All right.

Welcome everybody to the work session.

We will turn it over to I don't know it's city manager or Ken Bowers who will do the first section on tax increment reimbursements.

Yes.

Good morning, Mayor and Council.

We have two items today that are kind of related and interrelated.

The first of which is the tax increment reimbursement program.

We have Ken Bowers with Planning and Development to present this item.

Thank you.

And so the other key thing is that uh sometimes you don't know that there's going to be an opportunity until a specific project is proposed.

So you want to, as a as an organization, position yourself to be able to capitalize on opportunities when they arise, and a key part of that is being able to commit funding.

And so by looking at the tax rankment as the source for funding, it allows the city to act quickly when opportunities present themselves.

And so the land before development only paid $21,000 a year in city property taxes, and after development, it will pay $213,000 in property taxes based on current rates.

So that that increment, that $192,000 of extra money flowing into the city's ad valorum tax receipts is the source potentially for financing stuff.

So the the development the reimbursement from the developers who would come out of this annual tax increment for some period of time.

So like the tax increment grant, you're benchmarking it against these future tax payments.

You're essentially reimbursing the developer a certain share of that over a certain period of time, and the specific share and the length of time would be something that would be negotiated based on the size of the reimbursement that's needed to fund the thing that your developer is building on your behalf.

So a little history, the current tax increment grant policy was adopted back in May of 2021.

Since that time, uh the policy has never been used.

There have been no tax increment agreements entered into uh between a development entity and the city of Raleigh.

The original statutory basis for that was the economic development statute uh in October of 2023.

The City Council adopted some ordinance that allowed us to use some different statutory authority specifically for reimbursement agreements.

And those either are transportation projects or they are items that are uh within the city's capital program.

So for example, if a greenway trail is um part of the city's capital program, and uh a developer is building adjacent to that and builds the trail on our behalf and we reimburse them for that work, that would be done uh pursuant to that type of authority.

Then in April, um staff brought forward and and and this council adopted a partnership policy, and that partnership policy talked about the terms under which the city would enter into a partnership.

And a reimbursement agreement is one type of partnership where a developer builds something extra alongside the development project, and we uh work to offset the cost by reimbursing them for a portion of that cost, either all of it or some of it.

Um so that policy guided how we evaluate them, what sort of due diligence the staff does, what the public process is, and what the process is for council involvement.

And so here we are today talking about this new um replacement for the tax increment grant policy, which is the the where we have given the acronym TERP for tax increment reimbursement program.

A lot of animations here.

So what are the key features of the program?

It is flexible because it can fund projects from small to fairly significant depending on the size of the project, the private project that is being subject to the tax increment.

So a single, say, apartment building would be able to fund several hundred thousand dollars worth of improvements, something the size of a downtown South scale project would be able to fund several million dollars worth of external improvements.

Um the second thing is a very low risk.

The city is not borrowing any money, so this is not like tax increment finance, and we'll get into that.

Um, then the payments don't start until the benefits are constructed and in public use.

And then it's responsible because by basing it, basing the reimbursement payments off of a share of future tax revenues, you're assuring that there will be positive cash flow in terms of tax receipts in every year that the reimbursement is active.

You're never reimbursing more than is flowing in in new property taxes.

So, what kind of projects can we use this for?

The first category is economic development, and this is very much a carryover from the existing tax increment grant policy.

This is what it was structured around.

So you've got a major mixed-use project, and you want to finance some public um uh facilities or attractions.

That could be a sports venue, it could be a performing arts venue, it could be you know a major open space attraction that's allied to a private development project.

But in order to meet the test, it has to be something that creates a lot of jobs and supports economic sectors and grows the tax base.

So because of the job creation, a purely residential project wouldn't have qualified for a tax increment grant under the old policy.

Under the new policy, you can also use the same tool for financing smaller, more modest things.

So I used the example early of a single multifamily building, has about a $60 million assessment.

If you do some math with a you know projecting uh uh, say a 10-year payout based on 50 percent or so, you could finance maybe $700,000 worth of public improvements.

What kinds of things you might you do with that kind of money?

You might enhance a transit stop, you might make pedestrian improvements to an intersection.

If there's a concern in the neighborhood about traffic calming, you can't really require off-site improvements, but you could enter into a partnership to pay for, say, traffic calming on adjacent neighborhood streets to mitigate the impacts of a development.

So there's all sorts of things like that that would fall into that financeable range for a more modestly sized project that could be purely residential, or you could enter into a reimbursement agreement using this tool.

So, what are the project requirements?

It's got to align with city plans and goals, it has to have an agreement value that can be paid for by the tax increment, and we put a sort of minimum figure on there just because there is a certain amount of administrative overhead with doing a program of this nature.

So the you know, the value of the agreement to the city has to be at least 200,000.

