02-05-2008 Continued Work Session
CONTINUED WORK SESSION OF THE ISLE OF WIGHT COUNTY
BOARD OF SUPERVISORS HELD THE FIFTH DAY OF FEBRUARY IN
THE YEAR TWO THOUSAND AND EIGHT
PRESENT: Stan D. Clark, Chairman
James B. Brown, Jr. (Vice-Chairman)
Phillip A. Bradshaw
Al Casteen
Thomas J. Wright, III
Also Attending: A. Paul Burton, Interim County Attorney
W. Douglas Caskey, County Administrator
Patrick J. Small, Assistant County Administrator
Carey Mills Storm, Clerk
Chairman Clark called the continued work session to order at 4:00
p.m.
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Supervisor Wright delivered the invocation.
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The Pledge of Allegiance was conducted.
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Supervisor Bradshaw reported that the Finance Committee has
directed staff to obtain information from the County?s consultants relative to
moving forward at this time with securing bonds due to favorable market
conditions and bring a recommendation back to the Board at its February 21,
2008 meeting.
Supervisor Bradshaw reported on proposed legislation under
consideration by the General Assembly involving the elimination of proffers
with impact fees. He advised that the proposal under consideration is to
limit that amount to $5,000 per lot, effective January 1, 2009. He stated that
if this legislation is approved, it will have a significant impact on the
County.
Supervisor Bradshaw further reported that the General Assembly is
proposing the elimination of the Machinery & Tools Tax as of January 1,
2010. He advised that he and Supervisor Wright have contacted Senators
Lucas and Quayle to voice their opposition.
Supervisor Bradshaw moved that the Board direct staff to draft a letter
of the Board?s opposition to House Bill 124 (Elimination of Machinery &
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Tools Tax) to Senators Lucas and Quayle. The motion was adopted by
unanimous vote (5-0) with Supervisors Bradshaw, Brown, Casteen, Clark
and Wright voting in favor of the motion and no Supervisors voting against
the motion.
Supervisor Bradshaw requested that the letter of opposition be placed
on the County?s website requesting citizens to call Senators Lucas and
Quayle.
Supervisor Bradshaw reported that the Governor will be speaking at
the VACo VML Legislative Day and that he would also be in attendance at
the reception that is being held for the General Assembly members
afterwards.
//
Chairman Clark called for Approval of the Agenda.
Supervisor Wright moved that the agenda be approved. The motion
was adopted by unanimous vote (5-0) with Supervisors Bradshaw, Brown,
Casteen, Clark and Wright voting in favor of the motion and no Supervisors
voting against the motion.
//
Chairman Clark addressed the opinion of the Attorney General in
which Supervisor Bradshaw referred to at a previous meeting regarding the
boundaries of a Community Development Authority. He stated that the case
cited by Supervisor Bradshaw, Taylor vs. Northumberland County, was
heard in 1992, five (5) years prior to the CDA law coming into effect and it,
therefore, has no relation whatsoever to CDA?s in any respect, but it did
speak to how the General Assembly defined abutting. He stated that the
Attorney General?s opinion refers to a request by the County Attorney for
Spotsylvania County in 2006 seeking an opinion regarding abutting within
the jurisdiction of the CDA. He stated that the Spotsylvania County
Attorney was interested in knowing if that county?s CDA referenced
property on a water line, a road or on an improvement, if it abutted that
improvement, did it qualify for the assessment. He stated the question is
what is abutting, is it contiguous to or does it mean deriving a benefit from a
water line or a road. He stated abutting is clearly a property that was not
contiguous within the jurisdiction that derived a benefit, such as a lane, even
though it is not abutting or service by a water line that was not abutting.
Attorney Mark Williamson, McGuire Woods, explained that the
Attorney General?s opinion, in the past, has always dealt with taxes within
the CDA district, not outside the CDA district. He stated with respect to the
County, it has improvements within the proposed district and improvements
to Route 258 which are technically outside the district, but they abut the
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district. He stated the Attorney General?s opinion is that even though not all
of the improvements abut a piece, even though the parcels owned at one (1)
time by one (1) owner and subdivided to other owners, that the abutting
requirement is met. He explained that the reason that the abutting
requirement needs to be met is that for the improvement to be financed with
CDA funds, the improvement to be financed has to be abutting or in the
district itself.
