Studying Our Way to New Subsidy Schemes, pt. 2

Getting really weird feedback on the previous post - informal, of course, because no one wants to put themselves on the record for anything. 

- 'Don't worry - the developers hate this proposal too ....' 

Maybe, but no one has really provided the evidence yet. 

I suppose if I were a developer and I had (1) just wrangled a water subsidy out of the City that very few people recognized as such and (2) pretty good reason to think that this City Council wasn't going to raise either the Wastewater Excise Tax or the Water Connection Fees anyway, I might prefer to let sleeping dogs lie. This doesn't change the fact that the Raftelis contract is an open admission on part of the City that it no longer takes seriously either the Watewater Master Plan or the principle that new real estate development should pay its own way.

Just a guess, but maybe the development community doesn't want the City to so explicitly reject the Wastewater Master Plan. After all, if the cost allocation from that document is toast, why think we should follow it with regard to something like the North Wastewater Treatment Plant?

- 'Read Resolution R-1314-39 - it spells out what the contract is really about ....' 

I mean, we have the actual contract, so what is this supposed to add? 

At any rate, R-1314-39 is the problem! Section 15 says: "That in evaluating future funding strategies, the study shall assess the impact of the Wastewater Excise Tax on growth and development in the City of Norman, take into account existing fee structures, and be compared to both (a) surrounding and (b) comparable cities to ensure reasonableness, consistency and feasibility."

 

That was pretty much the beginning of the end for the WWMP split .... I'm not sure what R-1314-39 enthusiasts think there is to be proud of here .... Here's the link, so you tell me: https://norman.legistar.com/LegislationDetail.aspx?ID=1474743&GUID=CF08E7F2-DEE0-4E93-9518-F42A1485F27B&Options=&Search=.

Am I missing something here? If so, what?

Studying Our Way to New Subsidy Schemes

On May 12, 2015, the Norman City Council will be considering (and almost certainly approving) a contract with Raftelis Financial Consultants to study wastewater and water development taxes and fees (primarily the Water Water Excise Tax and Water Connection fees). The explicit mandate is to consider these fees with respect to how they influence the market for new real estate development, so this clearly is an attempt to keep development charges low. This strikes me as a mistake, of course, because if you don't charge full price, you are encouraged to keep performing activities even after they have become a bad idea. 

I will return to the subsidy theme later, of course, but first things first. One of the biggest worries about these sorts of proposals is the political obfuscation they spawn. To try to head that off, I sent the following letter to the City Council tonight:

"Dear Councilmembers,

I wanted to drop you a line about Item 50 on the May 12, City Council Agenda (K-1415-132). It is on the consent docket, so I am under no illusion as to whether it will pass. I do think it is important, however, to be very clear about the implications of conducting this study and even seriously considering its results.

1) The contract with Raftelis Financial Consultants is an explicit rejection of the Wastewater Systems Master Plan.

(a) The Wastewater Systems Master Plan (http://www.ci.norman.ok.us/sites/default/files/WebFM/Norman/Utilities/MasterPlan.pdf) includes a cost allocation (pp. 4-9 to 4-11). This allocation requires the part of the population to whom Norman had contractual obligations as of 2001 to pay for 13.9 Million Gallons per Day (MGD) of sewage capacity; post-2001 development is supposed to pay for 7.6 MGD additional capacity at ‘full build out’. The only mechanism Norman has to allocate costs to the post-2001 population was/is the Wastewater System New Development Excise Tax.  The recent wastewater capacity increase from 12 MGD to 17 MGD made it clear, however, that the excise tax hasn’t collected enough moneyfor post-2001 development.  The most anyone even claims is that the excise tax (current & future collections) is sufficient to pay for the 3.1 MGD that post-2001 development is responsible for in the most sewer system upgrade.  The last 4.5 MGD required for ‘full build out’ (planned for the North wastewater treatment plant) are (1) the responsibility of post 2001 development and (2) completely unfunded.

(b) K-1415-132 explicitly repudiates the cost allocation in the Wastewater Systems Master Plan. It is concerned with the exact same projects - "the next phase of planned wastewater infrastructure including, but not limited to construction of the new North Water Reclamation Facility (WRF) ..." (Text file K-1415-132) - but it calls for the development of a new funding model - "Recommend how wastewater user charge revenues and wastewater excise tax revenues should be used to fund future capacity, maintenance obligations and infrastructure improvement costs" (Text file K-1415-132).

2) The contract with Raftelis Financial Consultants is an explicit rejection of the principle that new real estate growth should pay it’s own way. This is actually a corollary of the first point, but it can be established independently as well.

(a) Historically, Norman has approached the problem of paying for the costs on the City imposed by new real estate development by way of “[t]he incremental cost method” in that it has “focuse[d] on the cost of adding additional facilities to serve new customers that can be tied to an approved capital improvements plan (CIP), infrastructure improvements plan (IIP), or master plan” (http://www.raftelis.com/services/#rfc_services_1).

