Chatham growth and quality of life

Chapel Hill Herald, Saturday, November 20, 2004
Final Edition, Editorial Section, Page 2

For advocates of controlled growth, Election Day brought some good news. The water extension bond was narrowly defeated in northeast Chatham County. This, coupled with the election of two commission candidates backed by the Chatham Coalition, indicates a tenuous but real change of direction for Chatham.

Sonny Keisler, president of Friends of Rocky River and a longtime developer, told The Independent's Jennifer Strom, "Water lines are a double-edged sword. They can do a lot of good but they can also do a lot of harm."

Given the frantic insistence on growth of the current majority on the county commission, northeast Chatham residents have done well to put the brakes on water-line extension.

The Chatham water situation brought to mind Carl Hiaasen's novels of development politics in south Florida. Hiaasen's stories usually involve corrupt officials, ruthless developers, ethically challenged investors, detectives who'd rather be fishing, slobbery dogs and murder.

In Hiaasen's latest, "Skinny Dip," the plot revolves around a scientist working for agribusiness whose job is to falsify wastewater tests, a situation not dissimilar from what is alleged to have occurred in Chatham County.

Chatham's water system had nine violations of state regulations in 2003. By contrast, OWASA has had only one violation in its entire history despite serving seven times as many customers as its Chatham counterpart.

Former Chatham Public Works Director Steve Talbert claims, "I was told verbatim by [county manager] Charlie Horne 'I don't want any announcements of these violations until after all the votes are over with.' " Horne called this charge "the most ridiculous thing I've ever heard" but officials from the Department of Environment and Natural Resources are investigating whether Chatham has falsified reports and purposely avoided reporting water quality deficiencies.

So far, unlike in Hiaasen's novel, no bodies have washed ashore.

One point on which there seems to be widespread agreement is that Chatham has had trouble retaining staff at its water treatment plant. County Manager Horne blames recent problems on turnover. Talbert believes that Chatham has "not hired good quality people to run its system."

The obvious conclusion and one apparently shared by the voters was aptly expressed by Ron Singleton, another former public works director: "[If] they can't operate the system they've got, why give them any more?"

Perhaps the most serious of the problems with Chatham water has been high levels of trihalomethanes, a disinfection byproduct, which is associated with cancer as well as problems of the liver, kidneys and central nervous system.

A consultant for the state has said that Chatham has recently improved its water supply, adding ammonia treatment to reduce THMs. Chatham now has "probably the best water we've ever had" crows Horne. But Chatham resident Ray Greenlaw points out that the most recent violations are for problems with sampling and testing. Chatham residents just don't know how clean their water really is.

Commenting on the election results, Sally Kost of the Chatham Coalition told Strom, "The people have spoken, and now it's up to the rest of the Board of Commissioners to listen to our voices."

Perhaps a tiger can change its stripes but I wouldn't hold my breath. The folks who backed County Commissioner Bunkey Morgan and company (see my column of Sept. 25) will not go down without a fight.

Meanwhile, development interests are not waiting for the 2006 election. Last Monday, a public hearing was held on a proposal to amend Chatham's Watershed Protection Ordinance to allow increased density along river corridors.

The change is being pushed by Bynum Ridge, LLC which would like its Williams Pond development to include 59 units along the Haw, priced at over $800K. Bynum Ridge operates out of the same Raleigh office suite as developer Tommy Fonville, a major supporter of Morgan's 2002 campaign.

More than 100 citizens turned out to argue against the change. Greenlaw, who helped draft the current regulation, said, "The reason we wrote it as we did is that we wanted to be sure that we protected our main watershed." Elaine Chiosso of the Haw River Assembly characterized the proposed change as "a serious mistake."

The planning board has until March to respond to the proposed changes. And so, the struggle continues.