Interim County Attorney Burton explained that Supervisor Bradshaw?s
concern was related to property owners being forced to pay taxes on
property that was located outside the CDA district, specifically Muddy
Cross Road. He advised that individuals can not be taxed on property that is
not located in the district. He stated that it is clear that only property in the
CDA district can be taxed to pay for the improvements for the CDA.
Supervisor Bradshaw inquired if the Board has the authority to
dissolve the CDA at any time.
Attorney Williamson advised that the Board will not be able to
dissolve the CDA after the bonds have been issued because there is no way
that anyone will agree to finance this project if that possibility exists. He
stated the special assessment is a one (1) time levy at the beginning of the
process and once that assessment is levied, the Board has no ability to undo
the levy. He stated once the bonds have been issued, they will be secured by
an additional real estate lien on the property and if someone can not make
their payments, the remedy will be to foreclose on the tax lien. He stated it
takes four (4) to six (6) months to get from establishing the CDA to issuing
the bonds and there will be substantial analyses done to ensure that there is a
sufficient revenue flow so that the bonds can be paid off. He stated with
respect to the concern voiced earlier regarding the survival of the CDA if the
rezoning application was not approved, he has added a proposed amendment
to the Benn?s Grant CDA that states that the ordinance shall not be effective
unless the Board approves the rezoning applications as described in the
petition and in the event that the Board denies the rezoning application, the
Benn?s Grant CDA shall be revoked and terminated. He advised that user
fees are not authorized under the Benn?s Grant CDA and he offered to add a
statement to the ordinance that in no event shall anyone charge any user fee.
He stated that the property contained within the CDA district, which is the
only property that is subject to the special assessment, is defined in the
petition and does not include the Riverside property. He stated that there is
some possibility that certain property may be conveyed to the County and,
therefore, there is a provision in the ordinance that states if it is conveyed to
the County, it comes out of the CDA district. He stated at the Board?s
discretion, the civic/IDA property can be removed from the CDA district.
He stated that Exhibit ?B? delineates the improvements to be financed at a
hard cost of $35 million, which consists of the internal road system, the
water and sewer system, stormwater management and all infrastructure, plus
the Routes 10/258 improvements. He stated that the CDA is going to issue
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bonds to finance these improvements and the bonds will be secured by the
revenue flows from the assessment within the district.
Supervisor Wright stated that his earlier concern with respect to the
suitability of the soils for building purposes has been addressed by Richard
L. Turner, the applicant, who advised him that out of the 600 acres, only 150
of them had been used as a borrow pit and have now been filled.
Jimmy Sanderson, Davenport & Company, reported that he had
spoken with officials of Loudon and Hanover Counties, as well as the City
of Hampton, with respect to what extent County staff will be burdened by
the general functioning of the CDA. He advised that each of those localities
charge a $30,000 annual fee to engage an outside consultant as the
administrator of the CDA. He stated that the assessment collected from the
landowners is done so by the County and at the time that those funds are
transferred to the CDA, the County retains the funds that are associated with
the County?s costs, which is an amount that is agreed upon upfront. He
stated that the County can request an increase in funds to the CDA on an
annual basis if it desires. He advised that the County will be asked to
approve a Memorandum of Understanding which will contain the amount
that has been determined to be the additional cost associated with the CDA.
He stated that Hanover County charges $5,000 annually to account for its
staff time involved with the CDA.
Chairman Clark requested Mr. Sanderson to poll counties that mirror
Isle of Wight County regarding any charges they incurred with respect to
CDA?s and that he respond back to the Board by memorandum.
//
Chairman Clark, addressing the issue of homelessness, requested that
County Administrator Caskey ensure that the County is being a good
regional partner and is being completely involved with respect to the issue
of homelessness.
Supervisor Bradshaw advised that there is a group of local churches
that have recently organized in an effort to combat the issue of homelessness
by providing shelters and food during only the winter months. He stated
that 36 children have been identified as homeless in the County.
