Thursday, May 29, 2008

Cash Proffer Raised, Barely

The issue before the Board of Supervisors Wednesday evening and into Thursday morning regarding the proposed increase represented an opportunity for the current Board to make some changes in a proffer that has remained fixed for the last three or four years at 15,600.

Developers and Home Builders were out in force to make sure that the proffer was not increased from the current levels and represented virtually 80% of all speakers being heard before the Board on the issue. As stated in the previous post, the Home Building industry came with the talking points we have covered here for the last two years.

Only this time, the developers threw in the national mortgage crisis and falling home values into the pot along with the issue of "affordibility". Developers making this arguement always seems very disingenious. They have control of the product in which they determine to bring to market in any given area, but also know that they can sell new homes with many high end upgrades which result in greater profits. The market seems to be preferring homes in the range of 350 to 450K which is exactly what the home builders have been building for the last few years relative to other value ranges. These folks threw affordibility out the window years ago.

After hours of discussion, the current Board offered two proposal motions. One put forth by Midlothian Supervisor Daniel Gecker (I)opting for an increase in the proffer by about 3K and one offered up by Supervisor Holland (D) which would take the proffer to 20,500.

Mind you many of the developers argued that the Board should not act on this proposal and in fact Bermuda Supervisor Dorothy Jaeckle (R) proposed a motion to defer the proffer matter for 90 days to give the Board and the Delegation of State legislature as well as representatives from the home building sector to meet and have discussions on the matter before voting on the proffer issue. Her motion failed.

Supervisor Jaeckle was certainly moved by many of the comments regarding Speaker Howell in the General Assembly's request for Counties to refrain from raising any proffers until after the 2009 Assembly session. Apparently, the remainder of the Board was less inclined to adhere to either Speaker Howell or Jaeckle's request.

In the end, Mr. Gecker's motion would pass with the support of Jaeckle(R) and Supervisor Warren (R). Marlene Durfee (I) of Matoaca District supported Holland's proposed increase.

The Gecker motion was certainly one based in appeasement. Gecker, who has criticized the Cash Proffer System in the past, no doubt understood that the status quo would not suffice given the gaps and shortfall in the funding for County services and his proposal appears to be yet another half-measure.

Now do not get me wrong. I have been supportive of raising the proffer as many of you know, but to acknowledge that the proffer level must be increased and then motion to raise those levels to such level that will not meet the requirements of funding the services they are intended does nothing but lesson the gap and shortfall but does nothing to solve the issue. The County staff has determined that the level required to meet the demand of services in the long run is much higher, though Gecker motion did meet the proposed model rate for the upcoming year. It is apparent that while the amount is less than what some, like myself, would have sought, Gecker may be hedging that he can get the Proffer Policy revised and then revist the amount next year.

Durfee and Holland spoke elequently regarding the position they see the Board is in. Durfee, even after the Gecker motion passed, made it a point to address the public by informing them that there is no way that the motion will put the County in a position to meet the requirements of services and also informed everyone that Governor Kaine at the Transportation meeting early in the day was clear the State would not be freeing up additonal money for roads to localities. Chesterfield is set to get 6.25 million a year but that could potentially change if the General Assembly passes a new Transportation bill. Durfee pointed out that the County already cannot meet the number required and stated that the dollars lost to the County for the Roseland case alone would be 25 million if the proffer level was not raised higher.

I have been critical of Durfee in the past, but this night she was impressive while others appeared out of their depth.

Gecker, Warren and Jaeckle obviously sought to find some middle ground on the issue and while seeking to get a little more proffers out of the developers the motion was not one that realistically would infringe to much on the home building industry. It basically amounts to closing costs on a new home. Yet, while it will not hurt the developers much it fails to adequetely address the true needs with regard to revenue shortfall that the County will experience.

As far as the developers are concerned I heard alot that frankly was quite amazing. In the future we will hear I fear how the Proffer System should be changed so that its fee is different for differing styles or parts of the County. The arguement was made that higher priced homes should have a higher proffer than lower priced homes. Currently, the Proffer is the same for all new zonings regardless of size of the unit.

Hello. These arguements totally discount the following:

1. It does not cost the County more money to have Police respond to a larger home.
2. It does not cost more money for the County to have Fire/EMS to respond to a larger home.
3. We all have equal access to Libraries
4. We all use the County roadways
5. We all have equal access to County School System
6. Its does not cost the County more for Water/Sewer Service

Why then should homeowners who purchase a higher priced home pay a higher proffer fee? The access to services ia equal and the burden should be shared equally regardless of unit price. If the County determines this amount to be 23K then it should cost that amount for all units in terms of proffering.

Afterall, the higher priced homes are already going to be contributing more in Property Taxes.


James said...

Two points from last nights meeting that seem to have gone unnoticed was the fact that not a single developer or even the Home Building Association offered up any other solution while making the assumption that the policy was detremental to housing and homewowners (a surtax if you will)othern than to say the system is broken.

This should come as no surprise. The builders had been effective at keeping the proffer at its current rate for years.

