THE TOWN OF MORRISVILLE

BLUE RIBBON COMMISSION ON TRANSPORTATION FUNDING REPORT DECEMBER 2014

Prepared for the Morrisville Town Council

Prepared by

The Town of Morrisville Blue Ribbon Commission on Transportation Funding

Reza Jafari, Chair

Lee Langston, Vice-Chair

Robert Bush

Craig Groce

Kenya Odour

Michael Roberts

V. Amar Sarvepalli

Jason Schronce

Narendra Singh

Brij Shah

Cindy Szwarckop

The information in this report was compiled by

Benjamin Howell, AICP, CZO Transportation Planner

Town of Morrisville Planning Department

Layout and Production by:

www.moffattnichol.com

TOC - 1

Table of Contents Executive Summary .................................................................................................................. i

Introduction ............................................................................................................................ 1

Evaluation Criteria ................................................................................................................... 4

Evaluation of Financing Methodologies ................................................................................... 6

I. General Obligation Bonds ....................................................................................... 6

II. Installment-Purchase Debt ..................................................................................... 9

III. Revenue Bonds ..................................................................................................... 12

IV. Tax Increment Debt .............................................................................................. 14

V. Special Assessment Debt ...................................................................................... 16

Evaluation of Funding Sources ............................................................................................... 18

I. Property Tax .......................................................................................................... 18

II. Motor Vehicle Registration Fee ............................................................................ 20

III. Powell Bill .............................................................................................................. 22

IV. Development Requirements ................................................................................. 24

V. NCDOT STIP Funding ............................................................................................. 26

VI. CAMPO/Federal Funds .......................................................................................... 28

VII. CDBG Infrastructure Grants .................................................................................. 30

VIII. Local Sales Tax ....................................................................................................... 31

IX. Special Assessment – Private Property ................................................................. 33

X. Impact Fees ........................................................................................................... 35

XI. State Transportation Grants ................................................................................. 37

XII. Permits/Fees/Sales & Service ............................................................................... 38

Conclusion ............................................................................................................................. 40

APPENDIX A .......................................................................................................................... A-1

Overview of Town Funds Spent on Transportation Improvements

APPENDIX B .......................................................................................................................... A-3

Approximate Cost Estimates for Roadway Projects

APPENDIX C .......................................................................................................................... A-5

Sources

APPENDIX D .......................................................................................................................... A-6

Acknowledgements

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Executive Summary The Blue Ribbon Commission on Transportation Funding was formed by the Morrisville Town Council in August of 2013, with members appointed that November, to study possible funding sources for transportation projects in the Town. The Commission met monthly from January until December of 2014, and presented a final report to the Town Council in January of 2015. The Commission consisted of 11 members, including two non-residents, who had varying levels of expertise and interest in transportation.

The following 6 criteria were used by the Commission to evaluate the possible funding sources:

Sufficiency

Timeliness

Predictability

Equity

Suitability

Cost

The Commission divided the possible funding sources into two categories – financing methodologies and funding sources – based on how the Town generated the funding. Following are the 17 financing methodologies and funding sources:

Financing Methodologies Funding Sources

General Obligation Bonds Property Tax CDBG Infrastructure Grants

Installment-Purchase Debt Motor Vehicle Registration

Fee Local Sales Tax

Revenue Bonds Powell Bill Special Assessments–Private

Property

Tax Increment Debt Development Requirements Impact Fees

Special Assessment Debt NCDOT STIP Funding State Transportation Grants

CAMPO/Federal Funding Permits/Fees/Sales/Service

A General Obligation Bond is a form of financing that generally has a lower interest rate than other municipal debt, is generally the only form of financing that requires a voter referendum, and is secured by the Town’s unlimited taxing power and full faith and credit. Installment-Purchase Debt is another form of financing that does not require voter approval (via referendum), and is secured by non-tax revenue or property. Revenue Bonds are secured by and paid for by user revenues, such as user fees or tolls on roadways. Tax Increment Debt (or tax increment financing) is secured by additional property tax revenue produced by private development. Special Assessment Debt is financing secured by and paid for from assessments levied against private property.

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Property Tax revenue, the primary source of revenue for many municipalities and counties, is levied on private property, including land, buildings and vehicles each year, and is based on the value of the private property. The Motor Vehicle License Fee is a fee charged each year when a resident registers a vehicle with the state. The State Aid to Municipalities funding, better known as the Powell Bill, are funds, generated by the state gasoline tax, distributed by the state to municipalities to help fund transportation projects on municipally-maintained roads. Private Development Requirements are requirements the Town places on new development to construct infrastructure to serve that development, including thoroughfare requirements from the adopted Transportation Plan. North Carolina Department of Transportation State Transportation Improvement Program (NCDOT STIP) funding is the traditional source of transportation funding in North Carolina for state roads – most of this funding comes from vehicle sales tax and state and federal gasoline tax revenues. Another source of funding is from the Capital Area Metropolitan Planning Organization and the federal government – CAMPO/Federal Funding – these funds are generally distributed through competitive grant processes, and are generated from the federal budget.

The Community Development Block Grant program provides some infrastructure grants (CDBG Infrastructure Grants) to the Town for use in areas with low-to-moderate incomes. The Local Sales Tax is levied by the county, and collected by the state, on purchases made within a county. Special Assessments – Private Property are assessments levied on property to pay for public improvements benefitting that property – this funding source differs from special assessment debt in that there is no related outside financing. Impact Fees are fees charged by some jurisdictions to fund certain public infrastructure and facilities – these fees are generally charged per unit. State Grants are miscellaneous funds distributed by the state to municipalities through a competitive grant process. Finally, Permits, Fees, Sales and Services is miscellaneous revenue generated by many different functions within the Town, such as facility rentals, recreation programs, development fees and privilege license taxes for businesses operation within the town.

In order to evaluate the potential funding sources for transportation, the Commission used several criteria to determine if the Town should continue using a funding source, review a funding source for future use, or not use a particular funding source to fund transportation projects. The following six criteria were used by the Commission to evaluate the different funding sources: Sufficiency, Timeliness, Predictability, Equity, Suitability and Cost. More information can about the evaluation criteria can be found in the Evaluation Criteria section of the Report.

The Town currently uses several sources to fund transportation improvements, and the Commission agreed that the Town should continue to use General Obligation Bonds to finance transportation improvements, as well as the following funding sources to either directly fund improvements or pay debt service related to financing: Property Tax, Motor Vehicle Registration Fee, Powell Bill, Development Requirements, NCDOT STIP funding, CAMPO/Federal Funding and CDBG Infrastructure Grants.

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For more information on the Commission’s recommendations, see the Summary Evaluation Matrix below and the Evaluation of Financing Methodologies and Funding Sources sections of the report.

Summary Evaluation Matrix - Transportation Financing Methodologies and Funding Sources

Table 1 The evaluation conducted by the Commission, and summarized in the Evaluation Matrix table, was subjective, and based on Commission discussion. For more information on how the Commission evaluated each item and how they came to their recommendation, please see the appropriate section of the Report.

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Level of Investment Matrix

Sources: Fiscal Year 2014-2015 Operating Budget, 2014 NCDOT Powell Bill Report

FINANCING METHODOLOGIES & FUNDING SOURCES

Fund

ing

Sour

ces

Installment-Purchase DebtProperty Tax

CAMPO/Federal FundingCDBG Infrastructure Grants

Impact Fees

NCDOT STIP Funding

State Transportation Grants

Motor Vehicle Registration FeePowell Bill

Local Sales Tax

Development Requirements

Special Assessments - Private Property

General Obligation Bonds

Approximate Level of Investment

Fina

ncin

g M

etho

dsRecommended Type(s) of Projects

$10,000,000+

$1,000,000 - $5,000,000

$0.01 Generates $373,000 (FY2015 Est.)$15 Generates $255,000 (FY2015 Est.) Maintenance; Bike/Ped; Transit

Bond Debt; Maintenance; Bike/Ped; Transit

Land Acquisition; Bike/Ped

New Roads, Major Road Widening

$502,929 (FY2015)$2,274,000 (FY2014 Est.)

2015-2025 Draft STIP: $86,386,000Up to $5,000,000/Project

$333,000 FY16-FY21$3,810,000 (FY2015 Est.)

UnknownUnknownUnknown Bike/Ped; Transit

Capacity ImprovementsTargeted Improvements

Bond Debt; Maintenance; Bike/Ped; TransitBike/Ped; Small Roadway ProjectsRoad Widening; Bike/Ped; Transit

New Roads; Road Widening; Bike/Ped; TransitThoroughfare Improvements; Bike/Ped

Maintenance; Bike/Ped

Table 2-This matrix correlates the approximate level of investment with types of projects. It is separated between financing methodologies and funding sources recommended by the Commission for continue to use or review for future use.

