CHAPEL HILL - The same back-and-forth occurs with nearly every big development proposed in Chapel Hill.
Critics say the projects where people can live, work, shop and eat, called mixed-use, cost the town and county more in services than they generate in tax revenue.
Developers and some town leaders say these projects are needed, especially if they have a national retailer, to sustain the town’s economy and reduce its reliance on residential property taxes.
The numbers remain debatable because the town doesn’t collect tax data on these complexes.
Mixed use has become the development style of choice in Chapel Hill, a town looking to grow its commercial tax base, promote mass transit and avoid suburban sprawl.
But some say the strategy hasn’t worked as hoped and that the mixed-use developments that have been built have not shifted the tax base, attracted enough new businesses, or in some cases, looked as pretty as expected. No data
Chapel Hill doesn’t track how much property and sales tax revenue these developments bring in, and it doesn’t require developers pitching new proposals to estimate their impact on the tax base.
Four major mixed-use projects have been built in Chapel Hill: Southern Village, Meadowmont, Greenbridge and East 54. Merchants in Southern Village and Meadowmont have at times struggled to attract shoppers. Greenbridge was foreclosed on, leaving most of its storefronts empty as sales were put on hold. East 54 slashed prices and has sold the majority of its condominiums and leased much of its commercial and office space, but some Town Council members say, like Greenbridge, it’s out of scale with its surroundings.
A new mixed-use project downtown, 140 West, is under way. The Town Council is still considering Charterwood off Martin Luther King Jr. Boulevard, and preliminary plans for the EDGE near the I-40 interchange to the north and Obey Creek on U.S. 15-501 to the south.
Council member Matt Czajkowski has asked for tax-impact data for years and says it “mystifies” him he can’t get it.
“Without data, without analysis, the discussion perpetually is one of, ‘Well, it seems to me, well, it seems like,’” he said. “To me, that’s no plan. What if we actually did get good numbers and we ran them and they contradicted some of the approaches that people have favored, then what do you do?”
Czajkowski, chief executive officer of NextRay Inc., an x-ray technology company, and a Harvard Business School alumnus, says he’s asked the town to look into economic development modeling software to no avail.
“At this point there’s not much I can do to advance things sooner [other] than to continue to make my point,” he said. “There doesn’t seem to be much interest in quantitative analysis.”
Council member Gene Pease said the council has been told commercial development brings in more tax revenue than it requires in public services such as police and fire protection and garbage pickup.
“My working assumption is that we need a stronger commercial tax base to even out the services it cost us for the residential,” he said “We need a better commercial tax base than we have now to slow down the tax increases that we’re going to have to have in the future.”
Both Chapel Hill’s and Orange County’s annual operating budgets rely heavily on residential property taxes.
In Chapel Hill, commercial properties make up about 16 percent of the tax base, and residential properties make up 84 percent. In Hillsborough, by contrast, commercial properties account for 40 percent of the tax base.
In 2010, property taxes made up 76 percent of Orange County’s general fund, or operating revenue. About 86 percent of the tax base was residential.
Durham County, by contrast, relied on property taxes for 58 percent of its budget; Alamance County, just 49 percent, officials there reported in 2010.
Pease said he’s also like to see an analysis on the costs and contributions of mixed-use.
“That’s something we could work on and take this opinion out of the conversation we have with the public,” he said.No ‘effective way’
Chapel Hill hasn’t analyzed mixed-use developments’ fiscal impact because there isn’t an established model that does it very well, said Town Manager Roger Stancil.
The town hired a consultant in 2009 to do a detailed financial analysis of the Carolina North development, but hasn’t done one since, Stancil said. TischlerBise found the future satellite campus would cost the town $12 million over 15 years, in part, because a new fire station would be needed.
Stancil said as the town begins to implement the 2020 comprehensive plan, he wants to find a way to look at the fiscal impact in a simple, way, then build on that model over time. But it will be a challenge, he said.
“I think it’s just very hard to do that because it’s a town and you provide certain levels of service for a community,” he said, “not just for people who live in a certain area.”
The amount of sales tax a particular complex contributes is also hard to calculate because the state collects that data first, and it is private, he said.
A fiscal impact analysis would be helpful, but it is only one tool in the decision-making process, Stancil said.
“I think the challenge is figuring out the right way to factor it in to your decision making,” he said. “There are factors other than revenue and expenditures that you consider when you develop your community,” he said.
In North Carolina, its rare for a municipality to require a fiscal impact analysis for projects, said David Owens, a professor of public law and government at UNC’s School of Government.
“It becomes a fairly expensive, complicated process if you do it right, to look at it very carefully in the context of that particular site, that type of development, what services it would demand, what services are available,” he said. “To do that kind of strategy takes time and money … it may not be worth the investment to do the detailed analysis.”Chapel Hill’s costs
One study challenges the idea that commercial development makes a lot more money in Chapel Hill.
The amount of tax revenue residential and commercial properties generate for Chapel Hill is about the same as the cost of serving those properties, according to a study by N.C. State agricultural and resource economics professor Mitch Renkow.
In a study finished in May, Renkow found residential development contributed between 92 and 98 cents in property taxes for every dollar of public services it got. Commercial properties brought in between $1.07 and $1.19 for each dollar of town services.
Renkow used 2009-10 fiscal year figures for his report and totaled tax revenue and how much was being spent.
“This is kind of a snapshot,” he said. “Any new kind of activity might bear a different set of consequences.”
The important question, beyond how much it costs to serve mixed-use complexes, is how the town can generate more jobs, said Dwight Bassett, the town’s former economic development director who commissioned Renkow’s study.
“Chapel Hill is still relatively a university community,” he said. "There are no significant employment sectors. You have to decide, do we want the jobs, do we want the retail base? I think there are some things that you simply overanalyze. There are just so many presumptions out there you can question to death.”
Bringing a national retailer to town would to boost the commercial property base and help retain sales tax dollars, said Bassett, who is now the economic development director for Raleigh.
“Right now you drive across the county line and leave your tax dollars elsewhere,” he said.
“There comes a point when you look at unintended consequences that occur in life cycles … you have to question do we as a community want to continue going down the same path as we did before and that includes not encouraging the business community?
“It’s still not an easy community to develop in.”