Ephesus Fordham Renewal: Expanding the Tax Base and Financing
This spring, the Town Council is considering the Ephesus-Fordham Renewal, a proposal to stimulate development in one of our oldest and largest commercial areas around the intersection of Ephesus Church Road and US 15-501 or Fordham, the northern gateway to Chapel Hill.
The proposal calls to renew an area well known for its confusing intersections, vast parking lots and traffic jams into a thriving walkable district with an urban character attractive to younger generations that will live and work in Chapel Hill. It hinges on adoption of a new zoning model to stimulate the development that will grow a tax base to fund about $10 million in transportation improvements -- and some stormwater benefits. Guided by the Ephesus Church Road-Fordham Small Area Plan, the proposal also includes an affordable housing development. See proposed zoning map.
The area was identified in the Chapel Hill 2020 community comprehensive plan as a focus area that requires more study and visioning for the future. Future focus areas are portions of Chapel Hill most likely to change due to vacant land, underdeveloped sites, and their locations along transportation and transit corridors.
“The Ephesus-Fordham Renewal has been in the works for a number of years, and now we are seeing many of the components come together to potentially make this the next cool place to live, work and play in Chapel Hill,“ said Town Manager Roger Stancil. “It’s important that our residents have good information about this multi-disciplined, systemic planning opportunity.”
Toward that aim, the Town of Chapel Hill has prepared a series of stories on the following areas – Rezoning, Transportation, Stormwater, Affordable Housing and Expanding the Tax Base and Financing -- to assist our residents in understanding the proposal. For more, visit www.townofchapelhill.org/ephesusfordham. Questions? Contact Town staff at email@example.com. As always, the Chapel Hill Town Council wants to hear from you at firstname.lastname@example.org.
Expanding the Tax Base and Financing
Chapel Hill is looking for opportunities to expand and diversify the local tax base because a healthy mix of commercial, retail and residential uses on development directly benefits the community as a whole and the people who live here. This is a key part of the Town’s Economic Development Strategy.
Why does expanding and diversifying the tax base matter to Chapel Hill? Consider that the Town increased taxes by 2 cents last year and has used budget strategies during the Recession to balance budgets that are not sustainable over time, including the use of one-time funds for street resurfacing. The Town has identified $183 million of capital needs of which it can only afford to finance less than half in the next 15 years with current property values and tax rates
Based on expected development scenarios, conservative to moderate estimations of new tax revenue from the Ephesus-Fordham project range from $26.5 million to $47 million over the next 20 years, said Ken Pennoyer, the Town of Chapel Hill’s business management director. This will expand the tax base and reduce pressure for tax increases on existing properties.
In Chapel Hill, about 18 percent of Town revenue is generated by the commercial tax base, which is lower than our neighbors such as Durham that relies on a 40 percent commercial tax base, or Raleigh with 35 percent. The lack of retail here means that we go elsewhere to shop.
“From clothing and makeup to appliances and TVs, there are many things you just can’t buy in Chapel Hill,” said Dwight Bassett, the Town’s economic development officer. “This is why about 70 percent of our residents leave Chapel Hill every day to once a week to shop.”
The number cited by Bassett is found in the 2013 Community Survey. The survey also shows a growing dissatisfaction in the growth of retail and access to quality shopping. Sixty percent of residents surveyed said that the pace of development for retail is “slow or much too slow” – an increase of 17 percent from 2009.
Based on expected redevelopment, the Ephesus-Fordham Renewal will generate an estimated $26.5 million (conservative estimate) to $47 million (moderate estimate) over the next 20 years to benefit the Town, the County, and the Schools -- and ultimately, help reduce the pressure for future tax increases.
The Town proposes to finance the $10 million worth of improvements for Ephesus-Fordham Renewal by coordinating the financing with other Town projects that can provide collateral for a combined financing.
The Town is planning on using the incremental increase in the tax revenues generated from expected development to repay the debt. By using this method of debt repayment the project’s public improvements are essentially self-financed by the expected growth in taxes.
The Town has requested that Orange County consider contributing a portion of the County’s tax revenue from the redevelopment to help pay the annual debt service, a contribution of up to $400,000 a year. This request leaves untouched the additional County tax revenue for the project dedicated to schools. This will help the Town pay the anticipated $800,000 of debt each year to fund the improvements.
Based on expected redevelopment the County would receive additional property taxes of about $2.25 million annually after the project’s full build-out in 15 years. The Schools, based on expected development, would receive an annual tax increment of about $549,000 after the 15-year build-out. In addition the Schools would receive one-time School Impact fees of about $1.92 million based on the addition of 1,495 additional multi-family housing units added during the 15 year-build-out period. These estimates are based on current tax rates and impact fee structure.
“The County’s participation creates a very strong, marketable debt structure,” Pennoyer said.
There will be a time gap between when the Town expects to issue the debt and when the redevelopment will begin to generate a tax increment sufficient to pay the debt service. To the extent possible, the Town will structure the debt for the Ephesus Fordham public improvements to defer debt payments to match the anticipated timing of incremental tax revenues.
About the Process
The Town of Chapel Hill has been working for several years on the renewal of this area. Following numerous public input sessions, the Council adopted the Ephesus Church Road-Fordham Small Area Plan in June 2011. In 2012, Town staff began to study and consider the use of form-based codes, an idea that evolved from the Chapel Hill 2020 visioning process and eventual comprehensive plan. http://chapelhill.granicus.com/MediaPlayer.php?view_id=5&clip_id=1396
A collaborative team of staff members from planning, stormwater, engineering, traffic, transit, finance and economic development areas has moved the renewal proposal forward. Beyond the internal team, professional consultants are working on technical challenges. The team is also working closely with the Chapel Hill Carrboro Public Schools, Orange County, Orange Water and Sewer Authority (OWASA), and Chapel Hill Transit on a cost/benefit analysis to better understand future impacts of the plan on the community.
In 2014, the renewal project was presented to the Chapel Hill Town Council on Jan. 22, and subsequently, public information meetings were held on Feb. 20 and Feb. 27. Council review continued at a work session on March 6, at a business meeting on March 24, and then at a joint meeting with the Orange County Board of Commissioners on March 27. There has been a high level of public interest and involvement throughout the planning process. With assistance from the Chapel Hill Carrboro Chamber of Commerce, the Town has contacted small business owners with information about the project.
Public information about the process is posted online at www.townofchapelhill.org/ephesusfordham.
The Council will consider action on proposed rezonings at its next business meeting on May 12. After this, there are numerous checks and milestones that would need to occur for this multi-faceted project to move forward. Visit www.townofchapelhill.org/ephesusfordham and click on the “Schedule” button to see where we are today in this process.