In Hiaasen's novels, the greedy win big at first but in the end get their comeuppance. In Chatham County today, developers and the investors behind them are doing pretty well. But if Chatham Coalition activists can build on this year's successes, concern for quality of life and the natural environment may soon become the driving force when it comes to growth in Chatham County.



At the Haw River Festival on Saturday, the Chatham Citizens for Effective Communities had a petition for a bill that would authorize a 1% land transfer tax. As I understand it, this would replace the currently used impact fee (Orange County as well as Chatham). According to analysis by Commissioner Mike Cross, the school impact fee is a one time payment while the land transfer tax is repetitive at every transfer sale (developer buys land, builder buys lot, buyer purchases house, owner resales property). For Briar Chapel, which is expected to generate $1.25 Billion is gross residential value, the impact fee would generate $7 million and the land transfer tax would generate $12.5 million through the first-time residential sale.

I thought I kept up with things pretty well, but this was the first time I heard (or focussed) on this proposal, which is coming up for a vote in the legislature soon. It is being sponsered by Hackney and Insko. Does anyone know if Chapel Hill, Carrboro, Orange County are in favor of this bill?

just keeping this thread at the top in the hope of a response from Carrboro/Chapel Hill/Orange officials.

My memory is that the idea of a real estate transfer tax has been on the legislative agenda of prior Councils as recently as 2003.

I do not think it was part of our two most recent legislative agenda resolutions (2004 & 2005), but neither do I think there was necessarily a good reason to drop it.

HB 1062: Orange/Chatham County Transfer Taxes:

Sponsored by Joe Hackney and Verla Insko.

According to Mike Cross (Chatham), the vote could take place any day now. If I understand this correctly, this transfer tax is much better than the one time, fixed impact fee. The transfer tax not only generates more income for the county, but will also go partway toward funding ongoing costs after development (through resales).

My problem with a transfer tax is that it taxes new and old construction the same. A new home increases the need for firemen, policemen, schools, etc. An existing home, when sold, does not. Oh, there may be a net gain or loss of a student or three, but that averages out over time. A new home only adds, never subtracts, to the town services burden.

The impact fee directly addresses that additional burden. I would think the transfer tax is very popular with new home construction interests versus an impact fee, because it spreads the cost around to everyone, and makes new homes more price competitive with existing homes. But it is not as fair.

We pay property tax every year for ongoing expenses. We can finance infrastructure through bonds (which is also paid longer term by property taxes). I see no reason to tie these costs to property transfers. I don't see a connection. If I live in a home for thirty years, I could avoid paying my fair share of the costs of repairs and upgrades to a school in my older neighborhood. That's not fair.

But new developments require new schools, policemen, fire stations, parks, etc. These are enormous costs that would not be incurred if not for these new developments. Impact fees address this directly.

I'm sure the real estate industry opposes both the tax and the fee. They would rather we all pay for this stuff through property taxes. But given a choice, impact fees or transfer fees, if I were a new home builder, I would choose the transfer fee. That way, more people would pay for the school my buyers need. Great for the builder, but again, not fair to those who are paying for nothing.

But the costs of schools and other infrastructure don't end with construction. The reason I find the transfer fee attractive is the very feature you don't like - - it will help fund ongoing costs of services. From what I have read, the real estate lobby is actively opposed to this bill. What I don't understand is why the legislature would pass this for Orange and Chatham only.

A bit of history---

The real estate transfer tax has been the preferred mechanism for generating revenue to meet these needs among elected officialdom in Orange County for many years (I held forth on this subject ad nauseum in an editorial published around 1990 that I'd share here, but can't figure out how to access the H-S archive---Any help, here, Ray?).

The current impact fee scheme was a compromise measure to appease real estate interests who have been more vociferously opposed to the more progressive tax, as well as offering a fig leaf to legislators who would rather be keelhauled than placed on record as approving a new 'tax', hence, the 'fee'.---In short, it was the only mechanism our delegation could get through the legislature. As has been expressed elsewhere, the real estate transfer tax is a far more progressive mechanism, generating a greater and more reliable revenue stream. As I understand the current legislation, this measure would be a substitute for the current, regressive fee---I for one, would take a dim view of any attempt to alter the measure to an additive device.