(b) K-1415-132 rejects this approach, however, because it is focused on non-cost information about wastewater treatment capacity - it will “[a]ssess the impact of the wastewater excise tax on City development based on a comparison to both surrounding and comparable communities” (Text file K-1415-132) - as well as non-cost information about new water capacity - “establishing water connection charges in relation to actual system capacity and the total development fees charged by surrounding communities" (Text file K-1415-132).

There are, no doubt, a host of things to be said about the advisability of sticking with the Wastewater Systems Master Plan or repudiating the new-development-should-pay-its-own-way principle. It would be disingenuous to claim, however, that either the Master Plan or the pay-you-own-way idea survives when we are asking for incompatible replacements.

Stephen Ellis

Ward 4"

My Academic Paper on Norman's Water Subsidy

I wrote an academic paper on Norman's Water Subsidy that should be appearing soon on ShareOK, a joint open-access platform set up by OU and OSU. Like anything else involving the OU Library system, things are taking fair bit of time .... Since I am interested in having people in-the-know look at it, I decided to link to it from here in the hope that it would garner some reviews.

Here's the link: https://shareok.org/handle/11244/14639

Griffin Memorial Hospital site redevelopment

Waterpolicy talk to resume shortly .... I have an academic paper on Norman's water capacity subsidy ready to go up on ShareOK and I will link as soon as it does.  

In the meantime, I went to see the Urban Land Institute report on plans for the Griffin Memorial Hospital complex this morning at City Hall. Here are some observations ....  

1) Wow, there were sure a lot of buzzwords flying around! Honestly, the content-to-word ratio was so low that it was almost incomprehensible. Almost ...  

2) Getting past the BS-word-cloud, there was some substance to the discussion. 

A. The Good 

There were a lot of cool ideas for what to do to redevelop the Griffin area. It was suggested that the cool Admin and Chapel buildings be repurposed, that a big hunk of the land be used for a park/streamway, that there be a lot of mixed-use, higher density development, etc. Lots of cool plans. This is a place where we want to develop b/c it wouldn't be expensive sprawl  lots of infrastructure; close enough to town to not require lots of driving, etc. 

B. The Bad 

This is being designed as a so-called 'Public Private Partnership' from the word "go" and that is regrettable. The citizens of Norman, the local development community, and the City government (esp. the staff) all have distinct interests in this matter and the whole ULI presentation was designed to obsfucate that very real fact. The proposal as it stands contemplates very vague goals that will, in practice, be specified 'on the fly' by the people who will take the most time to push their influence. In practice, that will tend to be the development community. The whole PPP model allows (and is probably designed to facilitate) the development community to take control of the process. The important thing to see, however, is that this isn't the only path  see below. 

C. The Ugly 

Even at this stage of the game, the development community has its hand out for a subsidy. The talk about how to finance development in the Griffin area was very vague and did not distinguish between financing public improvements and financing private investments. The subsidyask is already in place, however. ULI made it clear that Economic Development funds* will be asked for and that a Tax Increment Finance area** is in the works. The concluding remarks from the ULI team suggested that the local government needed to lead the way in taking monetary risks; not only is that inaccurate (see below) but it presages government givealways to the already welltodo.  

3) We should be able to get the Good part without the Bad and Ugly parts. We learned that path from the Center City Visioning process (led by the National Charrette Institute): set up a paintbynumbers process and only allow development that fits those parameters. More specifically, here are the steps: 

A. Zone the area strictly, with a form-based code. This requires that Norman be its own "Master Developer," but we should set up things the way we want. This won't be easy  we will need to think hard about what we want and what is feasible, but let's get the demand right before we bring in the suppliers. 

B. Open the area for development and steer new development there. The City will need to invest some in infrastructure, but that is no issue if our fee structures make sure that development pays its own way (we have some work to do on this front). A key part of getting businesses to develop where we want them to develop is to not open up new, alternative locations. If we want to get development at Griffin, we should make sure that it isn't easy to develop out on the fringe instead. (This would require a lot more discipline from the City Council than we usually see, but no more discipline than adopting a longterm PPP.) 

C. As the ULI suggests, we should look for interim uses of the Griffin area to show how attractive it is and to keep it productive while the development happens. 

The National Charrette Institute showed us that we don't need to let the development community take the lead when it comes to Norman's future  let's follow their advice.  

__________ 

* I.e., private entities will be asking for government money without offering any compensation in return. 

** This would be a misuse of the TIF mechanism, since they are designed to change the location of economic activity, not increase aggregate activity. The Griffin area is not a poverty stricken area that we need to underwrite by cannibalizing other parts of town.