying to answer the question of whether this was the time to sell, and were waiting to see how much the tax rate would increase. Mayor pro tem Wiggins said that this time, the increase may be what pushed them over the edge and they would be forced to sell. She said EmPOWERment, Inc. and Orange Community Housing and Land Trust may not be able to acquire those houses because they would not be the highest bidder.

Mayor Foy said he believed those questions needed to be answered, but did not think they could be answered now. Mayor pro tem Wiggins responded she was simply stating that it was an unmet need in terms of these two funds. Mayor Foy said the Manager should be asked to provide the Council with potential options, noting there may be all sorts of legal barriers to be considered. He said there may be more options than just cash, for instance there may be ways that people could lower the potential tax value of their property.

Mayor Foy said one example may be that the Tax Assessor would consider some types of easements to lower a property’s value. In any case, he said, those types of questions needed to be answered and all options considered, so that the Council could help people keep houses that were affordable in their family. Mr. Horton said they would research those questions and attempt to develop options for the Council’s consideration. He said he knew that Robert Dowling, the Executive Director of the Orange Community Housing and Land Trust, had explored such issues and may be able to assist them in some manner.

Mr. Horton said Mayor pro tem Wiggins had mentioned the possibility of making a connection between providing assistance and some opportunity to have a First Right of Refusal, and that suggested there may be a way to arrange some long term purchase options that would justify some payment to the property owner. He said there were also private sector opportunities for what was called reverse mortgages that in some circumstances may make sense, so they would explore what private section options might be available as well. Mr. Horton said they would have to have some time to do that but would do their best to move it ahead.

Mayor Foy said with regard to the discussion about these four funds, if the Council was going to consider granting operating funds to agencies, he would prefer to see a separate fund created. He said it was his understanding that they could accept payments-in-lieu and place it in any fund, and he would certainly want information about that. Mr. Horton said as long as funds granted were related to housing, he believed the Council would have wide discretion on its use. Mayor Foy commented that the $267,000 currently in the Revolving Acquisition Fund seemed like a lot of money, but it would purchase only about one and a half homes.

Council Member Strom agreed it was not a lot of money. He suggested one way to proceed might be to limit the amount they would grant for operating money to 10 percent of the balance in the fund, or something similar to that. Council Member Strom said it was a strategy that should be considered, noting such grants would make a difference in the community.

Council Member Hill said he had talked about help for low-income families during his campaign, and had suggested a similar program to what Mayor pro tem Wiggins was suggesting. He said that Orange Community Housing and Land Trust had a program in the past called “Urgent Repair” that was used for emergencies for low-income persons. Council Member Hill said the difference was that tax rates were an ongoing problem as opposed to repair.

Council Member Hill said shortly after the election, he had received a letter from a citizen suggesting that people who lived in historic districts and had invested a lot of money into their homes for repairs should have some sort of delayed system for paying property taxes, since the unrealistic real estate values in town were creating an undue hardship for their wealthier citizens. He said he thought that such an idea could be used to respond to the issue Mayor pro tem Wiggins had commented on. Council Member Hill said they were talking about the same thing, which was delaying payment of property taxes until you sell your home, at which time the Town would recoup its taxes on transfer. He said if such a thing worked for “wealthy people” it should work for the low-income community. Council Member Hill said he was not interested in tax relief for residents in historic districts, but the idea had merit for low-income families.

Mayor pro tem Wiggins, a member of the HOME Consortium, encouraged the Council to consider the comments made by Council Member Strom. She said when you get a new housing agency created that wanted to help with affordable housing issues, such as Affordable Rentals several years ago, there was excitement and a willingness to provide funds for purchase because it was new. Mayor pro tem Wiggins said most of the proposals they get each year were from the same agencies, and they receive additional funds each year. She said many times, due to time restrictions, the agencies do not use the funds in the time specified and the money comes back to the Town, which meant they had to figure out how to reallocate it.

Mayor pro tem Wiggins said they were always anxious to find new agencies that qualified for funds, especially for HOME funds. But, she said, if new housing agencies were established and then went out of business, there was no motivation or incentive for others. Mayor pro tem Wiggins said Affordable Housing had a bad experience and a couple of other agencies were teetering on the edge and if they go down, where is the incentive and motivation. She said then, they would have the same four or five agencies applying for funds, but losing some of it because of the time limitations.