No help to offer on the archive, Alex. The public archive only goes back to 1995, and the internal version only to 1991. The first three years of the Chapel Hill Herald exist only in hardcopy and have never been digitized.

I don't understand what you're saying Alex. On the one hand, it sounds like you believe the current impact fee is regressive (flat fee, same for all regardless of price), but then you say "I for one, would take a dim view of any attempt to alter the measure to an additive device." Isn't the 1% transfer an additive device? Are you against both the impact fee and the transfer tax?

Ed, I take your point about taxes being the vehicle by which homeowners pay for their ongoing services. Do you happen to know what those services are worth on a per household basis in Chapel Hill or Carrboro? If we don't know that figure, then taxes aren't really absorbing the actual costs to the town.

Alex, you use the phrase "progressive mechanism" as if just those words alone lend support to the idea. The only meaning for that phrase that I am aware of is that it will tax higher income families more than lower. I don't see how that is so.

You don't offer any justification, except that it raises more money. A higher impact fee would do the same, and I maintain it is a more fair method.

Of course, as available land is built out, the revenue from impact fees will diminish, but so will the spiking need for town services. Increased density will also put additional demands on the town, but a simple transfer tax is not tied to increased density. Perhaps an impact fee on reconstruction would do the trick.

Taxation strategies are as important as land use planning, in my opinion. Choosing them solely for political reasons or based on which will suck in the most dollars can have un-intended effects.

Do you happen to know what those services are worth on a per household basis in Chapel Hill or Carrboro?

Terri, I don't know the answer to that. You could divide the total budget by the number of households. That does not differentiate between operating costs and capital costs, however. But I'm not sure I understand your point. Taxes and fees do absorb the costs in the long run, or we'd be running a deficit, which is not allowed. (One exception: money from the feds, which so far has been able to run huge deficits as if they print money. Oh yeah, they do! But in the long run, there is still no free lunch there, either.)

In my perfect world, property taxes would pay operating costs plus debt service on bonds for capital expenditures for existing home and business owners only. Impact fees would fund capital expenses for new construction.

...the phrase “progressive mechanism” as if just those words alone lend support to the idea. The only meaning for that phrase that I am aware of is that it will tax higher income families more than lower. I don't see how that is so.

Ed, I believe this is a mathematical concept that has taken on a political/liberal connotation. A progressive tax as I'm sure you know is proportional. For income tax, it is proportional to income and in the case of land transfer, it is proportional to the size of the property. I see two assumptions that justify its use: 1) larger properties consume more services and 2) affordable housing is a critical societal need and should be subsidized by those who are able.

The problem with its use is that its not really used as a mathematical formula in which the factors within the equation are clearly understood and can be manipulated as conditions change. For example, larger properties create more stormwater runoff. But then when stormwater was recognized as a critical cost to Chapel Hill, instead of simply factoring in that cost to the tax equation, a new 'fee' was added, meaning that everyone is paying twice. In Carrboro, they are trying to make the same tax rate do more since stormwater runoff probably isn't adequately represented in the taxation equation.

As I am learning more about all of this, it seems to me the problem won't be solved until there's a good hard look at the legacy approaches to city planning and financing (and the associated software). The towns can't continue annexing, raising taxes, adding fees much longer. They are going to have to take a serious look at what services they offer, who should pay for them (city, county, university, individuals, businesses, etc.). If you listen/attend many council/alderman meetings, we hear a lot about values. Those values need to be clearly expressed and factored into the budgeting equations. For what it's worth, I'm not naive enough to believe that will ever really happen although Carrboro's vision 2010 comes close to doing just that.