It's finances stuff that would not occur but for participation in the program, the tax revenue is sufficient to cover.

And we're also requiring the developer to at least make a request of Way County, even though I think in many cases the type of stuff that would be that would be uh uh financed could be would be financed basically through city participation only.

But it is important to remember that the split between this on your property tax bill, if you live in the city, over 60 percent goes to Way County, less than 40 percent goes to the city.

So with county participation, the amount that could be financed is significantly higher.

And so for regional facilities or things for which there is a county interest if the county participated that could um generate a lot more financial power for this program.

So just to highlight again, risk is very low, the developer is building the thing and getting paid back, so they're essentially assuming the risk during funding and construction.

Um reimbursement doesn't occur until the tax increment is on the books.

There's capacity limits that would uh uh prevent too much of the city's tax base ending up in this program, so 2 percent of annual tax levy, and then there'll be reporting in the budget of all these outstanding agreements.

This is similar to what the Charlotte does with their tax increment grant program.

So it will be very easy for the public to find out what agreements have been approved and what the what the uh financial implications have been for the city.

But remember, again, this is paying for stuff that wouldn't otherwise not be existed that we're using a partnership as a way to deliver that those public benefits and infrastructure.

So what are the major changes?

The legal basis is broader under TERP than it was under TIG.

The eligible projects are more numerous and can be smaller.

Um the reimbursement schedule is is instead of saying this is what it is, it's it's going to be subject to negotiation based on the terms of the agreement, but never more than what can be financed out of the tax increment.

And then the uh instead of having a custom process that has that is different from what's in the partnership policy, we're just using the same process as for any other partnership agreement under the council adopted partnership policy process.

Then I want to talk a little bit since you know this is being thrown about, talked about in the context of other public financing tools or special assessments.

You know, for the tax compared to um tax increment finance, which is usually based off a larger district or an MSD, which is based off again off a larger district, this is really very site-specific in terms of who does the work uh most of the time in tax increment uh finance, or if it's you're using an MSD to make capital projects, is the city doing those capital projects?

In this case, the developer is doing the contracting and construction management.

The financing comes from the developer, unlike borrowing against future revenues or using pay-go in an MSD.

And the uh the tax rate that is faced by the development is unchanged in both uh TERP and TIFF, obviously municipal service districts is a type of special assessment district, and there is a higher tax rate for people inside the MSD.

So the next steps are really to answer any questions that you may have and uh have discussion today.

And if the council was amenable, this would appear as a as a special item on a future agenda item, special agenda item.

And uh were you to vote it voted out favorably, then it would be a replacement for the current uh tax increment grant program.

So with that, I'm ready to take any questions.

Thank you, Mr.

Bowers.

Do we have questions?

Uh Council Silver and then uh Councilor Pack.

Thank you, Ken, for the presentation.

Can you just clarify again, go over how that future assessment is determined?

Is that negotiated?

I know the Wake County is the one that determines current assessment, but just explain how that is projected out over a period of time.

Right.

So the all this will be subject to the particular negotiation of the agreement.

But the tricky part, of course, is that when you enter in the agreement, you have typically uh engineers' estimates of the cost, but not the actual bid, although you could try to defer it until you add the actual bid, which will give you more accurate thing on the cost side.

And then until the building is constructed, you have an estimate of what the tax revenue will be, but you don't have it, you don't know exactly what it will be until the building is completed and the assessor comes and does their assessment.

So you have to build into the agreement terms that work such that those numbers can be adjusted and the reimbursement still hits a target figure by the end.

But the if you read the program and we work very closely with finance and the and others in the manager's office, is that we are basing it on the actual assessment and the taxes flow into the county before the reimbursements flow out.

Okay.

Council Prophet.

Hi again.

I have a few, but um I might just start with it.

Anyway, I'll just start where we start.

Um so one of the conditions of the process is that the applicant will also petition the county for participation.

Does the county have a comparable program to this?

The county has they have a policy that was adopted, I think, back in 2007 that we related to tax increment finance specifically.

But um and we have had conversations with the county about the we had conversations with them when we developed the original tax increment grant policy, and we have had conversations with them as we have worked on this.

But I think at this point they don't have a specific policy that targets this exactly.

So if they wish to adopt one in order to have a better framework for how staff would evaluate a request that came in from a developer.

At this point, we put that into the policy so that the question would be posed, but it wasn't it wasn't if the county said no, we would still work with the applicant to see if there was a viable path forward.

Okay.

Yeah, I wonder if it might be worth further collaboration with the county, because I feel like if they don't have a comparable tool, then the applicant is going to ask and they're gonna say, oh, well, we don't have a way to do that.

Trevor Burrus, Jr.

And I I think we wanted to share this with the council at the work session before bringing it to the county following this meeting.

If we want to build a little time in between now and when this comes back on a future agenda, we can have more in-depth conversations.

