COUNTY OF ALBEMARLE
Albemarle Place and Hollymead Town Center Community Development Authority Proffers
Discussion Regarding Creation of Community Development Authority or Service District
Tucker, Foley, Davis
LEGAL REVIEW: Yes
January 4, 2006
ACTION: X INFORMATION:
In 2003, the Board of Supervisors accepted proffers in ZMA 01-07 (Albemarle Place), ZMA 01-19 (Hollymead Town Center Area B), ZMA 01-20 (Hollymead Town Center Area C), and ZMA 02-02 (Hollymead Town Center Area D) that generally provided that upon the request of the County that the owners of property used for non-residential purposes would petition and consent to the creation of a community development (“CDA”) authority that could impose a special tax not greater than twenty-five cents ($.25) per $100 of the assessed value of the property. The purpose of the proffered CDA was limited to funding improvements related to or associated with Route 29. The wording of each voluntary proffer varied somewhat from one another but was generally consistent. [Attachment A]
In 2004, the County retained John O’Neill from the law firm of Hunton & Williams to provide an overview of CDA’s and to explore the possibilities of creating a CDA relating to the Albemarle Place and the Hollymead Town Center developments. On April 7, 2004, Mr. O’Neill presented information to the Board regarding CDA’s and alternative special service districts. The Board requested additional information comparing CDA’s and service districts. That information was provided to the Board in a comparative chart on April 14, 2004. No action was taken by the Board to proceed with either approach.
In September of this year, the Board asked staff to revisit this issue.
Goal: 4.2 Fund County services in a fair, efficient manner and provide needed public facilities and infrastructure.
The purpose of the CDA proffers in the Albemarle Place and Hollymead Town Center rezonings was to provide a possible funding option to address road improvements related to Route 29 and roads associated with Route 29. At the time the proffers were offered there was no specific plan or time table for establishing such a CDA nor were specific road improvements identified that would be funded by a future CDA. The intent was to provide a mechanism for non-residential property to pay a special tax to fund, in part, road improvements necessary to meet the increased traffic resulting from these developments when the improvements were identified. It was anticipated that the Route 29 traffic study would identify improvements that would require additional revenue sources to implement them.
When this issue was reviewed in 2004, a number of obstacles were identified that made the formation of a CDA complicated. As a result, Mr. O’Neill suggested that the County consider the use of a service district in lieu of a CDA if it desired to create a special tax district.
Attachment B provides information regarding special tax CDA’s (This attachment only addresses special tax CDA’s and does not address CDA’s funded by special assessments. Assessment CDA’s are different in how and what improvements may be funded), Attachment C provides information regarding service districts, and Attachment D provides an updated chart comparing CDA’s and service districts.
One obstacle to creating a CDA is that the CDA must consist of a single “tract” of land and that 51% of the property owners based on acreage or value must petition for the creation of the CDA. The proffers only commit the property owners of land “used for non-residential purposes” to petition for the creation of a CDA. As shown in Attachment A, only Hollymead Town Center Area B consists of only non-residential uses. The other three developments have a potential mix of residential and non-residential uses. The specific location of the residential uses cannot yet be determined because site plans have not been submitted or approved identifying the exact location of the residential and non-residential properties. [Attachment E] The documents creating a CDA must specifically identify all property that will be included in the CDA. In addition, the Hollymead Town Center Area B proffer makes its CDA proffer contingent upon the CDA including all of the other non-residential properties in the other Hollymead Town Center areas. The proffer for Hollymead Town Center Area C only commits the property owners of property in Area C previously zoned Light Industry (L-I) to be included in the CDA. Some non-residential property in Area C previously zoned Highway Commercial (HC) may have to be involuntarily included in the CDA to meet the Area B contingency. It also may be difficult to draw a CDA that connects all the non-residential property in a single tract. The extent of this cannot be determined until the uses of the property can be reasonably identified. Again, it is unknown when development plans will be finalized so that the use of the properties can be determined.