Inclusionary Zoning

Mayor Foy said regarding inclusionary zoning, one thing that had changed since 2000 when the Comprehensive Plan was adopted was that they now have a report from the School of Government entitled “Locally Initiated Inclusionary Zoning Programs” in North Carolina. He said the Council did not have benefit of that report when they considered putting an actual ordinance into effect. Mayor Foy said first, their potential perspective on the law had changed, and we needed to consider whether we wanted to enact a law as opposed to a policy. Secondly, he said, we needed to consider the necessity.

Mayor Foy said at the time the Comprehensive Plan was adopted, he believed they were successful and saw no reason to jeopardize that success. He said now, they needed to look at whether they would continue to be successful, noting they have had some development proposals come in where they did not have the leverage they needed to institute the policy, adding they rarely encounter voluntary compliance. Mayor Foy said he believed those were the two things that needed to be discussed regarding inclusionary zoning.

Mayor Foy said if the Council decided they wanted to move forward and pursue inclusionary zoning legislation, a process to do that would need to be identified.

Council Member Kleinschmidt said he believed the Small House ordinance had been ineffective in advancing any affordable housing goals of the Council. He said it did address issues in the short term, and quickly became unworkable in actually achieving the Council goals. Council Member Kleinschmidt said the Council had even reacted negatively when it was proposed by developers, so they needed to seriously consider eliminating that ordinance as an option.

Council Member Kleinschmidt said when the Council had conceived of payment-in-lieu of affordable housing by developers as an option, it was not being used in those limited emergency or special circumstances as it had originally been contemplated. He said any new ordinance or policy the Council developed needed to limit that point when a payment-in-lieu becomes an option for developers.

Council Member Kleinschmidt said there was a problem with the gap between income earners who can purchase homes. He said the Council had done a great job in establishing a goal, but only a fair job in achieving that goal over the past five years for people 80 percent or 50 percent below the median with our policies. Council Member Kleinschmidt said the market seemed to handle people who were 120 percent or more above the median, but there was a gap there. He said developers had talked to the Council about the gap as well as non-profits, and we needed to address that gap since we were missing that part of the target. Council Member Kleinschmidt said they needed to think about options that would incorporate and calibrate for those different levels of income earners.

Council Member Kleinschmidt said thinking back on their most recent experiences, there seemed to be a gap in what developers understood the policies to be and what the Town believed the policies to be. He said that was clear when they were considering The Condominium project, noting that was a difficult experience for the Council with a close vote, and it reflected a Council that was wrestling with how it wanted to handle affordable housing issues.

Council Member Greene agreed, adding she believed the Town would see more multi-family housing projects because that was a “big gap” that was not adequately covered. She noted that the Wilson Assemblage was an unfortunate example of how they don’t have the right tools at their fingertips. Council Member Greene said at the Concept Plan hearing, the developer of Wilson Assemblage had requested up-zoning to give them greater density and would allow them to achieve 23 percent affordable housing. Then, she said, they got nervous about the rezoning and the application came in without it, so “all bets were off.”

Mayor Foy said that brought up a Council effort that did not gain public support that they should acknowledge. He said that prior to the adoption of the Comprehensive Plan the Council was beginning a strategy of coupling a zoning change with application for a Special Use Permit because a zoning change was completely discretionary and a Special Use Permit was not, which gave the Council some leverage. Mayor Foy said the Council decided it would be a good idea to down-zone property around Town with the idea that everyone would have to come in with a rezoning which would in turn give the Council some discretion. He stated that everything would have been down-zoned to the lowest density, which was R-1. Mayor Foy said people did not like that because they did not understand it. But, he said, they would have avoided some of the problems they have now seen and made the policy more effective.

Council Member Kleinschmidt commented that may not have given them the clarity they needed. Mayor Foy said they had a lot of discretion with the policy that they might not have with an ordinance.

Council Member Strom said the Council had held a public hearing on that issue which he had pushed for, because they were doing so well with the powers they had during rezonings and Special Use Permits. But, he said, the Council was split and it went nowhere.