Um then I was wondering if you could speak to like it seems like some of the things that could be addressed through this policy update are things we are accomplishing through some other tools.

So, like for instance, in my district we approved uh development agreement, I think, to construct a greenway.

Um just a different like mechanism.

We did.

And in order to do that, there had to be money sitting in the CIP that we could allocate.

Oh.

And so by pledging future tax increments, you're basically making a commitment in future budgets to budget for this, but you don't have to have the money banked in the CIP account in order to enter into the agreement.

Now, in the case of the case of the agreement that you are talking about, it is very similar in that it is a reimbursement, but it is not paid at all to the tax increment.

And in fact, likely when the payment goes out that year, it will far exceed what the tax revenue that goes in.

It is also a one-time payment where the payment goes out at the time that the city certifies that the work on the Greenway Trail is completed to satisfaction.

So that's the major difference is that you know this is think of this as a subset of reimbursement agreements, a special type where the reimbursement is paid to the future tax increment and occurs over a multi-year period as opposed to a lump sum.

And so in cases where we have some other type of agreement, like in that example, will these projects will be seeking to reevaluate whether we've used the right tool or whether we would switch to this one.

I think that would be for future projects on a case-by-case basis.

Um we there might be circumstances where we want to structure the agreement like we did on Lewis Brook Road.

We certainly won't be revisiting that agreement because it is already executed.

Got it.

Okay.

I'll stop there for a second.

Councilor Jones.

Thank you so much.

Uh I want to take a look at, I understand for the developer side and the city side.

I want to look at the residence portion of it.

So if we're saying that future budgets are going to be reduced with this, whatever that number is for these projects, do we have an allocation in the budget of which we are going to take that money from, or how does that work?

Help me explain that portion of it.

I think it's hard for residents to understand what part of the budget are they going to be see affected because of these projects.

Right.

So all ad velorum tax revenues flow into the general fund.

Right.

So ultimately, if you decide like any other expenditure on a capital project that comes out of the general fund, it will reduce the amount of money available for other things in the general fund, but it's it is based on the future growth of the general fund that's being that is occurring as a result of this project.

So part of the accounting is that you account for this in future capital budgets in the out years in which the expenditures are going to occur, and you cap that so it's never more than a small percentage of the city's ad valorem tax levy.

But it it does have an impact like any other dollar spend has an impact.

I'm not sure if I'm totally answering your question, but you may be, that's a lot of words.

Um I you may very well be answering it.

But I want to make sure that I'm able to explain it, and I don't know that I can very well explain that.

Yeah.

So sorry.

So again, the the cap is set up as two percent of the total ad valorem tax revenue.

If a specific question is, are we accounting for what we are not spending money on because we spent money on things that are financed this way?

Right.

So if I'm explaining it to them, I just want to make sure that if I say if we're we're going to cap it at 2 percent, where is that 2 percent coming from that they're gonna either see uh is there a reduction in services, how do I explain that to them?

Right.

So what would you say is that there is a there is a if we were to get close to the 2 percent cap, at this point we're at zero and have been a zero since the TIG policy was adopted.

If we were to get close to the 2 percent cap, um the implication would be is there the is that you would either have to reduce spending by a commensurate amount on some other thing, but that's always decided on an annual basis as part of the budget process.

So at the staff level, we can't say what those reductions are.

But it's the same if it's the same impact as if you spent money directly by financing a capital project.

So how about we have our CFO come up and kind of address that in layman's term, Councilmember Jones, that will make it make sense for you.

Thank you.

Yeah, good morning.

Uh Alison Bradshire with the finance department.

Um the way I think I would answer that specific question is think of it similar to the way pay-go dollars get allocated, because really in theory, you know, one of the SLADs talked about the fact that the city really would have plans to do this at some point in the future.

And so if you think about it as the revenues are coming in from the increase of the assessed value, which is typical, right, on an annual basis, our property tax number is increasing, and we're taking a little bit of that increase, similar to the way you think about our pay-go process, and we're allocating it to support that initiative.

So that that project, that's the way I would say that.

So I'm gonna say it back to you so that I make sure that I'm understanding it correctly.

Because of the whatever the project is, the whatever they're bringing in, we're hoping that that is softening that blow into our general funds.

So that's I appreciate that.

Thank you so much.

Um I'm sorry, uh, Counselor Melton, did you have a question?

I saw your hand raised and I don't want to interrupt.

Uh my question was sort of a part two to yours.

I always understood it.

Um the project requirements has the but for condition.

So really what we're talking about is to even qualify for this, it has to clear the threshold of this project would not occur but for the program.

And so then we have this new property tax revenue that will come in and it's like a rebate on the property tax revenue.

So it's not money that's coming out of our coffers where we're looking at a cut in services.

This is anticipated future revenue that would not exist but for the program encouraging the development.

Is that right?

