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HomeMy WebLinkAbout09-14-06 Impact Fee Advisory Committee Minutes.docMINUTES THE CITY OF BOZEMAN IMPACT FEE ADVISORY COMMITTEE THURSDAY, SEPTEMBER 14, 2006 7:00 P.M. ITEM 1. CALL TO ORDER AND ATTENDANCE Chairperson Tim Dean called the meeting to order at 7:07PM and directed the secretary to record attendance. BOARD MEMBERS PRESENT: Anna Rosenberry Tim Dean Ron Kaiser Rick Hixson Sean Becker Debra Becker BOARD MEMBERS ABSENT: Bill Simkins Randy Carpenter Nicholas Lieb Ken Eiden STAFF MEMBERS PRESENT: Chris Saunders, Assistant Director Kimberly Kenney-Lyden, Recording Secretary ITEM 2. MINUTES Chair Tim Dean noted the minutes were not available and will be reviewed prior to next meeting. ITEM 3. PUBLIC COMMENT {Limited to any public matter within the jurisdiction of the Impact Fee Advisory Committee and not scheduled on this agenda. Three-minute time limit per speaker.} Seeing there was none, Mr. Dean closed this portion of the meeting. ITEM 4. CITY COMMISSION LIASON { A standing item to be used as needed} Liaison, Sean Becker noted he is a member of the affordable housing board and they recently passed a recommendation to this advisory board to take a look at waiving some of these impact fees. He wondered if this body could possibly research the mechanism for this by reducing the interest expense, waiving the fee, or finding some other alternative. Chair Dean stated there has been discussion about the affordable housing impact fee and it being a scale down from the automatic fee structure. Ms. Rosenberry notes that charging less than 100% could be called a subsidy, but unless the city finds some other source of revenue to cover this fee, you are actually ‘under-funding’ the program. Mr. Saunders responded that anytime one chooses to cut the cost of a defined service, whether it is a percentage or not, it would have to come from someplace else so there is always a balance. Mr. Becker asked how we approach this since the city is only collecting at 80% and if a waiver is possible to which Mr. Saunders states that functionally the city has never waived these and cannot go back and charge additional impact fees to make up the difference. The commitment has already been made that the 20% will have to come from someplace else. Ms. Becker noted the criteria that the statute requires that these impact fees be proportional their impact they have on the community and can see an argument for why one would pay 95% versus the other one only paying 75%. She wondered if it would be sustained under that statutory requirement and noted that the home being charged is only at 95%, she agreed with Ms. Rosenberry that we would still not be collecting on the 100% and is not exceeding its proportional share for its cost on the impact on the community because it comes short. She states a graduated scale might work. Commissioner Becker noted the consultant will provide us some options. Ms. Rosenberry responded that the consultant is proposing that smaller sized residential units have a smaller impact on the streets and community, not under-funding the program for smaller size units. ITEM 5. PRESENTATION BY ANNA ROSENBERRY, CITY FINANCE DIRECTOR Presentation on how property taxes are received and utilized by the City. Chris Saunders noted that during their last meeting, there was some discussion with the consultant about where the other sources of funding come from to make up the portion of the expense for the maintenance and expansion of the street system that are not impact fee qualified. Since there was interest in the funding sources, mostly general levies that the city gets from property taxes, he has asked Anna to give the advisory board this presentation Ms. Rosenberry noted the dollar amounts that will be seen in this presentation is based off of 2005 data, they are right on the verge of getting 2006 numbers but are still waiting for the county. She will answer if the city could fund street improvements from property taxes. She stated she will show how much of the property tax bill goes to the city and how many total dollars the city has from tax revenue each year. Ms. Rosenberry will address whether or not the city could borrow enough money to fund these capacity and growth projects and philosophically whether the city should fund this from tax revenue. She notes this is a policy issue. Legally and operationally it is important to look at these sources of revenue. Ms. Rosenberry explained how expensive it is for these street improvements. The estimated costs for a mile of street improvements depends on how big of a street you are building; a collector street for one mile would cost 3.5 million dollars, a minor arterial like Durston would cost 5 million dollars per mile, and an arterial like North 19th, well, you are looking at 8 million dollars for one mile of street construction. What the city found was that legally, we could fund