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DIMOC 10-07-20 Meeting AgendaAGENDA DEVELOPMENT IMPACT MODEL OVERSIGHT COMMITTEE WEDNESDAY, OCTOBER 7, 2020 8:30 AM THE BOARD ROOM FREDERICK COUNTY ADMINISTRATION BUILDING WINCHESTER, VIRGINIA 1.Capital Impacts Model Update Discussion of the annual update of select inputs to the Capital Impacts Model for Frederick County, Virginia. Overview of Annual Update Information for the Capital Impact Model (CapIM).pdf Capital Impacts Study, Frederick County, Virginia – Executive Summary.pdf 2.Other Development Impact Model Oversight Committee Agenda Item Detail Meeting Date: October 7, 2020 Agenda Section: Overview of Annual Update Information for the Capital Impact Model (CapIM) Title: Overview of Annual Update Information for the Capital Impact Model (CapIM) COUNTY of FREDERICK Department of Planning and Development 540/ 665-5651 Fax: 540/ 665-6395 107 North Kent Street, Suite 202 • Winchester, Virginia 22601-5000 MEMORANDUM TO: Development Impact Model – Oversight Committee (DIM-OC) FROM: Mike Ruddy, AICP, Director of Planning and Development RE: October 7, 2020 DIM-OC Meeting CapIM update DATE: September 30, 2020 On June 12, 2019, the Frederick County Board of Supervisors directed staff to use the new Capital Impacts Model (CapIM) to analyze the capital costs generated by new development in the County. The CapIM was created by an economic consultant, TischlerBise, as part of a Capital Impact Study. Several inputs to the CapIM are to be reviewed and updated on a consistent basis to assure that the fiscal projections accurately reflect County capital expenditures. In this first annual update of the CapIM, the following base year data elements have been adjusted to reflect current year (2020) numbers: •Population •Frederick County Public School Enrollment •Jobs Please find attached to this memo a work sheet that identifies this new base year data (2020) information in comparison to the current data (2019). As you are aware, there is no fixed output value with the CapIM as each example is variable depending on the location and make up of a given project. Overview The CapIM is designed to evaluate the anticipated need for capital facilities based on growth and to determine the cost of those capital facilities to the County. Further, the model determines the cost to the County for mitigating the infrastructure impacts associated with rezoning’s. It is the tool to use to determine if a cash proffer can be collected due to the presence of “excess capacity” or not. The Model provides a cash proffer calculation for County staff to use in determining the reasonableness of a cash proffer for a development project. At the DIM-OC meeting staff will provide: •An overview of the base year data update •A brief review of the CapIM and what the model does and does not analyze •Examples of hypothetical projects with a summary of resulting impact For your background reference, please also find included the Capital Impacts Study, Frederick County, Virginia – Executive Summary. Recommendation. A recommendation from the Development Impact Model–Oversight Committee regarding the update of the base year data for the CapIM to forward to the Board of Supervisors would be appropriate. Please contact our department if you are unable to attend this meeting. Attachments: Base Year Data comparison sheet. Development Impact Model Oversight Committee Agenda Item Detail Meeting Date: October 7, 2020 Agenda Section: Capital Impacts Study, Frederick County, Virginia - Executive Summary Title: Capital Impacts Study, Frederick County, Virginia - Executive Summary Capital Impacts Study Frederick County, Virginia Submitted to: Frederick County, Virginia June 3, 2019 4701 Sangamore Road Suite S240 Bethesda, Maryland 20816 800.424.4318 www.tischlerbise.com 1 TischlerBise 4701 Sangamore Road Suite S240 Bethesda, Maryland 20816 800.424.4318 www.tischlerbise.com June 2019 2 EXECUTIVE SUMMARY Overview TischlerBise has been retained by Frederick County, Virginia, to analyze the capital impacts of new development. The objective is to quantify the capital costs generated by new development in the County, specifically in light of changes to Cash Proffer law in Virginia. The assignment includes the development of a Capital Impacts Model (CapIM) for use in: 1. Calculating the “static” capital impact of new development by type of land use and 2. To allow County staff to use the Capital Impacts Model to determine the capital costs for development projects that take into consideration whether capacity is available or not (and therefore, whether a cash proffer can be offered and accepted by the County). TischlerBise evaluated capital impacts for the following categories of public capital improvements: (1) Public Schools, (2) Parks and Recreation, (3) Public Safety: Sheriff, (4) Public Safety: Fire & Rescue, (5) Public Safety: Animal Protection, (6) Library, (7) General Government, (8) Courts, and (9) Environmental Services/Solid Waste. Methodologies and calculations are presented in this report as supporting documentation for estimating capital impacts from new growth as well as potential support for cash proffers. CAPITAL IMPACTS STUDY Frederick County, Virginia 3 Background on Cash Proffers Cash