Another obstacle is that only improvements located outside of the CDA that “serve” the CDA may be funded by the special tax collected by the CDA. The petition to create the CDA must describe the facilities proposed to be financed by the CDA. In order to determine that infrastructure and improvements outside the CDA serve the CDA district, studies of an acceptable consultant would be necessary. The Board is required to make a legislative finding that the improvements are necessary to meet the increased demands on the County as a result of the development within the CDA district. Unless the nature of the improvements is known at the time the CDA is created, this finding becomes more difficult.
A CDA is a separate political subdivision. Once created, a CDA is limited to act only within the powers granted to it in the enabling ordinance. The enabling ordinance can only be adopted upon the petition of the landowners. After the ordinance is adopted and finalized, it is recorded in the land records for each tax map parcel in the district and the CDA Articles of Incorporation are filed with the State Corporation Commission. A CDA board is required to carry out the purposes of the CDA. Unless the Board of Supervisors appoints its own members to be the CDA board, however, the CDA board can act independently within the powers granted to it. There is no flexibility to amend a CDA after it is created without the consent of the majority of the property owners within the CDA. A CDA has the authority to issue revenue bonds but bond counsel indicates that it would be difficult for a special tax district CDA to market such bonds based on the limited revenue stream. The amount of the bonds would also be limited by the revenue stream. No special tax CDA’s, to date, have been created in Virginia.
A service district can create the “same” special tax that could be imposed by a CDA. A service district can levy and collect a special tax to fund transportation improvements and road construction within the service district. Whereas a CDA is limited to a special tax rate of twenty five cents ($.25), there is no legal limit on the amount of the service district tax. The taxes that are collected are required to be segregated in a separate fund and can be used only for the improvements identified in the ordinance creating the district.
A service district is created by an ordinance that defines the boundaries of the district and any areas within the boundary that are excluded from the district. The creation of a service district does not require a petition or consent of the property owners. There must be a reasonable basis to include or exclude property from the district. The purpose of the district is to “provide additional, more complete, or more timely governmental services within the district”. The district could include Route 29 and the properties identified within Albemarle Place and Hollymead Town Center and any other properties deemed appropriate by the Board of Supervisors. Whether it would be appropriate to expand the service district to include other properties would need to be studied. No improvements could be constructed outside the boundaries of the district.
A service district is not a separate political subdivision. A service district is created, controlled, and can be amended at the discretion of the Board of Supervisors. A service district could be created when deemed appropriate to start collecting the revenue generated by a special tax. The properties included in the district could be adjusted after their use (residential, non-residential) has been established. A service district has no independent authority to issue bonds. There is uncertainty whether the County could issue “revenue” bonds based on the proceeds of the special tax. If the bonds could be issued, the amount of the bonds would be limited by the projected revenue stream.
There could be substantial expense incurred to create a CDA depending upon whether the property owners cooperate in the formation of the CDA, the expense of the legal documents necessary to establish it, and the cost of consultants to establish that the improvements “serve” the CDA district. These costs could be funded by the special tax collected by the CDA. A service district could be created at less expense. Both a CDA and service district would require staff time to establish the districts, collect the taxes, and administer the projects for the benefit of the district. Whether additional staff would be necessary would depend on the extent of the districts, whether existing software could be used to implement the tax collection, and the nature of the projects to be constructed.
If the Board desires to create a mechanism to collect special taxes on the non-residential properties in the Albemarle Place and Hollymead Town Center developments to fund transportation improvements related to Route 29, staff recommends that the more efficient approach would be to explore the creation of a service district rather than a special tax CDA. Although only consent to the CDA approach was proffered by these property owners, the effective fiscal impact of the service district approach would be the same as the proffered CDA if the service district tax was limited to twenty five cents. Legally the consent of the property owners would not be required to create a service district. Either approach would require additional staff analysis and study.
A – List of CDA proffers accepted by the Board in 2003 in ZMA 01-07 (Albemarle Place), ZMA 01-19 (Hollymead Town Center Area B), ZMA 01-20 (Hollymead Town Center Area C), and ZMA 02-02 (Hollymead Town Center Area D)
B – Information regarding Special Tax CDA’s
C – Information regarding Service Districts
D – Chart comparing CDA’s and Service Districts
E – Memorandum estimating non-residential acreages
F – Map depicting potential service area
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