those sort of improvements from the general fund, but operationally the city cannot fund projects of that magnitude from the general tax base. She states one of the reasons the cannot fund it from the tax base is that the city does not have the ability to raise taxes or to borrow for that purpose without a vote from the public so we would be held to our current taxing levels and make cuts in order to fund this type of project. Ms. Rosenberry clarified how property taxes are calculated within the city and it comes from the mill levy. It is just a rate per each taxable dollar, so one mill is equal to one-tenth of a cent of the taxable value of your property. It is just a basic calculation after the assessor puts a value on your property. Ms. Debra Becker wondered if the market value of what one’s property is worth versus the taxable property, if this was just a simple ratio? Ms. Rosenberry stated it is not a simple ratio, but it is a ratio and it is complicated system in the state of Montana. Taxes are to be based on the market value of the property and the market value assessment is done once every six years. Then they spend the next six years phasing in the increase in your property values, therefore we are always six years behind. She notes that when you have a market like Bozeman, where property values on existing homes are appreciating as quickly as they have, spending six years to get to 2003’s appraisal value leaves us behind the mark. There are different rates applied to different properties such as residential, commercial, utility property and industrial. There are some residential exemptions and different exemptions for commercial property and it’s based on the market value with other factors mixed in that the legislature sets. Mr. Dean stated he thought the assessors had to view the property on the outside and then set the value. Ms. Rosenberry notes how much a property sells for is not public information in Montana. They are building neighborhood models to track it, but it’s not available to the public. Ms. Becker stated there is a database available to real estate agents with this information, to which Ms. Rosenberry clarified it is only a subscriber database and not sure how accurate it is. Commissioner Becker queried to Ms. Rosenberry if the value of the mill could be changed. She replied that a mill is always 1/10th of 1 cent of the taxable value of the property, however as property values increase and new property is constructed, our total property value grows and that’s how the value of the mill grows. She then notes that the total taxable value of all the property in the city of Bozeman is 63 million dollars, the actual market value was almost two billion dollars, however once you apply all the exemptions and tax rates, you get to the taxable value of 63 million dollars so 1/10th of 1 cent of that (a mill) is equal to $63,000 of tax revenue. Ms. Rosenberry stated that luckily, that number is increasing in time. If one mill generates $63,000 in total tax revenue for the city, that means 16 mills is what it would take to generate a million dollars worth of tax. She stated this year the city will levy 163.42 mills which means in total, the city will be bringing in a little over 10 million dollars in property tax revenue for the year 2006. The median home in Bozeman pays about $457 a year in property taxes, but we all know they much more. Only 1/3 of every property tax dollars goes to the city, the rest of the revenue goes to the county, the schools, and statewide education. Ms. Rosenberry noted that most of the public thinks all this money in property tax goes to the city, but in fact, the city only collects 30%. She states we are allowed to recover through an increase in the levy at ½ the rolling 3 year average of inflation which was 1.43% last year. This was a conscious decision by the legislature a couple of years ago because they wanted to limit the property tax burden. Ms. Debra Becker noted the city could raise the mill rate, less than a mill, you wouldn’t just double it and charge 2 mills, but maybe by raising it to 1.25 mills this could work. Ms. Rosenberry agreed and replied that the law allows the city to go out two decimal points on the levy and then stated right now, the city levies 163.42 mills and each mill brings in $63,000 to the city. Ms. Becker asked if this rate is universal for everyone and uniform to all types of property and Ms. Rosenberry noted that residential has it’s own rate and commercial has a separate rate and it comes from the state, the city doesn’t decide that. Technically, the city would have to ask the voters for permission to raise the mill rate. Mr. Tim Dean noted that most city departments such as the building department are self funded. Ms. Rosenberry noted that was correct, however we have several sources of revenue in the general fund and none are as large as property taxes. If you look at the general fund, know