They were out in support of the interests they have but no one seem to want to reflect on just how the last rise in the proffer rate hurt their respective business.

Did I miss something or did we just go through a mega-growth phase and buildout? These interests did not stop building homes when the proffer was taken to the 15,600 level. Though the industry right now is facing some major hurdles, it is just coming off of record sales and closings throughout Virginia.

The other point is the State. Not a single developer/builder addressed just where the shortfall to cover roads was to come from if not through the proffer increase. Some 13,000 per home of the proposed proffer was slated to go to roads and infrastructure. The amount actually going to roads will be quite less and potentially insufficient given the passed motion by Mr. Gecker. Ms. Durfee got it right when she expressed how this will not meet the demands of the day upon the County and the cycle of playing catch up continues.

Mr. Holland spoke briefly on the eve and flow of receivables and payables with regard to the County. As a CPA I'll take his word for it. The motion will not meet the payables and the only place the Board will be able to go to get those revenues will be on the backs of the citizens and future tax increases.

But did not this Board just reduce the tax rate? Yes. But with the rising assessments most peoples taxes, the revenues to the County, went up and will increase the receivables. However, if homevalues or sale values continue to decline then there is chance that the measure of reducing the poperty tax will prove ill-advised.

The State will not be providing increased funding to Chesterfield. The State has its own budget issues.

The Board needs to look to itself for creating ways of addresssing roads and infrastructure. Governor Kaine all but said so.

The proffer proposal of $20,500 should have been adopted by the Board over Mr. Gecker's motion. It would not have put in place the full proposal north of $23,000 but would have brought in an extra 10 or so million to the pie off of some of the current proposed zoning cases coming soon before the Board.

Anonymous said...

I think Dan Gecker on the one hand took the ooportunity to take a few shots at the developer community in his statements.

Gecker has been involved in this process for eight or so years and nothing presented before the Board last night was anything he has not heard before.

He did however, virtually cave by only recommending the small increase. There was nothing the Board could do but raise proffers. There was not even a motion presented to keep them fixed at 15,600 until the General Assembly determined the future of Watkin's bill.

Knowing that the Board had to pass some form of increase, Gecker proposed the least amount amongst the members which undoubtedly pleased the developers by morning given what the utcome could have been (ie 23,000 or so).

So the County gets a littel relief and the developers pay a little more but in the end the County will stay behind the revenue curve.

This was not what residents of Midlothian supported last Fall. many of us had hoped he would support a larger increase as a means of artificially slowing down the growth rate in the short term so the County could re-group and re-tool the Comprehensive Plan. The Board can still do this by having stricter zoning requirements or at least harder demands for zoning cases as a another way of slowing don the number of units being brought to market.

Why should government play this kind of role? Because it is governments responsibility to service all residents in a safe and secure way and the current shortfalls challenge the capability to do so.

There was an opportunity lost given the upcoming zoning cases to begin to generate addtional revenue to offset infrastructure but it was lost last night.

Gecker and the Republicans resumed perfect form by limiting the cost to developers.

So I wonder just how different things would be today if Donald Sowder had not been defeated by Gecker last Fall? My conclusion is not much.

So far, we have not been rewarded for removing a Republican and backing an Independent in Gecker last Fall.

Three years is not that long I guess to remedy such actions.

Jeffery said...

Gecker did make a good point about the way in which the County allowed the development to progress by allowing builders to leapfrog into areas where the land was cheaper, buy the land and get it zoned and sit on the land until the determined they could build it out for max profits. Of course the County had to make sure that services were in place in those areas.
Gecker called it "inner" rings and "outer rings" of the County which contributed to the sprawl but commercial and residential we see today.

And James:
The developers see older housing as "affordable" as the for each new development that goes in with the prices in excess of 500K they artificially create the situation where older more established subdivisions must fill the void as the affordable options.
However, they fail to take into account that wages are not increasing nearly as fast as the prices of homes are.

Medium Average home price County wide as a model is a pipe dream. What County offcials should be doing is looking at the medium prices of the newly zoned housing.
If you take all the new ly zoned major developments of 2007, you are looking at around 370,00 as the average new home price and not the 245,000 you hear about all of Chesterfield.

Anonymous said...

I expect that the proffer system will be revisited and changed to provide for less cash and more performance. Raising the maximum to $23,000 does not do much for the county except continue the old thought process that we are actually "accounting" for the cost of growth through proffers. Because the proffer figure varies with what is available from the state during any given year, it does not truly represent the cost of roads, schools, etc. If the $15,600 number was correct three years ago, then the $18080 would be correct this year (it is the original $15,600 inflated by the construction cost index). The fact that the calculated number for this year is above $23,000 indicates that either it is wrong or the starting point is wrong. In either case, as we have seen in Swift Creek, cash is not a good substitute for performance on the ground. We should adopt the level of service standards and stick with them. This would provide us with a much better mechanism to have the cost of growth paid for by the development community.

