Whenever a plan becomes known for what will happen to the Confederate Statues in two Charlottesville parks, funding will be in place to cover at least some of the costs. Charlottesville City Council took action this morning at a special meeting on a resolution to allocate $1 million to the effort, which would be a legal action given a ruling this spring by the Virginia Supreme Court that the two statues are not protected war memorials. Council voted on June 7 on a resolution to ask groups if they had interest in taking ownership. (read the resolution)
“The 30 day window for considering statue relocation is coming to a close very shortly so we wanted to be able to have funding in place to take care of that,” Boyles said.
So far, there have been eight inquiries from entities interested in taking on the statues.
The resolution voted on by Council today also covered the Lewis, Clark and Sacagawea statue on West Main Street.
“This is just putting funding in place so that we can either remove, store, or cover any or all of the three statues,” Boyles said.
The main event at Council’s meeting on May 17, 2021 was direction to proceed with a plan to use millions of funding from the Virginia Department of Transportation to cover another cost overrun for the long-planned Belmont Bridge replacement. The project was put out for construction bids in February with a $31 million cost estimate. According to the city’s Urban Construction Initiative manager Jeanette Janiczek, that wasn’t enough money.
“The lowest responsive, responsible bid can be awarded with existing project funds, however there is a need for additional funding, $4.2 million, to cover contingency, construction inspection services, VDOT oversight, as well as utility relocation,” Janiczek said.
VDOT has suggested adding funds from its bridge maintenance account, something referred to as State of Good Repair. Janiczek said possible reasons for the higher estimate include inflation, increases in material costs, and potential issues related to the pandemic.
Janiczek said one choice would have been to remove items from the project, such as a pedestrian tunnel on the southern end.
“Any of these options would result in us having to rebid the project,” Janiczek said. “This adds at least a year in time but most importantly it doesn’t fulfil the commitments we’ve made to the public as well as the Board of Architectural Review.”
Janiczek if the appropriation of the VDOT goes forward in June, construction could begin this summer. Another public meeting will be held when the contractor is hired to explain how traffic will continue to use the bridge during construction.
“So once they submit their baseline schedule, we’ll release that to the public and let people know what to expect during construction,” Janiczek said.
Asked by Council if the project costs could increase, Janiczek said many of the prices for materials would be locked in as soon as the construction contract begins.
City Manager Chip Boyles said he thought construction costs would increase as the federal government prepares to make billions of investments in infrastructure projects. That’s why he r
“If this project is delayed, we’re already seeing very substantial inflationary projections into the near future,” Boyles said. “If President Biden’s infrastructure package that is in Congress is approved, you will see multiple fold of capital projects underway. If this had to be rebid, I would say that we would end up with less product and at least the same amount or more of the cost.”
The second reading of the appropriation will be on the consent agenda for Council’s June 7 meeting. They’ll next meet on May 25 to have a work session on the 7th Street Parking garage followed by a May 26 joint meeting with the city School Board on the reconfiguration of the city’s middle schools.
Council adjourned their meeting before 8 p.m. something that newcomers to city government should never ever expect.
The Charlottesville City Council will be presented with a $160 million five-year capital improvement program (CIP) that anticipates spending $50 million on a reconfiguration of middle school education.
Council and School Board will meet Thursday, January 28 at 5 p.m. to discuss budget preparations. (meeting info)
Staff has not recommended new funding for the West Main Streetscape in Charlottesville’s proposed capital improvement program for the next fiscal year, though the first phase of the project is fully funded. The future of a second phase is not certain at this time.
“The current CIP draft reflects priorities raised by City Council in previous budget work sessions,” said Charlottesville Communications Director Brian Wheeler. ”The inclusion of a $50 million placeholder for the City Schools reconfiguration project means other projects have to be reconsidered.”
While capital improvement budgets look ahead for five years, Council will only adopt an actual budget for fiscal year 2022, which begins on July 1. The proposed budget for FY22 is for $35.4 million, with $26.8 million anticipated to come from the sale of municipal bonds.
The draft CIP also continues the city’s $10 million investment in a new parking structure at the corner of Market Street and 9th Street. The project’s purpose is to support a new General District court to be used by both Albemarle County and Charlottesville.
The five-year budget anticipates a total of $13.5 million in investment in new construction of Charlottesville Redevelopment and Housing Authority including $1.5 million in FY22.
“This funding is the second year of a original City projected commitment of $15 million for the redevelopment of the public housing sites,” reads a summary of projects. In October, Council signaled they would approve a performance agreement governing the use of $3 million to help finance the Crescent Halls redevelopment and the first phase of redevelopment at South First Street.
The draft CIP restores several budget line items that were zeroed out for the current fiscal year. Instead of spending about $6.7 million of general fund revenue for certain items that could not be paid for through the sale of bonds, Council agreed with a plan to put that money aside in case of a shortfall.
For FY22, the draft budget restores funding to “non-bondable” items such as “city-wide traffic engineering improvements” and “bicycle infrastructure,” as well as funding for parks.
