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DIMOC 05-09-19 Meeting AgendaCOUNTY 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: May 9, 2019 DIM-OC Meeting Agenda DATE: May 1, 2019 The Development Impact Model - Oversight Committee (DIM-OC) will be meeting on Thursday, May 9, 2019 at 9:00 a.m. in the Public Works Department Conference Room on the second floor of the County Administration Building, 107 North Kent Street, Winchester, Virginia (please note the location of the meeting room). The DIM-OC will discuss the following agenda item: AGENDA 1. Review of the Capital Impacts Study and updated Development Impact Model. Please contact our department if you are unable to attend this meeting. MTR/slc Attachments: Capital Impacts Study Frederick County, Virginia – Executive Summary Overview Frederick County has been working with Tischler-Bise to develop a Capital Impact Study and Model 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 re-zonings. This Capital Impact Study also assists in ensuring the County’s Cash Proffer Policy complies with latest Virginia Cash Proffer legislation. Please find attached the Capital Impacts Study, Frederick County, Virginia – Executive Summary. At the DIM-OC meeting a presentation will be made to the DIM-OC by the consultant, Tischler-Bise, that will provide: • A brief introduction to remind committee of what the model does and does not analyze • Details and screenshots of how the model will be used • Methodologies and cost analysis of cash proffer-eligible categories • Example of input and resulting impact County staff will provide an overview of how the study and model is anticipated to be implemented by Frederick County. A recommendation from the Development Impact Model–Oversight Committee regarding the Capital Impacts Study and updated Development Impact Model to forward to the Board of Supervisors would be appropriate. Capital Impacts Study Frederick County, Virginia EXECUTIVE SUMMARY Submitted to: Frederick County, Virginia May 1, 2019 4701 Sangamore Road Suite S240 Bethesda, Maryland 20816 800.424.4318 www.tischlerbise.com CAPITAL IMPACTS STUDY Frederick County, Virginia i TischlerBise 4701 Sangamore Road Suite S240 Bethesda, Maryland 20816 800.424.4318 www.tischlerbise.com May, 2019 CAPITAL IMPACTS STUDY Frederick County, Virginia 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 and 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). The new section states that localities cannot request or accept an unreasonable proffer or deny a rezoning application or proffer condition amendment due to applicant’s failure or refusal to submit an unreasonable proffer. The implementation of this change to the cash proffer law hinges on defining an unreasonable proffer, or more positively, defining a reasonable proffer. 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. 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 1 to 3 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 STUDY Frederick County, Virginia 4 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 non-residential 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. 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. CAPITAL IMPACTS STUDY Frederick County, Virginia 5 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 for 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 systems that were oversized. At the beginning of each capital facility chapter the chosen methodology will be explained and illustrated with a figure. 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 CAPITAL IMPACTS STUDY Frederick County, Virginia 6 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 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 plan-based methodology is also used in this study. When using a plan-based method, it is important to determine if new development will contribute toward the cost of future public facilities. 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 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, components, and geographies used in the analysis is provided below in Figure 2. 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 Service Areas ▪ Elementary School ▪ Middle School ▪ High School Public School Students from Residential Development Incremental Approach Parks and Recreation* Countywide ▪ Indoor Recreation Facilities Service Areas ▪ District, Community, Neighborhood Parks ▪ Paved & Unpaved Trails ▪ Community Centers Residential Plan-Based Approach Public Safety: Sheriff* ▪ Public Safety Building: Countywide Residential and Nonresidential Incremental Approach Public Safety: Fire and Rescue* ▪ Fire Stations & Vehicles: Service Areas Residential and Nonresidential Plan-Based Approach Public Safety: Animal Protection* ▪ Animal Shelter: Countywide Residential Incremental Approach Libraries ▪ Central 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 ▪ Landfill Center: Countywide ▪ Convenience Sites: Service Areas Residential Incremental Approach Note: the public facilities with an asterisk are eligible for cash proffers