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Introduction Within the last decade transportation has been an important issue in the Town of Morrisville, due to the level of congestion on the roadways in Town and the lack of transportation options. Municipalities face the dilemma of needing to manage the need for transportation infrastructure expenditures in a climate of declining revenue sources from the state and federal sources. Through the years, the Town Council discussed forming a citizen board to work on transportation issues and concerns, but it wasn’t until 2013 that they were able to form such a group. The Blue Ribbon Commission on Transportation Funding was formed by the Town Council in August of 2013, with members appointed in November of 2013. The Commission began meeting in January of 2014, and completed their work by December of 2014.

Background on formation of Commission The Commission was formed to study possible funding sources for transportation projects in the Town, and report their findings to the Town Council. Staff prepared several informational presentations for the Commission, including one by Dr. Jack Vogt, an adjunct professor in the UNC School of Government, in which he presented a myriad of financing methodologies and funding sources for the Commission to consider and evaluate. The Commission evaluated 17 different financing methodologies and funding sources using six evaluation criteria, which were developed by staff and members of the Commission working together. This report provides an overview of the Commission’s work, as well as their recommendations concerning the different financing methodologies and funding sources.

Commission Membership In order to get a wide range of opinions and expertise, the Council opened membership on the Commission to both residents and non-residents. As part of the application process, the Council asked potential Commission applicants to identify their expertise or interest in the following areas:

Transportation Engineering

Transportation Planning

Project Development

Local Government or Project Finance

Motorized Transportation

Non-Motorized Transportation

Transit

Rank Location Factor 1 Transportation infrastructure2 Ease of Permitting and regulatory

procedures 3 Existing workforce skills 4 Land/building prices and supply5 Utility infrastructure 6 State and Local tax scheme7 Flexibility of incentive programs8 Availability of incentive 9 Access to higher education

resources 10 Legal Climate (tort reform)

Figure 1; Source: Site Selection Magazine, Survey of corporate real estate executives, Oct 2014

What Matters Most: Site Selectors’ Most Important

Location Criteria

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Once the call for applications for membership opened, the Town received 17 applications, six of which were from non-residents. After deliberation and several rounds of balloting, the Council appointed 11 members and two alternates to the Commission. During the Commission’s work, one alternate and one member resigned from the Commission.

Following are the final 11 members of the Commission, and their stated area of expertise or interest (if any):

Dr. Reza Jafari, Chair (Non-Resident) – Transportation Engineering

Mr. Lee Langston, Vice-Chair (Resident) – Project Management

Mr. Robert Bush (Non-Resident) – Transit

Mr. Craig Groce (Resident) – Rail Engineering

Ms. Kenya Odour (Resident)

Mr. Michael Roberts (Resident) – Project Management/Finance

Mr. V. Amar Sarvepalli (Resident) – Transportation Engineering

Mr. Jason Schronce (Resident) – Transportation Engineering

Dr. Narendra Singh (Resident)

Ms. Brij Shah (Non-Resident) – Civil Engineering

Ms. Cindy Szwarckop (Non-Resident) – Transportation Planning

Process and Timeline During the first four meetings (January – April), the Commission heard presentations from Town staff and outside experts about transportation in Town and the state, and different ways to fund or finance transportation projects.

The Commission spent the next five months (May – September) evaluating the various ways to fund transportation projects using six criteria, and used the final three months (October – December) to finalize the report. The Commission expects to present the report to the Town Council in January of 2015. Below is a brief timeline of the Commission’s work:

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Evaluation of Funding Sources The Commission evaluated ways to fund transportation projects by dividing seventeen funding sources into two categories – financing methodologies and funding sources – based on how the Town generated the funding. Financing Methodologies generally are debt instruments the Town can use (with funding generated by outside sources), while funding sources generate funding directly.

The financing methodologies evaluated were General Obligation Bonds, Installment-Purchase Debt, Revenue Bonds, Tax Increment Debt and Special Assessment Debt. The funding sources evaluated by the Commission include Property Tax, Motor Vehicle Registration Fee, Powell Bill, Development Requirements, NCDOT STIP Funding, CAMPO/Federal Funding, CDBG Infrastructure Grants, Local Sales Tax, Special Assessments – Private Property, Impact Fees, State Transportation Grants, and Permits/Fees/Sales & Service. To evaluate the financing methodologies and funding sources, the Commission used the following six evaluation criteria:

Sufficiency

Timeliness

Predictability

Equity

Suitability

Cost

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Evaluation Criteria In order to properly evaluate each financing methodology and funding source, the Commission agreed upon several criteria that were used for the evaluation. To develop the criteria for the Commission’s approval, staff worked with Jack Vogt, an Adjunct Professor with the UNC Chapel Hill School of Government, to present recommended criteria and example evaluations to the Commission.

The Commission then used the criteria to review each financing methodology and funding source to determine if the town should continue using, consider using in the future, or not use a particular financing methodology or funding source.

The six criteria are identified and defined below:

Sufficiency – To evaluate sufficiency, the Commission looked at whether a financing methodology or funding source could produce the funding needed to address the Town’s transportation improvements. The Commission then discussed if the methodology or source was sufficient for small or large projects, or if it was only sufficient for maintenance projects versus new construction or improvement projects, such as road widening.

Timeliness – The Commission evaluated timeliness by discussing whether a funding source or financing methodology could provide funding in a timely manner – such as whether funding would be available in a lump sum at the beginning of a project, or if the Town would have to save for a number of fiscal years to accumulate the necessary funding. In evaluating financing methodologies, the Commission specifically looked at whether a voter referendum would be required, since this effects timeliness of when a project can be started.

Predictability – In order to evaluate predictability of a funding source or financing methodology, the Commission considered whether a source or methodology was dependent on the economy, and whether it has the potential to change much year-over-year. The Commission also discussed the security of the financing methodologies and funding sources in relation to predictability – such as its history of use, or whether it was a “new” source or methodology that had not been used very much. Other factors considered included the legality and statutory authority for a specific methodology or source in the state, and whether the authority to use it could be removed in the future.

Equity – To consider whether a particular funding source or financing methodology was equitable, the Commission discussed how the source or methodology affected different users, and how it may impact different populations. The Commission looked at whether certain populations benefitted more or less from use of a particular source or methodology, or whether one population contributed to a certain source more so than other populations. The discussion also included geographic equity – whether a project

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benefitted a certain geographic area more than others – and project type equity – how different modes of transportation receive consideration in the funding source or financing methodology.

Suitability – The Commission evaluated suitability by discussing whether a financing methodology or funding source was appropriate for a specific use, and whether it might be limited by statutory authority or existing legal framework. The Commission also considered whether a source or methodology could provide adequate funding or flexibility for a specific type of project, and whether the source or methodology is limited to only certain types of projects or limited in the amount of funding it can generate or provide for transportation projects.

Cost – In order to evaluate the cost, both monetary and non-monetary, of a funding source or financing methodology, the Commission discussed whether a methodology or source had a financing cost or interest cost associated with its use, such as a loan origination fee, marketing fee, and interest rate. There was also a discussion of non-monetary costs, such as political costs associated with raising taxes.

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Evaluation of Financing Methodologies

I. GENERAL OBLIGATION BONDS General obligation bonds (G.O. bonds) are secured by the issuer’s unlimited taxing power and full faith and credit. These bonds may be paid from taxes or any other unrestricted revenue. In North Carolina, G.O. bonds are generally required by the State Constitution to be approved by voters in a referendum, and they generally have a lower interest rate than other municipal debt. Many North Carolina municipalities use G.O. bonds for major road projects. Local governments also have the ability to use what are called two-thirds bonds without voter approval, in which a local government issues non-voted G.O. debt in an amount up to two-thirds of the amount by which it’s outstanding G.O. indebtedness was reduced in the preceding fiscal year.

A. History of Use The town’s annual tax-supported debt service costs as a percentage of governmental revenues, is 6.36% at the close of Fiscal Year 2014. This is well below the policy limits of less than 15%, suggesting potential service flexibility and capacity to take on new debt. Debt as a percentage of assessed value is a low ratio suggesting the government is not overly reliant

on debt. As of June 30, 2014, Morrisville had a total of general obligation bonded debt outstanding of $10,525,000, and installment purchase related debt of $1,987,856. The total debt increased by $2,639,863 during the current fiscal year as a result of the issuance of $4,000,000 in general obligation debt for the Church Street Park and retirement of other installment loans.

Morrisville possesses a strong position within an expanding regional economic metropolitan area, with a wealthy and diverse demographic, strong financial position, and low debt obligation.