The draft budget also includes $800,000 a year in funding for the Charlottesville Affordable Housing Fund, for a total of $4 million. The specific use of those funds would be determined later.
The basic details of a plan to reconfigure Charlottesville’s middle schools were presented to the City School Board in December 2018. Michael Goddard is a project manager with the city who addressed Council at a work session on November 20, 2020.
“The plan is to utilize existing public properties so no land acquisition would be required,” Goddard said. “We would like to expand the pre-school and provide best-in-class wrap-around services, move 5th grade back to the elementary schools, reduce middle year transitions. By adding the 6th grade to Buford, we would make that a three year school.”
Both Walker Upper Elementary and Buford Middle School were built in the 1960’s. Goddard said another goal is to eliminate students needing to go outside to transfer between buildings.
The project has a placeholder cost estimate of about $55 million based on work conducted by the firm VMDO. In the fiscal year budget for 2020, Council authorized $3 million for design and pre-engineering.
“What we expect to see from our architect as part of this initial phase is a visioning document which gives us a general idea of what we can do, a goals and objectives document which lays out exactly what it is we intend to accomplish,” Goddard said.
West Main Streetscape
The firm Rhodeside and Harwell has been paid at least $2.8 million to develop design and construction documents for the three-quarter mile stretch between the University Corner and the Downtown Mall.
A value engineering study intended to reduce the costs will be shared with Council on Monday.
A total of $12.95 million was requested for the West Main Streetscape project in FY22 , but was not included. The project was split by Council into four phases in October 2017 in order to help secure funding. Phase 1 spans from West Main’s intersection with Ridge Street and McIntire Street to 6th Street NW.
“Phase 1 remains funded from prior CIP allocations,” Wheeler said. “The local allocations to Phase 1 are $3,162,045 spent and $13,422,860 available.”
The city received $3.2 million in VDOT revenue-sharing funds for West Main Phase 1, and the city will still spend $13.4 million in city funds.
Phase 2 travels between 6th Street NW and 8th Street NW. The city received $2 million in VDOT revenue sharing and $2 million in VDOT Smart Scale funding for this phase. The city had anticipated spending $7.1 million in capital funds but that is not reflected in the current CIP.
“We expect City Council to provide additional feedback on both phases in the budget discussions,” Wheeler said.
City staff had not budgeted spending any city money on West Main’s Phase 3, which spans from 8th Street NW to Roosevelt Brown Boulevard. Last year, Council agreed to submit a $10.38 million request to the VDOT’s Smart Scale process. Last week, staff recommended funding of this project.
As of last September, the city had not identified a funding source for Phase 4 which has a preliminary cost estimate of $8.7 million.
A former chief operating officer at the University of Virginia said in a March 2018 letter to Council that UVA would allocate $5 million for the city to use on the West Main Streetscape. The offer still stands.
“The University remains committed to its funding pledge for the West Main Streetscape project,” wrote UVA spokesman Brian Coy. “Per discussions with the City, our intent is to focus on safety and security improvements towards the western end of Main Street, supporting both students and the broader community.”
The fallout from the economic shutdown related to the COVID-19 pandemic means that Charlottesville is facing a tougher financial future than would have been expected. Last night, the City Council got an update on the city’s financial picture. Ryan Davidson is a senior budget analyst with the city. (read the report)
“There’s been a marked decline in many of our revenues and our new revenue projections are approximately $5 million than what we had previously presented to City Council,” Davidson said.
Specifically, meals tax collections are $2 million lower than had been forecast in September, and transient lodging tax collections are $1.86 million lower. But not all sources of revenue are in the red.
“Licenses and permits,” Davidson said. “This is one bit of good news! We are seeing continued strong performance in our building and plumbing and our other permits. We’re expecting almost a half million increase.”
Davidson said in the worst case scenario with revenues that continue to decline, the city could end up with a $13.2 million shortfall by the end of the year. To manage that shortfall, budget staff are using the cash reserve that Council agreed to put aside when it approved the budget for the current fiscal year. That money would have gone to various items in the capital improvement program. Davidson said the city may also need to use surpluses from both FY19 and FY20.
“That can be up to $4.1 million that we could bring in as the potential revenue source to help fill that gap,” Davidson said. He added that the city is trying to avoid laying off any employees, but it will take a full effort by Council and staff to continue to get through the year.
Davidson reminded the Council there are still just over five months left in the fiscal year, and projections can change over time as conditions fluctuate.
“Let’s try to manage to the worst case scenario, then if things are better than that, then we will be prepared for that,” Davidson said. “And if they’re better than that, we have leverage and we will have resources that we have not yet had to use.”
Charlottesville’s appointed officials sought fiscal clarity from Charlottesville’s elected officials during a budget work session on November 12 that sought to gauge Council’s willingness to seek additional revenues to pay for major projects. John Blair is the interim city manager.
