Last week, someone using the name Jon Miller wrote to Town Council, concerned that proposed changes to the Ephesus-Fordham form-based code would weaken it. I responded that the modifications would strengthen it — taxpayers have a $10 million loan to repay from increased net tax revenue, and the four projects planned or underway won’t generate sufficient, if any, net revenue. We need to encourage higher-value buildings. Former council candidate David Schwartz adds more detail to bolster my argument. Schwartz writes:
Council has been presented with projections that Village Plaza apartments — now called Alexan — will be revenue negative for Chapel Hill taxpayers. A year ago, Orange County planning staff conducted a fiscal impact analysis of the entire Ephesus-Fordham redevelopment and found it to be net revenue negative.
Read the staff memo here: http://www.orangecountync.gov/January_27__2015.pdf
Here’s the key passage:
“Based on information provided, the County would potentially receive incremental property tax revenues over three phases of the Project of approximately $14 million. County expenditures, based on current County financial policies and guidelines, would total $23 million prior to the requested debt contribution. After paying the requested debt contribution of $400,840 over 20 years, Attachment B-1 reflects Scenario 1 where the County would net a deficit of incremental tax revenues of $10.4 million. This scenario includes the cost impact of providing County services affected by the project, as well as the 48.1% target impact of General Fund revenues provided to Education, and the costs to fund the additional students in each phase of the project at the current per pupil amount of $3,571 per pupil.
After paying the requested debt contribution of $400,840 over 20 years, Attachment B-2 reflects Scenario 2 where the County would net a deficit of incremental tax revenues of $6.9 million. This scenario only includes the 48.1% target to Education and the costs of the additional students in each phase of the project.”
The Orange County analysis assumes that residential property accounts for around 60% of the total redevelopment. Because the apartment building is more than 90% residential, we can infer that this one project will be even more revenue negative than the Ephesus-Fordham redevelopment as a whole.
There is a widespread consensus among planners and economists that residential property, whether single family or multifamily, greenfield or infill, is revenue negative. No evidence exists to suggest that redevelopment in Chapel Hill is an exception.
If the appraised tax value of a dwelling unit is high enough — in Chapel Hill, probably more than $500,000 — a residence can be net positive. But almost all of the more than 5,000 new units already in the pipeline will have appraised values well below that break-even point. The County staff’s analysis of Ephesus-Fordham and the Town staff’s analysis of Obey Creek are probably the best guides for the likely fiscal impact of all this new housing.
Any residential land use, even very high-end housing, will be less fiscally beneficial than commercial or industrial land use. With residential property making up over 80% of Chapel Hill’s tax base, we need to encourage new development that does more than just break even; we need to be promoting development that generates revenue far in excess of the costs it imposes, and that means commercial/industrial. That’s why the Town Planning Commission has recommended that the residential component of any new development not exceed 33%.
– David Schwartz