AGENDA #2k(2)
BUDGET WORKING PAPER
TO: W.
Calvin Horton, Town Manager
FROM: Kathryn
Spatz, Parks & Recreation Director
Roger
Waldon, Planning Director
DATE: May
17, 2000
This is a follow-up to the April 18 Budget Work
Session. A Council member requested a
report on potential use of impact fees for recreation improvements.
In 1986, the Town Council sought and received
special legislative authority to pursue a system of impact fees for Chapel
Hill. In the process of researching and designing such a system, discussion
focused increasingly on the difficulties and complexities associated with
impact fees.
Advantages of impact fees as a revenue source are:
·
Such
fees require new developments to contribute to mitigating the projected impacts
of such new development
·
An
impact fee system benefits the developer by adding some degree of certainty and
equity through the development review process
Disadvantages of using impact fees include:
·
Funds
cannot be used to upgrade facilities that were already inadequate unless other
funds are provided to deal with the pre-existing inadequacy
·
There
needs to be a clear linkage between impacts of new development and the way in
which funds are used
·
Funds
have to be expended within a certain period of time or be returned. Therefore, if a required improvement is more
expensive than the fee paid by the developer, the Town would be responsible for
financing part of the improvement.
·
The
Town is responsible for constructing the improvements, rather than the
developer
·
The
amounts of money likely to be generated from such a system are not large
·
The
preparation for and administration of an impact fee system is complex and expensive
Orange County Model: Orange County has adopted an impact fee to help fund school
construction. We believe this effort would serve as a useful model for
implementing any impact fees in Chapel Hill. Prior to implementing the fee in
1995 County and school staff worked cooperatively to develop a method for
determining both the level of education expected in Orange County and the
capital cost per student accrued by the school system. This study included
consideration of a student generation, housing units and children per unit. The
process for determining appropriate school impact fees took approximately 15
months to complete.
Relation to Upcoming Parks and Recreation Master
Plan: Last
summer the Council approved funding in the 1999-00 budget for development of
the Town’s first Parks and Recreation Master Plan. We believe the master plan
process will help the Council determine leisure needs and values in the
community. Information gathered during
the Master Plan process would likely be useful in considering an impact fee for
recreation improvements for Chapel Hill.
Relation to Orange County Joint Master Plan Report: We are aware that the Board of Commissioners recently directed
County staff to examine the County’s development requirements for dedication of
recreation space and payment-in-lieu programs. The Commissioners also adopted a
resolution approving the creation of an Inter-Governmental Parks Work Group,
mentioned in the Orange County Joint Master Plan Report. On March 28, 2000 the
Council reviewed an agenda item concerning the Joint Master Plan Report. The
Council recommended that the Inter-Governmental Parks Work Group, once created,
would be the appropriate vehicle for examination of parks and recreation impact
fees.
Potential Uses of Money Generated from a Parks and
Recreation Impact Fee: The following restrictions limit a community’s ability to spend funds
derived from Impact Fees:
Because of these restrictions we believe the use of
impact fee revenue could best be directed toward creation of new neighborhood
recreation areas and trails. This would be a useful source of funds in
situations where need and funds match. For example, funds raised in the
vicinity of the Southern Community Park or Homestead Park could be used to help
build those facilities. However, we would likely face some situations in which
no viable projects could be found that would satisfy the criteria for using
these funds. For instance, funds raised in the eastern portion of Town might
have to be returned for lack of a viable project. Even if, for example, the Council had decided to acquire a
certain tract for an eastern community park, the revenue from an
impact fee payment in lieu could not be used
unless the Town could finance the cost of the acquisition not covered by the impact fee payment
in lieu. On the other
hand, if land were in hand and a concept plan adopted, it would probably be
possible for the impact
fee revenue payment in lieu to be spent on
implementing a small portion of the plan.
Section 17.9 of the Town’s development ordinance
concerns dedication of recreation areas (see Attachment 1). Major subdivisions
must provide or dedicate recreation areas suitable for residents’ common active
recreational use. The ordinance contains a recreation area ratio table by
zoning district. In lieu of providing or dedicating recreation area, a
developer may, with the approval of the Council, make a payment to the Town.
(Attachment 2 lists all payment in lieu money received to date. Another budget
working paper contains a list of payment in lieu funds received by the Town and
details spending of these funds.) In addition, planned developments require
improved recreation area. Payments in lieu can also be substituted for these
areas.
A possible alternative to Impact Fees could be
achieved by altering the Development Ordinance to encourage more contributions
from developers. The Town has collected relatively few payments in lieu of
recreation areas for subdivisions and improved recreation areas for planned
developments.
Advantages to using the payment in lieu approach
include:
·
The
Town has successfully acquired several key tracts connecting various greenways
projects as well of expansion of some parks
·
Payment
in lieu money has been used to address leisure issues in several existing parks
·
Larger
tracts have been acquired that serve as neighborhood open space
·
The
current system has some flexibility to take land or money as desired by the
Council (with limitations)
·
Payments
are determined by the value of the project
·
There
is flexibility in the use of the funds that are generated
Disadvantages to using payment in lieu include:
·
Current
formula discourages payment (see discussion below)
·
Each
project requires a separate appraisal and negotiation process
We believe the current process discourages
developers from employing the payment in lieu option.
High Cost of Using Payment in Lieu: The amount of the payment is determined by multiplying the
minimum amount of recreation area required 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) is the expected market
value of the land after it is subdivided in the manner proposed by the
developer and approved by the Town. This in essence means that the market value
is based on the value of land after development costs have already been
incurred. Most developers cite the high cost of these payments as the main
reason they decline to provide payments in lieu.
Review Process: Some small projects may receive approval
with staff and Planning Board approval. We have experienced several review
processes in which the developer preferred to make a payment in lieu. However,
only the Council can approve payment in lieu, and the developer declined to
submit the project for Council review.
The result in each case was provision of marginally beneficial recreation
improvements.
Acceptance of Marginal Open Space: Many open space
dedications have offered marginal value. They are too small to provide
significant open space or are located in areas that would not have been
developed for other reasons. We believe that payment in lieu would better serve
the community in many cases. (Attachment 3 is a list of developments approved
in calendar year 1999 and the recreation space requirements met—to come from
Planning).
FUTURE STEPS
We believe three ongoing or imminent projects will
make important contributions to the discussion of potential impact fees for
parks and recreation improvements:
We note that on May 22, 2000 the Council will consider
a recommendation to fund a review and revision of the Development
Ordinance. The council has already
authorized work on the Parks and Open Space Master Plan.
We believe that questions related to Impact Fees and
Payments in Lieu of Recreation Areas could best be addressed as components of
these projects. Our preliminary
recommendation is that we first attempt to address this issue by modifying the
Development Ordinance provisions, to make the payment in lieu option more
workable.
Attachments: 1. Section 17.9 of the Town’s development
ordinance concerns dedication of recreation areas
2.
Payment in Lieu money
received to date
3. List of developments
approved in calendar year 1999 and the recreation space requirements met