Council Member Strom said regarding payments-in-lieu, he proposed that they not eliminate the option, but define it in a way that it not be what it costs the Land Trust to build an off-site affordable housing option, rather it should be the difference between a unit in that specific development and what it would cost to bring it down to 80 percent of the median or even 50 percent. He said if someone was building million dollar condos, they would most likely provide the affordable housing in that scenario and that was exactly what they wanted to happen. Council Member Strom said he would move that they define payments-in-lieu to make specific units in specific developments affordable to either 50 to 80 percent of the median income.

Council Member Strom said he was not sure this was a multi-family problem, but was a rezoning problem. Council Member Greene responded that what she was trying to say was that with a project like Wilson Assemblage, there was no rezoning so they had no leverage. Council Member Strom said that was why he thought the Council should aggressively pursue inclusionary zoning at this time. Council Member Greene agreed, noting that more specificity was required so that we did not get into “tug of wars” with applicants.

Council Member Hill said since he was elected to the Council, most nebulous and uncomfortable moments had centered on not having a clear policy. He said the study from the School of Government was exciting in terms of what other communities had done with their policies, and contained a lot of good ideas. Council Member Hill said that drafting an ordinance would limit their options, but it would also be very clear to applicants what their expectations were and would streamline the process. He said had they had such an ordinance in place when dealing with Wilson Assemblage and Dobbins Hill, it would have reduced the uncertainty. Council Member Hill said he believed the review process should produce better projects, and this had the potential to do that.

Council Member Hill stated that regarding payments-in-lieu, that should be discussed once it was decided whether or not to go forward with this. He said he believed they should pursue this as rapidly as possible.

Council Member Harrison said during the vote on Dobbins Hill on Monday evening, he had commented that anywhere else in the State, that project would not have happened without a rezoning. He said it was not required because the developer had other options, but clearly it would have been to the Council’s advantage to have had a rezoning.

Council Member Harrison said he was not sure he agreed with coupling a rezoning with a Special Use Permit, and would reserve judgment on that. Regarding the Small House ordinance, he said it was the only ordinance he had encountered in this Town that caused him to say, “Oh, that silly ordinance again.” Council Member Harrison said he believed all other ordinances were useful although some needed additional work, but it was a strange and silly ordinance that was apparently the best idea at the time.

Council Member Harrison said he would not want to get rid of payment-in-lieu, because those funds were used in many places for many things. He said it did need to be refined, but he wanted to keep it as an option.

Mayor Foy said it appeared that the Council wanted to move forward on a draft ordinance.

Council Member Greene commented that she had included two other documents with tonight’s materials that were background to the School of Government report. She said one of the documents had come from a discussion with members of the Triangle J Council of Governments who initially were trying to figure out how to do an inclusionary zoning program for the region, but had concluded that would not work.

Council Member Greene said the shorter document reiterates that they do have legal grounds to pursue this, and the longer document on page 9 gives a bullet summary of steps recommended to be followed. She said the first thing recommended, and that was for legal reasons so that they could justify what they were doing under the statutes, was the adoption of a report that defines why they need affordable housing. Council Member Greene said they would also need to develop a rationale for the thresholds, or what kind and what percentage of housing was being proposed. She said then it would need to be tied to the Comprehensive Plan; that they should not refer to it as a tax; and they should stay away from rental regulations.

Council Member Greene said what was not on the bulleted list, but was in the report itself, was that the Council needed to have a broad discussion with the community of what this was going to look like. She suggested that they move along so that by the fall they would have a draft ordinance and generally know the direction they want to go as a Council, and convene a citizen’s task force to include developers, members of the Chamber of Commerce’s work force housing committee, other citizens, real estate agents and others to help the Council refine exactly what this would look like and help them close these gaps in a way that was most reasonable for everyone.

Council Member Verkerk said she was not clear on the benefits of policy versus law. She commented that she understood that the ordinance would bring more clarity, but Mayor Foy had indicated that the policy was working, noting they were doing a better job than Davidson. Council Member Verkerk said she understood that with an ordinance, they would be giving up some flexibility, and asked if that was correct.

