Fiscal Note
The inclusion of any new property within the City's boundary will have some fiscal impact, as assessable property is added to the City tax roll and as services are extended to new areas. Usually, annexations involve undeveloped land in relatively unpopulated peripheral locations. In these situations, the initial cost of providing City services is relatively low, and the tax revenues derived from future taxable development is typically sufficient to fund the increased City costs associated with extending infrastructure and services to the newly developing area. When annexations involve previously developed properties, they typically occur in small increments, often involving single parcels. In these cases, the impact on existing service delivery routes, schedules and staffing requirements is minor. Often, the additional tax revenues derived from the annexed property will more than cover the marginal cost associated with extending services to the new parcels.
The proposed attachment of Town of Madison territories located in the vicinity of Badger Road, Ann Street and Park Street presents a considerably different case, however. The revenue sharing provision contained in the proposed settlement agreement and the inclusion of a significant number of existing residents within the attachment area will act to increase the budgetary impact of this boundary adjustment when compared to the typical annexation.
Revenue Sharing
The state approved cooperative plan between the Cities of Madison and Fitchburg and the Town of Madison required a revenue sharing payment in cases of "early attachment" of Town property such as this one. That plan states that the Town will retain the property taxes collected for the most recent year, and the City will provide a revenue sharing payment to the Town, equal to that amount, for the succeeding 9 years. The currently proposed settlement agreement pertains to the second allowable early attachment, which is broken into 3 phases. The attachment of Phase 1 property prior to the end of 2006 would require no revenue sharing in 2006 or 2007. It would, however, require the City to make an annual payment to the Town beginning in 2008.
On January 1, 2006, the properties located within the proposed Attachment Area 1 had a total assessed value of $12,268,880 and the Town, with a reported 2006 municipal tax rate of 8.15 mills, will assess municipal property taxes of approximately $100,000, payable in 2007. The Town would retain these collected in 2007 and the City would pay $112,000 to the Town annually from 2008 through 2016.
Service Costs
Operating impacts associated with serving Attachment Area 1 would begin to be felt in 2007. The area proposed for attachment includes 49 parcels containing approximately 128 dwelling units and an estimated 250 to 300 residents along with a number of retail commercial establishments. The dwelling units are almost all located within multifamily attached structures. Responsibility for serving these properties would transfer to the City immediately upon attachment.
No estimate has been made regarding the additional resources that will be needed to serve this newly attached area and no funding is provided in the 2007 Operating Budget for staff and service cost increases related to this attachment. Separate Common Council budget amendments would be required to increase current staffing or expenditure authorizations. Future year service costs would need to be considered as part of those subsequent years' budget deliberations. In the absence of additional budgeted resources, the attachment of this expanded territory will result in the reallocation of existing staff and other operating resources from existing areas of the City, to the extent that services are allocated to the newly attached area.
No estimate has been made of the infrastructure and capital investments that may be needed to serve the area to be attached.
Future Tax Revenue Growth
After the City reassesses properties in Attachment Area 1, the taxes collected on this newly added value are estimated to total approximately $115,000, about equal to the $112,000 annual revenue sharing payment to the Town. These additional taxes would first be received in 2008.
Much of the attached territory, as well as adjacent lands currently located within the City, may be considered for inclusion within the boundaries of a newly created TIF district. If this would occur, increased taxes derived from property value growth within the TIF district would be committed to fund the capital project costs anticipated in the adopted TIF plan. Thus, new development and redevelopment of existing property would serve to increase the incremental taxes flowing to the TIF district, and future growth in property value from the newly attached area would not be available to fund operating budget services until the TIF district is closed. TIF increment could, however, be used to fund the required revenue sharing payments in the future if such a district is created.
Summary
No estimate has been made of the operating costs or capital investment needed to serve the properties and residents within the proposed Attachment Area 1. Funding for additional staffing and other service costs is not included in the 2007 budget, and in the absence of separate budget amendments to augment the existing service level, any direct services provided within the attachment area will necessarily be reallocated from other existing areas of the City. The City would also be responsible for making annual revenue sharing payments of $112,000 to the Town of Madison for 9 years, beginning in 2008. This payment would be roughly equal to the base year taxes the City would collect from the newly attached properties. Finally, if future property tax revenue growth derived from the attachment area will be committed to TIF redevelopment purposes, it will not be available to fund increased operating costs incurred to serve this area until the TIF district is closed.