Yes.

We're just legally not allowed to do a rebate.

I didn't mean that in the legal term.

I just understood.

Good catch, Alison.

Yes.

But that's exactly what it is, um, Councilmember Lambert Melton.

Um really make an investment to ensure that private investment is made in the community that otherwise would be a public responsibility at some point down the road if it were to happen at all.

Awesome.

Um did you have some.

Councilmember, might I add just a couple quick uh additional points, Pat Young with planning and development.

Uh first is uh Ken said this, but I want to emphasize it, council will get the opportunity to review carefully each of the terms and approve any of these.

And the second thing I'll mention is that even though the private developer would be subject to public bidding requirements and other public requirements, um, it has been proven um that very close to 100 percent of the time the private sector, because of existing relationships with contractors can do these projects faster and cheaper than than we can.

So it's just something to consider as you weigh out the different opportunities.

The other question that I had, and I'm not sure if if Ken, this is for you or not, but when we talk about increasing, so right now we're at zero, you're saying we have no partnerships, no TIG policies, and we want to increase that to that two percent.

Um do we have the staff capacity to do that?

Are we going to need to hire more people?

This seems like a lot of tracking and I know as we talk about other areas in planning we say that we need to follow and track metrics over time.

Do you see an increased need in staffing for doing this policy or do are we covered?

So there's two bits of overhead.

One is the negotiation of the agreement itself.

That's kind of what my division urban projects is already doing.

Okay.

If we started doing many more of these than we're doing I wouldn't rule out a future budget request for an extra staff person.

But that would because the work we were doing is useful and the council wish to support it.

On the budget and finance side I'll defer to our CFO.

Thank you.

Yeah.

Good afternoon again.

Alison Bradsher with finance.

Yeah from an administrative standpoint we can absolutely manage this from an administrative perspective.

So I think we're okay.

Okay.

Fantastic.

And then lastly I think there were a lot of uh I know you mentioned in the backup materials there was an ordinance that you mentioned here that we enabled in 2002.

There is the poly the I'm sorry let me find my notes as to where I had that the whole overall point because I can't find where that note is is those partnership policy with 2024.

There it is, the partners the policy partnership policy I don't know that I saw those as we go towards this can we make sure that all those documents are there just so that I can reference it and I can see how we got here and then thank you.

I appreciate it me again just one more from me I wondered if how housing benefits will be a considerate considered public benefit is under this.

I I have seen that some others well while we often use the term inclusionary zoning that's like unfunded I've seen some papers from other states about funded inclusionary zoning and believe they use a tool or approach similar to this to offset costs of that and I wonder if that is a thought on how we might use this tool That's that's a good question.

We haven't written it specifically with that purpose in mind and I think the reason is is that the in order to put public money into a affordable housing project you need an inclusionary threshold of at least 20 percent of the units and we're not sure that this is enough funding to support that level of inclusion.

But it's something that we could look at and tax you know in communities where formal tax abatement is legal or if something is publicly owned and can be tax abated because it's publicly owned, that can be a very powerful tool for affordability.

So it's a very good point to raise I have a question just about the General Assembly and local government commission.

So all of are we the only city doing this or what are the other cities you may have already mentioned that and then all of this is copacetic.

Yeah so the no special authority is needed for this because again it's we're using existing reimbursement authority that will either fall under those two those ordinances we adopted the economic development statute or be executed through a development agreement which might be a common tool.

The original model for this tax agreement grant policy was the tax increment program in Charlotte and Charlotte has been doing this for for many years.

So they have a lot of experience with it.

They mostly execute them through development agreements that they may exclusively it's been when we were researching the tax recrement grant they had all been done as development agreements.

So because and I don't believe there's any um involvement in local government commission because the city is not doing any borrowing thank you.

One more question I saw in the backup materials that this would it would have to be aligned with the comprehensive plan in order for this to take effect or in order for them to be able to ask for it.

So I'm wondering if that's true, does that mean that that this requirement would prevent them from applying for rezoning or will that be up to council?

Like will you as staff say all right here you've met this, met this, you meet with this, or is this something that you'll say it kind of meets and it doesn't hit this one, but we get to decide so it would not either to my mind it would be something that would be rel uh could be related to rezoning in the case if it were a development agreement that were being brought forth alongside a rezoning case.

Now the standards for evaluation of rezoning case.

If the development agreement is part of that and there are impacts, you would have to decide does the development agreement create an avenue for addressing the impacts adequately that I believe that approving this rezoning is both consistent with the plan and reasonable and in the public interest.

I think most of the most of the time those types of rezoning decisions would be based on factors that were outside of the development agreement.

But there could be circumstances under which a development agreement might be mitigating impacts that would otherwise be of a concern about the development such that it tips the scales in the minds of the council members to be more inclined to vote in favor of it.

But that's very hypothetical.

