By Neil Williamson, President
Albemarle County Board of Supervisors are now considering two options for review of their cash proffer policy: Option One is a simple method that allows the staff to put current proffer practices, established by precedent, into the comprehensive plan, Option Two is a more comprehensive review with significant public input and a more holistic review of the policy.
While staff prefers option one because the cash proffer policy has only been in place since 2007 and there is not enough data for a more comprehensive review, the Free Enterprise Forum prefers the Nuclear Option Three – Repeal Cash Proffers.
But wait you said the Supervisors are only considering two options. Unfortunately, due to what I believe may be an irreversible addiction to unreliable cash proffers as a capital revenue source, Option Three may never see the light of day – and that’s too bad.
Interestingly several localities across the Commonwealth are slowly walking away from cash proffers as a funding mechanism. The Commission on Local Governments (CLG) Annual Cash Proffer Survey revealed that 22.84% of the 162 eligible localities reported cash proffer collections during FY 2013. This represents a decrease of 2.6% in the number of local governments accepting cash proffers compared to FY 2012. FY2011 saw a similar drop in locality participation.
Why then isn’t Albemarle, often a leader in land use reforms, considering the repeal of this rezoning ransom? With apologies to pop singer Jessi J – It is all about the money, money, money.
When we presented the Contradictory Consequences Cash Proffers White Paper to the Board of Supervisors last year, Charlottesville Tomorrow reporter Sean Tubs captured the thrust of the county’s philosophical support of cash proffers:
[Supervisor Dennis] Rooker asked Williamson and [2013 Free Enterprise Forum Chair Michael] Guthrie what their alternatives would be for raising money to pay for infrastructure. Neither had a response.
“There is an impact on the community that results from new people moving to the area and new structures being built,” Rooker said. “The question ultimately comes down to who should bear the cost of that impact?”
There is a fallacy inherent in Mr. Rooker’s argument – have the owners not been paying taxes on the land previously? If it is a greenfield development the land has been under utilizing county infrastructure for generations. If anything these land owners are due a tax rebate rather than being hit with property devaluing cash proffer.
The inverse relationship of land value to cash proffers actually hinders economic development. As the white paper outlined:
Lower land values, lower property tax revenue – In concept, cash proffers are voluntary payments made by landowners to mitigate the impacts of changing the prescriptive zoning on their property. The concept works best when the rezoned value exceeds the increased cost of the cash proffer combined with the other increased costs of rezoning the property (time, additional proffers, carrying costs, etc.). Such a symbiotic relationship is difficult to achieve with automatic inflation increasing cash proffers and fragile, fickle housing markets not keeping pace.
Further, any proposed rezoning must be in accordance with the publicly vetted Comprehensive Plan. The developers therefore are the entities putting capital at risk to actualize the county’s vision – and for this they must pay a surcharge of $19,753 per Single Family Home?
Even Albemarle County recognized this when they proactively rezoned much of the downtown area and created an entire new zoning district without cash proffers. In the code it stipulates –
“By right uses; residential. The following residential uses are permitted by right, provided that the first floor of the building in which the residential use exists is designed for and occupied only by a use permitted by subsections 20B.2(A), (B), (C) or (E).”
Cash proffers are enabled by Virginia Code § 15.2-2303 which allows localities to accept cash contributions to address impacts to public facilities generated by new residential development.
In 2013, the Free Enterprise Forum produced the Contradictory Consequences Cash Proffers White Paper 2013. In this groundbreaking report we documented how the use of cash proffers was undermining Albemarle County’s Comprehensive Plan:
In many, if not most, cases the zoning in a locality’s development area does not match the comprehensive plan designation. Comprehensive plan designation must be reviewed by the locality every five years under state code. While the property owner does not have to agree to the comprehensive plan changes, they cannot act on those new designations until they have rezoned the property. Alternatively, if the land owner chooses to move forward with the existing, some might call “stale”, zoning, which likely does not agree with the locality’s comprehensive plan, they can do so immediately without paying any cash proffers.
By moving forward with the so called “stale” zoning the county fails to achieve their vision of more dense, mixed use communities.
The siren’s song of cash proffers is very strong for elected officials. The idea of generating revenue from new home buyers (who are not yet voters) to “pay their way” is too good to be true.
All Virginia Localities are required to have Urban Growth Areas where they plan to focus growth. Such design provides economic efficiency in delivery of core government functions and preserves important ecological contributions of the rural areas. Unfortunately, cash proffers discourage rezoning in the development areas and encourages the very type of large lot low density residential construction in rural areas.
Sold to the public as a way to make growth pay for itself, the unintended negative economic and planning impacts have caused localities across the Commonwealth to repeal such ordinances and replace these funds with more dependable and equitable infrastructure funding options. Today, rather than simply recalibrating their cash proffer calculation, as Albemarle County is doing, full repeal of cash proffers in all localities is a much more economically sensible and sustainable alternative.
Cash proffers are per unit fees “voluntarily” extracted from applicants seeking to rezone their property. These funds were designed to help fund major facilities and infrastructure, such as schools, roads, parks, libraries, courthouses and fire stations that are required to service the new residential (or commercial) units.
In theory, such “voluntary” proffers would be directly tied to the costs associated with the increased density of a rezoning. We have found several case studies where cash proffers lowered land values, encouraged by right development contrary to comprehensive plans and fostered a false hope for outside infrastructure funding. In addition this economic disincentive promotes rural/leapfrog development and hinders the entire community’s economic vitality.
Cash proffers are an unreliable way to fund infrastructure spending. Forecasting cash proffer revenue is much like predicting snow in Central Virginia, localities do not know when it is coming, how much they are actually going to get or when it will stop. Cash proffers rarely, if ever, total the amounts localities are banking on.
In what may be a Pollyannaish perspective, we believe local governments are starting to recognize the negative impacts of cash proffers. Localities are finding that just because the state legislature may empower the ability to collect cash proffers in may not be in the localities best interest to collect them.
The elimination of cash proffers will promote better community design and encourage new home construction invigorating the economic vitality of all localities.
The Free Enterprise Forum is encouraged that the FY2011 and FY2012 CLG survey found the number of localities accepting cash proffers had declined. We are also encouraged by the actions of Hanover County to repeal their cash proffer policy and eagerly await the results of several other locality cash proffer reviews.
Cash proffers have produced a plethora of Contradictory Consequences without achieving significant benefit.
We encourage Albemarle County’s Board of Supervisors to choose Option Three and repeal this rezoning ransom.
Neil Williamson, President
Neil Williamson is the President of The Free Enterprise Forum, a public policy organization covering the City of Charlottesville as well as Albemarle, Greene, Fluvanna, Louisa and Nelson County. For more information visit the website www.freeenterpriseforum.org