//
Mr. Sanderson stated with respect to credit considerations, included in
the CDA policy is a statement that no CDA shall have any impact on the
County?s credit rating. He stated with respect to bank qualified debt, CDA
debt does count against the County?s bank qualified limit. He stated to the
extent the County intends to issue greater than $10 million in debt in any
calendar year, a CDA bond issuance will not impact the County.
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Supervisor Casteen asked Mr. Sanderson what his opinion was on the
residential versus commercial aspect.
Mr. Sanderson replied that some jurisdictions require that the
assessment on residential property be prepaid; some run it for the life; and,
some will not approve CDA?s that have residential components.
Supervisor Casteen inquired how much of this CDA relates to the
residential aspect versus the commercial aspect.
Mr. Sanderson stated that the administrator hired by the CDA
determines the apportionment of the assessment to the different uses within
the CDA.
Supervisor Casteen requested that Mr. Sanderson brief the Board on
the CDA for the Peninsula Town Center done by the City of Hampton.
Mr. Sanderson responded that the Peninsula Town Center project
consisted of mostly commercial and that the developers had requested that
they either receive assistance from the City of Hampton in filling the stores
or they were going to close the doors. He stated that the City formed a CDA
and issued bonds and the first line of repayment to the CDA bond holders
was incremental tax revenue produced in the commercial district. He stated
there was also an assessment placed on that property to the extent that the
project did not move forward and those incremental tax revenues were not
produced, then there would be a backup assessment on the property and the
property owner would have to pay the debt service on the bonds.
Supervisor Bradshaw questioned why CDA?s are formed in Virginia.
Attorney Williamson replied that CDAs were intended to be an
economic development incentive tool.
Supervisor Casteen called the Board?s attention to a letter that he had
distributed to the Board members earlier from Lawrence Pitt making
reference to an article on what is occurring in New York with respect to
CDA?s.
Supervisor Bradshaw questioned the reasoning behind why the
Department of Economic Development supports the concept of a CDA.
Patrick J. Small, Assistant County Administrator, stated a premise
behind CDA?s is that by lowering the developer?s costs in terms of
borrowing, excess capital is freed up and, negotiated correctly, that excess
capital is split equally. He stated the use of a CDA does allow a locality a
better negotiating position when it comes to what you get out of a project.
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Supervisor Bradshaw questioned why staff has not pursued a CDA
with the owner of the Airway Shopping Center.
Mr. Small stated that CDA?s do not become an effective tool until a
borrowing reaches a certain amount to make the project viable.
Supervisor Bradshaw stated there are multiple properties there that are
vacant that could have been capitalized.
Mr. Small stated what would likely be a more viable unconventional
finance tool is be a tax increment finance district but, the economics and the
population base at that location are thin enough that the retail economics of
that district are challenging and a tax increment financing district probably
would not yield sufficient revenues off the incremental development.
Supervisor Bradshaw stated that the area is zoned light and heavy
industrial with commercial and there have been many business opportunities
lost because of the lack of infrastructure at that location.
Mr. Small advised that there has been limited interest in that area from
the development or industrial communities. He stated that the County once
considered publicly purchasing that property at one time.
//
Chairman Clark moved that the Board take a five (5) minute recess.
The motion was adopted by unanimous vote (5-0) with Supervisors
Bradshaw, Brown, Casteen, Clark and Wright voting in favor of the motion
and no Supervisors voting against the motion.
Chairman moved that the Board return to open session. The motion
was adopted by unanimous vote (5-0) with Supervisors Bradshaw, Brown,
Casteen, Clark and Wright voting in favor of the motion and no Supervisors
voting against the motion.
//
Chairman Clark requested that Mr. Sanderson be allowed to give his
economic impact summary without the interruption of questions or
comments from the Board.