Mayor Foy said he had some concern about this, but what had persuaded him that we should go forward and look at an inclusionary zoning ordinance was that he believed they were likely to see more development in the future over which they didn’t have discretion, and absent that discretion they were going to be frustrated. He said there may be problems with an inclusionary zoning ordinance, but they may be able to be worked out using a process such as Council Member Greene had described.

Mayor Foy said his biggest fear was that Chapel Hill was a really good target for a test case on whether such a zoning ordinance was legal in the State of North Carolina, and he believed that was what Council Member Greene was suggesting regarding getting community buy-in to strengthen the ordinance.

Council Member Greene said Davidson had been a target ever since adopting their ordinance in 2001, and she suspected there were two reasons why they had not been challenged. She said one was that after studying the law she believed they were on solid ground, and second was that they had gone to a great deal of effort to get community buy-in.

Mayor Foy said his point was that it was a risk, and they would most likely be targeted. He said that he believed that having community buy-in would give the courts some grounds to find that they were acting within the realm of what they were legally capable of doing. But, Mayor Foy added, that does not mean that they would not be sued by someone like the Property Rights Foundation in California.

Mayor Foy stated he believed it was a risk, and they needed to acknowledge that. He said that they as a Council should try to anticipate what the consequences of that would be if the ruling went against them, then what would they do and how might they respond because he did not know what kind of a set back that would be.

Council Member Kleinschmidt said it was an important consideration, and they should move forward with their eyes wide open. He said he thought they should look back as well and look at the sources of frustration they had experienced, and consider how the use of their current policy may have been troublesome or perhaps made them vulnerable. Council Member Kleinschmidt said he believed there were points of frustration where clarity did not exist between developers and the Town, and that was when they really risked having a problem.

Council Member Kleinschmidt said what an inclusionary zoning ordinance can do is actually take away a lot of that frustration and haziness about what their objectives were and why they were doing what they were doing. He said he did not think they were free from that particular risk by staying the course, but were not at further risk by moving forward.

Council Member Kleinschmidt said he liked the idea of creating a group to consider this, and would like them to consider the whole of the issues he had mentioned, and also to have a starting point from which to begin their discussions. He said that may mean seeing what kind of an ordinance they could have developed in order to allow a task force to begin work. Council Member Kleinschmidt said he did not want to have a group together in a room with no place to start. He asked Mr. Karpinos how they could develop a starting point, or a beginning ordinance.

Mr. Karpinos said they had a draft ordinance that was drafted for possible inclusion in the Land Use Management Ordinance, noting it was a chapter that was developed but the Council chose not to implement it. He said Mark White, the consultant, had drafted the chapter and noted he was the author of the Davidson ordinance as well. Mr. Karpinos said the draft he had provided for Chapel Hill as well as the Davidson ordinance would be two they could take a look at immediately.

Council Member Kleinschmidt said the concerns that had been discussed here today and those two ordinances would be a good place for a task force to begin. He said he really liked Council Member Greene’s idea about having the task force be inclusive and not just limited to housing non-profits.

Mr. Karpinos suggested that the Council might want to take a look at the two ordinances prior to a task force, as there may be some changes they would want to make before it was considered. He said he could have them copied and distributed to the Council in the next few days.

Mayor Foy said he did not think the benefits of the Davidson ordinance should be overstated. He said there seemed to be a number of problems with it, according to the report by Anita Brown-Graham with the School of Government. For example, Mayor Foy said, apparently none of the affordable housing counts against density which means that all of the affordable housing was increased density. He said they needed to consider if that was what they wanted. Mayor Foy said that apparently they do not build the affordable housing until the last thing, which was why they don’t have much of it. He said they don’t mix it into the community which is what Chapel Hill requires. Mayor Foy said they don’t have any apparent design standards. So, he said, all of those things were things that the Town needed to make sure were a part of its ordinance.

Mayor Foy said one thing they had achieved that was critical was the long-term affordability. Council Member Greene agreed, stating they definitely wanted that.

Council Member Kleinschmidt said they were so far ahead on that.