that the pennies are split to cover employee healthcare, employee retirement that’s required by state law, insurance, the planning department a little, senior transportation, fire equipment, library debt, and transportation debt. The last three were all voter approved levies. She stated the health insurance and retirement contributions are important levies and are part of the city’s labor contracts. Next, Ms. Rosenberry noted the 30 cents out of the total dollar were based on the 2005 numbers and the total dollars collected for 2005 for the general fund was 6.4 million dollars. So, if we were really talking about funding street improvements with property tax dollars, what would be available is what goes to the general fund right now, only 6.4 million. She noted that once the debt for the library and transportation is paid off, the tax goes away and the city is not allowed to collect those dollars. The bond for the transportation is being paid off at $400,000 a year, so once this is paid off, we don’t get to keep that extra $400,000. Chair Tim Dean states it interesting if you look at the data, 48 cents of property tax dollars goes to city schools and wondered if that’s why the schools do not get charged an impact fee. Mr. Saunders responded that the discussion with the school districts at that time and noted they claimed they were doing really well with individual levies for bond issues and declined to participate. He further stated that there is an option under the statute that a school district could come to a local county or city and ask to apply an impact fee because under law right now, only a city or county can apply an apply an impact fee, however the can apply it on behalf of a special district. Mr. Saunders noted the likelihood of that happening is slim, because it would take a unanimous vote from the county commission or super majority of the city commission for this to work. Ms. Rosenberry stated she was not sure how much of the property taxes go to fund the schools. The state gives funds to the schools and divides that between districts. She did note that most of the school funding comes from the general fund on top of the large sums they receive from the state. Ms. Becker notes that the only way the tax payers tax bill can increase is if the taxable value increases or the voters approve an increase of the mill. She stated there was a lot of voter control over these issues. Anna Rosenberry states the general fund is where our property tax dollars goes, this year it has 19 million dollars worth of expenditures it is supporting and out of all the funds the city has, it is used to fund people, public service workers. Out of a 19 million dollar fund, there is an 11 million dollar payroll: Administration (IT department, city manager, city attorney, building maintenance), City Court, Police Department, and Fire Department. The vast majority goes to fund public safety. Although the planning department is paid for by the city, we are seeing that them become more independent and pay for itself by the fee structures for review and applications. Ms. Rosenberry noted that in addition to property tax revenue, we have a revenue share from the state such as $1 million dollars for fines from the municipal court, we share in the local option vehicle tax which totals about $1 million dollars a year, and then we have a user fee from recreation services and campsites and the like. In addition to property tax revenue, in Bozeman there is a special assessment bill for maintenance of the streets, trees, and urban forests and it is smaller than the property tax revenue, but it does add to it. These are special districts that are prohibited from spending this money on anything else except for this distinct purpose. Debra Becker queried the presenter as to how it came to be that these special operations were funded by special districts. Ms. Rosenberry responded that she’s not 100% sure, but the idea for the creation of special districts has been in our statutes for a very long time. Back in the 1980’s, one of the first property tax freezes that happened across Montana used special district assessments became more popular as a way to provide service away from the property tax bill. These districts were created through public hearing processes, but not an election process and it was allowed by law as a way to utilize funds specific services without using the general taxing authorities. Ms. Becker stated that the government could just as easily increase the tax base, however Ms. Rosenberry noted they are not charged like a property tax where the tax is based on the value of your property. These special assessments are made by the square footage and zoning classification of your property, not location – a house on a 5,000 sq. ft. lot in a crummy part of town will pay the same fee that a nicer home on a 5,000 sq. foot lot on South 6th will. Chris Saunders noted this process is