proffers are one-time voluntary monetary commitments made at the time of rezoning to offset the impact on certain public facilities from new residential development. The funds ultimately collected from cash proffers are used to construct capital improvements to mitigate capital impacts with the goal of maintaining levels of service. Funds can only be used for capital improvements that provide additional capacity, not operations or maintenance. Cash proffer are calculated using level of service standards to account for infrastructure that may currently have excess capacity. Cash proffers cannot be used to correct existing deficiencies. However, since cash proffers do not apply to “by-right” development but only apply during the rezoning process, only a portion of the impacts from new growth can be mitigated through cash proffers. Cash proffers are a small part of an overall funding strategy and should not be regarded as a total solution for infrastructure financing needs. Therefore, other strategies and revenue sources are needed to offset the impact to infrastructure from new growth. Cash proffers are authorized under Virginia Code §15.2-2303 and §15.2-2298. A major change to cash proffer authority was enacted in 2016 affecting Section 15.2-2303.4(B) that added requirements to the acceptance of cash proffers. The new section states that localities cannot require an unreasonable proffer or deny a rezoning application or proffer condition amendment due to applicant’s failure or refusal to submit an unreasonable proffer.1 The implementation of this change to the cash proffer law hinges on defining an unreasonable proffer, or more positively, defining a reasonable proffer. Defining reasonable proffers requires the analysis of existing capacity in public facilities as well as the demand for additional capacity from growth. This report and the accompanying Capital Impacts Model address this requirement specifically for Frederick County and provides a tool for ongoing implementation of the cash proffer law. Furthermore, the changes to the cash proffer law restrict the infrastructure categories to public transportation facilities, public safety facilities, public school facilities, and public parks and further restricts the impacts that can be addressed to capacity improvements associated with construction projects. 1 Virginia Code Section 15.2-2303.4(B) was revised in 2019 from restricting a local governing body from merely requesting or accepting an unreasonable proffer, to restricting a local governing body from requiring an unreasonable proffer. This allows a local governing body to discuss and negotiate with a developer to determine a reasonable proffer. CAPITAL IMPACTS STUDY Frederick County, Virginia 4 Capital Impacts Approach TischlerBise evaluated possible methodologies and documented appropriate demand indicators by type of land use for the infrastructure categories addressed in this study. The formula used to calculate each capital impact is diagrammed in a flow chart at the beginning of each chapter. Specific capital costs have been identified using local data and current dollars (2019). Because cash proffers reflect a point in time, the calculations and study should be updated periodically (typically 3 to 5 years). Costs reflect the direct impact of new development on the need for new facilities and infrastructure and do not reflect secondary or indirect impacts. Capital impacts and resulting cash proffer amounts are calculated to recognize three key elements: need, benefit, and proportionality. • First, to justify a cash proffer for public facilities, it must be demonstrated that new development/rezonings will create a need for capital improvements (including an assessment of existing capacity). • Second, new development/rezonings must derive a benefit from the payment of the cash proffers (i.e., in the form of public facilities constructed within a reasonable timeframe). • Third, the cash proffer to be paid by a particular type of development (land use) should not exceed its proportional share of the capital cost for system improvements. For each capital impact calculation, the report includes a summary table indicating the specific factors used to derive the amounts. These factors are referred to as “Level of Service” (LOS) standards. The capital impacts outlined in this report reflect the actual cost to the County generated from new residential and nonresidential development, and as such, each represents the true capital impact generated by type of land use for each public facility category. The Capital Impacts Model developed for the County by TischlerBise is the tool to use to determine if a cash proffer can be collected due to the presence of “excess capacity” or not. The Model provides a cash proffer calculation for County staff to use in determining the reasonableness of a cash proffer for a particular development project. CAPITAL IMPACTS STUDY Frederick County, Virginia 5 Methodologies Any one of several legitimate methods may be used to calculate cash proffers. The choice of a particular method depends primarily on the service characteristics and planning requirements for the facility type being addressed. Each method has advantages and disadvantages in a particular