7.95%7.21%

6.36%7.64%

11.45% 11.03%

12.88%12.30%

Actual 2012

Actual 2013

Actual 2014

Proposed 2015

Forecast 2016

Forecast 2017

Forecast 2018

Forecast 2019

MORRISVILLE'S DEBT RATIO

3 From Morrisville FY2015 Annual Operating Budget Report Figure 2 - From Morrisville FY2015 Annual Operating Budget Report

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The town currently holds $20,000,000 in outstanding unissued bonds for Park and Street related improvements scheduled for issuance in Fiscal Year 2016 and Fiscal Year 2018. The Town is anticipated to leverage its taxing authority related to these approved bond referendum projects. Current forecast indicate that the debt ratio will remain just below 15% from 2016 – 2019 as a result. Retirement of other significant debt obligations will occur in 2021, lowering the ratio within historical norms potentially indicating future capacity.

As of June 30, 2014, the Town reported a healthy Unassigned Fund Balance of 49.9% as a percentage of expenditures. This is just above the Policy Target of 45%, indicating some potential for pay-as-you go options for onetime capital items.

Morrisville possesses a strong position within an expanding regional economic metropolitan area, with a wealthy and diverse demographic, strong financial position, and low debt obligation. The taxpayer base is diverse, with the Top 10 leading taxpayers account for 19% of Ad Valorem Revenue. The Town maintains an AAA bond rating from Standard & Poor’s Corporation and an Aa1 bond rating from Moody’s Investor Service. With such superior ratings, the Town can reap the benefits of stronger borrowing power yielding lower interest rates for future projects.

B. Evaluation The Commission evaluated G.O. bonds using the six criteria mentioned in the Evaluation Criteria chapter:

Sufficiency: G.O. bonds were deemed by the Commission to be one of the most sufficient ways to fund transportation projects - they are nearly unlimited as a financing methodology for the Town, since they are secured by the Town’s taxing authority. Use of G.O. bonds for the Town is limited by its debt capacity and annual budget, as well as the willingness of its residents to approve tax increases through voter referendums for specific G.O. bond-funded projects.

Timeliness: The Commission considered G.O. bonds to be relatively timely; however, they did note that it takes time to put the bonds out for voter approval and then sell the approved bonds. Generally, the Town cannot sell bonds for a project until the project is nearing the construction phase, which factors into the timeliness of bonds. For example, voters approved G.O. bonds in November 2012 for transportation and parks facilities; the bonds are not expected to be sold until 2015 at the earliest, with construction slated to start on the transportation project in 2016.

Predictability: G.O. bonds are considered to be one of the most secure financing methodologies from a borrowing standpoint, since the Town is pledging its taxing authority to pay the bond debt. While generally

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predictable, in most cases G.O. bonds must be approved by the voters in the Town, so the Town must be cautious in choosing projects funded by bonds to ensure voters approve the additional debt.

Equity: The Commission believes that equity of G.O. bonds is dependent on specific revenue sources the Town chooses to use to pay the debt incurred by the bonds – while the Commission generally agreed that using property tax revenue is equitable, using sales tax revenue was not believed to be as equitable. The general consensus of the Commission was that with G.O. bonds, Town residents receive some benefit from their investment (via property tax).

Suitability: The Commission agreed that G.O. bonds are one of the most, if not the most, suitable financing methodology for transportation projects – especially large projects costing millions of dollars.

Cost: The cost of using G.O. bonds is generally proportional to the amount of the bond itself – the larger the bond, the lower the financing cost would be in proportion to the amount of funds received from the sale of the bond(s). While the interest rate on the bonds is dependent on the Town’s bond rating, the Town maintains a high rating, which allows it to receive low-interest bond-financed debt. There are some upfront costs to sell the bonds, but the Commission believes that with larger projects, that cost is well worth the investment.

C. Recommendation The Commission recommends the Town continue use of G.O. banks, especially for large, expensive transportation projects. These bonds allow the Town residents to vote on a specific project, and allow the Town to access much more funding than its operating budget allows through long-term financing with generally low interest rates.

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II. INSTALLMENT-PURCHASE DEBT Installment-purchase debt is a loan transaction in which the town borrows money to finance repairs to an asset (like a road) and the town pledges the asset security. These transactions are commonly called 160-20’s because the requirements are found in G.S. 160-20. The debt is repaid by available and annually appropriated non-tax revenue and sometimes by the property financed with debt. By using Installment-Purchase debt the town can “finance or refinance the construction or repair of fixtures or improvements on real property by contracts that create in some or all of the fixtures or improvements, or in all of some portion of the property on which the fixtures or improvements are located, or in both, a security interest to secure repayment of moneys advanced or made available for the construction or repair.” Installment-purchase debt generally carries a higher interest rate than general obligation bond-financed debt.

A. History of Use Installment-purchase debt has been used extensively by local governments in North Carolina since the early 1990s for a variety of projects. Most local governments have used this financing method for capital projects such

as schools, jails and public safety facilities, but some municipalities have used this method to finance smaller street projects. Table 1, above, provides an analysis of the impact of the Town’s Debt Service on the budget.

In the past, Morrisville has used installment-purchase debt to finance land acquisition.

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Debt Service Items 2012 2013** 2014 2015 2016 2017 2018 2019 statusBonds 2004 Street Improvements (MSV-CRP/Jerimiah 117,775$ 114,363$ 110,950$ 67,275$ -$ -$ -$ -$ PendingGO Bonds 2007 Public Improvements (PSMS BLDG) 785,943$ 766,543$ 747,143$ 727,743$ 708,343$ 688,943$ 669,543$ 651,840$ continues to 2027Land Purchase 2008 (Downtown Development) 214,976$ 209,122$ 203,173$ 197,357$ -$ -$ -$ -$ PendingFire Station Two 1998 112,754$ 112,752$ -$ -$ -$ -$ -$ -$ Fire Trucks 2004 81,398$ 81,398$ 81,398$ 40,773$ -$ -$ -$ -$ Fire Station One 2011 334,623$ 327,484$ 320,518$ 313,552$ 306,681$ 299,620$ 292,654$ 285,688$ continues to 2021Municipal Service District Projects -$ -$ -$ 200,100$ 200,100$ 200,100$ 200,100$ 200,100$ continues to 2024Public Safety Radio Replacements -$ -$ -$ 162,360$ 159,575$ 156,790$ 154,003$ 151,218$ Bond 2004 Park Improvements (RTP Ball Park) -$ -$ 53,642$ 293,600$ 289,600$ 285,600$ 281,600$ 277,600$ continues to 2033Bond 2012 Street Improvements (NC54-Bypass) -$ -$ -$ -$ 1,430,000$ 1,394,250$ 1,358,500$ 1,322,750$ continues to 2034Bond 2012 Park Improvements (MAFC) -$ -$ -$ -$ -$ -$ 350,000$ 341,250$ continues to 2034Bond 2012 Park Improvements (MCC PhII) -$ -$ -$ -$ -$ -$ 220,000$ 214,500$ continues to 2034

Total Debt Service 1,647,469$ 1,611,662$ 1,516,824$ 2,002,760$ 3,094,299$ 3,025,303$ 3,526,400$ 3,444,946$

Equivalent Tax Rate 0.04872 0.04577 0.04199 0.05409 0.08153 0.07892 0.09019 0.08596Current Debt 1,647,469$ 1,611,662$ 1,463,182$ 1,346,700$ 1,015,024$ 988,563$ 962,197$ 937,528$ New Debt -$ 53,642$ 656,060$ 2,079,275$ 2,036,740$ 2,564,203$ 2,507,418$ Retiring Per Year as Calculated from Benchmark Year 2013 148,480$ 116,482$ 331,676$ 26,461$ 26,366$ 24,669$ Accumulated Retired Debt as Measured to Benchmark Year 2013 -$ 148,480$ 264,962$ 596,638$ 623,099$ 649,465$ 674,134$ Tax Base 3,381,598,636$ 3,521,406,350$ 3,612,522,538$ 3,702,835,601$ 3,795,406,491$ 3,833,360,556$ 3,910,027,768$ 4,007,778,462$ Total Expenditures* 20,732,159$ 22,345,251$ 23,855,623$ 26,206,560$ 27,030,719$ 27,431,859$ 27,371,523$ 28,009,161$ Maximum Debt Outlay Annually within policy 2,868,075$ 3,124,264$ 3,277,929$ 3,930,984$ 4,054,608$ 4,114,779$ 4,105,728$ 4,201,374$ Debt Service as % of expenditures - Policy 15% or less 8% 7% 6% 8% 11% 11% 13% 12%* Expendi tures less Transfers

** Benchmark Year

Table 3-Source: Progress in Motion--Town of Morrisville FY2015 Annual Operating Budget

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B. Evaluation The Commission evaluated installment-purchase debt using the six criteria mentioned in the Evaluation Criteria chapter:

Sufficiency: The Commission agreed that installment-purchase contracts may be sufficient for small projects, but would be a difficult financing method to use for larger projects, since it would take the Town longer to pay the debt off and installment-purchase contracts generally have higher interest rates than other financing methods.