not perfect, but it is used for intensity of use and kinds of uses. He states it just helps the city adjust the cost better. Ms. Rosenberry commented that there was a cap put on the assessment, even if your lot was thousands of acres, the fee was capped at a relatively small level. Ron Kaiser states he heard that these special assessment fees were only designated for certain tree-lined streets and that the expenditure of these funds were only for certain portions of the city streets. Ms. Rosenberry commented that this is not the way this operates, this assessment fee is to maintain all the streets on all the right of ways in the city, however if you live on Willson with all the older trees, you will see more crews working there than in a newer subdivision. Mr. Kaiser notes that a lot of the newer subdivisions, as part of approving the PUD process, the homeowners association would be responsible for the street maintenance. Mr. Saunders responded this situation only happened in certain circumstances due to the fact that the developer has asked to allow this because the association could handle street or tree issues in a timelier manner than the city, or they built substandard streets to which the city could not maintain. He also notes there is mechanism in place that will allow the city to take it over and then an SID can be create to make these streets standard. Mr. Kaiser asked if a street does not have a curb and gutter, is that considered a non-standard street and Mr. Rick Hixson replied that if a street is narrower than 31 feet, it is considered a sub-standard street. He added the minimum width for a two-way drive aisle is 24 feet and some PUD’s in exchange for something build streets that are narrower than 31 feet and the city does not maintain those. Mr. Dean notes the best example is the Claire Daines subdivision and Mr. Hixson stated the two trailer parks on West Babcock, Wheeler Mobile Home Parks and Yellowstone Peaks have streets that are only 20 feet wide and are the absolute minimum that two cars can drive down. Ms. Becker wondered if those properties that have these sub-standard streets still pay for the assessment and Mr. Hixson noted they do because they end up paying for other streets that they use in the city to be maintained. Mr. Saunders comments the gravel on the roads around town is annoying because they cause our windows to chip as we drive on it, however they are a phenomenal cost mechanism because asphalt breaks apart in sunlight. He notes those layers with rocks and oil done every six years, actually protects and maintains the street so the city can get 50 years out of a street. Doing the maintenance on these streets, the city saves capital amount of dollars in care. Ms. Rosenberry commented that technically, the city could use some of these maintenance funds, but the equipment alone is extremely expensive. Mr. Hixson noted that the city has stayed away from using these funds for anything other than maintenance because the needs are so pressing. Ms. Rosenberry commented that this is the reason why funding for these projects can be philosophical, should the expansion of roads be added to costs paid by the taxpayer already or should these come from somewhere else. Ms. Becker stated she got the impression that city employees do not get paid that much, however the city employee payroll take a large chunk of this general fund. Ms. Rosenberry noted this includes a percentage of their salary, employee’s benefits, their retirement package, their health insurance, and worker’s compensation contribution. Mr. Saunders stated health insurance is where most of this goes and Ms. Rosenberry clarified that about $7,600 of the $50,000 annual salary goes to health insurance. She also added that the payroll includes street foreman, superintendents, and some seasonal employees. She notes this is an important benefit and a good benefit – health, dental, and vision. Mr. Saunders stated that for the past three years, the city has had the same premium and Mr. Hixson added that we as a group are a healthier group. Ms. Becker wanted to know if it was more cost efficient to be self insured and Ms. Rosenberry responded by noting the city went into a pool with other like minded municipalities so technically, we are no longer self insured. Commissioner Becker asked if the wellness benefits changed when the city went into this pool and Mr. Hixson stated they did not, he further explained that city employees get a great group rate at The Ridge and since we are generally a healthy group, it keeps the rates down. Ms. Becker noted that all it would take for a rate increase is to have one bad medical case. Ms. Rosenberry states the city offers its employees a $1,500 deductible, however each employee has to pay for each dependent on their plan. Ms. Rosenberry proceeded to the issue of borrowing and debt capacity of the city. She noted the city has a statutorily defined amount of