situation, and to some extent can be interchangeable, because each allocates facility costs in proportion to the needs created by development. Reduced to its simplest terms, the process of calculating cash proffers involves two main steps: (1) determining the cost of development-related capital improvements and (2) allocating those costs equitably to various types of development. In practice, though, the calculation of cash proffers can become quite complicated because of the many variables involved in defining the relationship between development and the need for facilities. The following paragraphs discuss three basic methods for calculating cash proffers and how those methods can be applied. Plan-Based Calculation. The plan-based method allocates costs for a specified set of improvements to a specified amount of development. The improvements are identified by a facility plan and development is identified by a land use plan. In this method, the total cost of relevant facilities is divided by total future demand to calculate a cost per unit of demand. Then, the cost per unit of demand is multiplied by the amount of demand per unit of development (e.g., housing units or square feet of building area) in each category to arrive at a cost per specific unit of development (e.g., single family detached unit). Incremental Expansion Calculation. The incremental expansion method documents the current level of service (LOS) for each type of public facility in both quantitative and qualitative measures, based on an existing service standard (such as square feet per student). This approach ensures that there are no existing infrastructure deficiencies or surplus capacity in infrastructure. New development is only paying its proportionate share for growth-related infrastructure. The level of service standards are determined in a manner similar to the current replacement cost approach used by property insurance companies. However, in contrast to insurance practices, the cash proffer revenues would not be for renewal and/or replacement of existing facilities. Rather, revenue will be used to expand or provide additional facilities, as needed, to accommodate new development. An incremental expansion cost method is best suited for public facilities that will be expanded in regular increments, with LOS standards based on current conditions in the community. Cost Recovery or Buy-In Calculation. The rationale for the cost recovery approach is that new development is paying its share of the useful life and remaining capacity of facilities already built or land already purchased from which new growth will benefit. This methodology is often used for oversized systems. At the beginning of each capital facility chapter the chosen methodology will be explained and illustrated with a figure. CAPITAL IMPACTS STUDY Frederick County, Virginia 6 Generic Cash Proffer Calculation In contrast to development exactions, which are typically referred to as project-level improvements, cash proffers fund growth-related infrastructure that will benefit multiple development projects, or the entire jurisdiction. The basic steps in a generic cash proffer formula are illustrated in Figure 1. The first step is to determine an appropriate demand indicator, or service unit, for the particular type of infrastructure. The demand/service indicator measures the number of demand or service units for each unit of development. For example, an appropriate indicator of the demand for schools is growth in student enrollment and the increase in enrollment can be estimated from the average number of students per housing unit. The second step in the generic formula is to determine infrastructure units per demand unit, typically called level of service (LOS) standards. In keeping with the school example, a common LOS standard is square feet per student. The third step in the generic formula is the cost of various infrastructure units. To complete the school example, this part of the formula would establish the cost per square foot for school construction. Figure 1. Generic Cash Proffer Formula XX Dollars per Infrastructure Unit Infrastructure Units per Demand Unit Demand Units per Development Unit XX Dollars per Infrastructure Unit Infrastructure Units per Demand Unit Demand Units per Development Unit Students per housing unit Level of Service {e.g., Sq. Ft. per student} Cost {e.g., $ per Sq. Ft.} CAPITAL IMPACTS STUDY Frederick County, Virginia 7 Credits A general requirement common to cash proffer methodologies is the evaluation of credits. Two types of credits should be considered, future revenue credits and site-specific credits. Future revenue credits are necessary to avoid potential double payment situations arising from a one-time cash proffer payment plus the payment of other revenues that may also fund the same growth-related capital improvements. Future revenue credits are dependent upon the cash proffer methodology used in the cost analysis. The incremental expansion methodology is best suited for public facilities that will be expanded incrementally in the future. Because new development will provide front-end funding of infrastructure, there is a potential for double payment of capital costs due to future principal payments on existing debt