“As you all know there are a number of large scale capital projects that have been talked about in various iterations through the past few years but what I’ve asked our budget team is to provide you with some numbers that are going to demonstrate using your debt capacity for various projects,” Blair said.
Blair said that the city is close to its debt capacity and more projects will likely require tax increases, but he said that topic was not directly before them. Blair’s budget for FY2022 will not be unveiled until March. It will also be the first to be prepared under this Council.
“Obviously I think a number of you have interest in various capital needs whether it be affordable housing, education, infrastructure,” Blair said. He also said this would send a message to would-be city managers about the kind of city this Council wants it to be.
For now, the budget is in the very early stages of formation because exact revenues aren’t yet known. Budget staff needed to know Council’s thoughts on whether to change a key policy to increase the amount of bonds that could be sold to pay for capital projects. Doing so will increase the amount the city needs to spend on debt service to pay back those who buy those bonds for a steady return.
We have been in fiscal year 2021 since July 1, and a decision was made by Council earlier this year to continue with $25.8 million of projects in the capital budget, and they signaled support for a total five-year plan of $124.1 million.
“We were going to fund $84 million of this five year plan with bonds, and if you recall, due to COVID, just about all of the cash that was originally intended to go to the CIP was held in a reserve with the general fund to offset any of the unknowns,” said Krissy Hammill, Senior Budget and Management Analyst for the city of Charlottesville.
Practice has been to use a mixture of cash and bonds to pay for capital projects and since 2010, the average has been 37 percent in cash. For this year’s capital budget, 93 percent will be paid for through bonds. Currently the city has about $90 million in government debt, $80 million of which is for bonds that have been approved for projects but not yet issued.
“That means that we typically issue bonds on a cash-needed basis so we don’t issue the bonds until the project is either imminent or underway because we do have spending requirements that once we issue the bonds we typically need to spend that money within 24 months,” Hammill said.
Hammill said the city has been building up a fund balance to help reduce the amount of cash that needs to go to debt service each year. But at some point, the city will need additional cash from property taxes to make up the difference. Hammill showed a hypothetical situation where $32 million in new bonds are floated each year through FY2027. That would increase the debt service steadily over time, from $11 million in FY2022 to $19.2 million by FY2026.
“You’ve basically built in the need for a penny of additional revenue, that’s equivalent to basically a penny a year,” Hammill said, adding that in further years, the need for additional revenues would continue to grow.
To put it colloquially, Hammill effectively stated that the city can float an additional $52 million in bonds without maxing out the credit card. Potential projects include additional spending at the future parking garage, reconfiguration of city schools and continued investments in affordable housing.
After a long discussion about debt financing and how much additional capacity can be found, Council then began discussing potential projects. The first was whether a $10 million project to build a new municipal parking garage could be altered to provide more building height.
In a ten-page white paper dated October 14, Economic Development Director Chris Engel lays out the current plans.
“The City has plans to construct a parking structure on a one-acre assemblage of property it owns at the intersection of Market Street and 7th Street,” Engel wrote. “A conceptual design study indicates that a four level structure of approximately 300 parking spaces and 12,000 square feet of street front commercial space is feasible on the site and such a structure is permissible by-right within the City’s current zoning ordinance.”
Engel also included a contingency of an estimated $5 million to build a stronger foundation and employ other measures to ensure the taller building would be structurally sound.
At the November 12 work session, Engel said the project will be built using a design-build contract, which means one firm will be asked to do both tasks. A request for qualifications is expected to go out this month, followed by a request for proposals early next year.
“When we go through the process of seeking a design-build contractor, their proposals will have those types of details that we can compare one to another and that’s when the city chooses the best respondent and gets into a contract with them to actually build it,” Engel said.
The city has never pursued a project through a design-build project before. Engel explained this project is not a public-private partnership in part because of a bad experience within the last decade when a project to develop a city-owned parking lot fell apart.
“[West 2nd] started as a design competition really and then lead to a development agreement,” Engel said. “The path that we are on now is not that. The path that we are on now is that this is a city-owned facility. We build it with our money and we own it and we control it. That’s in part to eliminate risk and that’s done in part to honor the agreement with [Albemarle] county and best control those parking spaces so that they have confidence. Entering into a third-party agreement complicates that a little further.”
In the case of West 2nd, the city asked private developers to submit proposals to redevelop the City Market lot with a mixed-use building and space for the market.
“We spent four years and we ultimately got to a point where the project did not proceed from there,” Engel said.
Engel said the parking garage is expected to be operational in three years.
Councilor Heather Hill said she remembered when these questions were asked two years ago.
“It just seemed like it wasn’t a feasible option to go that route and invite a partner given the significant cost between what we’re proposing here and how much additional it would cost to do more than what we’re proposing,” Hill said.
Councilor Lloyd Snook asked how much delay there would be if Council decided to go on a different path.
