Albemarle’s ‘Welcome Stranger’ Tax May Be Slashed by 75%

By. Neil Williamson, President

luther ingramSomehow, I hear Luther Ingram’s  “(If Loving You is Wrong) I Don’t Want To Be Right” as I read through the detailed reporting on the  current discussion of cash proffers.

While State law changes and a lack of locality infrastructure expenditures have combined to generate a new cash proffer number that is 75% lower than the current amounts, Albemarle supervisors are still entranced by cash proffers as the latest report indicates they have received promises of nearly $50 million dollars.

But I am getting ahead of myself. Please let me explain.

Albemarle County’s Fiscal Impact Advisory Committee (FAIC) has issued their advice regarding the County’s cash proffer policy.

To review, according to the Virginia Department of Housing and Community Development:

A cash proffer is (a)any money voluntarily proffered in a writing signed by the owner of property subject to rezoning, submitted as part of a rezoning application and accepted by a locality pursuant to the authority granted by Va. Code Ann. Section 15.2-2303 or Section 15.2-2298, or (b) any payment of money made pursuant to a development agreement entered into under authority granted by Va. Code Ann. Section 15.2-2303.1.

Theoretically, cash proffers are designed to offset the infrastructure cost of new development.  The reality is that these “voluntary” sums are required to gain approval of residential rezonings.

It is important to note the cash proffer amount does not include the infrastructure cost (AKA Hook-up fees) for Albemarle County Service Authority.  Those are a separate line item totaling about $20,000 per Single Family Detached unit.

Until recently, localities had the ability to include maintenance items in their Capital Improvement Program as a part of the proffer calculation absent any true connection to new development.  Albemarle had considered many inappropriate capital items as a part of their cash proffer calculation.  The most egregious of these (that we know about) was three years ago when a technology upgrade was included.  At the time we stated our belief that new residential development did not generate the need for the technology upgrade.  Recently, Richmond tightened the rules regarding proffer calculation.

The staff report outlining the new methodology references the change in state code:

Note that the proffer amounts calculated in this memorandum reflect the net costs generated by growth-related capital projects in the following categories: Public safety facilities, park facilities, libraries, schools, and transportation projects. Note also, that, under current Virginia law, costs associated with maintenance and replacement capital projects cannot be included in the calculation.

In their memo to the Board of Supervisors the FAIC outlined the changes to the proffer calculations:

Under the revised provisions of the Code of Virginia only those items which expand capacity may be considered. The CIP and CNA has also been reduced to be essentially a maintenance program with limited capacity expansion. Moreover, the Committee finds that under the current proffer model, as the County’s capital budgets grow, so too do the dollar values of the proffer amounts per unit.
The committee found that the new calculated amounts were:

Single Family Detached (SFD): $4,918
Single Family Attached/Townhouse (SFA/TH): $3,845
Multifamily (MF): $5,262

For context, the 2014 “voluntary” cash proffer amounts were:

Single Family Detached (SFD): $20,987
Single Family Attached/Townhouse (SFA/TH): $14,271
Multifamily (MF): $14,871

Interestingly, buried in the staff memo is a different set of numbers based on the concept that only the FY 15- FY 19 Capital Improvement Program (CIP) should be used rather than the CIP plus the Capital Needs Assessment.  That calculation results:

Single Family Detached (SFD): $487
Single Family Attached/Townhouse (SFA/TH): $1,477
Multifamily (MF): $2,144

To most accurately reflect Albemarle County’s Capital expenditures, the cash proffer amount would not need to be $20,987 (the current amount) nor $4,918 but a mere $487 per Single Family Detached Unit.  

The Free Enterprise Forum has consistently called for the elimination of the ‘Welcome Stranger’  tax.  We agree that at these lower rates some of the concerns we raised in our 2013 White Paper Contradictory Consequences may be avoided.

However, even as these “voluntary cash contributions” may be reduced still find them to be an ineffective, unreliable revenue source with significant negative impacts.  Yes, capital programs must be funded but they should be funded by the entire community not just the new residential home buyer.

Again, we call on the Albemarle Board of Supervisors to eliminate the ‘Welcome Stranger’ Tax.

Respectfully Submitted,

Neil Williamson

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20070731williamson 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

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