for public facilities. That is, because new development that may pay a cash proffer will also pay taxes to retire debt for the same type of infrastructure, a credit is included in the cash proffer calculation to account for this. (A credit is not necessary for interest payments if interest costs are not included in the cash proffers.) The second type of credit is a site-specific credit for system improvements that have been included in the cash proffer calculations. A site-specific credit is handled during implementation and would reduce the cash proffer amount due to contributions of improvements or land that mitigate new development’s impact on the infrastructure needs covered in the cash proffer program. Policies and procedures related to site-specific credits for system improvements should be addressed in the policy that establishes the Cash Proffer program. However, the general concept is that developers may be eligible for site-specific credits or reimbursements only if they provide system improvements that have been included in the cash proffer calculations. Project improvements normally required as part of the development approval process would not be eligible for credits against cash proffers. CAPITAL IMPACTS STUDY Frederick County, Virginia 8 Summary of Capital Impacts Approach A summary of infrastructure categories is listed in Figure 2. To be eligible for a cash proffer, the facility must be for Public Schools, Parks and Recreation, or Public Safety (Sheriff, Fire, and Animal Services) which are noted in the figure. The noneligible infrastructure categories are included in the CapIM to capture a developments total capital impact to Frederick County. The County cannot collect a proffer for noneligible categories; however, understanding the full impact of a development (or a collection of developments) can be a tool in the long-term planning process. The figure includes the components and serve areas used in the analysis as well. The geographies used for an infrastructure category were determined based on how the County service is being provided and through discussions with County staff. For example, most of the Parks & Recreation facilities serve only the local population, so the Urban and Rural service areas are implemented in the analysis. While the Sheriff’s Office and Public Safety Building are serving the whole County. More granular service areas were needed for the School and Fire capital impact analysis. Several service area options were discussed with County staff when determining the service area for the School analysis. A properly calibrated service area is needed to accurately identify the local school utilization (enrollment compared to capacity) at each of the three grade levels. More general and larger service areas (i.e., countywide or Urban and Rural) would reflect utilization of the schools within that area being analyzed. More detailed service areas (i.e., based on school attendance zones) would result in the model analyzing only the utilization of the specific school that would be directly affected by the development. Initially, the model’s service areas for the School analysis were programmed based on the General Service Areas (i.e., Urban and Rural) with the Elementary School analysis splitting the Urban Service Area into North and South areas. This would provide some flexibility as school boundaries are adjusted to address growth-related needs. After review from the Frederick County Development Impact Model Oversight Committee (DIMOC), a consensus was reached that the service areas should be the school attendance zones. Thus, when a development is being inputted into the Capital Impact Model, the local school at each grade level is chosen. The model then analyzes just the utilization of those schools. CAPITAL IMPACTS STUDY Frederick County, Virginia 9 Figure 2. Summary of Frederick County Capital Impacts Methodologies Type of Public Facility Infrastructure Components and Geography Used Cost Allocation Methodology Public Schools* Countywide ▪ Transportation Vehicles ▪ Education Centers ▪ Support Facilities Attendance Zones ▪ Elementary School ▪ Middle School ▪ High School Public School Students from Residential Development Incremental Approach Parks and Recreation* Countywide ▪ Indoor Recreation Facilities Urban & Rural Service Area ▪ District, Community, Neighborhood Parks ▪ Paved & Unpaved Trails ▪ Community Centers Residential Incremental Approach Public Safety: Sheriff* ▪ Public Safety Building: Countywide Residential and Nonresidential Incremental Approach Public Safety: Fire & Rescue* ▪ Fire Stations & Apparatuses: Fire Districts Residential and Nonresidential Incremental Approach Public Safety: Animal Protection* ▪ Animal Shelter: Countywide Residential Incremental Approach Libraries ▪ Library: Countywide Residential Incremental Approach General Government ▪ General Government Facilities: Countywide Residential and Nonresidential Incremental Approach Courts ▪ Court Facilities: Countywide Residential and Nonresidential Incremental Approach Environmental Services/Solid Waste ▪ Convenience Sites: Urban & Rural Service Area ▪ Landfill: Countywide Residential Incremental Approach *Note: the public facilities with an asterisk are eligible for cash proffers