MOUNT VERNON — Mount Vernon City Council members are considering adding another tool to the city's development toolkit. The tool is attractive because it answers the question “Who pays for the infrastructure needed to accommodate growth?”
The new tool is an NCA: New Community Authority. Similar to the special energy district and PACE program council approved last year, council would create the tool, and then apply the tool to projects as they occur.
The new projects are residential and commercial development.
“These new community authorities are probably the best way to do that within the economic development ecosystem,” Area Development President Jeff Gottke told council on Monday night.
“This is a way we can accommodate for all of those increased infrastructure costs that we're going to have based on new housing developments.”
Caleb Bell of Bricker & Eckler law firm said NCAs started out as a county tool only as a way to create new communities out of farmland. Over time it evolved into something used by municipalities, with a number being used in Central Ohio.
An NCA is a separate government entity that has development powers. It can put in infrastructure and acquire land for a development as well as levy a special tax in that development only to pay for the project.
“That combination of powers is what makes this tool very special,” Bell said. “The reason communities that are experiencing growth use this is tool is because it's a way of getting an additional revenue stream from new development. It doesn't burden the existing community.”
To create an NCA, a developer — which can be a municipality — files a petition with city council. Council holds a public hearing and must approve creating the NCA.
Council then creates an NCA board and appoints members, typically seven, to the board.
Bell said the NCA tool targets new developments or undeveloped areas that are going to be developed and puts a charge or assessment on those properties only. The property can be a 1,000-acre development or a single parcel.
“That's the key tool here. What that does is creates an independent revenue stream that comes from just new development,” he said.
The assessment can be based on a dollar amount per year, millage, income, and/or sales. Bell does not recommend the income or sales options.
The assessment is placed only on those properties under the NCA, not existing properties. It runs for a specified length of time, such as 20 years, and stays with the property.
Assessment rates can be different depending on the structures built. For example, single-family homes might be assess millage, whereas apartments or commercial structures might have a different financing structure.
NCA money can be used for land acquisition, infrastructure, roads, sanitary sewer, a new fire station, and community facilities. Community facilities include day care centers, pools, parks, educational facilities, lighting, pedestrian underpasses, recreational facilities, and other amenities.
NCA money can also be used for debt service on bonds issued to finance development improvements. That means the city can borrow money now to put in the infrastructure and use the NCA revenue to pay off the bonds.
“Based on our experience, [the assessment] has not been a hindrance. It's not blocked people from buying a lot or freely transferring a lot,” Bell said. “What we see are developments that are supported by community charges tend to have slightly better amenities packages or better infrastructure surrounding those developments.”
Gottke said he spoke with several local Realtors, exploring different millage scenarios and asking if they felt it would hinder clients' ability to buy or sell. Their response was “no.”
“But that's the needle that we have to thread: What's that assessment going to be, and how do we maximize that without hurting the market. But I didn't hear any negative feedback from the Realtors about an extra assessment hurting demand,” he said.
Projected revenue depends on the millage amount and number of years the assessment is in effect. Applying 2 mills to the Rockford Homes and Highland Real Estate developments that are in progress, revenue would be $3.79 million over 30 years.
A 6-mill assessment would net $11.39 million.
Council sets the millage amount and length of the assessment. City council can also direct the NCA to set aside a portion of the millage to go toward schools to offset the effect of more students.
Bell said that in his experience, schools typically perceive schools as agnostic or beneficial because it is additional millage, not diverting money from other revenue streams.
Gottke said he has talked with the Mount Vernon Schools' superintendent and treasurer about an NCA. Based on the outcome from Monday night's council discussion, Superintendent William Seder will determine whether to talk with the school board about what a potential agreement might look like.
Developers must agree to use the NCA tool. Matt Skinner of Highland Real Estate has worked with other municipalities that have NCAs and agrees it is a simple way to pay for growth.
“Someone who is buying a $300,000 house is not going to worry about $500 extra a year in taxes,” he told council. “This is an awesome tool for the city.”
City Auditor Terry Scott said he sees an NCA as being a win-win.
“Because where does the burden lie in the development itself?" he asked, adding that with an NCA, existing residents do not get burdened with the cost.
Unlike a TIF (Tax Increment Financing) District, Scott said, “This is more open-ended and has the ability to provide more services well beyond what we can think of right now.”
Bell said it typically costs $20,000 to $25,000 for his firm to create the framework for an NCA. Council agreed to have him proceed.