Timeliness: Installment-purchase contracts do not require voter approval, so the Town may be able to receive the financing in a timelier manner. This type of debt usually has a shorter pay-back period, which may create a mismatch between the life of the facility and the pay-back period of the loan obligation.

Predictability: Installment-purchase debt is legally/statutorily secure – the NC Supreme Court has upheld its use throughout the state. Since this method of financing is similar to a bank loan or mortgage, it is not as predictable as G.O. Bonds due to the volatility of the market for financing. This financing method could also be difficult to use with road projects due to the security requirements from the lending institution.

Equity: The Commission felt that this financing method, if used for road projects, would most likely be used on smaller, Town roads, and so may be equitable for Town residents. The Commission did have questions about the equality when the pay-back period versus the life of the facility is taken into consideration, and the fact that no voter approval is required. The Commission also agreed that this financing method may not be equitable depending on the project funded, due to project size and location.

Suitability: Installment-purchase debt is most likely more suitable for funding smaller projects that are needed quickly, since the financing can be put in place relatively quickly and the time for the Town to pay the debt off can be shorter than that required to pay the debt from bonds.

Cost: Installment-purchase financing usually has a higher interest rate than general obligation bonds, resulting in a higher interest cost and potentially require the Town to pay an origination fee. There may also be additional

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monetary and non-monetary costs in the requirement to provide security (i.e. collateral) for the debt.

C. Recommendation The Commission recommends the Town review installment-purchase debt as a future financing method to fund small transportation projects such as small town roads. While this method may have higher interest rates than other financing methods, it may be an effective financing method for funding small, high-impact, short-term transportation projects.

III. REVENUE BONDS Revenue bonds are secured by and paid from user revenue generated from the self-supporting public enterprise. Many local governments in North Carolina have used these bonds for water and sewer system improvements, since these systems receive revenue through usage fees. For transportation projects, revenue bonds are generally associated with toll roads, since these types of facilities generate revenue. One other use for revenue bonds is constructing parking decks, since these facilities can produce revenue from parking charges.

A. History of Use Revenue bonds have a fairly long history of use by municipalities in the state for water, sewer and even trash collection systems (“enterprise funds”), since these systems generally receive revenue from system-specific usage fees.

North Carolina does not have much of a history of use of revenue bonds for transportation because, until the 2000s, there were no toll roads in the state.

B. Evaluation The Commission evaluated revenue bonds using the six criteria mentioned in the Evaluation Criteria chapter:

Sufficiency: The Commission agreed that revenue bonds, secured by tolls, at least in North Carolina, are generally not sufficient to fund the entire cost of a roadway project that will be tolled – the toll roads built to date in the state have required additional “gap” funding to cover the gap between the revenue bond payment and the toll revenue. Revenue bonds may be sufficient for the cost of construction of a parking deck, but the Town has not had a need for a public parking deck to date.

Timeliness: While revenue bonds do not require voter approval, there is time required to sell the bonds once a project is ready for construction. Once the bonds are sold, the funds would be available to the town immediately, with a schedule for paying the debt off over a number of years.

Revenue bonds traditionally finance construction of toll roads, with bonds repaid through toll revenue.

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Predictability: The Commission questioned the predictability of revenue bonds as a financing methodology due to their limited use in North Carolina for roadway projects. The predictability would be dependent on ensuring a road project financed with revenue bonds would generate enough toll revenue to generate the funds needed to meet the scheduled payments. The Commission also agreed that, in general, revenue bonds would be a higher-risk method of financing a road project.

Equity: Since revenue bond-financed road construction would be paid back by road-user fees, the Commission agreed that one of the most equitable ways to finance road construction would be entirely through revenue bonds. If other financing methods or funding sources are used in addition to the revenue bonds, this method becomes less equitable. Another equity question the Commission addressed had to do with the fact that toll roads generally exclude certain users, a given fee is regressive (each dollar represents a greater portion of income for a poor than a wealthy person.)

Suitability: At this time, revenue bonds are generally not available for use by municipalities in North Carolina, since only the state has the authority to toll roadways, and there are limitations in the General Statutes for tolling roads. Based on this, the Commission agreed that revenue bonds would not be a suitable financing method for road construction by the Town.

Cost: The cost of revenue bonds would be similar to the costs of general obligation bonds as far as bond sales; there would most likely be additional cost in the construction project due to the requirement to have a collection mechanism for the toll revenue. The Commission also believes that revenue bonds would probably carry a higher interest rate than other types of bond due to the risk associated with predicting how many people will use a toll road.

C. Recommendation The Commission does not recommend the use of revenue bonds for road construction projects, due to the issues cited above in the evaluation section. However, if the Town ever finds a need to finance a parking lot or parking structure, revenue bonds may be an adequate financing methodology to fund the construction. Further research into revenue bonds would be required to determine if this would be the best way to finance such a project.

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IV. TAX INCREMENT DEBT Tax Increment Financing (or TIF) is a type of debt financing in which a local government establishes a district and borrows monies to fund public infrastructure projects that will benefit (and incentivize) new private development in the district. The local government will pledge the incremental increase in property tax revenue generated within the district, due to the presumed increase in property valuation caused by the transportation improvement (as an incentive for development), as security for the loan. Tax increment financing generally does not require voter approval, but a local government approve the project. Also, a description of the TIF district and a development plan must be submitted to a state agency for approval. TIF’s are one of the few options a municipality can use without issuing general obligation bonds. It does usually carry a higher interest rate than other forms of financing. This type of financing could potentially be used to fund any type of transportation project – roadway, bicycle, pedestrian, streetscape improvements and transit infrastructure.

There is also what is known as a “Synthetic TIF,” which differs from a TIF in the nature of the security pledged for the loan. With a Synthetic TIF, the local government pledges either the asset (or portion of the asset) that is being financed or the government’s general taxing power as security for the loan, instead of the incremental revenue that is expected from the development. Legally there is no difference between a regular installment financing and a Synthetic TIF

A. History of Use This form of financing has only been authorized for use by North Carolina local governments for about 10 years, with debt issued for only two projects. Synthetic TIFs require the government to use either general obligation bonds or installment-purchase financing to provide the

funding for projects, so there may be voter approval required depending on the type of debt the local government will use. Potential uses for TIF or Synthetic TIF in Morrisville include public infrastructure for the Main Street site, in the proposed McCrimmon Transit Small Area Plan area, or even in the McCrimmon Parkway Extension area between Airport Boulevard and Aviation Parkway.

B. Evaluation The Commission evaluated tax increment debt using the six criteria mentioned in the Evaluation Criteria chapter:

Sufficiency: The Commission agreed that this financing methodology would only be sufficient for new projects, since the project must increase the property value in the designated district in order to generate additional tax revenue. One concern the Commission mentioned is the fact that, historically, most property values are increasing in Morrisville regardless of

Charlotte has been successful in using synthetic TIF for some development projects related to its light-rail line.

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investment, therefore incentivizing development with transportation improvements has not been required. Further, this methodology would work best in a location where the infrastructure investment will catalyze new development that will increase the property value in a district significantly.

Timeliness: While voter approval is generally not required for tax increment financing, it may be required depending on how the municipality funds the infrastructure development, which may impact the timeliness of this financing method. The availability and timeliness of funds will depend on whether the town chooses to use standard or synthetic tax increment financing, and the method of financing (i.e. loan, bonds, installment-purchase, and fund balance).

Predictability: The predictability of tax increment financing is dependent on the real estate market and general economy – the town must be able to realize the increase in property value and resulting tax revenue in order to pay the debt issued under standard or synthetic tax increment financing. This method also requires approval of the loan in standard tax increment financing by the NC Local Government Commission, which may be difficult to predict and receive based on the limited history of use in the state.

Equity: In reviewing the equity of the different types of tax increment financing, the Commission agreed that this method of financing could be equitable if the infrastructure constructed using tax increment financing catalyzes development in the district, since those property owners most benefitting from the infrastructure would be paying for the infrastructure with the increased property taxes. With that said, the Commission did discuss how the town must look at whether development served by infrastructure funded with tax increment financing will require more services in the future.

Suitability: Suitability of tax increment financing depends on the area served – the Commission generally agreed that it may be suitable for a commercial area, but most likely not suitable for a residential area. This method of financing would also not be suitable for correcting existing infrastructure problems, or for areas where development will occur regardless of the infrastructure investment of the town.