“If we said, okay, the courts aren’t actually going to be built until 2025 and we’ve got sort of a slow-down in parking needs at the moment because of COVID and working at home and all the rest of that stuff, and some of that is going to maybe happen for the next couple of years, maybe we don’t need desperately need to get things done by 2023, maybe we work something out with the county to say, okay 2024 is fine. These are all just hypothetical here.”
Engel said it would be hard to predict the delay but again repeated that negotiations would likely take six months to a year.
Councilor Michael Payne asked if the city could just provide the required spaces for the county at the Market Street parking garage.
“When we’re looking at our CIP budget we’re going to have to, there’s no way around trying to revisit past decisions and figure out what to prioritize and re-adjust,” Payne said.
Another question before Council was whether the city should invest in improvements to make the Dogwood Vietnam Memorial in McIntire Park more accessible. Staff had recommended working on a way to build a parking lot closer to the memorial to replace the one removed for the skate park. Council did not reach consensus on how to proceed.
Council needs more info to provide direction
Council was asked to come up with priorities to help the budget staff develop a preliminary CIP budget.
“Without cutting something out, we are anticipating the need for tax increases,” Hammill said. “Not this year necessarily, but soon in the future.”
The city’s property tax rate has been $0.95 per $100 of assessed value since 2008.
One of the big questions is this Council’s willingness to proceed with school reconfiguration.
Hammill said $3 million was allocated to the school reconfiguration in FY20 to help with design. According to that budget, the purpose is for “architecture and engineering services and [to] determine preliminary designs and costs.”
Councilor Lloyd Snook said he was not sure how much direction he could give at this time.
“As a general proposition it’s hard for me to think of anything that’s more important that we do than educate our kids and we ought to be allocating significant resources to educating our kids but whether significant resources means $60 million over six years or $3 million next year and we’ll see or anywhere in between, I don’t know how to answer that question,” Snook said.
The West Main Streetscape has $18.5 million in approved funding, but the bonds have not yet been issued. Hammill said staff would be asking for another $8 million to complete the financing for the West Main project.
A value engineering study to bring the cost of the West Main Streetscape down is not ready. That project currently has a total cost estimate of $49 million though some of the four phases have been funded by the Virginia Department of Transportation. Council had a work session on this topic on September 30 and are expecting a report from RK&K about how adjustments can be made to save money.
Mayor Nikuyah Walker said she couldn’t make a decision until that information was ready.
As the budget work session came to a close, Councilors said they needed more time before making decisions on specific items. But let’s hear from three of them.
“There is no way that we’re getting out of this without cutting things that we all care about tremendously,” said Vice Mayor Sena Magill.
“This has to be put out to the community and they’re going to have lead that conversation with us given the scale of this investment and what it could mean to taxpayers,” said Councilor Heather Hill.
“I echo Councilor Magill’s point that I think that as well as in the context of COVID which is creating greater uncertainty for us in terms of our revenues could be worse than what we’re thinking, the composition of the Senate at the federal level should make us contemplate the reality that there will not be additional support coming from the federal government to bolster state and local governments,” Payne said. “Even if we assume tax increases, if we’re just taking an honest look at it, I think our only path forward is to look at some of our previously committed expenditures and evaluate what the trade-offs are and make cuts.”
Council will have another work session on the budget this Friday beginning at 1 p.m. Before that, they will have provided direction on whether to proceed with additional local spending for traffic calming efforts on 5th Street at their meeting on November 16.
Charlottesville City Council has endorsed an agreement that describes how a $5.5 million loan from the city to the Piedmont Housing Alliance will be used for the first phase of the redevelopment of Friendship Court.
“It has been over four years getting to this point and with a tremendous amount of work from in particular on the part of residents of Friendship Court and in particular the advisory committee at Friendship Court,” said Sunshine Mathon, the executive director of Piedmont Housing.
There are currently 150 rental units at Friendship Court, which was built in 1978 on land cleared through the urban renewal of Garrett Street.
“Resident-led redevelopment efforts propose a four-phase approach to replace all of the existing units and add additional residential units over the next eight to nine years,” said Brenda Kelley, the city’s director of redevelopment.
In 2019, Piedmont Housing was awarded funding from the Virginia Housing Development Authority through the Low Income Housing Tax Credit program to help finance the first phase of the project. The loan from the city helped make that application more attractive. The VDHA is now known as Virginia Housing.
“In total, the overall redevelopment proposes to construct approximately 450 new affordable units and more details to come before City Council in the future,” Kelley added. “This approach allows current residents to move directly into newly constructed units in each phase so that there is only one move associated with the relocation of residents.”
The first phase will be built where playgrounds and the community gardens have been. Mathon said the gardens will be relocated elsewhere within the development.
There will be 106 units, 46 of which will be new replacements for existing subsidized units at Friendship Court. The terms of the deal require the affordability restrictions to be maintained for 99 years.
“The item in front of you tonight provides for a master covenant that spells out the overall master plan requirements and also more specifically provides a separate phase one covenant that identifies the terms and the conditions for allocating the forgivable loan,” Kelley said.
