The views expressed in Guest Opinions are those of the author and do not represent BizSense or BizSense reporters.
Much has been written lately about the upcoming $50 million shortfall in the Chesterfield County budget for 2010 and the impact it will have on the school system.
Part of the budget shortfall is due to the county’s cash proffer policy, which requires the payment of a maximum of $18,966 per single-family unit to the county prior to the issuance of a building permit.
I have been an opponent of the proffer system since 2003 for a variety of reasons:
1. A proffer is supposed to be a voluntary contribution made by a developer during the rezoning process in order to offset costs for fire and or public safety, schools, parks and recreation, libraries and roads. It is certainly a misnomer in the case of Chesterfield County, which has a written proffer policy.
2. The proffer is actually passed onto the homeowner by the developer. Therefore, if there is an $18,966 proffer for a home, the buyer pays the full amount, with no added value, and an increased tax burden annually because the proffer dollars are not deducted from the assessed value of the property.
3. Neighboring property owners that may have bought houses prior to the proffer policy or when proffers were “only” $6,000 (in 2004) would still pay higher assessments because of the higher price of neighboring houses, what is known as comparables.
From the county’s budgeting process, the only way that proffer revenue can be determined is when a building permit is issued. As a result, the budget planners can only guess at what the numbers might be in any single year, a crapshoot to say the least. When the unexpected happens, such as the severe recession that we have been in, the revenue stream falls to a trickle and only adds to the budget shortfall. That’s what Chesterfield County is experiencing.
So what’s the answer to this dilemma? I am not generally an advocate of raising taxes, but in this case the county has few choices. Cut programs, as the school system is going to have to do, or raise the real estate tax rate. If the members of the Board of Supervisors have the courage to bite the bullet and close at least a portion of the budget gap by raising the real estate tax rate, they should also kill the proffer program so that the there is a level playing field in the future for all county residents. The advantage of this approach is that all residents in the county would be treated equally, and no one would have to pay the obscene sum of $18,966.
There is no good reason for students in the county to pay the price for something that is beyond their control. Most parents would be willing to pay a higher real estate tax to ensure the high educational standards that Chesterfield County is known for.
It is time for the Board of Supervisors to assure residents that a failed proffer policy is not fatal. I truly hope they have the courage to take the necessary action now.
Brian Glass is a commercial broker with the firm Grubb & Ellis|Harrison & Bates. The views expressed are his and do not represent his employer.
Brian,
Very well said!
Bruce Hobart
Unfortunately, for Developers, Builders and Buyers of New Homes, the proffer system does exactly what it is designed to do. It taxes the two market participants that benefit from the infrastructure demands they create. The Builder/Developer and The Buyer. What is the alternative? Tax all property owners more, via the property tax, because that’s what would happen. You can’t just eliminate that revenue, especially when the County already has a multi-million dollar short fall. And “Impact Fees” are just proffers by another name.
What we SHOULD do is offer Tax Credits to offset the proffers for in-fill and redevelopment projects, because those create housing where infrastructure already exists. If I am a Buyer and I want to live in Sprawlville, then that cost should be passed down to me as a consumer through the builder (via the proffer.) That’s just good Economics.
And if buyers and builders don’t like the proffer, then they will move their projects to areas that have lower proffers, like counties with infrastructure or urban areas where redevelopment can take advantage of existing services.
Carter Snipes
Snipes Properties
Shamless plug. But, one of our projects, Parham Estates (www.ParhamEstates.com) is a perfect example of developing in an in-fill area which utilizes existing infrastructure. It’s two blocks from Jackson-Davis Elementary, it is served by revitalized commercial centers (Walmart on Parham) that are bringing needed tax dollars back to an older section of the West End and its affordable for Teachers, Police and Fire personel because homes are under $250k.
Carter is building in Henrico County which has no cash proffer system regardless whether the new homes are in-fill or green development. Henrico determined years ago that it would not rely on the ups and downs of building permits in an attempt to balance its budget and is not experiencing the budget issues of neighboring Chesterfield County. The cash proffer penalizes low and moderate income housing disproportionately because the cost of the proffer is the same regardless of the cost of the new house. Obviously, an $18,000 cash proffer is a higher percentage of a $250,000 house than it is a $600,000 one. The purpose of the proffer is to discourage lower-priced housing from being built, regardless what the politicians will tell you. It’s a bad system.