Got it.

Okay.

Thank you.

Any other questions?

Okay.

Thank you.

You're welcome.

We will move ahead to the annexation practices and associated growth policies and Matthew Klim.

Good uh afternoon it is now, uh, Mayor and Council.

I'm Matthew Klem with planning and development.

Uh we're excited to speak to you today about what is very important issue of managing the city's uh growth at the city's edge.

So the purpose of today's meeting is to share information, respond to council interest on the current annexation practices, and provide options for adjustment for our annexation practice while we conduct some cost of growth analysis that I'll talk about in just a little bit.

So today we will recap our previous council engagement on the matter, walk through our existing annexation framework, uh, what constitutes annexation eligibility, uh, and focus on why these decisions are important and why some require more scrutiny than others.

Uh staff has worked with each of our service delivery departments to discuss impacts and concerns regarding annexation practice and how they'd like for us to involve them in upcoming analysis.

Uh and of course, while we're starting on some annexation work now uh with our cost of growth analysis, the reflecting rale process will consider new policy guidance uh for the council regarding uh growth and annexation um and be part of our next comprehensive plan.

So in the last year and a half, uh there have been several council touch points on annexation, including a presentation at your January retreat, an update uh in the manager's weekly report, uh, and some council action related to public utilities policies and the adoption of the fire service master plan.

So I'd like to start with our historic annexation practice.

Um since 1792, the city has consistently grown outward from our uh thousand-acre William Christmas plan to the 150 square mile corporate limits that we have today.

So this map shows the William Christmas plan uh in the center of the map uh here.

And um you can see the orderly growth patterns uh emanating from the center and larger tracts of land um through the 1920s, 50s, and 60s.

Um this map shows intervals of growth over the last 233 years.

Uh and it may not come as a surprise that our practices have changed uh in that time.

Um a particularly impactful change uh was in 2011 when uh North Carolina towns and cities uh lost the power to conduct involuntary annexation.

Um this map highlights uh the tracks that have been annexed uh after 2011, and they're shown here in yellow.

Um really the key change in how the city operates and provides services and delivers infrastructure since 2011 is without the ability to perform uh involuntary annexation, the city is now responsible for providing infrastructure and services up front.

Whereas previously, before 2011, properties would develop at the city's fringe uh to city standards, so that when um there was a baseline of tax generating properties in the edge of the city, the city could come in, bring those properties into the corporate limits, get tax revenue from them to provide the full suite of city services.

Um that was a big change in how the city grew over time.

So this table shows a dip in um annexation area that can be correlated uh with the change in 2011.

Um yeah, this table shows uh the years and the acreage uh annexed over time.

Um now uh you can see that there has been lower levels of annexation uh since 2011.

Um under the 2011 legal structure, properties are brought into the city are less likely to have tax generating uses on them and much more likely to have lower levels of service uh on day one.

But we're still responsible for providing our full suite of services.

So again, city costs are upfronted uh and there's more early obligations for service with a checkerboarded service area without large contiguous areas to serve.

Um that makes costs higher for the city and service efficiency lower, uh, and tax revenue uh often lower per acre as well.

Um this highlights a fiscal disadvantage for the city in terms of collecting taxes uh to provide public services.

So in short, we know that we're uh required to upfront services now and wait for tax revenues as development increases over time.

So uh regarding service costs, this map highlights the total assessed value per acre and shows where tax revenues come from across different parts of the city.

Uh you can see the highest tax value generating land is in and around downtown and in high activity centers like North Hills, Crab Tree Mall, uh, the village district, and the Blue Ridge Corridor.

Um later, I'll talk through an example of uh Rivertown.

And you may ask yourself uh why can't I see Rivertown on this map?

Um uh the reason you can't see on this map is because it's undeveloped now and is generating very little tax revenue.

Um so to sum up, annexations result in new tax revenue uh and density generates higher tax revenue, which helps pay for city services.

So our current annexation practice.

Um how are your annexation decisions structured today?

Well, there are several council adopted resolutions that dictate how and where annexations can be uh considered.

Uh these council actions define what is eligible for annexation.

Um we can go through each of these in more detail uh if you'd like, but I think it would be more helpful to show you uh instead.

So this map shows in dark green what is currently eligible for your consideration.

Um so properties that are shown in green, those property owners, developers uh have the right to petition the city council for annexation, uh, and you at the end of the day have the decision whether or not to annex them.

Um these properties qualify for annexation consideration for being inside of our extraterritorial jurisdiction, or ETJ, uh and being contiguous to corporate limits.

Um so why does this matter?

Well, the more land that is annexed at the city's edge creates more land that becomes eligible for future annexation petitions.

So under this structure, uh this will continue our trend of spreading further into the fringe.

As more properties are annexed, more properties become eligible.

Um, and so the story goes uh out into the fringe.