debt that the city can issue that is backed up by the general taxing authority of the city. The total number is determined by the total taxable value, our assessed value each year. Right now, the city has about 22 ½ million dollars of capacity that’s not being used. We are only using 7 million of it for the transportation and library general obligation bonds. In theory, we could borrow the 22 ½ million we could borrow for transportation improvements, but only if the voters approve it. This could finance 4 miles of street construction, however for almost 20 years, we would not be able to borrow for other purposes such as fire station or police station needs. Sean Becker asked if the state and federal governments assist in helping to fund these needs with urban funds to which Ms. Rosenberry and Mr. Saunders responded that the impact fee is a companion fund to these federal and state funds. Mr. Becker asked how many miles of road we have in this city and Mr. Hixson stated there were well over a hundred. Mr. Saunders clarified that overall, there are 170 roads that the city is responsible for maintaining, the entire lump equal 225 streets. Mr. Hixson commented that 19th is under the jurisdiction of MDT and they would pay to improve that street. However, developers and citizens have paid to improve it and noted the reason why is the government just takes forever and a day to get to these improvements. He further noted that the city does get ‘Urban funds’ that we can use on urban routes such as 19th, Kagy, Rouse, and Oak. He commented that the city has about 5 million dollars saved up so far, it’s a special earmark and the city has not spent any of this money since the improvement at South 3rd. Senator Burns got the city 5 million dollars that will be used to improve South 19th, but the cost is currently going to run at about 8 million dollars for this project. The city will end up using 3 ½ million of the urban funds to cover the balance. Mr. Becker queried as to whether it would have been better to decline that special appropriation at that time and Mr. Hixson replied the city did not have it back then. He further noted that a lot of money flows from the federal government to us through MDT, however there is a loss of time by the time it gets here and with 6% growth rate, it makes it almost impossible to have to wait because now there are safety issues that need to be addressed. Chris Sanders noted there is going to be a rebuild to Main Street and wanted to know how long the timeline is for completion. Sean Becker commented it was supposed to start in the spring then Mr. Saunders responded he’s heard that same comment for the past five years. Mr. Hixson replied to both and noted it is supposed to start in 2007. Mr. Ron Kaiser stated the role of the impact fee committee is to assess the need and level of those impact fees for the new developments as they come on line with the city. It is clear from the presentation tonight that the costs for these improvements have increased dramatically and the city is limited on other resources they can use to help fund these projects. He stated he was from Denver and was part of the municipal bond committee and with subdivision growth, they used special improvement bonds for the roads and sewers, then assessed these fees to the home owners over a period of twenty years. Mr. Kaiser then asked Ms. Rosenberry to comment on what other communities in other states do with the same restrictions we face or if the state of Montana is just statutorily constricted. Ms. Rosenberry replied that with SID’s, when the city did Durston and Babcock, the property owners did pay for certain improvements. She noted that certainly the City Commission could start saying, “Get rid of the impact fee system and we’re going to deal with infrastructure through SID’s”, but then is when the equity issue starts to get blurry. She further stated you’d have to prove a dollar value benefit to the lots that you’re assessing and it can’t be a benefit ten years from now, but a benefit today. In Montanan it would be a little harder to prove to say you are planning for expanded capacity in five years. Mr. Kaiser wanted to know if there are other mechanism besides SID’s and impact fees? Ms. Rosenberry states there is no sales tax in Montana which could help in funding improvements as it does other states. Mr. Dean noted that Billings has a ‘systems development fees’ for years which has worked very well for them and Mr. Saunders stated it is similar to impact fees, but are only used for water and sewer. Mr. Hixson commented on this and noted they have an arterial collector fund that is based on zoning, but no impact fees. Mr. Kaiser noted that one could argue that the concern of the community is the impact on homes prices and the affordability of impact fees, so if it were possible to spread out the payment over time as opposed to a fee up front, it would be preferable, but