Title
SUBSTITUTE - Authorizing the Mayor and City Clerk to execute an intergovernmental settlement agreement with the Town of Madison for the attachment of Town lands to the City in the Badger Road-Ann Street-Park Street area and to provide for future revenue sharing payments to the Town in accordance with the approved cooperative plan.
Body
WHEREAS, the state-approved City of Madison, City of Fitchburg and Town of Madison Cooperative Plan (the "Plan") authorizes two Early Attachments of territory from the Town of Madison ("Town") to the City of Madison ("City") as part of the City's creation of a tax incremental district ("TID") or redevelopment district ("RD"), provided that the City has conducted the necessary blight studies and prepared a complete TID or RD plan that includes some territory in the Town, and further provided that the City agrees to provide certain revenue sharing payments to the Town for lost local tax revenues; and
WHEREAS, the City has completed the necessary blight studies and prepared a complete TID or RD plan consistent with applicable law that includes some territory in the Badger Road-Ann Street-Park Street area of the Town, and has notified the Town in writing that the Common Council intends to adopt an Ordinance (ID No. 01628) attaching the subject Town parcels that are to be included in the proposed TID or RD, all as provided under Section 8.A.3. of the Plan; and
WHEREAS, the Town has objected to the inclusion of some of the Town parcels in said attachment ordinance, and, on August 1, 2005, submitted the matter to binding arbitration under the said Section 8.A.3. of the Plan; and
WHEREAS, the Town and the City have met and entered into negotiations to resolve this dispute on mutually acceptable terms outside of the pending arbitration and have reached an agreement to implement paragraphs 1 through 4 below immediately and to submit the balance of the terms to the State Department of Administration as a minor amendment to the Plan, as follows:
1. The City shall not adopt the attachment ordinance in the form previously proposed in Substitute Ordinance ID No. 01628.
2. The matter of the City's previously proposed attachment ordinance is withdrawn from arbitration.
3. The City may adopt an attachment ordinance providing for immediate attachment of some territory, as set forth in the Second Substitute Ordinance. This attachment shall be the City's second and final Early Attachment under the Plan, and shall not require City of Fitchburg or State approval, as it is not an amendment to the Plan. The Agreement constitutes notice under sec. 8.A.3. of the Plan and the Town waives its rights under the Plan to object to or challenge the attachment as set forth in the Second Substitute Ordinance and shown on the attached map.
4. If the Second Substitute Ordinance takes effect on or before December 31, 2006, then the nine revenue sharing payments from the City to the Town associated with the attachment shall, for each year, be increased to 103% of by $12,000 over what they would otherwise be under Sec. 8.A.3.b. of the Plan.
5. The Town shall continue property maintenance and building code enforcement procedures for all parcels contained in Area 2 and Area 3 on the Map. The property maintenance and building code enforcement procedures shall include:
a. Log and document all property maintenance and building code complaints and contacts.
b. Perform an interior unit inspection of all property maintenance and building code complaints, prior to contacting the landlord.
c. Write violation orders for all code violations revealed by the initial inspections, prior to contacting the landlord.
d. Prosecute all code violations not corrected as ordered; however, the building inspector may reasonably extend the period for correcting the code violations.
e. Make records pertaining to paragraphs (a) through (d) available for review and potential copying by City personnel at the Town Hall upon request by the City.
6. The City may in the future attach a parcel or group of parcels in Area 2 or Area 3 if the following requirements are satisfied:
a. Owner-Initiated Redevelopment Project.
(1) Definitions.
(a)"Redevelopment Project" means:
1. The construction of, alterations of, or additions to any buildings, structures or accessory structures on a parcel or group of parcels; or
2. The demolition of any existing principal building(s) or structure(s), provided that the demolition is:
(i) in preparation for construction of a new building(s) or structures(s);
(ii) in preparation for the construction of additions or substantial alterations to existing building(s) or structure(s);
(iii) in preparation for the creation of a new open space or planned open space improvements; or
(iv) any combination of (i) through (iii).