Mr. Sanderson stated that he was engaged by the County to assist with
looking at the potential cost benefit associated with the Benn?s Grant
development. He stated that having a recognizable developer such as
Armada Hoffler is important. He stated the majority of his work over the
past year was associated with taking a look at the fiscal impact analysis
produced by ERA and putting it into his firm?s model to ensure that it was
functioning correctly, while stressing it to provide the County comfort with
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its ultimate results. He stated key considerations associated with the
development are cash flows. He stated that identified early on was whether
the 5,000 square feet of office space was realistic; what were the potential
impacts on school capacity needs; and, whether it was plausible to create a
capital reserve fund from proffers and net revenues that can be used to offset
infrastructure needs that the County has. He stated the impact analysis
breaks out revenues and expenses to the County, both from a low and high
perspective. He stated that the base case analysis reflects net positive
income revenues beginning in year one (1) of $1.2 million and levels out in
year eleven (11) at $1.4 million annually. He stated the build out for Wal-
Mart and the home improvement store is one (1) year; other retail is six (6)
years; office park is twenty (20) years; other commercial in year one (1);
hotel five (5) years; and, housing ten (10) years. He stated the average
annual cash flow under the base case is $1.3 million net revenues to the
County. He stated that under case two (2), which is the slow growth
scenario, the Wal-Mart and home improvement store will come online in
year two (2); other retail is developed within a fifteen (15) year period;
office park at twenty (20) years; other commercial in two (2) years; hotel in
year ten (10); and, the housing is built out over eleven (11) years. He stated
in year one (1) under case two (2), there is a net negative revenue to the
County of $146,000 because the residential component has been maintained
going forward and slowed the commercial development and moved it to year
two (2), resulting in the County taking a hit in year one (1) of all the cost
associated with the residential piece, but no benefit from the commercial
piece. He stated the commercial comes on-line in year two (2) and the
revenues jump to $1.1 million. He stated that the average annual cash flow
under this assumption would be $781,000 annually net positive, assuming
no development for the office park. He stated that net revenues to the
County are exclusive of any proffers. He stated ERA listed out the total
proffers associated with the project of approximately $11.8 million and also
listed additional developer contributions of $19.2 million. He stated that his
firm has suggested the creation of capital reserve funds to its previous
clients. He stated he is suggesting that the County set aside the annual net
revenues associated with the project, as well as the school proffers, for the
first five (5) years of the project to be applied directly to construction costs
to offset the cost of any new school. He stated initial observations show that
Benn?s Grant should provide a net fiscal benefit to the County. He stated a
Memorandum of Understanding with a CDA does provide an opportunity to
ensure that the project is what the Board wants. He stated that the Board
should recognize that while CDA indebtedness is going to be a direct cost to
the CDA, this will be an overlapping debt to the County; discussions should
be held with the rating agency to ensure that there is no impact on the
County?s rating associated with this project; it is often the case that these
projects are looked at as economic drivers rather than negatives in an area;
that the developer is not requesting that the County put up additional tax
revenues, as seen in other jurisdictions; and, the Board should use its legal
and financial consultants to ensure that the County is protecting in forming a
CDA and in executing the plan of finance through the Memorandum of
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Understanding. He advised that he has reviewed and provided comments to
ERA on its impact analysis which have been incorporated into its analysis
regarding the inclusion of a social services cost.
Supervisor Bradshaw requested Mr. Sanderson to be prepared to
address the following at the Board?s work session scheduled for Monday,
February 11, 2008 at 4:00 p.m.: Employment numbers; retail space with
respect to when it is coming on line; the operating cost of the school; if the
action that the General Assembly is in the process of approving with respect
to the elimination of proffers and the institution of impact fees of $5,000 per
lot is approved before July 1, 2008, would it be at the recordation of the
deeds or when the rezoning occurs; and, how the Homestead Act, which
allows a 20% reduction in real estate, will impact this development and the
Community Development Authority.
Supervisor Casteen requested Mr. Sanderson to be prepared to address
the following at the Board?s work session scheduled for Monday, February
11, 2008 at 4:00 p.m.: Expectation of the sales of the homes and the timing
of those sales and how that correlates to recent history of the County.
//
Chairman Clark moved that the Board recess its meeting until
Monday, February 11, 2008 at 4:00 p.m. The motion was adopted by
unanimous vote (5-0) with Supervisors Bradshaw, Brown, Casteen, Clark
and Wright voting in favor of the motion and no Supervisors voting against
the motion.
__________________________
Stan D. Clark, Chairman
______________________
Carey Mills Storm, Clerk
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