Council Member Hill stated that was what was so good about this. He said they have many examples listed with the pros and cons, and they could use the Davidson ordinance as a beginning. But, he said, Chapel Hill does the better job in providing long-term affordability. Council Member Hill said that Boulder, Colorado had a situation similar to Chapel Hill in that they have a lot of low-density neighborhoods that want to remain the same, and their program works with that. He said there were many things from which you could pick and choose from within, and that was what he saw happening during the task force’s work which was taking the things that do work and incorporating them into the ordinance and rejecting the things that don’t. Council Member Hill said they have a great opportunity here, and they could end up with something that was stronger than others. Council Member Hill said if they could get all the stakeholders involved, then they could achieve buy-in.

Council Member Strom noted he had served on the task force that looked at the inclusionary zoning issues in the region, and agreed with the Mayor’s assessment that they do not want to use the specifics of the Davidson ordinance as a starting point. He noted that Davidson’s ordinance got the ball rolling, but he believed they wanted to blend what they were doing here with an inclusionary zoning ordinance so that they can address the issue specifically about having authority when rezonings were not an issue. Council Member Strom said that was the fundamental flaw and only weakness in the approach they have taken thus far. He stated it was frustrating, but that was the benefit to getting the gap closed in their approach to getting affordable housing built by the private sector.

Council Member Verkerk said the striking difference between Davidson and Chapel Hill was that 91 percent of Chapel Hill’s affordable housing was built by the private sector, compared to none in Davidson. She said that was something she wanted them to look at very carefully.

Council Member Kleinschmidt said he did not believe they should throw out what they had and start over. He said this was not about substituting someone else’s program for theirs, it was about taking what they had done and making sure they have the continued authority to move forward and to enhance the policies that they have now. Council Member Kleinschmidt said that would include all of the things discussed tonight and to make sure the clarity exists not only in the community but with the Council as well.

Mayor Foy noted that he and Council Member Greene had discussed this, and he suggested putting an ordinance on the table, and have a task force advise them on how to make it better. He said if that was the way the Council wanted to proceed, then the next step would be to ask the Attorney if it was appropriate to bring forward the draft ordinance already prepared. Mr. Karpinos noted he had not looked at it since it was first proposed, and said he believed it should be distributed so that everyone could comment on it. He said based on that feedback, another draft could be prepared.

Mayor Foy suggested that Mr. Karpinos distribute the draft, and that it be placed on an upcoming agenda in May or June for Council discussion. He said they could use that time to both make sure that they were comfortable with putting that ordinance forward, and also to attempt to set up the remainder of the process. Mayor Foy said for example, how to structure the task force, when to make the appointments, what exactly do they do, and when should they come back to the Council. He said what he and Council Member Greene had anticipated was to structure it with stakeholders, and then they would appoint in September and ask for a report in January 2006. Mayor Foy asked did that seem like enough time.

Mayor pro tem Wiggins noted that the Manager and the Mayor were aware of upcoming agendas in May and June better than the Council, and asked if they saw the Council dealing with this substantively. Mayor Foy replied that it seemed like it would be possible to at least put something on the table, rather than telling a task force to read reports. He said he envisioned the May or June discussion as a half-hour discussion and not a two-hour one, and hopefully not one with time for comments by the public.

Mayor Foy said he would work with the Manager to pinpoint a time to place this on the agenda, and because of the time spent today it should not require a whole lot more discussion.

Mayor pro tem Wiggins said it would take some time to get the task force’s charge and composition developed, and that would probably need to come back for action. She asked if the Mayor was proposing that all of that be accomplished by the end of June. Mayor Foy said that was correct.

Council Member Ward said he assumed there may be some good ideas in Colorado’s efforts or others where a few phone calls may result in some good information on how to come up with a finished product. He said such communities could help them decide what their task force’s composition should be and other information.

Council Member Greene said they build the schedule not to forget that they need to take the first step of conducting some sort of survey and preparing a report to determine what the need is. She said she did not know who would do that or how much effort it would take, but it essentially would be a document that would pass legal muster to show a court if necessary that the ordinance we had passed had a rational relation to the statute that gave us the broad authority to regulate the Town. Council Member Greene said to the extent possible they would need to specify what their needs for affordable housing are and how this ordinance attempts to address it. She asked who would do that, as well as how and when.

