Charlotte Future 2040
4.5 Fiscal Considerations, Funding and Financing Tools
This section summarizes key findings from a Fiscal Impact Analysis and then highlights a set of existing and new funding and financing tools that respond to the expected fiscal impacts of the Comprehensive Plan policy guidance and opportunities to evolve the manner in which the community is currently paying for and benefiting from new growth across Charlotte.
Fiscal Impact Analysis Key Findings
The following major findings were identified during evaluation of fiscal impacts of the desired growth pattern in the Charlotte Future 2040 Comprehensive Plan process.
The desired growth strategy generates a more fiscally beneficial growth pattern for on-going operations for the City and County.
Growth forecasts developed by City Explained for the Charlotte Future 2040 Comprehensive Plan, CONNECT Our Future, and other regional entities were used to evaluate the net fiscal impact of new development on the City of Charlotte’s General Fund and Mecklenburg County’s General Fund. EPS evaluated a “Business as Usual” growth pattern based on development trends over the past 20 years and a “Future Place Types” growth pattern based on the growth strategy developed for the Comprehensive Plan. The evaluation of the fiscal impact of these growth patterns (using the regional forecast for new households and jobs in the City’s Sphere of Influence between 2020 and 2040) revealed that the desired “Future Place Types” pattern generate a 17% greater net positive fiscal impact on the City’s General Fund annually. The greater net fiscal impact is due to the lower amount of expenditures generated from the more compact and coordinated growth pattern. Specifically, expenditures needed to provide fire services and street/highway operations and maintenance, which are major expenditure items in the City’s General Fund, would be lower.
Activity Centers designed to attract new development generate a substantial return on investment that can be leveraged to funded local area and community wide infrastructure and amenities.
The attraction of new development to the City’s Regional Activity Centers, Connected Corridors, and Neighborhood Centers is a major tenant of the Charlotte Future 2040 Comprehensive Plan growth strategy. The fiscal impact analysis has found that these denser high growth areas most often create benefits (i.e. increased tax revenue) that outweigh the costs the public sector must pay to support the growth of these areas. The added benefit these growth areas can generate (compared to average new development) can be redirected to help fund both local area improvements needed to support growth and also improvements that support the community as well. In addition, using value capture tools to fund improvements needed to support high growth areas can alleviate the need to utilize CIP funds to keep pace with new development and as a result allow for the redirection of capital funds to underserved areas or areas lacking investment.
Certain major expenditures/departments lack dedicated and/or reliable funding sources to support the community’s desired future vision.
Four specific expenditure areas were identified as lacking funding tools to support new development including transportation and mobility, schools, public spaces, and community amenities:
Transportation and Mobility
- Street and highway maintenance is provided by the Charlotte Department of Transportation (CDOT). The City ’s expenditures on street and highway maintenance are accounted for through two major funds – the General Fund and the Powell Bill/Street Aid Fund. The Powell Bill (or State Street Aid) Fund is funded primarily from the State gas tax revenue that is distributed to the City based on population and lane miles maintained and dedicated to mobility expenditures.
- Maintenance of streets is a major cost item for the City. The direction of maintenance and repair dollars is driven primarily by the condition of the pavement/roadway. Streets that have a lower pavement rating will be resurfaced sooner. Impacts on pavement quality are related to the level of travel, the types of vehicles, and construction impacts on roadways. Infill development has varying impact on pavement quality but is correlated with lower pavement scores generally. Large infill projects will require reconstruction of portions of roads but the developer is required to pay for this cost. However, for smaller, by-right infill development this is not required and likely not feasible, and projects are not subject to the same level of review and regulation. A street with multiple small infill projects can result in multiple cuts of the pavement and individual/piecemeal repairs. This has been resulting in pavement quality in these areas degrading more quickly and focusing more resources to these areas.
- New development in the City is generally responsible for providing the infrastructure and improvements needed for streets that directly access and serve the development. However, the impacts of new development on collector, arterial, and regional roads are not accounted for. Increased traffic volume caused by new development creates additional need for maintenance on the overall City network and enhancements and new street systems to address more modern mobility challenges. The City currently does not have a mechanism to fund the impacts of new development on streets beyond the existing funding sources used for existing street maintenance. This can result in a dis-proportionate amount of funding going to areas that are attracting new development either to address impacts of infill and/or to ensure the regional network can support growth.
- A cost recovery mechanism can help address lack of funding for network growth and enhancement needed for new development. Tools, such as Impact Fees or Improvement Districts, applied to new development should be explored to generate revenue and address impacts of new development.