So there are currently 23,000 acres of land eligible uh to be annexed by the city.

Uh that's a big number uh to put it into perspective.

Um that's about three nightdales worth of land area uh or five zebulents.

Um current eligibility does not represent a significant expansion and service area, as most of this land that's eligible has been in our extraterritorial jurisdiction for a really long time.

What that means is that our plans and service departments have been preparing and planning to serve these areas in the long term.

Um based on current trends, we anticipate that this eligible land uh represents about 20 years of voluntary annexation um to accommodate uh demand for growth in the near term.

Um also additional revenue in existing service areas uh can improve the ability of the city to provide high quality services.

So when you get an annexation petition and it's a small single lot that is surrounded by developed area, a subdivision somewhere, those properties are uh people living or using those properties are benefiting from city services.

They're using our streets and sidewalks, they're visiting our parks, but those areas uh and properties are not contributing to the tax base.

So they're they're getting city service and not contributing to to how we provide them.

So um back up to Rivertown.

Um this map shows our planning jurisdiction in light blue and our corporate limits in dark blue.

Uh and the burgundy color is what um is eligible on this map.

Uh you can see Rollsville to the north and Nightdale to the South.

So Rivertown was annexed in 2006.

And earlier this year, a joint rezoning annexation request was approved on March 4th.

So the parcels in red on this map show what was eligible before the annexation and rezoning was approved.

This is the new annexation eligibility based on that action.

So based on North Carolina law and our adopted resolutions, this annexation uh decision has activated the next generation of annexation creep into the fringe.

So the pattern can continue.

Uh if these properties uh are annexed, then more properties at the fringe gain eligibility.

And so uh and so the story goes there.

So above all else, the city provides public services.

Those services are paid for by tax revenue.

Um some types of development uh generate more tax revenue, some less.

Um some types of development cost more to serve, and some less.

So pairing high cost of services with low tax generating uses puts the city at a fiscal disadvantage to provide services uh in the long term.

So we generally know that the cost of services per acre downtown are less per capita and per acre because of the gridded street network, the amount of below ground infrastructure needed to serve, dense development, uh trash collection, police and fire services, uh multimodal access to parks, jobs and services all support lower per acre service costs for the city.

Um those areas also produce far more tax revenue per acre uh compared to other areas of the city, meaning that excess tax revenue from low cost to serve areas is effectively subsidizing high cost to serve areas with lower tax generating values.

So these pockets of more fiscally productive developments around the city are essential for providing quality public services everywhere in the city.

Right.

So now uh on to what's next.

We're um working through the reflecting Raleigh process.

Um we have uh clear uh information on tax revenues coming from and less specific information on the cost disparity uh of service provision across the city.

We know that some areas cost more to serve than others.

Um through the work of Reflecting Raleigh, the next comprehensive plan, uh we are working to solicit consultant proposals for a cost of growth analysis.

Um this work will include cost and revenue information for the whole city and help to inform annexation and development decisions throughout the city as well.

Um that work will include a capital needs assessment and analysis on all city fees.

So some T uh key takeaways for you today.

There's plenty of land eligible today for annexation to accommodate near-term near-term growth.

Umnexing existing eligible land does not create significant new service challenges, those infill annexation sites.

And conducting a cost of growth analysis will give us more fiscal information regarding our long-term service commitments uh and provide council more detail on the cost of expanding the corporate limits at the fringe um beyond what is currently eligible for annexation.

Um again, next steps uh we are working to solicit um consultant bids for a cost of growth study.

That will be a part of our reflecting Raleigh uh planning process.

And when that work is done, we'll have more cost and revenue information to help you make um annexation and growth decisions.

Um what does that look like?

Again, we know where the revenue is coming from, uh, we know what the overall city budget is uh our overall cost to serve.

What we're working towards is understanding the difference of cost in different areas of the city, um, what locations cost more to serve um relative to uh tax generation per acre.

So um, this is some data that we have regarding some transportation costs.

It's it's two-dimensional, so um looking at a skewed aspect will help understand it better.

But what we want to know is where in the city does it cost more to serve our full suite of services and what the disparity is across uh the geography of the city.

Uh and that work is coming.

Um we're looking for council guidance regarding annexation eligibility um and some potential options include establishing a fixed area for uh annexation eligibility based on the current conditions.

Um if we do that, uh staff recommends a period of 12 months so that we may conduct our cost of growth analysis uh and come back with more detailed information on um what the fiscal impacts of those decisions are.

This will allow us to, again, conduct the study and give you better information to help inform these decisions going forward.

And with that, I am happy to take questions.

Okay.

Well, I'll start with Councillor Branch and then Counselor Silver and Pat.

Definitely thank you for the information.

A couple of questions.

My first one is when you come back with information, can you also include the cost impact and cost analysis of our regional partners?