Cost: Tax increment financing is generally more cumbersome to use than other methods, due to the higher risk associated with relying on the increase in property values and tax revenues in a designated district will constrict the funding.

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C. Recommendation Due to the successful use of other financing methodologies, and the limited areas in Town where tax increment financing could be used, the Commission generally does not recommend the use of tax increment financing for road construction projects. However, the Council could potentially review using standard tax increment financing for certain infrastructure in the McCrimmon TOD area or potentially the Main Street area.

V. SPECIAL ASSESSMENT DEBT Special assessment debt is secured by and paid for from assessments levied against specific property benefitting from public infrastructure built with the debt. This type of debt was authorized by the legislature in 2008 and modified in 2009 to add authorization for use for renewable energy infrastructure. The general statutes allow cities to use revenue bonds, project development financing instruments, general obligation bonds and general revenues for special assessment debt. The authorizing legislation places strict limits on municipalities’ use of special assessment debt.

A. History of Use Special assessment debt for infrastructure has only been authorized in North Carolina since 2008, so it has a very limited history of use in the state. This type of debt has been used in Florida for many years, but the state saw many

defaults during the recent recession.

B. Evaluation The Commission evaluated special assessment debt using the six criteria mentioned in the Evaluation Criteria chapter:

Sufficiency: The sufficiency of special assessment debt for funding transportation improvements depends on the project and the assessed area – the Commission agreed that this type of debt may be more sufficient for smaller projects where the assessments used to pay off the debt can be low, since a higher-cost project would result in higher assessments to pay off the debt load.

Timeliness: Special assessment debt generally requires an upfront loan or some other method of financing, so the timeliness of this method would be dependent on the financing method chosen. While voter approval is not required for special assessment debt, if general obligation bonds (secured by the revenue from the special assessment) are used to fund the project, the municipality may have to receive voter approval, which would affect the timeliness of this financing method. Timeliness is also a factor to consider in how long the municipality will have to carry the debt – in other words, how

Only one project in Hillsborough has been approved to date to use special assessment debt for infrastructure.

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quickly a special assessment can generate the revenue needed to pay off the debt.

Predictability: This financing methodology could be considered high-risk if the area designated for the assessment is in “flux” – the municipality must be able to ensure the assessment will be able to pay the debt issued for the project. Another concern about the predictability of special assessment debt is how the debt is secured – the municipality cannot “repossess” an infrastructure improvement if a property owner or several owners in the assessed area do not or cannot pay the assessment. The Commission also discussed that one way to preserve predictability would be to have a back-up plan for paying the debt if the assessment was not adequate.

Equity: The Commission questioned the equity of special assessment debt, if it was used for a larger project, because you could have a small group of property owners paying for an improvement that benefits many more people. If special assessment debt was used for a small project targeted to a specific area, it may be considered more equitable, as it would be more likely that those most benefitting from the improvement would be paying for that improvement.

Suitability: Special assessment debt is more suitable in areas where the property owners paying the assessment receive the most benefit, or in areas where property owners are deemed to be able to afford an additional assessment. One such type of area may be a mixed-use area in need of targeted infrastructure improvements.

Cost: There may be limited up-front costs for special assessment debt, but the long-term cost could be high due to the requirement for managing the billing and collection of assessments. There is also the potential added cost that could be due if property owners default on the assessment and the town is required to make up the revenue elsewhere.

C. Recommendation The Commission agreed that special assessment debt is similar to tax increment financing, in that both methodologies are best targeted for smaller projects, since both methodologies rely on properties benefitted by an improvement to ensure the cost of the improvement is repaid. There could be potential for use of special assessment debt by the town for certain projects if the risks can be minimized.

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Evaluation of Funding Sources

I. PROPERTY TAX Property tax is one of the primary sources of revenue for the Town, paid by property owners once a year, with the amount paid based on the property tax rate and the value of the property (land and structures). Property taxes are also paid by vehicle owners – collected by the North Carolina Division of Motor Vehicles at time of registration renewal. Generally speaking, there are no statutory limits on the amount of property tax a municipality can charge. By statute, counties are required to conduct property value (real estate only) revaluations at least once every 8 years for property tax purposes. Personal property (such as automobiles) values are evaluated annually.

A. History of Use Morrisville’s tax rate for Fiscal Year 2015 is 39 cents per $100 of assessed value, which is expected to generate over $14,000,000 in revenue for the town. The tax rate was increased in the Fiscal Year 2014 budget by 2.35 cents based on approval of two

general obligation bonds in 2012 and additional funding for streets maintenance. The property tax revenue makes up over 50% of the town’s overall revenue each year – climbing from 52% in FY 2014 to 54% in FY 2015. If Morrisville were to increase the property tax rate to the average of all municipalities in Wake County, it could generate approximately $1,600,000 in additional revenue.

One penny of property tax generates approximately $352,000 of revenue for the Town. This amount will change when Wake County completes the next real estate property value revaluation, which will become effective January 1, 2016. Unlike most, if not all, municipalities in Wake County, Morrisville funds the cost of solid waste collection in the town from the property tax revenue, instead of funding it through a solid waste fee. The cost for solid waste collection in the town currently amounts to approximately $1.1 million, or almost 3 cents on the property tax rate.

B. Evaluation The Commission evaluated property tax using the six criteria mentioned in the Evaluation Criteria chapter:

Sufficiency: The Commission agreed that property tax revenue was only sufficient for smaller projects on a pay-as-you-go basis, since many transportation projects have a high cost when compared with the amount of revenue the property tax generates. However, it is a sufficient way to pay back debt obligation for larger transportation projects, such as those funded with general obligation debt.

Compared to other Wake County municipalities, Morrisville’s property tax rate is one of the lowest.

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Timeliness: Voter approval is not required for use of property tax revenue, unless associated with payment of general obligation bond debt. Use of property tax revenue is not considered timely for funding larger-scale projects that may take a number of years to save for, but may be considered timely for small projects if the capacity exists within the Town’s operational budget.

Predictability: The property tax is very secure – it is one of the primary ways the Town funds its operations and generates revenue. The amount of property tax revenue is based on the economy and the property tax rate set by the governing board, so the amount of revenue generated by property tax may not be predictable year-to-year.

Equity: The Commission believes that property tax is generally equitable, in that it is charged throughout town based on the value of property – those property owners with larger (or more valuable) assets generally pay proportionally more in property tax. Where its equity comes into question with public road projects is that non-taxpayers may use the road without having paid for any improvements.

Suitability: While the Commission agreed that property tax revenue could be suitable for smaller, lower-cost transportation projects, they believe that the town must be careful in use of property tax revenue to fund transportation improvements, since it is the foundation for funding town services and other infrastructure. Property tax revenue is believed to be unsuitable for major, or high-cost, improvements that are needed quickly, unless the town was willing to tap into its General Fund. The Commission also discussed how problematic it could be for the town to save property tax revenue for a larger project due to inflation – oftentimes the cost of a project increases the longer it takes to begin construction on the project. There was agreement that property tax revenue is suitable for maintenance, as the town currently uses it, and it could potentially be suitable to help pay for operational costs of transit in the future.

Cost: While there may be potential political costs to using property tax revenue to fund transportation improvements, there may be little direct, or financial, costs to do so. The Commission discussed how there might be “opportunity” cost if the town’s tax rate were to become out-of-line with surrounding jurisdictions – such as increasing the tax rate to directly pay for more transportation improvements. There was also discussion of costs related to timing of improvements – being able to start construction of a project sooner using bonds or other financing, versus saving property tax revenue for a number of years before beginning construction, which would most likely result in higher project costs.

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C. Recommendation The Commission recommends that the town continue to use property tax revenue to fund smaller projects (such as sidewalks, turn lanes, etc.), to pay debt for financing (such as General Obligation Bonds) and for maintenance of town roads. Since property tax is one of the primary ways the town can raise more revenue, it is also recommended that the town review using property tax revenue in the future to create a dedicated transportation funding source that could be leveraged with financing and grants.

II. MOTOR VEHICLE REGISTRATION FEE The motor vehicle registration fee is an additional fee charged by the town on citizens’ vehicle registrations, which is paid when vehicle license plates are renewed. The fee is collected by the NC Division of Motor Vehicles and remitted back to the town. By statute, municipalities can charge up to $5 for a municipal vehicle registration fee, which can be used for any lawful purpose. Certain counties are also allowed to charge an additional vehicle registration fee for regional public transit agencies – Wake, Durham and Orange County are all permitted to charge $5 for this purpose.