Charlotte Mecklenburg Schools
- Funding for schools in North Carolina is complicated with funding coming from Federal, State, and local (county General Fund) revenue sources. Historically there has been a lack of ability for school districts to obtain funding outside of these traditional sources. CMS has no dedicated funding source and does not have taxing authority. Capital improvements needed to keep pace with a growing city/county are a major challenge for CMS. Traditionally, CMS has been able to rely on the private sector support through land dedications and other contributions as new neighborhoods need school facilities to attract buyers/renters. As the City reaches build-out and new housing is being built in smaller, and more infill oriented, developments, CMS is challenged with obtaining locations and funding to build (or enhance) schools to support new students. Furthermore, the school facility models needed to support the community are more diverse and different in scale than the traditional models (e.g. large schools serving several neighborhoods). The development review process provides CMS opportunity to highlight facility needs to developers and the City of Charlotte. More proactive planning between the City and CMS can help identify needs before development applications come in, but schools may need to become a priority community need that can be obtain through discretionary approval processes or capital investments. Even with more proactive efforts, a mechanism for obtaining land and/or funding to offset the impacts of new development is needed to support CMS. Tools such as land dedication requirements and/or impact fees should be explored.
Open Spaces and Trails
- Traditional parks, trails, and open spaces in Charlotte are built, operated, and managed by the Mecklenburg County Park and Recreation Department. The Park and Recreation Department have their own Master Plan (Meck Playbook) that guides the policies, programs, and investments for the department in order to serve the community. However, as the City attracts more mixed-use and denser development, there is a growing need and demand for more public open spaces (e.g. pocket parks, urban plazas, off-street bike/pedestrian ways, and trail connections) that are not within Park and Recreations purview and outside of their financial ability to support. As well, the City and County lack tools or a cohesive strategy for the capital funding and long-term management of these public spaces. These types of places in some cases can be provided and managed by the private sector (e.g. plaza next to an office building or a pocket park maintained by a HOA), however with more piecemeal and infill development occurring the ability to ensure the private sector can or the public sectors’ ability to provide amenities is becoming more challenging. A collective approach to the funding, construction, and long-term maintenance (and activation where necessary) of these open spaces is needed to guide the private sector and ensure the public sector has the resources necessary to provide these non-traditional public open spaces.
- Lastly, the plan policies call for a variety of community amenities to be built to support the major plan goals such as 10-Minute Neighborhoods. The community amenities identified in the plan include day cares, healthy food stores/vendors, health clinics, banks, affordable housing units, and green infrastructure. These amenities are often provided by the private sector and can become scarce or non-existent in lower income neighborhoods due to market dynamics. Furthermore, the capital hurdles to building amenities in areas lacking them currently can be too high to overcome by a private business operator even if there is demand from the community. The City and County in many cases do not provide or have control in the availability of these amenities. Many of these amenities have been identified in the plan and by the community as essential elements to complete neighborhoods or well-rounded employment areas. Creative solutions to leverage investment from the private sector to create desired community amenities are needed to help support the private and non-profit sectors in building and supporting these essential community assets. The plan has identified the desire to explore new development impact mitigation tools and community benefit partnerships as a way to provide support.
New Funding Tools/Approaches
The outreach the community and fiscal impact analysis has helped generate the consensus that for Charlotte to achieve the goals in this plan, a collective approach to funding infrastructure and amenities is needed. As well, a greater partnership with citizens and businesses in identifying and maintaining improvements over time is needed. The Comprehensive Plan calls for a “Shared Prosperity” approach to creating new funding tools in partnerships with the private business sector and overall community.
Cost Recovery Programs
The City will implement cost recovery funding programs that can mitigate the increased cost of infrastructure and services cause by new development. Programs focused on funding growth of the regional mobility network, school system, public spaces, and community amenities will be considered including impact fees and land dedications.
Value Capture Programs
Value capture is the use of funding tools to redirect the increased tax value/revenue generated in an area from new development to fund improvements in that area. The increased tax value is spent locally to support and mitigate impacts of new development instead of going to the City’s general fund or funds. The use of tax increment (the increased tax revenue from the value of new development generated by new development in an area/project) is a common value capture technique. The City of Charlotte currently uses Tax Increment Grant Program (TIG) to provide repayment of costs for public improvements provided by a private development. The expanded use of tax increment should be considered to help fund improvements from new development. Other value capture techniques include the use of sales tax sharing and improvement districts (additional property or sales tax) that can support improvements on a district/small area scale. The City will expand the use of value capture tools in conjunction with new development in Regional Activity Centers, Connected Corridors, and Neighborhood Centers, or to support developments that provide priority community benefits (i.e. affordable housing).
Community Investment Programs
Community investment programs are created to integrate the residents and the business community directly into the identification and funding of infrastructure and amenities that benefit their community. These types of programs are most typically used in a partnership between a business area and a local municipality. Business improvement districts is the common example where of business and property owners in a non-residential area choose to assess additional fees or taxes to fund services and capital improvements. In some communities, neighborhoods have decided to create similar programs to help fund desired amenities. A neighborhood improvement district isn’t too dissimilar to a home owners associations often used for suburban subdivisions. Beyond improvement districts, there are wide variety of programs that can allow for a specified area (neighborhood or commercial area) to increase their participation and advocacy in identification of and funding of desired improvements. One of the two “Big Ideas” within the 10-Minute Neighborhood Goal is to create a culture of developer-community collaboration through community benefit agreements. Community benefit agreements are a newer type of community investment programs that cities are using to directly tie improvements funded or built by new development projects directly with input and direction from the community for which the new development will impact. Charlotte will be creating new community investment programs to increase participation and influence of local neighborhoods and districts into the growth of their areas.