Because as they grow, we are providing services to them as well.

And there's a cost to us.

And my question is, is the cost recovery what's the delta of that cost recovery?

Because I think for us to have a complete picture of it on some of our services, we can't just look at Raleigh proper.

We have to also look at our partnering communities that we are providing services to.

Case in point, City of Raleigh truck, I just saw the other day in Garner working, doing work.

So I know we are providing those services.

And my second question is also: can we have a cost analysis on those areas that we are providing services?

And they're not in Raleigh proper.

They're not, they're they're in our ETJ.

They're getting our water and they are getting our sewer.

Um we are giving it to them already, and they are paying an out-of-city fee, but what is that fee comparable to the services that we are providing?

Because that will also help us, I think, in determining the future and how we go forward.

Because if we're providing services and they're not really paying the cost for it, but yet around them, we're saying, hey, you are on the fringes, we don't want to incorporate you.

It may be better incorporate somebody that is asking to be incorporated who is on the fringe to help cover some of that cost recovery.

Yeah, absolutely.

So our uh cost of growth analysis will include all of our service delivery departments, including Raleigh Water.

Um so yeah, we will have that back with our cost of growth analysis.

Counselor Silver.

Thank you so much for this presentation.

Others have questions.

I'm excited to see this.

I know there was a section, a chapter in the previous conference plan.

I expect there to be a new one.

And I'm also delighted to hear about the cost of analysis uh work that you are going to do.

I just want to be clear on, let's say, River Town as an example.

That was not even within our extraterritorial jurisdiction.

It was about two or three miles from our border.

And as I understand it, that was annexed in 2006, 19 years ago.

We provided utilities to that track.

Is that correct if I'm saying I believe I can uh have public utilities?

I just want to confirm because the point I am making is that you know, as we have this debate, particularly I know we have the acronyms NASA and SESA, that I want to make sure as we have this conversation and public understands there were commitments with this rezoning, this is important.

It was a large track.

The city provided utilities to this track, and in 19 years it has not been developed.

But now that it's been established, all these annexations are now being brought to us contiguous to be careful, a ghost uh of a track that was brought into our annexation, and that we the taxpayers just want to understand the cost of how we're subsidizing a ghost subdivision that has created all sorts of implications.

So I just want to be clear as you come back, using that as kind of a poster child, it's important for the public to understand the implications.

Well, that's something you do through the reflect the reflecting Raleigh process, or that's something that the consultant will do to their cost of a growth analysis?

Yeah.

And those those are one and the same.

The cost of growth analysis is part of the reflecting Raleigh planning process.

So uh as part of that work, we're looking at cost of service across the city and expanding into the fringe.

So getting the information on what our obligations are will help us create new growth policies for your consideration and adoption and how we continue to grow at the edge.

My last question is there were some discussion when I came on board about the growth areas.

I know you didn't cover it in your presentation.

We have our extra territorial extraterritorial jurisdiction, and then we have both north and southeast of these growth areas.

Uh will that be part of the analysis so the public understands what is ETJ mean?

What is these service areas mean so they understand how growth occurs and the fact that all the surrounding jurisdictions have kind of claimed that territory if somebody eventually wants to annex in.

So will that be part of the reflecting Raleigh, or that will be part of the growth analysis so the public understands what these these white space means?

That's right.

Yes.

It will be a part of both of those.

So the Northeast Special Study Area, which you see here, the borders of that were established by the annexation agreements with our neighbors as you stated.

And what we need the cost of growth analysis to do to create the policies in the next comprehensive plan of how we grow is get a better understanding of what it would cost to develop these areas at various densities, or when that occurs as other services fill out to serve Rivertown and Rivertown upstream here or whatever we call that next development.

Yes, all of that will be included.

Last question is kind of a yes or no.

So you say we have 20 years of growth within our extraterritorial jurisdiction.

So as we look to this, we don't have to move into the white space.

There are 20 years or 23,000 acres of growth.

That could be absorbed over 20 years if you absorb a thousand acres a year.

So I just want to be clear that the recommendation from staff, or at least for council to consider, is to communicate we have 23,000 acres, 20 years of growth.

We do not have to contemplate going into the white space in the NESA and SESA.

I'm confused because part of the CESA is in the ETJ, and there's a plan.

So can you help me understand what part of that because that's NESA, that's the Northeast study area, but the Southeast study area.

Oh, it's within the ETJ now?

Part of that is already in our ETJ.

Because I know when we did the property off of Hodge, which should have been phase three, um that part was already there.

So I think that's the best map you have that shows the CESA part on the bottom.

What part of that is already in our ETJ?

Good morning, Bine I'm Walter, planning and development.

I first want to speak to Ms.

Councilmember Silver's question about the 23,000 acres and the 20 years of growth.