3. To constitute a Redevelopment Project, the estimated cost of the work to be performed pursuant to the redevelopment project must exceed fifty percent (50%) of the highest equalized assessed value of the (including improvements)only on over the past five years of the parcel or parcels on which the work is to be performed and be in excess of $500,000 $1,000,000.
4. To constitute a Redevelopment Project, the parcel(s) proposed for attachment to the City under paragraph (2), below, must, as a group, be contiguous to territory already in the City that is part of the City's Redevelopment District.
(b) "Implemented" means more than fifty percent (50%) of the proposed Redevelopment Project has been completed.
(2) Not sooner than July 1, 2011 for any parcel in Area 2, and not sooner than July 1, 2016 for any parcel in Area 3, if any Town parcel is proposed to be included in a Redevelopment Project initiated by a property owner who desires to attach the parcel to and redevelop the property in the City, the parcel may be unilaterally attached to the City upon thirty (30)-days written notice to the Town. The property owner shall have a bona fide, owner-initiated Redevelopment Project proposal that has been reviewed and is supported by City Planning and Development staff. If the Town objects to the proposed attachment, the City may not attach the property unless and until an independent third party, acting under paragraph 3.b., below, determines that there is a bona fide, owner-initiated Redevelopment Proposal for the parcel(s) that meets all the requirements set forth in paragraph 3. of this agreement. The Redevelopment Project shall be implemented within two years of attachment. If the Redevelopment Project is not implemented within two years of attachment, the City shall either:
(a) Detach the property back to the Town, or
(b) Pay additional revenue sharing to the Town. The amount of additional revenue sharing to be paid by the City shall be one hundred percent (100%) of the local government share of tax revenues (measured at the year of attachment), for the parcel or parcels on which the Redevelopment Project is planned for each full year, beyond two years, that the Redevelopment Project is not implemented. The additional revenue sharing shall be prorated for the year, after two years, that the Redevelopment Project is implemented. The City need not make payments under this paragraph until the Redevelopment Project is implemented and, thereafter, shall make the additional revenue sharing payments to the Town in equal parts spread over the remaining years for which it owes revenue sharing payments associated with attachment of the parcel(s). Notwithstanding the above, all payments due the Town under this paragraph must be made no later than January 1, 2017.
(c) Any dispute over whether or when a Redevelopment Project has been implemented shall be resolved by an independent third party under paragraph 3.b., below.
b. For purposes of paragraph 3.a., above, the "independent third party" shall be an individual chosen by the director of Municipal Boundary Review of the Department of Administration, or the functional successor to that position. The individual shall not do substantial business for the City or the Town. Nor shall the individual do substantial business on behalf of others before the City or the Town. The individual shall be knowledgeable on the types of issues involved in the dispute. Any decision issued by the independent third party may not be appealed and shall be based on written submissions made by the parties. The independent third party shall issue his or her decision within twenty (20) days of receipt of the parties' submissions.
7. The Town and City acknowledge that it is in their mutual interest to prevent the development of premises with chronic problems requiring policy or building inspection services and to address such premises once they develop so that the problems are resolved. The Town and City also acknowledge that the value of the City's investment in the Redevelopment District may be compromised if such premises develop and persist within or in proximity to the Redevelopment District. Accordingly, the Town and City agree that they shall confer concerning how to address such premises that may develop: (1) in City territory within the Redevelopment District; (2) in City territory within 1/4 mile of the Redevelopment District; or (3) in Town territory within Area 2 or Area 3. The Town further agrees that if the City proposes a plan for addressing such premises in Town territory within Area 2 or Area 3, which plan includes early attachment of lands to the City, the Town will in good faith consider agreeing to such attachment.
NOW, THEREFORE, BE IT RESOLVED that the Mayor and City Clerk be and are hereby authorized to execute an intergovernmental settlement agreement between the Town and the City of Madison containing the terms and conditions stated above, in a form approved by the City Attorney.