In fiscal year 2019, Council allocated $5.545 million in capital funds to the project to pay for public streets, infrastructure, utilities, and affordable units for households with low to moderate incomes.
“The master affordable housing covenant will be recorded in the public records to provide assurances of affordability for the entire site,” Kelley said. “However, in the event of foreclosure, the affordability restrictions will terminate.”
Piedmont Housing will be required to submit an annual report. When the terms of the LIHTC funding are up, the city will have first right to lease or purchase units that are constructed. They’ll also have that right if the projects are ever foreclosed upon.
Piedmont Housing’s repayment will be deferred for 40 years as a forgivable loan, but if the nonprofit breaches the terms of the agreement, they will be responsible to pay for the full amount plus interest.
Part of the funding structure involves an agreement between Piedmont Housing and the Charlottesville Economic Development Authority.
“To help facilitate the financing of the project, Piedmont Housing has requested that the city consider an agreement that will share the incremental increase in real estate tax revenue generated by the investment,” reads the staff report for Council’s discussion. “With a commitment from the city to contribute the future revenue stream (as a grant), Piedmont Housing will borrow on this with a private lender to create the cash needed to begin the project.”
Mayor Nikuyah Walker was concerned about how this was set up given the number of other projects that will have the city paying to cover the costs if its own taxes, such as with Crescent Halls and South First Street.
“Essentially [Piedmont Housing] is taking out a $3 million loan for the gap funding for this and the request for the [Tax Increment Financing] would mean that the city would then forgive taxes up to the amount of the initial loan plus the interest that would accrue over the 30 year period,” Walker said. “Is there a better option than this arrangement where they’re taking out a loan that we will pay back anyway?”
Councilor Heather Hill said she thought this was a result of increased costs for the project.
“Things change,” Hill said. “There are a lot of moving parts, there are some inflationary costs in terms of the construction and that’s what I remember being like, you know, things were covered. Things are now not coming in like we thought. I remember sitting around a table with staff and another Councilor and that’s kind of where I remember that precipitating and then a lot of brainstorming going on to feel like what are some ways to get through this because we knew the city wasn’t going to be in a position to just outlay that capital outright.”
Walker said her caution is based on not knowing what future financial requests will be for the additional phases.
“I think these are two very important projects,” Walker said. “Of all the projects that I have voted on or not voted on that have been in front of us, and I’m just speaking for myself have looked at it, I think [CRHA redevelopment and Friendship Court] are going to take us to places and help us in ways that none of those other projects could do, and so it’s very important but I don’t think we’re looking at any of these projects in a fiscally sustainable way.”
Mathon said this approach was first discussed with city leadership in the spring of 2019. Phase 1 is being built atop a buried creek called Pollocks Branch.
“The site costs for doing work on Friendship Court continued to go in the wrong direction because of the soil conditions there being far worse than we originally anticipated,” Mathon said. “The proximity to the underground creek just caused site work to increase significantly and so we were trying to search for some additional source to cover that delta.”
Chris Engel, the economic development director, said these discussions occurred with Mike Murphy was interim city manager, before former city manager Tarron Richardson began work in May 2019.
This section of the discussion took place before Engel had a chance to give his staff report.
“What you’re going to hear about next in the performance agreement is a way to use the increment without the borrowing and it’s a mechanism that works and we’ve used it in a couple of cases,” Engel said. “This case is a little different in that it involves not a commercial interest, but commercial and residential, primarily residential but it can be helpful in funding something.”
Mathon said he believed this mechanism was in keeping with common practices. He gave a quick overview of how he believes capital budgeting works.
“The city has prioritized in terms of how it uses dollar on an annual basis out of its general revenue fund to pay for its priorities and it bonds a whole number of different items for infrastructure, schools, to pay for things it can’t afford in the short term,” Mathon said.
In this case, the $5.545 million the city is spending on the project will be paid for through the sale of bonds. All localities are evaluated by ratings agencies to determine their creditworthiness at paying bond holders over time. Charlottesville has a AAA bond rating which affords a lower interest rate. There are limits to how much a locality can borrow without jeopardizing that rating, and so the additional $3 million was above the city’s capacity. Hence the need to find a different way forward.
Walker said she was also concerned about the lack of details about phase 4. Mathon said it may take Piedmont Housing another year to begin to plan because of physical distancing protocols caused by the pandemic.
“In the schematic diagram that is included in the performance agreement, Phase 4 continues to be a bit of a placeholder because we are working in a co-design process with the residents,” he said. “Our focus on the last nine months, and COVID has complicated this of course, and has slowed down the process even further but our focus has been on the one hand preparing them and the community for start of construction and on the second hand we’re deep in the throes of final design of phase 2 so that we can apply for tax credits for LIHTC in March 2021 in a few months.”
Council reached consensus to move the loan to the consent agenda for the November 2 meeting.
Before we go, let’s hear one last time how the tax increment financing would work from Chris Engel.
