Thursday November 01, 2018
The South Burlington Election Day Ballot features five articles, four of which relate to the City Center building project proposed for Market Street and a $20.4 million bond question.
But first, an overview. As many residents are aware, the ballot asks voters to approve financing for the proposed City Center municipal building, which would house a new library, senior and recreation center, and city hall. There are four articles related to that proposed project.
A separate city article, Article III, relates to the reconstruction and improvement of the Kennedy Drive Stormwater Retention Pond. The project will not use taxpayer funds, but the city is required to get voter approval for the project, which will cost up to $300,000, in order to be reimbursed by the state through the Green Stormwater Sponsorship Pilot Program.
“It appears it’s an agreement to bond, but we need (the ballot item) to get the state grant, and it has to go to the voters for approval,” said City Manager Kevin Dorn.
Article I asks voters to approve letting the city use city credit to bond, borrow, or use Tax Increment Financing to fund the proposed City Center building project for an amount not to exceed $20.4 million.
Article II asks voters to allow the city to lease the current city hall building on Dorset Street to the South Burlington School District for three years, with two, three-year renewals, along with an option to buy the property. The lease would be for $10 a year. If the school district decides to by the current city hall property, the city will sell it to the district for $10.
Article I asks voters to approve the conveyance of three easements at the Rick Marcotte Central School property from the South Burlington School District to the City of South Burlington to use for parking, utilities, and present and future access to the proposed City Center municipal building.
Article II asks voters to authorize the South Burlington School Board to enter into the option to lease the city hall for three years, with two, three-year renewals, along with an option to buy the property on Dorset Street and move the school district’s administrative offices to the city hall building.
But what does it all really mean?
Dorn emphasized that all four articles related to the City Center project have to pass in order for the project to go forward.
“We have to be able to incur debt,” he said. “We have to have authorization to lease the city hall property to the school district. The school needs approval to provide the easement to the city for parking and utilities, and the school district needs authorization to lease the city hall property.”
Those are the four City Center articles in a nutshell.
“I think the message is, if you want the city center building to be constructed, vote for all four articles,” Dorn said. “If you don’t, vote ‘No’ on all four. If you don’t, the message will be very confusing as to what the taxpayers think.”
City officials have said that approving the proposed bond for the City Center project will not increase the current tax rate. In other words, the city tax rate may go up in the next iteration of the city budget, but not because the City Center project was approved.
Taxpayer money goes into the General Fund, and annually the city has moved money from the General Fund into the City Center Reserve Fund in anticipation of funding this proposed project. Taxpayer money will continue to be used to fully service the debt with a continued annual contribution to the reserve fund of $736,000. That amount is already built into to the current tax rate.
“This project utilizes the taxes you’ve been paying already,” City Council Chair Helen Riehle said at an Oct. 24 public information meeting. “So, I can’t say we’re not using taxes, because we are, but we’re not increasing them.”
TIF REVENUE PROJECTIONS
Most of the questions and concerns about the City Center project in South Burlington are related to the funding formula city officials have crafted to pay for it. The funding is predicated on the fact that the building is proposed for the city center zone, an area that encompasses Dorset Street, San Remo Drive, Market Street and the area east of Hinesburg Road and North of Kennedy Drive. Within that zone lies the Tax Increment Financing, or TIF District. It is one of 11 TIF Districts in Vermont.
A state program run by the Agency of Commerce and Community Development, TIF Districts require state approval and oversight through the Vermont Economic Progress Council. A TIF District is established by a city or town to promote growth and development in a specific area. Property values are established at the time the district is created, and taxes are paid to the state education fund and to the municipality. However, the community can then bond for infrastructure improvements to enhance or encourage private development within the TIF district, and then retain a percentage of the new property tax revenue created, rather than sending it to the state. It is a 75/25 split, with 25 percent going to the state.
For all of the concern about over-development of open space in South Burlington, the TIF District represents an area where development is actively encouraged. South Burlington grew over the years without a distinct city center, and the City Center building project represents 40 years of trying to establish a real downtown.
