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• System Development Fees are the New Impact Fees

  As detailed here, in 2016, the North Carolina Supreme Court held that municipalities (and by analogy counties) lack the statutory authority to impose certain upfront charges for water and sewer services. Upfront charges are charges imposed on new or existing development before a property parcel is actually connected (or under contract to connect) to a local government’s water or sewer system. Local government utilities across the state impose a wide variety of upfront charges, some that are assessed only on developers as a condition of securing development approvals, and others that are imposed on both new and existing property owners. The purposes of these fees range from reimbursing the utility for past investments, to reserving capacity, to covering the costs of extending infrastructure, to establishing a reserve for future maintenance or expansion of the system. In Quality Built Homes Inc. v. Town of Carthage, No. 315PA15, ___ N.C. ____ (Aug. 19, 2016), the supreme court invalidated certain types of upfront charges. Questions remained, however, as to whether government utilities have authority to impose other types of upfront charges pursuant to their general rate-making authority. As detailed in this post, local government utilities were left to make difficult decisions about who to charge, when to charge, and how to calculate the amount of the charge.

  A new law, the Public Water and Sewer System Development Fee Act, S.L. 2017-138, clarifies a local government utility’s authority to assess upfront charges for water and sewer. The new law grants local government utilities specific authority to assess one type of upfront charge—a system development fee—albeit with significant limitations. It also preserves the authority of local government utilities to impose certain other upfront fees. At the same time, however, it prohibits local government utilities from assessing many of the types of fees that have become routine in recent years. Local government utility providers will need to act soon to bring their fee schedules into compliance.

  This post sets out the basic contours of the new law. It discusses who must comply, who can be assessed and when, what the processes are for calculating and adopting the fee schedule, and how a local unit must administer the fee proceeds. It also lists the other types of allowable water and sewer charges. Finally, it identifies a few drafting quirks that may cause some implementation issues. The Generally Assembly has specified that the new law’s provisions be narrowly construed by the courts. To that end, local officials should carefully follow the statutory requirements and proceed cautiously when interpreting any statutory ambiguities. (Future posts will flesh out the details for the calculation requirements and deal with potential liability issues for past fees that were assessed unlawfully.) Read more »

• The Electric Grid of the Future

  The energy landscape is changing. More and more, renewable energy plays a larger role on how we generate and consume power. Fundamental differences between traditional power generation technology and renewable sources requires an overhaul of the entire energy industry, from infrastructure to business models, creating the electric grid of the future. Three of the biggest differences, which this blog post will explore, are: variability, decentralization, and digitalization. Read more »

• One Neighborhood at a Time: The Incremental Development Alliance

  In the Town of Riverdale, Betty Cooper is taking a walk through her neighborhood. She notices the dilapidated structures and blight that plague the area, and thinks to herself, “someone should do something about this.” Is Betty just a disgruntled citizen…or a developer in the making?

  The Incremental Development Alliance (IDA) is a not-for-profit alliance of real estate development practitioners, private sector partners, and grassroots groups who train citizens like Betty to become small developers, helping to support neighborhood revitalization and assist city champions with coordinating development across the country. IDA began in 2015 as a collaboration between small developers John Anderson and Monte Anderson (no relation), who believe that small-scale, incremental development is a key approach to economic development. Read more »

• What @sog_ced is reading online: July 2017

  The following are articles and reports on the web that the Community and Economic Development Program at the UNC School of Government shared through social media over the past month. Follow us on twitter or facebook to receive regular updates.

  Items of interest related to CED in North Carolina:

  Examining population decline in North Carolina’s municipalities: http://unc.live/2uRjBrb. Some small towns in NC and elsewhere are growing. This article examines why: http://bit.ly/2weuPp2 (Proximity to growing metro helps.)

  Dan River health equity report examines health issues in Caswell County, North Carolina. http://bit.ly/2utlHjg 

  Article in Triangle Biz Journal on the UNC School of Government Development Finance Initiative’s work with local governments across North Carolina: “Meet the Town Whisperers” (subscribers only). http://bit.ly/2tXqr16

  Map of North Carolina local food infrastructure, including value added processing, cold storage, incubator farms and more. http://arcg.is/1zyWXv 

  Other CED items:

  The Atlantic asks: if declining rural towns “deserve to die,” where should their residents go? http://theatln.tc/2su9zOH 

  Poverty in rural areas is three times that in urban areas, prompting a look at creative approaches to “rural renewal”: http://bit.ly/2udMpIA

  Is using 30% of income on housing the right affordability measure? Harvard housing researchers examine, compare options. http://bit.ly/2f279RD

  Opinion piece argues that demand side (Section 8) better than supply side (LIHTC or Low Income Housing Tax Credit) affordable housing approach. http://bit.ly/2tPMkvh  Read more »

• Legislative Changes Affecting the Tools in the North Carolina Water Finance Toolbox

  Water and wastewater utilities have a wide range of capital project needs. Most utilities have existing assets (treatment plants, water storage tanks, underground lines) that have reached the end of their functional life and need significant rehabilitation and replacement investment. Some utilities also have capital investment needs that are driven more by customer growth. These types of growth projects may include a new water line and storage tank to reach a new industrial park or a wastewater treatment plant expansion that provides capacity to a new residential sub-division.