“Essentially what the performance agreement does is use the tax increment that’s created by the project… PHA pays real estate tax that is assessed on the new project. And we would then transfer, the city would set aside as has been discussed, that amount to the [Charlottesville Economic Development Authority] and the EDA would grant back to PHA in this case 100 percent of the incremental taxes created by the project.”
The agreement has a 40 year term, but ends as soon as the EDA has granted a total of $6 million back to Piedmont Housing.
Walker voted for the agreement but said she still did not support it.
There will be a budget work session on capital financing in November, and interim City Manager John Blair said they could have a more full discussion about potential financing arrangements.
Councilor Michael Payne said he supported the agreement.
“I do think the timing is critical on these projects,” Payne said. “I do think that this has something that has helped made the project actually be able to come together and keep together the tight timelines for LIHTC applications and other funding sources and I do think that this is a real critical way to make sure able to be a a shovel-ready project that is able to happen.”
On October 19, 2020, Charlottesville City Council signaled they would approve a performance agreement for direct city investment of $3 million in public housing renovation and development. The funding will be used for the Charlottesville Redevelopment Housing Authority’s nonprofit to renovate Crescent Halls and new units at South First Street.
CRHA currently is authorized by the U.S. Department of Housing and Urban Development to operate 376 public housing units, and many units were built in the 80’s and have not been well maintained. Brenda Kelley is the director of redevelopment for the city, and she presented Council with an ordinance to grant the CRHA $3 million in city funds to help finance the work.
“CRHA and its partners have been engaged in robust resident-led redevelopment planning efforts,” Kelley said.
One of those partners is something called the Charlottesville Community Development Corporation, which is actually the CRHA Board of Commissioners, a body appointed by Council. The CCDC is a nonprofit entity that is eligible to receive and distribute Low Income Housing Tax Credits which help to subsidize the projects through private investment.
“The funding will be disbursed as a grant to CRHA, CRHA will provide the funds to the CCDC, whereby the CCDC will lend the funds to the project as an interest-free 30-year loan,” Kelley said. “One hundred percent of the units constructed will be provided for rental by low and moderate income persons having household incomes at or below AMI. No fewer than thirteen units will be public housing units at South First Street phase one, and no fewer than 53 units will be public housing units at Crescent Halls.”
Above: Project cost breakdown for South First Street Phase One
CRHA would not own the properties, but will continue to own the land and operate the buildings, but the CCDC will own the structures. That means they will be responsible for paying taxes. We’ll come back to that in a bit.
These details are worth documenting.
“The private sector project owner has an investment member and the investment member has a right to sell its interest in the project prior to the end of the 30-year LIHTC term,” Kelley said. “If the investment member’s interest cannot be bought out by CRHA, this could potentially result in termination of an extended use agreement after year 15. So year 15 may be a significant milestone whereby CRHA has an option to purchase the project. This raises unknowns also including how much this purchase price would be and where will CRHA obtain the funding.”
Council’s discussion centered around two issues.
One is a clause in the resolution that compelled CRHA to complete a financial sustainability plan that was requested by Council in February 2019. CRHA has to complete that plan anyway as part of a plan with HUD. The federal agency considers CRHA to be a “troubled” agency and the local authority must document how they can hit performance measures.
The ordinance before Council required that plan to be in place in order for the CRHA to get a third payment from the $3 million.
CRHA Executive Director John Sales said that requirement would prevent the project from breaking ground by the end of this year.
“It’s going to be really hard for us to close on both loans with that requirement in there because we won’t be able to show a bank that we’ve satisfied that requirement in order to close, so that could really put both projects at a point where they would not go forward,” Sales said.
Councilor Heather Hill said she wanted the sustainability plan to be completed.
“I want to know that by the time we get to that third draw which is our intention that we’re seeing real progress made to a reasonable end to the sustainability study because I just think that the longer this goes on, it’s not to our advantage,” Hill said.
Councilor Michael Payne said he would be willing to drop the requirement
“I’m certainly willing to be flexible,” Payne said. “Our intention is not at all to have this jeopardize any funding or jeopardize these projects.”
Council agreed to require the plan to be produced by the time a second phase for South Street moves forward.
The other issue regarded the taxes. The CCDC will not be exempt from local taxes.
Sales said the existing resolution did not give a guarantee that future Councils might stop paying an annual subsidy “equal to the dollar amount of the real estate taxes assessed and billed to the new project owner.” Currently the CRHA makes an annual payment to the city in lieu of taxes.
Jeff Meyer at the Virginia Community Development Corporation said the project will not attract investors if there is the potential for future liabilities that are not built into their proforma.
“No one is going to go forward with lending money or investing money into the project if we understand from the very beginning that they are not economically feasible because they have to pay the full liability for property tax,” Meyer said. “The concern would be that a future city council could overturn what’s written in the ordinance here.”
Under Virginia Law, elected bodies cannot appropriate funding beyond one fiscal year.