Mayor Foy said he was not sure that the task force would have the capacity to do that, and anything like that would need to be coupled with the ordinance. He said that would mean they would not necessarily pass an ordinance in January, but would get the report from the task force in January. Mayor Foy said then, the ordinance would need to be developed.

Council Member Greene suggested that the Chamber of Commerce group that was already working on similar issues could assist with that.

Mayor pro tem Wiggins said it seemed that the survey would come before the ordinance because she thought they would use that data to justify the ordinance. Council Member Greene agreed.

Mayor Foy said that something needed to be prepared to come back to the Council regarding the structure of the committee, and suggested that a limited-purpose subcommittee of the Council be formed to do that in the next three or four weeks.

Council Members Kleinschmidt, Greene, Strom and Hill volunteered to serve on the Council subcommittee.

Council Member Strom said one document that would be useful to the community was a report from Orange County’s Affordable Housing Task Force. He said he had recently attended a three-year follow-up to the adoption of that report. Council Member Strom said Orange County also had some documents justifying their two bond issues on affordable housing, and those documents would be useful as well.

Council Member Verkerk commented that the University and UNC Hospitals had tracked where all employees lived and what they earned. She said she believed that data would show that many of the people who were served or should be served by affordable housing are University and Hospital employees, and that information should be obtained.

Council Member Strom stated he was in support of the process discussed tonight, and asked that the Council take specific action that would put them in a position to redefine the payment-in-lieu.

COUNCIL MEMBER STROM MOVED THAT A REPORT BE PREPARED OUTLINING THE COUNCIL’S POLICY REGARDING PAYMENTS-IN-LIEU SO THAT IT CAN BE REDEFINED AND PLACED ON AN UPCOMING AGENDA PRIOR TO THE SUMMER BREAK FOR COUNCIL DISCUSSION. THERE WAS NO SECOND.

Council Member Strom commented that Mr. Horton appeared concerned. Mr. Horton responded that the Council was requesting so much that the staff was guaranteed to fail. He said they would do their very best, but they would not be able to complete every request in the short time between now and July 1.

Council Member Strom said there were payments-in-lieu issues, and then there were funding issues about how to use existing funds and whether or not to create new funds to address some of the issues that Mayor pro tem Wiggins highlighted. He said those three things were separate from the inclusionary zoning issue and didn’t appear to be enormous work items, but rather they should be prepared like normal agenda items so that the Council could consider taking action.

Mayor Foy noted that the Manager was aware of what needed to be done, and suggested giving Mr. Horton discretion on the timing of that. He said within the context of that discretion, he believed they needed to know about the payment-in-lieu issue but it would most likely be fine if it was carried over to September. Mayor Foy said the same held true for the Small House ordinance issue, noting that the staff needed time to do what needed to be done.

Council Member Strom said that would be fine, but he did not want the issue to slide past September. Mayor Foy agreed.

Mayor pro tem Wiggins stated that use of the funds was time-sensitive.

Council Member Strom replied that by discussing use of the funds they would generate interest in the issue.

Mayor Foy said that they had created a minor subcommittee of the Council to work on these issues, and offered his assistant’s help with that subcommittee unless the Manager had another idea. Mr. Horton said that with all due respect to his assistant, he was not sure that she had the knowledge that would be most helpful to the subcommittee and recommended that it be staffed in the normal manner.

Mayor Foy said he was attempting to “lighten the load” for staff. Mr. Horton thanked him for that, but said he believed it would make it more difficult for the subcommittee to obtain its goals.

Mayor Foy confirmed with Mr. Horton that the issue of inclusionary zoning would come back to the Council prior to the summer break.

Council Member Strom said he did not want the Council to forget to add to the schedule the consideration of elimination of the Small House strategy. He said that was a small action item that they needed to follow up on.

Mayor Foy agreed, and Council Member Kleinschmidt concurred. Mr. Horton noted that the Attorney would prepare an ordinance to repeal that and present it at the next business meeting.

Mr. Karpinos stated that would not be possible, because it meant making a change to the Land Use Management Ordinance which would require a public hearing prior to Council action. Mayor Foy stated then they would proceed with that process.

The meeting was adjourned at 5:25 p.m.