I also think we need to take a hard look at services that could be handled jointly such as police and fire. I don't support merging Chapel Hill and Carrboro, but I do think they could cooperate more and reduce the taxes/fees for the property owners and citizens within the two towns. This was a suggestion in the recent budget advisory meetings but one that no one wanted to take on. But, if we want to achieve social goals such as affordable housing, we going to have to do something, relatively soon. If the town's had done this already, Carolina North might not be of such monsterous size.

I bet everyone's happy I live in the county! :~) I am very much a novice in my thinking/understanding of all this. I'm expressing my current understanding and would be happy for anyone to explain holes in my thinking.

Ed, The phrase 'progressive mechanism' refers to the notion that the fairest tax system is one based on the notion that tax burden should be based on the ability to pay---To wit, those with the greatest resources pay accordingly.
You propose that simply raising the impact fee would be a fairer mechanism. If we can agree to the general premise that the expense of a new home generally reflects the resources of the buyer, I offer the following: Let's say the 'fee' is raised to $5,000 per dwelling unit: That means, that a first-time homeowner purchasing a $100,000 condo (assuming such a thing could be built for that price) would pay a 5% premium, while a buyer of a $500,000 'executive home' pays only 1%. What's fairer about that?

Moreover, under the Transfer Tax proposal, revenue is generated every time a property turns over---Not only does this spread out equivalent revenue over a larger number of transactions (remember, the 'fee' only applies to new construction), it captures revenue from speculative real-estate 'flippers' who buy and sell existing properties for quick profits, escaping the 'fee' under the current scheme.

What I meant by 'additive', is a scenario that would preserve the current impact fee structure, and 'stacking' this levy in addition. It should be a substitute.


Terri & Alex, I see your points, which are similar, and agree to a point. We have a long tradition of dipping deeper into the pockets of those with higher income. So an impact fee could be a flat fee plus some percentage of the total value. At least in theory, a 5 bedroom house is likely to add more students than a 2 bedroom house. And the runoff issue is valid. But what impact does flipping a house, or merely buying an existing house and living in it, have to do with the rising cost of town services? One owner moves away and another moves in. What impact does that have on the town? The net effect should be zero, in theory. Maybe it's a younger family with kids to educate, but that's something that should average out over time, I would think.

I mean, if we are looking at the transfer tax simply as a way to generate revenue, fine. Let's just call it that, and not try to justify the why. We need money, and this is a source. But if we want to have these incremental increases in town costs born by those who are creating them, it's much harder to argue for a transfer tax over some sort of impact fee.

Ed, I suggest you take a look at Mr. Shaggy's recent analysis of Briar Chapel's real impact vis-a-vis student generation rates to get a sense of a true per bedroom cost.

It's funny/sad that Newland initially used numbers based on mature developments (30 or more years old) in Wake County as a baseline for determining their developments fiscal impact on the county (high tax base with low service requirements vs moderate tax base with high student growth rate/new fire and police service/new roads/etc.).

I agree Ed. That was my point about needing to know the cost of services and being able to separate them out into discrete factors within the taxation formula. In the absence of 'multipliers' and discretely accounted for costs for each factor (such as police, school, fire, road maintenance, etc.) the town's are simply guessing and not doing a very good job of it. Therefore the need for new sources of revenue--even when they are duplicative.

Alex--as far I can tell from the legislation, you're right that HB 1062 adds the transfer tax on top of the impact fee. Would it be the decision of towns/county to cancel the impact fee if HB 1062 is enacted or does the legislature have to cancel it?

Good stuff, Will. And quite amazing. This goes right along with what I wrote before the last election in regards to Ammendment One. The Chamber of Commerce types were touting the tax benefits of new development. What a laugh. I'm not patently anti-development, but there is no denying that we all subsidize it.

Terri, it sounds like you're onto something. At this level your approach sounds so much better than just wringing as much out of everyone as possible. People talk about affordability in this town, but if anything runs us out, it will be taxes.