Um what we are saying is that at the current rate of annexation, a voluntary annexation of about a thousand acres a year, it would take 20 years to get all of the ETJ into the city.

I don't want anybody to have the understanding that that acreage would support the growth necessary to support population growth of 20 years.

I don't know the answer to that question.

That's part of why we're doing the comp plan, right?

And then uh, Mr.

Branch, your question was about uh this part of the uh corporate limits and ETJ.

So you can see in blue in this area the corporate limits.

You can see in the dark green what's currently eligible, right?

And the dark green is generally what's in the ETJ currently, right?

Does that help with your question?

And and so um the Southeast study actually goes down past off of this map.

Correct.

Uh you can see this line here, this dashed blue line out here.

That's our right now the state regulations say that umything that we annex must be within a certain distance of our of our corporate limit.

And so that's showing you sort of outside that line.

Those things aren't eligible anyway per state law, even though there have been some uh long held community studies with the county that have said in the long run, Raleigh will serve way out here.

But that's been the shared understanding for 30 years and it hasn't happened yet.

So I just want to draw to clarity of of the 23 that was mentioned, because I mean on our agenda today, we have some annexations, and if we approve those annexations, this map automatically changes.

Exactly.

I just before you totally got the takeaway.

Thank you.

Before we go to Councilor Patton, I just want to say for the record, I did not vote for that.

I got off council in 05.

I was not part of Rivertown.

Yeah.

Just want to be clear.

I think Donald Bay Silver was only one of them.

Counselor Patton.

Sure.

And I think we can all agree that was that was a poor decision by the policymakers at that time, and we're all bearing the current implications of that.

Um I have a couple of questions.

Can you go to the one of the NESA zoomed-in maps that you had on earlier?

Here?

Uh yeah, that one is a good one.

Um before I get to my question, I just wanted to um kind of put it in asterisk on Councilmember Branch's point from earlier.

As you are doing cost of growth and cost of the full suite of services.

So I just, you know.

So just if we can ask all departments to be like really realistic about what happens to these parcels that are near or mixed in or these donut holes and all of that.

So that's kind of an aside.

But then related to this map, I just want to make sure I'm understanding the question that's called.

Does City Council wish to establish a fixed area eligible for annexation for a period of time, perhaps 12 months?

So in a so am I understanding the question that you would kind of draw a little line around the you know, like around these burgundy parcels and be like for the next 12 months, only the stuff inside is eligible and all that white area is not eligible while we have this assessment.

Is that kind of what you're saying?

Absolutely.

And so uh another way is any annexation action by the council does not create new eligibility from newfound um adjacency, right?

Got it.

So you can annex these, but these are not eligible based on that action.

Got it.

Okay.

Yeah, I would be supportive of that.

Like just kind of drawing a firm line and saying like if you're inside of it, you can still proceed as normal.

People deserve predictability, but we can't kind of continue the pattern of like peppering new ongoing new eligibility.

Yep.

Thank you so much.

I just have two.

Um again, piggybacking on uh counselor branch's comment.

I saw in the backup materials that uh we have the Raleigh Durham annexation agreement, and that's that's up near me.

I would love some just a debriefing on that so I can better understand as as the decisions are made.

So however you and I can meet for that, that would be great, as well as the property between 540 and Strickland Road watershed policies.

Those two that you had noted, I would love to have a for a deeper understanding and conversation about.

Um then second question, uh as we look at these annexation reports, and and I'm I we we I've mentioned it at different ones.

I feel a little bit under prepared.

I'm like, oh, and I I look at whether it's the fiscal impact over 10 years, and I'm like, wait, but balancing it and how what are we what am I missing in in annexation report so that I'm not making the decisions based on something that really shouldn't be taken into consideration?

Yeah, two pieces to that.

One, the cost of growth analysis will give you better information to inform future decisions.

And two, I think if I can look at this map.

Um like this green area here, right?

This little green dot that is surrounded by city services, that is surrounded by our infrastructure.

Folks all around are on our trash pickup schedule, water and sewer exist in the ground.

Um I think you could think of these areas as service committed based on our existing infrastructure and existing levels of service.

Um areas outside or currently ineligible for annexation or at the fringe, what could be considered service expansion areas.

So where new services will be needed to bring uh those properties into the current levels of service for the rest of the city.

So I I would kind of um evaluate them that way.

Like are are these service committed areas or are these service expansion areas?

Okay, thank you so much.

Just one thing that hope we can consider too and looking at look at the size, because if you get if for some reason some big company or some someone large comes in to an area that is right on the fringe, but is taking up 600 acres, I think that's something that we might want to at least say bring that to council for council to consider or whatever.

So just something like a trigger size-wise, you you know you all are the experts, you know what is reasonable, so something just to think about.

Yeah.

And just to respond to that, like there is a certain strategic scale of a decision.

Okay.

If not, that concludes uh this uh topic and also our work session.