Monday, February 25, 2008

Who's got the tab? or will you need another drink?

You may need one, as word has it that Thursday may be when Senate bill 768, aka "The Watkins bill" has its day on the hill in Richmond.

The Newport News Daily Press ran an article about 768 on the 16th, Senate passes a bill to change who pays for the impact of developments on localities "A bill that would overhaul how housing projects are paid for passed the state Senate Tuesday — much to the chagrin of the state's fastest-growing cities and counties. While builders say the bill will lead to lower-priced new homes, local officials statewide say it could mean homeowners see higher property tax bills." read more at

It's no coincidence that John Watkins (R) of Chesterfield, sponsors the legislation which would put an end to the majority of the "proffer system", as Watkins is a developer, as well as being a Senator of District 10 [map]. Proffers currently allow developers to haggle with Virginia counties over how much cash or "in-kind donations" they'll need to contribute to offset the impacts created by each re-zoning that they request; many developers say they pay too much.

The complicated system that would result from the bill becoming law, would be a state directed, capped "Impact Fee" system, and an increase in each home seller's "grantor's tax". Developmental impact fees, also known as DIFs, would pay into the kitty from which new service needs would be funded. So instead of developers $ covering the local infrastructure created by their having built more "units", the needs created by development would come out of the pockets of current residents and landowners, in more ways than one, some speculate.

Ask yourself some questions. If the potential developer of a vast new project agrees to purchase your land "based on the acceptance of its rezoning", and the county sees that the additional housing could create a burden on the associated schools, or roads, or necessitate the creation of other new infrastructure which would not be covered by the associated impact fees, then might the county deny the re-zoning? Would residents stand up and holler in zoning meetings? Or as a result of these new hoops, would current land values need to drop to accommodate such purchases?

In a press release entitled "Developer/Builder Bill proposes Tax Increase on Virginians", Stewart Schwartz, the Executive Director of the Coalition for Smarter Growth says, "We see this bill as a tax increase on existing Virginia homeowners and taxpayers. It pushes even more of the costs of new development onto existing residents. The bill requires increases in the Grantor's Tax outside of Northern Virginia and Hampton Roads - paid by every home seller - by an additional 20 cents per $100 in value. That's $600 on the sale of a $300,000 home."

"This bill is a slap in the face of voters and taxpayers," said Schwartz. "The November 2007 county elections were dominated by voter anger over growth with smart growth candidates winning many races. And Loudoun County underwent a revolution, sweeping "growth-at-any-cost" incumbents out of office.The 2005 Governor's election also turned on the issue of growth, particularly in the outer suburbs. Developers then blocked two attempts to strengthen local power to say no to development that would clog roads, but succeeded with burdening Virginians with new taxes for transportation."

"These impact fees are a bad deal for local governments," said Chris Miller, President of the Piedmont Environmental Council. "Capped by the state, the fees would be far less than the current value of cash and in-kind proffers, and would be reduced by so many credits, that they would shrink to virtually nothing. Developers would also evade even these fees by developing in rural areas where impact fees cannot be imposed under this law."

Developer/builders in Northern Virginia would pay on average only $8,000 per new single-family house, $6000 per townhouse, and $4000 per multifamily unit. In other parts of the state the payments would be $5000, $3750, and $2500. While some local governments might be tempted because these fees would apply to existing "by-right" zoning, a huge loophole is the exclusion of already filed subdivision plats and site plans.

"We believe that the fees will not come close to covering the huge infrastructure costs of major re-zonings," said Schwartz. "Moreover, we think this bill is will result in routine rejection of major smart growth, mixed-used developments. Without cash proffers, off-site proffers, and the flexibility of the proffer process, higher density redevelopment...will be rejected by residents and elected officials.""

Others assert that the proffer system has gotten out of hand, and that developers suffer as a result. On Bacon's Rebellion has covered the "Watkins bill" too, and Anonymous commented:

"Economists tell us, (and this seems to be pretty well established with actual data) that about half the cost of proffer goes into the price of the new house, and and about 
half the price comes from lower prices offered for the land.

If the developer can't get the land at that price, he doesn't build (there) and that is what causes values to go up. Proffers therefore contribute to an insufficient supply.
 This is why economists also tell us that a $1 increase in proffers causes the cost of new AND EXISTING homes to increase in price by $1.60."

Either way you choose to believe, it looks like the same "conundrum" posted as a comment on Historic Varina by Anonymous on 2-23-08 at 11:47 AM, (in that more roof-tops would be necessary for the Postal Service to recognize our District as viable enough to stamp Varina on each envelope.) Anonymous sure does get around.

It's easy for Historic Varina to agree that allowing these potential roof-tops to be built just to collect fees to create the infrastructure necessary to support them, constitutes DISASTER. Besides being based on us, the people who live here now, those costs would also be placed on residents who have yet to arrive. So we'd just have to keep growing and growing to be able to attract those who'll help pay the fees for the changes it takes to bring them here.

If SB768 passes, we'd be paying for the right to share the road, the right not to see the stars, the right to send children to new schools, oops- schools with more trailers. (Don't want to get too optimistic.)

Varina residents will continue to pay for development one way or the other. Which is better, the current Proffers system or the Impact Fees which would come with the passage of Senate Bill 768? But it isn't up to us to decide. The outcome is in the hands of all of those men, most in from out of town, staying in local hotels- oh, and of course the Governor.

Want to learn more?

At Richmond Sunlight you can track SB768 and any other House or Senate bill on the books this session.