A. History of Use In FY 2015, the town increased the motor vehicle registration fee from $10 to $15, earmarking the additional revenue for increased road maintenance funding. In 2013, the $10 fee generated approximately $156,000 in revenue; the $15 fee is expected to generate approximately $230,000. In a local bill adopted by the legislature in 2007 (Session

Law 2007-108), the legislature authorized Morrisville and Apex to charge up to $15 for the motor vehicle registration fee. In the legislation authorizing a local sales tax for transit, the County is authorized to charge an additional $7 vehicle registration fee to fund public transit, and Triangle Transit is authorized to charge a $3 vehicle registration fee to also fund public transit

B. Evaluation The Commission evaluated motor vehicle registration fee using the six criteria mentioned in the Evaluation Criteria chapter:

Sufficiency: Since the motor vehicle registration fee only generates approximately $150,000 to $230,000, it is not sufficient for many transportation improvement projects. The Commission agreed that it is sufficient for maintenance of town roads, as the town has used at least a portion of the fee in the past.

If the County and Triangle Transit were to charge the maximum fee allowable, citizens in Morrisville would pay $30 in local vehicle registration fees, above the fees that are charged by the state.

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Timeliness: There was a question about how often the town receives the motor vehicle registration fee revenue from the state, and how timely that disbursement might be. Even if the revenue were only received once per year, it was generally agreed that it could be timely for maintenance or small improvement projects.

Predictability: The Commission agreed that it is a fairly secure source of revenue; however the amount of revenue the fee generates may change year-over-year due to the level of vehicle ownership in the town. It may be somewhat difficult to predict future revenue generated by the fee due to the changing characteristics of the town’s population and level of vehicle ownership, especially if additional modes of transportation become more readily available in the town.

Equity: The fee is generally equitable in relation to vehicle owners and the town’s use of the revenue the fee generates for road maintenance. However, since only vehicle owners in town pay the fee, it may not equitable when considering the level of use of town roads by non-town residents. Another concern with the equity of the fee is the fact that it is a flat fee – it does not vary based on type or size of vehicle – which means that larger vehicles that may cause more impact to a road pay the same fee as smaller vehicles.

Suitability: The town is limited in the amount of revenue the fee can generate, as well as the use of that revenue. Due to the amount of revenue the fee generates, the Commission agreed that this funding source is most suitable for road maintenance; however, there is the possibility of saving all or a portion of the revenue generated by the fee for a number of years to pay for a higher-cost project.

Cost: The cost of the motor vehicle fee is generally low – a small portion of the revenue generated by the fee is returned to the state to pay for the collection of the fee. There may be a negative perception by the public when comparing the amount of the fee charged by the town to other local jurisdictions.

C. Recommendation The Commission recommends the town continue to use the revenue generated by the motor vehicle registration fee to supplement the town’s road maintenance budget. The fee revenue may also be suitable to fund small improvement projects, but will not generally be suitable to fund larger, higher-cost project. As the town diversifies its available transportation modes (i.e. transit becomes more readily available), the amount of revenue generated by the fee could decrease if the level of vehicle ownership in the town decreases.

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III. POWELL BILL The State Street-Aid program, better known as the Powell Bill program, is the way NCDOT returns a portion of state gasoline tax revenues back to municipalities to use to supplement local funding for maintenance, repair, construction or reconstruction of any public road in the corporate limits of a municipality. Powell Bill funds may also be used for the planning, construction and maintenance of bikeways, greenways and sidewalks. Once a year, municipalities are required to submit reports to the NCDOT in June, reporting the mileage of municipally-maintained streets in the town, with the disbursements of funds occurring the following October and January. In 2013 the state legislature amended the Powell Bill statutes to change the distribution, from 1.75 cents of the gasoline tax to 10.4% of the net amount of gasoline tax revenues after refunds produced each year. In FY 2014, the total Powell Bill funding distributed to the 507 eligible municipalities across the state was $147,310,111.15. The Powell Bill funds are distributed to municipalities based on population (75%) and mileage (25%) of roads within the corporate limits of the municipality – equating to a FY 2014 per capita rate of $20.56 and a per mile rate of $1,642.85.

Figure 4-Data from Road Maintenance Report to Blue Ribbon Commission 4/17/14

FY2010 FY2011 FY2012 FY2013 FY2014

Powell Bill Allotment (StateFunds)

$225,269 $366,883 $342,043 $530,235 $473,789

Road Maintenance Budget (TownFunds)

$1,952 $45,535 $516,211 $134,833 $465,685

Actual Fiscal Year Expenditureson Road Maintenance

$227,221 $412,418 $858,254 $655,068 $939,474

Road Maintenance Expense

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A. History of Use The FY 2014 Powell allocation for Morrisville increased to $502,929.15 from a FY 2013 allocation of $489,215.40. In FY 2014, the Town reported a total road mileage of 44.94 miles, an increase of over 19 miles from FY 2009. While the Powell Bill allocation is very important to the Town, the town

has included local funds in addition to the Powell Bill allocation since at least 2010. The town almost matched the Powell Bill allocation in FY 2014, to provide an overall road maintenance budget of $939,474.

B. Evaluation The Commission evaluated Powell Bill using the six criteria mentioned in the Evaluation Criteria chapter:

Sufficiency: Since the Powell Bill distribution only generates approximately $500,000 each year, it is generally not sufficient for large transportation projects. The Commission agreed that it is sufficient for how it is currently used – to primarily provide funds for road maintenance, snow removal and sidewalk construction. There was discussion and agreement that Powell Bill funds could be sufficient to pay debt associated with larger road improvement projects in the future.

Timeliness: With the distribution from the state occurring twice each year, Powell Bill funds are considered timely; however, the time required to meet the reporting requirements may affect the timeliness of the funding source. The Commission agreed that this funding source may not be timely if the town does not properly plan for maintenance needs.

Predictability: Since Powell Bill funds are dependent on the amount of vehicle miles driven the state and the amount of gasoline sold in the state, the predictability of this funding source may be considered questionable. With increased fuel efficiency in vehicles and more modes of transportation becoming available, it is likely that the amount of gasoline sold in the state will continue to decline, directly affecting Powell Bill funding. The amount of Powell Bill funding may also decrease based on the number of road miles and population in other municipalities, compared to Morrisville.

Equity: The Commission discussed the fact that Powell Bill funding indirectly has a higher impact on users who have to purchase more gas due to driving more miles or less efficient vehicles. There was also discussion about how it may not be equitable for all road users since alternative fuel vehicles (such as hybrid, electric and E85 vehicles) may not pay as much in gasoline tax compared to how much they drive. Generally speaking, everyone does benefit from the gasoline

With town growth, there has been a steady increase in the number of town-maintained road miles, which has resulted in increased Powell Bill distributions.

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tax even though it may not be equitably charged to all users. The last equity issue the Commission discussed with the Powell Bill funding was the distribution formula in relation to areas like Morrisville, where there may be a relatively low number of locally-maintained street miles, but high vehicle volumes that negatively affect transportation in the town.

Suitability: Since the Powell Bill statutes specifically spell out that the funding must be used for transportation uses, the Commission agreed that it is suitable for funding any type of transportation projects. However, since Powell Bill funding will most likely be a declining revenue source in the future with the new distribution formula, it may be less of a suitable source of funding in the future, other than for maintenance.

Cost: Powell Bill funding is generally low-cost for the town, other than the staff time and expertise required for reporting requirements. There may be a cost to the town in relation to reduced state Powell Bill funding because of declining gas tax revenue.

C. Recommendation The Commission recommends the town continue to use Powell Bill funds for maintenance, since it is most likely a declining revenue source. The Commission also recommends that the town continue monitoring Powell Bill funding since state transportation revenues are changing, and the state may move away from gas tax, which would directly affect Powell Bill funds.

IV. DEVELOPMENT REQUIREMENTS This funding source describes the practice of requiring development to construct needed transportation improvements as land is developed. In many municipalities, including Morrisville, when developers request approval for a new development, they are responsible for constructing and installing the infrastructure necessary to support and serve the development, such as roads, water and sewer lines, and then dedicates that infrastructure to the municipality for public use. Developers may also be required to provide transportation improvements other than roads, such as bicycle and pedestrian infrastructure and/or transit infrastructure, if the improvements are included in an adopted plan. Once the infrastructure is dedicated to the municipality for public use, the municipality becomes responsible for its operation and maintenance. In some towns, such as Morrisville, many developments are also required to complete a Transportation Impact Analysis to determine that development’s impact on the transportation network near the development site, and may be required to construct transportation improvements to address that impact.

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A. History of Use In addition to constructing thoroughfare improvements on the property or along its frontage in accordance with the adopted Transportation Plan, Morrisville has generally been successful in requiring developments to mitigate their specific transportation impacts. Oftentimes, the

improvements consist of new or extended turn lanes, or upgrading nearby intersections. Developments also construct bicycle and pedestrian infrastructure, including greenways, and some larger developments have been required to provide transit stop infrastructure in the past.

