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DIMOC 02-11-14 Meeting Minutes Page 1 Development Impact Model – Oversight Committee Meeting Minutes February 11, 2014 MEETING MINUTES OF THE DEVELOPMENT IMPACT MODEL – OVERSIGHT COMMITTEE (DIM-OC) Held in the Planning Department conference room of the Frederick County Administration Building, 107 N. Kent Street, Winchester, Virginia, on February 11, 2014. DIM-OC MEMBERS PRESENT: JP Carr, Bob Hess, Gary Lofton, Paige Manuel, Steve Pettler, Roger Thomas, and Kris Tierney DIM-OC MEMBERS ABSENT: John Lamanna and Brian Madagan STAFF PRESENT: Eric Lawrence OTHERS PRESENT: Patrick Barker and Carson Bise CALL TO ORDER The Development Impact Model – Oversight Committee (DIM-OC) meeting was called to order at 10:00 AM. Mr. Carson Bise of Tischler-Bise was present to answer various questions posed by the DIM-OC in advance of the meeting, as well as any questions that arose during the meeting. Mr. Bise, who created the Development Impact Model (DIM) in 2004/05, offered a brief overview of the County’s DIM, and its purpose and functions, in an effort to address some of the questions provided to him in advance of the meeting. Mr. Bise clarified that the DIM was a direct impact model with emphasis on fiscal impacts. The DIM considers all local costs and revenues, and models the entire County budget. By design, the DIM has various modules that may be used independently of one another, or all together. The modules calculate impacts on individual County services and/or on an accumulation of all County services. The model may be used to solely evaluate projected revenues, demands for services, and/or capital expenditures. Page 2 Development Impact Model – Oversight Committee Meeting Minutes February 11, 2014 It was noted that the County’s DIM is not an indirect impact model. An indirect impact model would consider all costs and revenues beyond solely those controlled by a locality, and require additional projections/assumptions. Indirect models are less conclusive and tend not to be as conservative in their projections, with greater probability of errors as more factors are considered. An indirect model would not only look at taxes paid directly to a locality, but also project tax contributions that might result from business transactions outside of the locality’s control. Because of the complexity and increased probability for error, such a model would not be a good tool for the County to utilize for the purposes for which Frederick County has used the DIM – analyzing land use decisions and associated impacts. The DIM is able to model various land use scenarios, such as: All residential; All commercial; and/or a mix of both. The DIM has the ability to tailor a project by square footage, number of housing units, types of housing units, etc., and project the fiscal impacts (positive and negative) that result. The DIM has the ability to analyze capital and operational impacts on a locality. It was noted that the County previously (October 2005) chose to use the DIM primarily for capital impact projections in an effort to provide guidance during the evaluation of rezoning applications since proffers, by state law, would only be applicable to address capital impacts. The DIM is a fiscal impact model, not an economic impact model. Fiscal impact models look to analyze impacts on a locality, the public sector. Economic impact models are used to evaluate impacts on the private sector. How localities use fiscal impact models vary by locality. Some localities follow the output of the model strictly, while others (like Frederick) use the model as a guide when evaluating and making land use decisions. A proffer model is much more intense than a fiscal impact model. The proffer study looks very closely at capital and dedicated revenues. The results become more rigid and less open for discussion. Open discussion has significant advantages and disadvantages to Developers and County officials alike. The DIM is not a proffer model, but is a fiscal impact model. A question posed by a member of the DIM-OC sought clarification that if houses can continue to be constructed yet the County real estate tax rate does not increase, isn’t that an indication that new houses are not a drain on the local budget. In response, Mr. Bise pointed out if the County didn’t have other taxing options available to it under state laws, then the real estate tax Page 3 Development Impact Model – Oversight Committee Meeting Minutes February 11, 2014 rate would probably need to be increased to address the additional demands for service that new houses place on the locality. He also pointed out that the complexity of the local budget and the various tax sources that are utilized – from real estate taxes to meals taxes to Business, Professional and Occupational License (BPOL), enable the locality to maintain a relatively low real estate tax rate. The complexity of local taxing abilities enables the locality to balance the budget, provide quality services, and spread the Community’s fiscal responsibilities to contributors across many areas in the local economy. A strength of the DIM is that it considers the various and complex taxes the County is enabled to levy to balance the budget. In discussing how the DIM should consider school impacts, one suggestion was that the County evaluate schools by level (elementary, middle, high), with the goal of possibly only collecting proffers where the demand was clear. The thought being that maybe the demand for new seats/schools was concentrated at one level rather than all levels. As the discussion continued, it became clear that Frederick County continues to build schools at each level, which is an indication that such a demand continues to exist across all school/education levels. In discussing what could be revised in the DIM to reflect more specific impacts and credits of a particular development, it was noted that the DIM has the ability to project impacts reflective of housing types, numbers, and sizes of homes. This would be a fundamental change on how the DIM is presently utilized, and the end result may actually increase the value of projected impacts. For example, the DIM presently is run annually based on the value of a single family home valued at $400,000, which results in the 2013 projected capital facilities impact of $19,600 (over a 20 year period). If the value of the home was reduced, the impact value would increase; lower value homes generate lower tax revenues but continue to generate demands for County services. The consensus was to not revise the valuation of homes currently utilized in the DIM. The DIM does not consider debt service; it looks at straight cost of construction. The values considered are derived from the adopted Capital Improvement Plan (CIP), and reflect real time construction costs (i.e. schools get construction estimates which are made a part of their CIP submissions). The DIM presently does not evaluate nor project transportation impacts resulting from new development. While the DIM analysis could be enhanced with the addition of a transportation module, it was noted that since roads are presently constructed by the state and not the Page 4 Development Impact Model – Oversight Committee Meeting Minutes February 11, 2014 County, a transportation analysis may not benefit the County’s development impact evaluation process. When questioned if the model was being used as designed, Mr. Bise stated the model is able to project impacts which result from a land use change such as rezoning; so yes the model is being used as designed. He also noted that the full strength of the model is more than simply analyzing impacts from a rezoning. The model is designed to provide for a more complex analysis of larger land use plans - comprehensive plan size land use evaluations - that look at mixing residential, commercial, and industrial land use activities, and understanding the associated fiscal realities. Mr. Bise offered to review the DIM to confirm/identify if any aspect of development impacts are being overlooked or misused in the model. He will also identify any areas in the DIM that might offer additional credits that are currently not being realized. The following questions were discussed as part of Mr. Bise’s presentation of materials and clarification of the DIM. • What was the model designed to calculate? • Is it designed to analyze costs and revenues generated as a result of different development scenarios? • How is it used by other governmental users? • Does the model function properly if the “revenue” component is “turned off”? • How does TischlerBise determine which input variables to include in the model? • How often are the algorithms used to calculate the impact revised to reflect actual/historic economic trends (if they are at all)? For example – pupil generation rates; ratio of increased population to increased broad-based tax revenues (sales tax, restaurant tax, gas tax); ratio of increased population to demand for public services? • Are costs of transportation (or lack of transportation) improvements included in the model? If not, can they be? • Is cost of debt service factored into the model? • Is the fact that the locality uses debt to finance major capital improvements (as opposed to current revenues for taxes and fees) factored into the model? • Are “fee for service” revenues included in the model (i.e., rescue squad calls)? Next meeting of the DIM-OC is To Be Determined. The meeting will be scheduled once we receive the results of Mr. Bise’s review of the DIM. The meeting adjourned at 11:25 AM.