Legislation approving these mechanisms is what is known as 'enabling' legislation. These are measures that provide authority to the requesting bodies to impose the mechanism up to the amount allowed. As such, if approved, the Commissioners could levy the tax at any amount up to, but not to exceed 1%.

The 'additive' component,Terri, that you've observed, which is express in the bill, is that this tax is in addition to the .05% state excise tax on conveyances. This is a separate state revenue source. H.B.1062 is silent on the issue of the standing impact 'fee', so unless there's a companion bill elsewhere repealing that authority, it remains at the County Commissioners' disrcetion to repeal or retain the 'fee', if, and when the Transfer Tax is approved. As I've said, my support for this measure is contingent on the repeal of the regressive 'fee'(for all that anybody gives a rat's a** what I think).

It is worth noting as well, that the currently approved 'fee' is restricted to educational capital needs, while the proposed 'tax' legislation is a general fund measure, allowing the Commission far greater latitude.

What remains, is the resolution of our general philosophical approach to the entire issue of 'who pays what?': Do we believe that we should attempt to calculate the costs that each household and by extension, individual, consumes in services and attempt to 'charge' accordingly(Orange County commissioned a torturous study by Tischler and associates to accomplish this in setting the current fee schedule)? Or do we subscribe to the notion that basic governmental services--Schools, transit, police, fire, etc. are basic community functions that the community should support as a whole, based on ability to contribute? My colleage Joal Hall Broun, has expressed with great eloquence her belief in the latter as an essential ingredient of a civil and just social contract. I agree. And I would submit to Ed, that rather than a measure trying to 'wring' revenue out of certain people, that the mechanism proposed is designed to try to spread the burden among a larger group, capturing those who profit by escape, and index the cost to the payers' resources, thereby providing relief to those who are most vulnerable---Namely, those in the entry-level market for whom the current 'fee' is a disproportionate burden, as well as stable,and particularly fixed-income households, for whom rising ad valorem taxes are an increasing burden.


Alex--I'm not proposing "to calculate the costs that each household and by extension, individual, consumes in services and attempt to ‘charge' accordingly". I'm proposing that if you know what your values are (as expressed in Carrboro 2010) and what your costs are, you can put the two together as the foundation for a taxation/budgetary policy. For example, I know Carrboro requires a certain percentage of homes in a new development to be affordable. Where did you get that percentage? When you approve a new development, how do you know whether or not that development will generate enough tax revenue to pay for the services consumed? See Will's reference on Chatham as an example of a challenge to their formulas.) How will you know if the policy is effective or whether you need to increase the percentage of required affordable dwellings?

My proposal isn't made to ensure that each household pays for itself (micro-level policy). My proposal is a macro-level planning and budgeting tool. Remember--I said I'm new to this. Maybe those formulas and tools are already available?

The cost of additional homes is a disproportionate burden to us all. From what I've read and seen, the vast majority of new home construction is not affordable, not entry-level. In fact, it is well above the median home price in the area. Having or not having an impact fee is not going to change that. So "to try to spread the burden among a larger group" as Alex would have us do, would be to have us all subsidize a family moving into a new $500K home. Doesn't sound progressive to me. The impact fee formula might need to be changed to be more progressive, but getting rid of it is regressive.

Given what Alex has to say about why we now have an impact fee instead of a tax, my big question is why will legislators be more willing to vote for a tax today?
Is it because Ed is correct in his assessment that builders will be behind this legislation?
I agree with Ed that there's nothing fair about this transfer tax. On the other hand, ‘transfer tax' sounds good and I don't think buyers of existing homes are going to question the tax. I doubt that they will even discover that they are absorbing an 'unfair' cost of growth.
One more thing, I agree with Alex that the current 'school' impact fee is a disproportionate burden to lower income folks, but I wouldn't totally do away with it if we get the tax. I'd reduce the 'unfair' fee for now.


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