B. Evaluation The Commission evaluated development requirements using the six criteria mentioned in the Evaluation Criteria chapter:

Sufficiency: Requiring development to mitigate its impact on the transportation network is considered a sufficient way to construct transportation improvements, especially for larger developments with more impact. The Commission agreed that this funding source is only sufficient for new construction or improvements, not maintenance. Depending on the issues with certain roadways, this source may not be sufficient to completely “fix” a roadway.

Timeliness: The timeliness of this funding source may be dependent on when the improvements are completed – if the developer constructs the improvements, the funding source would be considered timely in relation to the impact. However, since the town may accept payment-in-lieu for some improvements, the Commission discussed that the funding source may not be timely if payment-in-lieu is accepted. The Commission also discussed the fact that the timeliness of this funding source may be dependent on the market, and how quickly an area develops.

Predictability: The Commission agreed that this funding source’s predictability is dependent on legislative authority and action that would allow the town to continue the practice of requiring developments to construct improvements. There is some question to its predictability because these developments generally depend on the local economy and market, and the continued flexibility on behalf of developers to work with the town to construct needed improvements.

Equity: Development-constructed improvements are equitable, since most projects construct improvements to address their specific impacts, based on a transportation impact analysis. The Commission agreed that this is an equitable

Morrisville has generally been successful in requiring developments to mitigate their specific transportation impacts.

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way to get improvements constructed, since most developments are required to construct necessary improvements to address their transportation impact or comply with the town’s adopted plan. There was also discussion related to equity of how these requirements may affect uses generating higher levels of traffic disproportionately, or that costs of these improvements may be passed on to consumers.

Suitability: The suitability is dependent on the size of the development, and the level of improvements the town can require may be limited due to the nexus and proportionality standard. The Commission agreed that this funding source is highly suitable for what it is designed to do – ensure developments address their transportation impacts.

Cost: There is little to no cost if the developer is able to install the required improvement, however, there are potential monetary costs to the town if the developer only submits payment-in-lieu, since it is difficult for the town to transact improvements in a timely manner with payment-in-lieu funds. There is the potential additional cost of the requirements limiting development in town if developers believe the requirements to be too stringent or if land becomes too expensive, which could ultimately limit the growth of the tax base in town.

C. Recommendation The Commission recommends the town continue to require development to make improvements to address impacts caused by development. The Commission does not recommend acceptance of payment-in-lieu in many circumstances due to Town’s difficulty in transacting improvements at a later time.

V. NCDOT STIP FUNDING The North Carolina Department of Transportation (NCDOT) uses the State Transportation Improvement Program (STIP) to provide state funds for transportation projects of all modes. Historically, the STIP has been a 7-year plan, but several years ago the NCDOT changed the STIP to a 10-year work program, with projects identified in the first 5 years as fully-funded, and projects in the second 5 year period as unfunded. The STIP is generally adopted by the state every 2 years, and for the last few cycles has been based on an evaluation of quantitative criteria and qualitative input from local jurisdictions and MPOs. In 2012, the state legislature changed the way transportation funding is allocated to projects in the STIP. From the early 1989 until 2012, transportation funding in the state was allocated according to what was termed the Equity Formula, which was an effort to ensure all areas of the state received their “fair share” of transportation funding and improvements.

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In the legislation approved in 2012, the state is required to fund transportation projects based on quantitative and qualitative criteria, depending on the type of project. Projects of statewide importance, such as interstates, US highways, major commercial airports, and large railroad projects, are funded based on quantitative criteria only. All other transportation projects, including roads, bicycle and pedestrian, rail, air, ferries and public transportation, are funded based on a combination of quantitative and qualitative criteria, depending on the type of facility.

A. History of Use While Morrisville has had several transportation improvement projects within its jurisdiction over the years, there have been few lately funded in the STIP. Based on preliminary information available when this report was written, Morrisville could see between $50 and $85 million in transportation

investments, including two I-40 interchange projects, one grade separation project, and several widening projects, in the next 10-year STIP cycle if the projects previously identified as having high quantitative and qualitative scores are funded.

B. Evaluation The Commission evaluated NCDOT STIP funding using the six criteria mentioned in the Evaluation Criteria chapter:

Sufficiency: STIP funding is generally the largest pot of money available in the state for funding transportation projects, and the STIP has been able to provide funding for large, expensive projects in the past. Overall, however, STIP funding has been declining due to declining gas tax revenues, and most likely will not be a sufficient funding source in the future unless a new revenue source is developed to fund the STIP.

Timeliness: The Commission agreed that STIP funding is generally not very timely, due to the amount of time it takes to get a project on the STIP, designed, permitted and constructed – since the STIP is a 10-year work program, a project could be funded in an early year of the STIP, or at the end of the STIP. Much of this is dependent on how much work has been completed for a project prior to inclusion on the STIP.

Predictability: From a project standpoint, STIP funding is secure and predictable if the project is funded in the first 5 years of the STIP. There is a long history of use of in the state for STIP funding, but questions remain about its future predictability due to volatility in gas tax revenues.

Equity: While anyone who purchases gasoline in the state provides funding for the STIP, over the past 20 years or so there has been an argument that STIP funding is not equitable when you compare urban and rural areas in the state.

There is the potential for several important road, interchange and grade separation projects to be funded in the 2015-2024 STIP; scheduled for June 2015 adoption.

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Suitability: Since the STIP is used to fund many transportation projects across the state, it is certainly suitable. However, STIP funds can only be used on state-maintained roadways, so it is an unsuitable funding source for town-maintained or private roadways.

Cost: There is a cost concern in the amount of time that it may take for a project to get fully-funded in the STIP, and once funded, constructed.

C. Recommendation The Commission recommends the town to continue to pursue STIP funding for larger transportation projects on state roadways, with potentially using other funding sources to construct smaller, lower-cost improvement projects throughout town.

VI. CAMPO GRANTS/FEDERAL FUNDS This funding source includes the Locally Administered Projects Program (LAPP) from CAMPO and other federal transportation grant programs, such as the TIGER (Transportation Investment Generating Economic

Recovery) program. CAMPO uses LAPP to distribute federal transportation funds to member jurisdictions for transportation projects. The CAMPO program includes funding for roadway, bicycle/pedestrian and transit projects, and awards funds based on a competitive process using quantitative scoring criteria. The TIGER program is a nationwide grant program open to all states and municipalities and is very competitive. In order to qualify for a TIGER grant, a jurisdiction or state must show quantifiable, positive economic impacts. The Federal Transit Administration (FTA) also provides funding to transit providers (such as CAT, Triangle Transit and C-Tran) to help fund capital and operating costs for service.

A. History of Use While Morrisville has not applied for or received funding from the TIGER program, the town has been successful in receiving LAPP funds for many different projects. Since LAPP began, Morrisville has received funds from the program for improvements to Morrisville-Carpenter Road and

the Davis Drive intersection, a sidewalk along Church Street between Morrisville-Carpenter Road and Jeremiah Street, a wide sidewalk along NC 54 under NC 540, and several greenway projects including the Shiloh greenway between McCrimmon Parkway and NC 540 and the Crabtree/Hatcher Creek greenway between Evans Road and Davis Drive. For the FY 2016 program, Morrisville applied for funding from LAPP to begin design of another widening and improvement project on Morrisville-Carpenter Road. If Morrisville receives transit service in the future, the Town may qualify for additional funding from the Federal Transit Administration for service in town.

One issue the town has encountered with LAPP is that only 4 roadways in town are currently eligible to receive funds from the program.

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B. Evaluation The Commission evaluated CAMPO Grants/Federal Funds using the six criteria mentioned in the Evaluation Criteria chapter:

Sufficiency: This funding source is considered to be sufficient for many transportation projects, as the LAPP grant potentially could be up to $5 - $6 million, and the TIGER grant program could provide over $10 million in funding. This funding source most likely cannot be used for maintenance, but can provide funding for a variety of transportation projects.

Timeliness: This funding source is generally timely, as funds are usually available within a year of the application deadline. Once the funds are available, the town must be able to obligate the funds within one year.

Predictability: Funding from this source is unpredictable, as most programs have a competitive process to select funded projects. The total amount of funds also varies year-to-year, and is based on the federal budget, so this source may not always be secure or predictable.

Equity: Since programs in this category fund most modes of transportation found in the town, it is generally considered equitable across all modes of transportation.

Suitability: While this funding source may generally be suitable for larger projects, the town has had difficulty providing the required matching funds for larger projects, and has generally used the funds available from this source for smaller, lower-cost projects. The CAMPO program has also been very suitable for non-roadway projects, such as greenways and sidewalks, for the town.

