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DIMOC 03-31-14 Meeting MinutesCOUNTY of FREDERICK Department of Planning and Development 540/ 665-5651 Fax: 540/ 665-6395 Eric R. Lawrence, AICP Director 107 North Kent Street  Winchester, Virginia 22601-5000 MEMORANDUM TO: Board of Supervisors FROM: Eric R. Lawrence, AICP, Planning Director SUBJECT: Development Impact Model – Oversight Committee Report from Meeting on March 31, 2014 Regarding Business Friendly Initiatives DATE: April 14, 2014 ________________________________________________________________________ The Development Impact Model – Oversight Committee (DIM-OC) met on Monday, March 31, 2014 at 8:30 AM. Members Present Members Absent Robert Hess J.P. Carr Dr. John Lamanna Brian Madigan Gary Lofton Roger Thomas H. Paige Manual Stephen Pettler Kris Tierney Patrick Barker, Eric Lawrence, and Wayne Lee were present. *** Informational Purposes Only *** The DIM-OC has completed its review of the Development Impact Model (DIM) and determined that changes to the model and its application to the rezoning process do es not warrant additional changes. Page 2 DIM-OC Report April 14, 2013 Background On August 14, 2013, the Board of Supervisors directed the Development Impact Model- Oversight Committee (DIM-OC) to review, evaluate, and forward a recommendation regarding reducing rezoning proffer expectations. The referred directive stated: “Reduction in Proffer Requirements” The Land Use and Development Subcommittee recommended a reduction in proffer requirements for future rezoning applications, as well as amendments to existing proffers in order to create viable projects that will deliver needed transportation improvements and other benefits. The economics of the current proffer model or development impact model do not allow for construction. The Committee examined the model and determined there were numerous capital items contemplated and incorporated into the model, but those projects were not being built in the current year. It is anticipated none of these government capital projects will be built at any time in the near future, if at all. Further, the Development Impact Model does not fully account for business, personal property tax, or other revenue that is of significant benefit to Frederick County, in addition to property taxes. A re-evaluation of the Development Impact Model taking into account current economic conditions would be appropriate. This recommendation should be referred to the Development Impact Model Oversight Committee for evaluation and recommendation to the Board.” A supplemental directive issued by the Board of Supervisors on December 6, 2013 stated: “..review the model to see if there are any components that prohibit growth.” The DIM-OC began their review and discussion of the Development Impact Model in October 2013, by recognizing that the critical inputs of the DIM are reviewed each spring as part of the annual update of the DIM. Local tax rates, capital facility costs, and student enrollments are some of the inputs identified as critical inputs that are updated annually. The inputs are essential in order to maintain an updated DIM. The DIM-OC reviewed the residential building permit trends to ascertain economic health of local new residential construction. It was found that new residential construction (new residential building permits issued) was up by 30% in 2013, over the previous year; certainly a positive sign for our local economy. Page 3 DIM-OC Report April 14, 2013 It was noted that the DIM is a direct fiscal impact model, a planning tool which projects anticipated operational and capital facility costs associated with land use planning. The DIM is also commonly referred to as the model utilized to project the capital facility impacts resulting from new residential development, which results in cash proffer contributions. It was noted that the output figures utilized as part of the rezoning application evaluation do not include revenue credits or debt service costs; the projection solely considers impacts on capital facilities. In considering whether cash proffers amount to a significant value to the county, it was noted that since 1995, the county received cash proffer payments in excess of $9.4 million. More significant is that in FY2013, the county received $1,185,263 in cash proffer payments. The DIM-OC had an opportunity to meet with Carson Bise of TischlerBise, Inc., creator of the County’s DIM. Mr. Bise discussed the purpose and design of the DIM, and responded to questions raised by the DIM-OC. Mr. Bise also reviewed the county’s DIM and reported that the DIM continues to function as designed, with its formulas and links all working correctly. The DIM is in good shape. The DIM-OC found the DIM’s output as used for the rezoning application evaluation indicated that a single family detached dwelling placed an impact of $19,600 on the County’s capital facilities; rezoning applicants typically mitigate this impact through a proffered cash contribution. This contribution is at the lower range of a number of studied jurisdictions’ impact mitigation expectations, with the higher end of the range approaching $50,000. It is foreseeable that the rezoning impact mitigation expectation could be reduced to reflect a policy decision regarding what percentage of projected impacts should be addressed, or to reflect a credit for the contributions that result from new development. The DIM-OC studied potential contributions in the form of:  Tax contributions that may result from new residential development o This concept would enable the DIM to calculate tax revenue that results from residential development, and reflect that revenue as a credit against the projected impacts on capital facilities. o DIM-OC did not support this potential policy revision.  Tax contributions that may result from new commercial development associated with a residential development proposal o This concept would enable the DIM to calculate tax revenue that would be generated from a proffered phased commercial component Page 4 DIM-OC Report April 14, 2013 of the rezoning application, and reflect that revenue as a credit against the projected impacts on capital facilities. o DIM-OC did not support this potential policy revision.  Value of proffered capital improvements (such as transportation) that may be considered as an offset from the DIM’s capital impact projections. o Staff did learn that in some jurisdictions, the value of proffered transportation improvements, above and beyond what is generally expected/required by ordinance with a new development, and may be utilized as a credit against the projected capital facility impacts. o DIM-OC did support this policy revision, and previously forwarded a recommendation that the Board of Supervisors consider amending policy to implement. The Board of Supervisors did accept this policy amendment in January 2014. In running the DIM, the DIM-OC found that a single family detached residence in Frederick County places a demand on county services (operation and capital) of approximately $133,511 over a 20 year period. The DIM projects tax revenue contributions of $73,924 during the same period. This leaves a shortfall of nearly $60,000. After recognizing the shortfall in revenues to expenses, the DIM-OC felt it was not appropriate to offer a revenue credit when considering rezoning applications. The DIM-OC concluded that the DIM is not perfect, is very complex, and is reasonable in its projections. Residential demands for county services exceed its contributions. No change to the DIM or how it is implemented is recommended. The DIM-OC will continue to use the annual review in May/June to confirm that the input variables are appropriate. This practice has been in effect since 2005 and offers reassurance that the DIM continues to be a valid, current fiscal model. It was noted that the use of the DIM to project the annual proffer expectation is appropriate. It was also noted that this expectation results from the Board and rezoning applicant working together to demonstrate how the development proposal is mitigating the capital impacts on the county, and is often addressed through proffered improvements or cash contributions. This development review process offers flexibility so that developers may demonstrate the merits of a proposal. More importantly, current residents should not be expected to bear the costs associated with new growth through increased real estate taxes; development needs to pay its way.