“You can budget for payment of your obligations from one fiscal year to the next but you can’t enter into binding obligations over a long term that aren’t subject to what we call a non-appropriations clause,” said interim City Attorney Lisa Robertson.
Robertson said there was no legal way for the city to waive the property taxes CCDC has to pay on the buildings. The CRHA will still own the land.
One solution would be for the city to pay the next fifteen years of property taxes in one lump payment that could be put into an escrow fund that the CCDC could draw down from.
Council chose to not go with that option.
“Our budget picture is pretty brutal and there’s still substantial uncertainty about what the impact of COVID will be this budget cycle,” said Councilor Payne.
Mayor Nikuyah Walker asked Meyer if the project would be halted if Council could not cover the cost of paying the next fifteen years of property taxes in advance.
“I think we’ll make every effort to go forward the with project but I can’t say something won’t come up once the language in the ordinance becomes something that our other partners and the others funders are going to read, and everyone who is going to review all of the documents,” Meyer said.
Walker pointed out that three current Councilors will serve until 2023. Payne said he would continue to support the city’s annual subsidization of property taxes for CCDC.
“It’s not difficult fiscally for us to fund that each year and maintain that but to put it all up front in one year, especially at this time, is a challenge,” Payne said. “I certainly get the uncertainty but I think the community and the Council has a 100 percent commitment to this.”
As this was only the first reading of the resolution, staff will take a look at potential ways to address Meyer’s and Sales’ concern. One option is a line item in the capital improvement program.
“It would set forth the idea that there is a plan and the intent is that you are going to fund this over the five years,” said Krissy Hammil, Senior Budget and Management Analyst for the city of Charlottesville.
Speaking broadly about public investments in housing, Walker said it was important to understand what these complex arrangements will mean for future Councils. Later in the meeting they took action on $5.545 million request for Piedmont Housing Alliance for the first phase of the Friendship Court redevelopment.
“It’s important for us to understand what we’re setting future councilors up for and when you talk about commitment to housing, then we have to say that this is our commitment to housing,” Walker said. Walker is a member of the CRHA and CCDC Boards.
Walker said Council also had to remember there would be future requests from CRHA and PHA for future phases.
“I just think if there’s a vote in favor of this, and I think both of these projects are very important, and I think the other Councilors agree, then we need to understand our limitation on doing other major projects while we figure out these two projects,” Walker said.
Budget staff have prepared a draft capital budget that more than doubles the amount of funding for housing-related programs.
“As has been the case in recent years, preparing for this five-year plan was most challenging,” wrote Ryan Davidson, the city’s senior budget and management analyst. “What is being presented to the Planning Commission reflects what we know at this time regarding the City’s total revenue and expenditure needs for FY2020.”
Interim City Manager Mike Murphy’s recommended budget for the next fiscal year will be presented to Council in early March of next year. Each year, Council generally approves the budget by April 15 after a series of work sessions that include public input.
While the capital budget lists potential outlays for a five-year period, Council only adopts a definitive budget for the twelve months that begin on July 1. The other four years are projections and can be changed or altered by future Councilors.
This past April, Council adopted a capital budget for FY2019 of $23.4 million. The proposed capital budget for FY2020 is $35.3 million, an increase of 51 percent over the current year.
The higher amount reflects a willingness of the current Council to put more funding toward affordable housing, including the redevelopment of properties owned and managed by the Charlottesville Redevelopment and Housing Authority and the Piedmont Housing Alliance.
The additional $12 million in capital funding for FY19 is made up of a $1.7 million increase from the general fund, $1.87 million by moving money from existing capital funds, $3.2 million from a budget surplus from FY 2018 and a bond issue in FY20 that is $7 million higher than the previous year.
The surplus money is specifically to be used for “affordable housing redevelopment” according to the line item in the draft budget.
The capital budget anticipates spending $15 million on public housing redevelopment over the next five years. That’s an increase from $500,000 in the current year. While the topic has been the subject of at least two Council work sessions, no specific course forward has been agreed to yet.
“This project would be to begin to set aside funding for the future redevelopment of the
City’s public housing sites,” the staff report reads.
There will no longer be a capital contribution made specifically to the Charlottesville Affordable Housing Fund.
Instead, funding will go to specific line items such as $900,000 for a supplemental rental assistance program to help increase the number of housing vouchers. Another $500,000 will go to “housing rehabilitation.”
“This would provide a continued source of funds for the housing rehabilitation projects
that were previously funded through the Charlottesville Affordable Housing Fund,” reads the staff report.
The Piedmont Housing Alliance is slated to get $1.54 million in infrastructure improvements for Friendship Court and another $4.4 million toward the first phase of redevelopment.
“This is a request for the costs of infrastructure construction related to the phased
redevelopment of Friendship Court into a mixed-use, mixed-income neighborhood,” reads the staff report. “The final redevelopment will be approximately 450 residential units in addition to an early childhood center and other commercial spaces that will serve the community.”