South Burlington’s TIF District was established in 2012 and is in the earlier stages of development. Of the 100 acres in the TIF District, less than a third is developed. Current businesses generating TIF funds include Healthy Living, Pier 1, and Trader Joe’s on Dorset Street, plus the Black Bay Ventures housing project on Market Street. The Allard Square senior living project on Market Street is nearing completion and will also generate TIF funds.
The funding formula for the $21.8 million City Center project is based on projections of what the TIF District will generate over the next 20 years, and those funds will be used to pay for the bond on the City Center project, if approved.
But Dorn and South Burlington Project Manager Ilona Blanchard, who calculated the proposed financing model, said that the projected TIF revenues are conservative and could potentially be much higher. Dorn said the TIF revenue projections do not include property on San Remo Drive, or property to the north of Market Street owned by the Unsworth and Chastenay families, or the potential redevelopment in the Blue Mall on Dorset Street.
“There are a lot of underdeveloped properties in the TIF District that were not included in the calculations for the needs of financing the City Center project,” Dorn said. “So, we’re very conservative on that.”
“We’re really looking only at projects that are in the development pipeline,” Blanchard added.
Thirty-four acres of expected development within the TIF District was factored into the financing formula for City Center, including 16 acres south of Market Street optioned by South Burlington-based real estate development company Snyder Braverman. Dorn said the company has spent the last year actively developing projects for the land.
“They’ve already spent a year in permitting for wetlands and stormwater,” he said. “so they essentially have all the state and federal permits they need for this development.”
While the details on Snyder Braverman’s plans have not been announced, Dorn said the city is confident that the company will proceed.
“They have a very large, shovel-ready site,” he said.
Dorn said that the TIF District generated $84,928 so far for fiscal year 2019, which ends in June.
The city projects TIF revenues from the Snyder Braverman property to increase to over $2 million a year.
If approved, the up to $20.4 million bond needed to finance the City Center project will be acquired from the Vermont Municipal Bond Bank. But the interest rate cannot be locked in until the debt is authorized by the city council once all of the ballot articles are approved.
“If we’re not going to actually start construction until next summer, we’re likely not going to go to marker and lock in an interest rate unless it appears rates will go up,” Dorn said.
Dorn emphasized that the $20.4 million bond amount on the ballot is a “not to exceed” amount.
“If we can build this thing for less, obviously we will bond for less,” he said. “But we can’t bond for more.”
A letter to the editor in last week’s The Other Paper discussed the tax rate and how the city tax rate has increased 48 percent over the last decade, while inflation has increased by 14 percent in the time period. But because Vermont property taxes are divided into city property tax and educational property tax, the writer took issue with the disparity between the rise in city taxes verses education property tax increases (14 percent, the same as the rate of inflation).
City Councilor Meaghan Emery took issue with that assertion, calling it “an apples to oranges comparison” and used U.S. Census numbers to make her point. She noted that the population of South Burlington grew almost 7 percent from 2010 to 2017, and 13.45 percent from 2000-2017.
“The local student body has not seen the same increases as has our housing infrastructure,” she said. “Therefore, with the student population remaining the same, it makes sense for the school budget to reflect the rise in inflation. This is not the case on the city side, which has seen a population increase every year. These increases have so far been covered by the increase in the Grand List, and this is typical of municipal budgets.”
Emery added that infrastructure costs increase with development, and that includes an increase in the cost of city services such as police and fire protection, road maintenance, and plowing.
“Every new structure has increased the overall property values for South Burlington (what we call our Grand List), and the Grand List is used to determine our tax rate,” she said. “Over the past recent history of South Burlington, every year has seen an increase in the Grand List. Therefore, city budgets not only reflect the cost of inflation, but also the cost of servicing these new residents and employees, who are also injecting new tax dollars into city revenues.”
Voters will head to the polls on Tuesday, Nov. 6 to vote on all five ballot items. If the four City Center building-related ballot items are approved, construction on the City Center building project is tentatively scheduled to begin in the spring of 2019, with an opening scheduled for some time in 2020.
SOURCE: Lee Kahrs, The Other Paper