  Figuring out how to pay for the costs of water and wastewater capital in general is hard, but paying for the cost of growth related projects carries its own set of unique challenges. Existing customers are often wary of paying for projects to serve newcomers, particularly when their existing system has so many capital needs. In the past, water and wastewater utilities have used a variety of upfront fees to generate revenue that to offset the costs of serving new customers. Many utilities believed authority for these different fees was far reaching and granted in Read more »

• 4% LIHTC Use in North Carolina’s Triangle Region

  A Brief Introduction to the 4% Low-Income Housing Tax Credit

  Development of low-income housing in the United States continues to be a challenge for local governments, affordable housing developers, and policy advocates. Institutional, market, and financing obstacles are all barriers to increasing the supply of affordable housing. Since the passage of the Tax Reform Act of 1986, Low-Income Housing Tax Credits (LIHTC) have helped finance 2.6 million low-cost housing units. The LIHTC program seeks to address the financial barriers by incentivizing private investment in the affordable housing market. Despite lower vacancy and debt service common in affordable housing deals, lower rents often result in a project that are not feasible for private developers, resulting in a funding gap. Developers of low-income housing units, therefore, must gain access to various sources of gap financing such as low-income housing tax credits.

  The LIHTC program offers two tax credits types: the 4% and the 9%. The 9% credits, limited by federal law and distributed on a per capita basis to states, amount to a larger benefit for the tax credit developer, usually accounting for 70% of total project costs. However, use of the 9% credits prohibit the developer from using additional federal subsidy programs and a competitive application process allocates limited credits to a few successful bids. The 4% credits, on the other hand, leave open the opportunity for developers to take advantage of additional federal subsidies and are accessible through a noncompetitive application, but cover a smaller portion of the total project costs (usually nearing 30%). The additional funding sources eligible for 4% LIHTC projects help to close this larger funding gap. Read more »

• How Should We Measure Community and Household Economic Conditions?

  One of the fundamental measures for CED officials to track is a community’s economic condition. This issue of measuring economic condition, whether for an entire community or a single household, has taken on a central role in policy discussions recently, ranging from an emphasis on income inequality in academic research, to social movements, to political discussions on reforming anti-poverty social safety net programs such as Medicaid and the Supplemental Nutrition Assistance Program (SNAP). It is also part of the discussion in new analysis of the types of jobs coming to North Carolina, which is finding that the state is missing out on middle-class wage job growth.

  In many instances, official government measures such as the poverty, unemployment, and related social safety net participation rates are used to reflect local economic condition.  These measures have long been recognized as flawed and/or limited Read more »

• Property-Assessed Clean Energy (PACE) Programs in North Carolina: Part I

  There are several ways for state and local leaders to promote investments in their communities and reduce utility costs for residents. One tool that has been often overlooked in North Carolina are Property-Assessed Clean Energy (PACE) programs. This post provides an overview of PACE programs and their history in North Carolina.  A subsequent post will examine the benefits and drawbacks of PACE financing in more detail.

  PACE Overview

  PACE Programs allow state and local governments to facilitate or directly fund fixed energy efficiency or renewable energy installations. These projects are often unattractive because they require high up-front investments that only payoff over time. PACE programs overcome this problem by allowing property owners to make improvements without paying any upfront cash. Local governments can structure PACE financing so it has little or no impact on their balance sheet. PACE programs can also be combined with other clean energy incentives. Read more »

• An Innovation District in Downtown Durham: Will It Mean Gentrification? Not Necessarily…

  On March 16, 2017, Longfellow Real Estate Partners, in partnership with Duke University and Measurement Inc., broke ground on the first phase of new construction on the Durham Innovation District, or Durham.ID, in downtown. Durham.ID describes itself as “1.7M square feet of possibility nestled among lab rats, hipster, locavores, artists, pre-revenue-work-all-night start-up junkies, and a few thousand rabid Bulls and Blue Devils Fans.” Tenants, including Duke University and Duke Clinical Research Institute, will be housed in two seven-story office buildings located at the corner of Morris and Hunt streets, with access to a 1,200-vehicle, eight-story parking deck. Read more »

• Our Shared Fate

  Our Shared Fate was the title of an Aspen Institute report from 2008, which argued that bridging the rural-urban divide created new opportunities for prosperity and equity.  A Brookings Institution report published in the previous year, made the case that rural and urban areas are interdependent and that national prosperity requires both a healthy and sustainable rural economy and culture and vibrant, well-functioning cities and suburbs. This suggests that rural and urban communities should be looking for common cause…and removing obstacles that currently get in the way of meaningful dialogue. Yet a decade later, the longstanding debate about the future of rural America, and specifically, about an apparently deepening divide between rural and urban America continues unabated. This blog is the first of a two-part exploration of how this plays out in North Carolina.

  Read more »