That includes replacement of 150 existing units that are currently provides to households that make less than 30 percent of the annual area median income, 150 new units that be set aside for families making between 40 and 60 percent of AMI and 150 for “middle-income households.”
All told, that translates to more than a doubling of funds toward housing in the capital program from $3.4 million this year to $7.3 million in FY2020. The five-year budget anticipates $17.5 million to be spent on this priority from FY20 to FY24.
There is another $300,000 that is anticipated for “City Yard Environmental Remediation.” City Yard is a 10.4 acre plot of land owned by the city of Charlottesville between West Main Street and Preston Street. The land is within the scope of a small area plan being conducted by the New Hill Development Group that is intended to help design a future neighborhood on the site.
“The City Yard at 4th St NW is the site of a former Manufactured Gas Plant (MGP), the
nearly 100-years of operations of which have left various byproducts and contamination
On-site,” reads the staff report. “While there is no clear State mandate or authority to address the on-site waste, its presence is and will continue to be a real or perceived liability that may limit or preclude transfer of ownership and redevelopment.”
The specific request is to complete the investigation stage and to pay for design of whatever remediation is required. A request for proposals for this service was issued earlier this month.
The 10.4 square acre property was assessed with a value of $6.87 million in 2018, down from $7.67 million in 2017.
Public safety and parks
The increased capital budget is not all related to increased capital spending on housing projects.
In early December, Albemarle and Charlottesville officials finally agreed to proceed with a plan to jointly locate their two General District courts in Court Square. The city anticipates spending $6.36 million on this project over the next two years. Albemarle County will pick up the rest of the $30 million tab.
“Under the agreement, Albemarle and Charlottesville will undertake a redevelopment of the Levy Building site, located at 350 Park Street,” reads the staff report for Tuesday’s meeting. “The Levy Building will be renovated for use by the County Commonwealth’s Attorney Office and a new 3-story building connected to the Levy Building will accommodate court sets for the City General District Court and County General District Court.”
Additionally, the capital budget shows $3.7 million going toward a replacement of the fire station on the U.S. 250 bypass. The city this week issued a request for proposals for a firm to design the new structure.
“After accounting for current station deviancies and various constraints surrounding ‘optimal’ fire station locations, the Study recommended the redevelopment of both the Bypass Station and the Ridge Street Station at their current locations, with the Bypass Station being the highest priority,” reads the staff report.
While there is $245,000 programmed for new restrooms at Riverview Park, there is no money in the five-year capital budget to implement a master plan for McIntire Park. The budget does anticipate the spending of $1.2 million over the next three years (including the current year) on renovations at Darden Towe Park, which is jointly owned by the city and Albemarle County.
Several line items that have been in the budget for many years have been zeroed out for the coming year and others have been slated for elimination completely. There is no money proposed for “economic development strategic initiatives” in FY20 or FY21, though $150,000 is programmed for each of the following three years.
The capital budget for the current fiscal year includes $250,000 for “NDS permit tracking software replacement” and $50,000 for a “cultural landscape study.” Neither of those will receive additional funding.
The city will continue to spend $200,000 a year on “bicycle infrastructure.”
“Potential projects will be vetted through the Bicycle and Pedestrian Safety Committee as well as at Traffic Meetings to include N.D.S., police, fire, parks/trails planner, and public works,” reads the staff report.
Two separate line items for “trails and greenway development” and “parkland acquisition” have now been combined into a single “parkland and trails acquisition and development” that is slated to receive $1.25 million over the next five years.
“These funds will be used to pursue land acquisition opportunities to preserve open space,
protect natural resources and improve riparian buffers and provide future trail connections,” reads the staff report. “Green infrastructure and open space conservation are often the cheapest way to safeguard drinking water, clean the air and achieve other environmental goals.”
There is another $625,000 that would be spent to refurbish infrastructure of the downtown mall, a project that currently does not have a dedicated source of revenue. If agreed to by Council, this money will come directly from fees paid for by mall vendors.
“Examples of work would include runnel repair or renovation, crossing repairs,
repairs to section from Omni to Water Street, reworking/repairing larger fields of pavers
that have failed or are failing, light relocation or replacement, upgrading electrical
systems to include more efficient lighting fixtures, banner and flag bracket replacement
and repairs, twice a year cleaning and sanding and similar activities,” reads the staff report.
As is the case every year, there are more requests than can be funded.
Central Library Renovation – $12.3 million
Ridge Street Fire Station and Redevelopment – $10.9 million
Dairy Road Bridge Replacement – $6.5 million
McIntire Park Master Plan Implementation – $6 million
Washington Park Recreation Center Replacement – $5.25 million
New sidewalks inside the Strategic Investment Area – $4.9 million
Tonsler Park Master Plan implementation – $3.5 million
Meadow Creek Valley Trail Railroad Tunnel – $1.47 million
Stribling Avenue sidewalk – $1.45 million
Monticello Trail / I-64 Tunnel – $1.45 million
Structural maintenance at Market Street Garage – $485,000