Report advises fiscal impact eval for new development

At the Sept. 18 meeting of Albemarle City Council, Kevin Shepherd of Verdunity, a consultant hired by the city to perform a Land Use Fiscal Analysis, reported on the long-term fiscal health of the city with respect to land uses.

In the study, the firm provides recommendations on long-term changes to the city’s approach to land use. These will be used in the city’s comprehensive plan as well as in individual development decisions.

“Most cities experience a significant resource gap between money on hand and money needed to sustain the quality of living its residents are accustomed to,” said Shepherd in summarizing a number of factors he has evaluated in providing similar services to cities throughout the nation.

“Every city says it wants to be fiscally sustainable, environmentally resilient and socially inclusive, yet in reality, development patterns, daily decisions and investments rarely align with these desired outcomes,” he noted. “Verdunity provides city leaders with fiscally-based planning, engineering and community engagement services that prioritize civic vitality and long-term sustainability over short-term results.”

Shepherd cautioned council members against common mistakes many cities make in their efforts to grow.

“Not all growth and development is necessarily good when one considers the long-term impact on city finances and its ability to serve and maintain infrastructure and neighborhoods,” he said.

Shepherd noted the importance of parcels within a city generating revenue to make them sustainable over time.

“Properties in the city limits to which services (utilities, etc.) are provided, but which are vacant or otherwise unused cost the city, which is on the hook for the infrastructure to the property,” he said.

Modern trends in residential and business development do not always bring about favorable results, Shepherd added, using downtown business districts and suburban stand-alone store areas as examples.

“The traditional downtown grid outperforms suburban style development,” he stated, in reference to fiscal sustainability.
“For example, a mixed use development in a traditional downtown grid district, with ground-floor businesses and upstairs residences, 16.32 acres in size, generates an average of $6,784 of tax revenue per acre. A big-box store, normally located outside of a downtown area, which occupies 20.62 acres, only generates an average of $4,193 tax revenue per acre,” he noted.

The correlation is similar in residential areas, according to Shepherd.

“The more of a property a building occupies, the higher the revenue per acre,” he said, adding that additional vertical floors further increase such revenue.

“More small lots lead to more houses,” said Shepherd, “and over time that can slow or eliminate the need to increase property tax rates,” using a residential development with 70-foot lots and 31-foot wide streets, compared to one with 50-foot wide lots and 27-foot wide streets, as an example.

“This is true in every city we’ve modeled,” he added.

Revenues are crucial to sustainability as the cost of maintaining and adding streets and infrastructure becomes necessary, said Shepherd, using an example of the cost that would be required to totally rebuild all streets in Albemarle over a 25-year period.

“The cost to totally replace the city’s streets would be about $190 million,” said Shepherd, noting that over 25 years that cost would be $7.6 million annually.

“Very few cities are actually doing this,” he noted, “but you need to be aware of these liabilities.”

Shepherd described Albemarle’s financial status as positive in reviewing the 2023-24 city budget, in comparison to many cities with whom he deals.

“The fact that Albemarle’s budget revenues come almost 41% from property taxes is a good sign,” he
said. “We (Verdunity) encourage cities to shoot for a goal of 50%.”

Shepherd also was complimentary of the city’s recent updates to subdivision and zoning regulations.

“It is important to update ordinances regularly and build on these updates over time,” he noted, “and it
appears you are doing this.”

Shepherd closed with two additional items of advice to council members.

“Be sure to prioritize and coordinate economic development and the city’s capital improvement plan so that incremental growth is incentivized,” he said.

“Also, the city needs to continue to pursue aggressive preventive maintenance for its streets.”

Mayor Ronnie Michael thanked Shepherd for the information provided in the report.

“You have given us something to study and discuss in preparation for the next budget year,” he said.