It is also interesting to me that in all the talk about proffers and infrastructure the vote on extension of the water line to Magnolia Green went unnoticed by you and the community. Sprawl does not occur without provision of infrastructure (meaning water and sewer). Zoning alone is not enough to allow development to occur in the more rural parts of the county. The board missed a chance to change the policy that we will provide utilities to any zoned site when it voted 4-1 (with me dissenting) for the water line extension. We can talk all we want about proffers and capturing costs, but at the end of the day unless we put the cost of development where it belongs we will just be doing more of the same.

Dan Gecker

Anonymous said...

We must "put the cost of development where it belongs" as Mr. Gecker states is either directed at the infrastructre positioning or at the people themselves. If the implication is the people of Chesterfield should be paying for the cost of development I disagree whole heartedly.

The developer community has long gotten a freeer, not free, but freer ride off of the Planning Commission of which Mr. Gecker was a member and the Board of Supervisors. The model referenced is being challenge and yet in the interim of determining whether that model truly reflects the costs on the ground Mr. Gecker voted to support what to me is a rather narrow and lean view with regard to proffers.

It is apparent Mr. Gecker does not have faith in the system, but the "system" was not up for a vote. It was rather the costs as stipulated by the model, as the current indicator no matter how questionable, is what was to be voted upon.

Many developers and builders spoke as the the "systems" faults but that was not the issue before the Board. What was the issue was an increase of the current proffer based on the model currently used. The amount proposed by Gecker while potentially accurate for 2008 will certainly not provide the necessary revenue gneration to sustain the infrastructre build out nor the water and sewer lines required to develop much of Bermuda and southeastern Mataoca east of Chesdin towards Dinwidde and Amelia.

There will be a proposal by the School Board wich will call for the construction of some six new schools. SIX. We have already been experiencing on avergae of about one thousand new students a year and yet if you take the buildout that Mr. Gecker in the last eight years has overseen both as a PC representative and now a Supervisor that number will surely triple by 2012. How I wonder will all these be paid for to support the already "approved" zoning cases.

Prediction: another bond vote. The easy politcial solution when they require more money then they have revenues to fund.

Cost cutting could be in order Mr. Gecker. We should be exploring every one of our options, with the proffer system and impact fees being one, before we are forced to consider another bond.

There is little Mr. Gecker can do to dissassociate himself from the growth we have experienced. I would support a measure going forward that would place a moratorium on any large scale new zoning cases until the Board has determined the Upper Swift Creek issue, the revision of Comprehensive planning guidelines, the school issues and funding, and of course our roads.

A greater issue will be the infrastructure that will have to be created to support the proposed creation of the required new schools. One such issue is covered in the Roseland case for schools being built by Sowers in that case and yet the Board has postponed the vote on that case.

If I am not mistaken, Roseland and Magnolia Green could add some twelve thousand new students over the next ten to fifteen years depending upon the rate of buildout. If of course you go by the 1.6 children number and if you allocate at least two cars per household we have some twenty thousand more vehicles on our roads by then. I am confident that inside Roseland and Magnolia Green the road will be just fine but want about those that will be auxillary roads or supportive roads outside in the Midlothian and Matoaca district? What is the plan to fund those roads and upkeep? 6.25 million a years from Mr. Kaine certainly will not go far..about 2 to 3 miles of new pavement it seems.

The level of 23,000 does not do much for the County as expressed by Mr. Gecker and exactly how does 18,000 benefit then? Should we not begin the process of looking toward the demands of the future and come to grips with the true fallacy of growth paying for growth in this reality.

Growth only pays for itself if the underlying requirements of that growth are met with financial responsibility and yet we have a situation where we are the fourth largest population in Virginia and a great market for business as it is and yet we allow commercial zonings to go profferless.

They buildout stripmall after stripmall contributing to urban and commercial sprawl and what to we charge to have access to our market; nothing. We hope to live off sales (1% to the County 4% to State) tax generated from such developments. There is something fundamentally wrong with paying million in nour budget for an Economic Development department to go out and bring business here at tax payer expense and then at the outset commercial entities have zero barrier to entry in terms of a proffer to pay for what it will require for County services, ie water,sewer, police response, fire response etc.

Theres pro-business and there just economical suicide business.

Pray Chesterfield never gets so far behind the curve that it loses AAA bond status or suffers the fate of some municipalities who are close to bankruptcy because they failed to look at the long term trend lines of cowing to the business and commercial community at the expense of its citizens.

Anonymous said...

Whats changed? Nothing thats what?

A Republican majority would have had to do due diligence this time around and raise the proffer irregardless of Sen. Watkins pleas for supporting his impact fee bill.

So this Board is proving that very little is changing.

With Geckers alignment with the Republicans on this issue the lessor increase passed. Had Donald Sowder remained on the Board, what would have been different? Nothing.

How is this change? I mean real change. No matter how they nuance it, little is changing on the ground while the Board continues its learning curve.

Jim said...

Alter have any info on the proposed School Board plan referenced above in Anony post.

I am curious what the porposal is for elementary and middle schools given we should see increased enrollment in those ages before high schools.