it doesn’t sound like there is a mechanism to do it. He further commented that the lack of sales tax, the manner of not being able to pass a levy without voter approval, and other issues just make it seem that the city is restricted. Ms. Rosenberry responded by stating she did not work for the city when the impact fees were created, but as she drives around the city, she sees the best built infrastructure and more adequately built infrastructure than any other community and thinks it entirely from what Bozeman has been able to do with impact fees. Mr. Dean agreed, but notes it has impacted our affordability issue. Mr. Saunders noted that Kalispell, they are looking at impact fees, but do not have as much commerce. Belgrade is actively pursuing impact fees and noted they are in even worse shape because their mill is only at $6,000. Mr. Saunders noted that Al Stiff, who was a commissioner for twenty years, was here during the Valley Unit debacle when the city got stuck with all the bills. Mr. Stiff was adamant that as long as he was alive, he would never again leave the tax payers responsible for a city disaster. Mr. Kaiser noted the Valley Unit issue happened to Denver in the late eighties also. Rick Hixson notes the city of Bozeman has a lot of SID’s, almost every street in the old part of town was built by and SID that around 700 right now. Mr. Kaiser stated that technically, no one can take a bond without passing that accumulating debt and passing on to the next homeowner. Mr. Dean noted that if the developer who has created 50 more single family homes has created an impact to our current city streets and city services, they should pay an impact fee…period. Ms. Becker responded that impact fees are only a minimal amount compared to the 25% amount of appreciation. Mr. Saunders notes that one of the reasons he has liked impact fees is because it doesn’t tie into an individual dollar. He states it forces one to evaluate the larger, bigger picture and have government address the issue in an immediate need time frame instead of putting it on the back burner. Debra Becker stated the public would come to their own conclusions on how the impact fee is spent but wondered if it’s the advisory committee’s responsibility to educate the public on why the impact fees are necessary. Mr. Saunders replied that when Bozeman was in charge of putting this advisory committee together, they decided that we, our group, would be the independent review committee that would be part of city and provide direction on applicable laws. The members had to be people from the building industry, have formal financial training, and have the general citizen represented properly as to make this board as equal across the board as possible. He added that he hopes that all members would help educate the public. Mr. Tim Dean stated the committee would need a platform that would allow us to do that, possibly at a City Commission meeting. Mr. Becker noted there are work sessions that could allow the advisory committee to do that. Ms. Rosenberry and Debra Becker noted a visual presentation would help immensely and there could be a way to have a separate meeting that would be televised for the public. Tim Dean noted to Ms. Rosenberry that this meeting was very informative. He added he hopes this committee would be giving recommendations as a joint effort, with everyone on board. ITEM 6. OLD BUSINESS Seeing there was none, Mr. Dean closed this portion of the meeting. ITEM 8. NEW BUSINESS Chris Saunders stated that the transportation portion of the update process has begun. There is contract for Water and Sewer and are hoping they will be here on the 28th to do their introduction. The city is in the process of writing the contract for Fire and have decided to go with HDR. Mr. Hixson noted that the transportation plan is being updated and is their guideline for the basis of these impact fees. The city has elected a selection team to pick out a consultant for the 2006 transportation plan update and there are three candidate firms; PBS & J, HKM, and Robert Peccia & Associates. Mr. Saunders notes the consultant will be looking at the cost per unit mile of capacity. However we do look at the transportation plan very carefully as far as the street’s function. Mr. Becker asked if the growth policy has been updated yet and Mr. Saunders replied it is being worked on and the process has started. ITEM 9. ADJOURNMENT Chair Tim Dean adjourned the meeting at 8:43PM. _______________________________________ ____________________________________ Tim Dean, Chairperson Chris Saunders, Assistant Planning Director City Of Bozeman Impact Fee Advisory Committee Planning and Community Development and Staff Liaison to IFAC *City of Impact Fee Advisory Committee meetings are open to all members of the public. If you have a special need or disability, please contact our ADA Coordinator, Ron Brey, at 582-2306 (voice) or 582-2301 (TDD).