Cost: Many of the grants mentioned in this funding source require matching funds of 20% or more, and there can be a cost associated with meeting the administration requirements for many of these grant programs.

C. Recommendation The Commission recommends the town continue using the LAPP to fund transportation improvements, as the town has been successful in the past in receiving funding through this program. There may also be an opportunity in the future to partner with the state to apply for funding from TIGER, if a project in town can meet the eligibility requirements.

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VII. CDBG INFRASTRUCTURE GRANTS Community Development Block Grant (CDBG) funds are granted by the federal Housing and Urban Development Department to Wake County to administer to the smaller jurisdictions in the county. These funds must provide benefit to areas with a majority of residents considered to have low – moderate incomes, and this source is generally limited in the amount of funds that are available. CDBG grants also require a local match of 20% from the town.

A. History of Use The Town has received CDBG infrastructure funding for several projects in the past, including reconstruction of Barbee Road and Fiona Circle, construction of sidewalks on Church Street in the Shiloh area, and has received funds to construct a

new sidewalk on Church Street from Treybrooke Drive to the existing sidewalk behind Cedar Fork Elementary School.

B. Evaluation The Commission evaluated CDBG Infrastructure Grants using the six criteria mentioned in the Evaluation Criteria chapter:

Sufficiency: The Commission discussed how these funds most likely will not be sufficient for many transportation projects (if any) in town in the future, due to the restrictions on where the funds can be used. As past use has shown, the funds are sufficient for small transportation projects, but due to the changing characteristics of the town, there may not be areas that can meet the qualification requirements.

Timeliness: The funds are distributed from Wake County on a rotation between all eligible jurisdictions, so the town usually only gets funding from this source once every 3-5 years. Once the town is due for funding, the funds are provided relatively quickly, but the town is required to pay its local match up front.

Predictability: This funding source is not very secure or predictable for Morrisville due to the changing demographics in the town.

Equity: This is considered to be an equitable funding source, since once the project is constructed it can be used by all users.

Suitability: CDBG funding may not be suitable for the town in the future due to the limitation on locations where the funding can be used.

One concern with this funding source is that the town does not have many areas that will qualify for the funds in the future.

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Cost: There is a monetary cost to the town for using this funding source – the town is required to provide a minimum 20% local match, and is responsible for any cost overruns above the construction cost estimated by Wake County.

C. Recommendation The Commission recommends the town continue to use this funding source if projects and areas can be determined to meet the eligibility requirements. If there are determined to be no eligible areas for transportation improvements funded by this source, the commission recommends the town examine other potential uses for the funds, such as land acquisition for affordable housing.

VIII. LOCAL SALES TAX (COUNTY) In North Carolina, counties are permitted to levy a sales tax and distribute revenue from the sales tax to municipalities. The sales tax is collected by the state, and allocated back to counties based on point-of-sale and population, while counties distribute sales tax to municipalities based on either population or ad valorem tax levy. For several years, the urban counties in the state have been permitted to levy an additional sales tax whose revenue is specifically earmarked for public transportation. Mecklenburg County has successfully used this additional sales tax levy to raise funds to construct a light rail system, and in 2013, Orange and Durham Counties began to levy a ½ cent sales tax for transit, to fund additional bus service and future rail transit service.

A. History of Use In FY 2014, Morrisville received over $3.3 million in local sales tax revenue, which is expected to increase in FY 2015 to over $3.8 million. This revenue source represents 14% of the town’s total general fund revenue, and is considered general

revenue. While Morrisville did see a significant impact during the recession in 2009 and 2010, the town has seen the sales tax revenue increasing over the last 3 – 4 years, and has estimated a 6% increase from FY 2013 to FY 2014. The town is also estimating that sales tax revenue will increase between 4 and 6% each year until 2018. Wake County, while authorized to levy an additional sales tax for public transportation, has yet to hold the referendum that would allow the County to begin charging the additional tax.

B. Evaluation The Commission evaluated local sales tax using the six criteria mentioned in the Evaluation Criteria chapter:

Sufficiency: The Commission agreed that, due to the amount of funding the local sales tax generates for the town, it is potentially sufficient to fund larger projects ($1 – 2 million range) without adding debt. However, the town currently uses the sales tax revenue for a variety of services, so the Commission questioned whether the town would be willing to divert sales tax revenue to fund

Wake County sales tax is distributed to municipalities based on municipal population, not where the tax was generated.

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transportation projects, since the town would most likely have to replace that revenue, possibly by increasing the property tax rate.

Timeliness: Since the sales tax is distributed from the state and county on a consistent schedule throughout the year, the funding source can be timely for the town. There are few restrictions on the town’s use of this revenue, so the town could use the revenue as it is received (for lower-cost projects), or easily save several million dollars for a larger project in 1-2 years.

Predictability: The Commission believes that the source is relatively secure and predictable, but it can fluctuate with the economy, as seen in 2009 and 2010. There is some question of the Predictability based on recent state legislative action, especially concerning the ability of the county to levy an additional sales tax specifically for transit.

Equity: Generally, sales tax is considered a regressive tax, which is not entire equitable in itself. However, if revenue from sales tax were used to fund transportation improvements, the Commission would consider it to be equitable in that both residents and non-residents would be contributing as they use the roads in town to access the retail areas where sales tax is charged. There was also discussion on whether the distribution of sales from the county (based on population) was equitable, and whether this funding source would be considered equitable when comparing residences (only directly pay property tax) and residences (pay property tax and generate sales tax revenue).

Suitability: Since sales tax is the second largest revenue source for the town, it is considered to be suitable for funding transportation projects based on the amount of funding it generates annually. There is a question of suitability since the town currently uses sales tax for many purposes, and that funding would have to be replaced (or the town budget reduced) if sales tax revenue were to be dedicated for transportation projects. There is also a natural limit, based on the economy and the characteristics of the town, on how much growth could occur in sales tax revenue.

Cost: There is generally a low cost for use of sales tax revenue – there may be some collection and administration costs for the town, or financing costs if this funding source were used to pay debt from financed transportation projects. The Commission also discussed the non-monetary cost of the variability of sales tax rates between counties – if the Wake County sales tax rate increases above neighboring counties’ rates, would that potentially drive consumers to those neighboring counties to make their purchases?

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C. Recommendation The Commission recommends that the town consider dedicating at least a portion of the sales tax revenue it receives for transportation infrastructure, which would require a higher reliance on property tax or other revenue for other town services and operations.

IX. SPECIAL ASSESSMENT – PRIVATE PROPERTY In North Carolina, municipalities have the authority to levy special assessments on private property to fund the capital costs of streets, sidewalks, water systems, sewage systems, storm sewer and drainage systems, as well as beach erosion control, flood and hurricane protection works. There is also a specific process that municipalities must follow to implement to special assessments, including holding public hearings before the project has begun and once the project is completed but prior to charging the assessment. These assessments are generally levied based on a benefitting property’s frontage area or overall acreage, and are typically paid off, with some accumulated interest, over a number of years. Often municipalities use this as a type of financing, either entering into debt to fund the infrastructure construction, or using the special assessments to “pay back” the general fund expenditures for the infrastructure construction.

A. History of Use The statutory authority allowing municipalities to levy special assessments differentiates the process to levy a special assessment for street and/or sidewalk projects (NCGS §160A-217) – assessments for these types of projects can only be levied if a petition signed by at least a majority of the

property owners that would be assessed is received. For street and sidewalk projects, municipalities can only assess up to 50% of the total cost of improvements. Raleigh has used this authority in the past to levy special assessments for sidewalk construction on some public roads, and Carrboro has levied special assessments in the past for street repaving and sidewalk construction. While Morrisville has not used special assessments in the past, the town has adopted a Municipal Service District to fund conversion of private streets in some developments to public streets, which in some ways is similar to a special assessment. However, where special assessments can be used to fund a variety of infrastructure improvements, Municipal Service Districts are statutorily limited to certain uses and areas.

In addition, the additional tax charged in a Municipal Service District cannot exceed 30% of the ad valorem tax rate in effect in the municipality.

Municipalities in North Carolina have long had general statutory authority to levy special assessments for street, water, sewer and other infrastructure.

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B. Evaluation The Commission evaluated special assessments using the six criteria mentioned in the Evaluation Criteria chapter:

Sufficiency: This funding source is difficult to use to fund roadway projects, especially larger projects that would benefit more users than those owning the property being charged the special assessment. The Commission agreed that this funding source may be sufficient for smaller projects, such as in a particular neighborhood, where the most benefit will be received by those being assessed to pay for the project. This source may also be sufficient for certain maintenance projects in small areas, with one key being keeping the cost relatively low in order to keep the assessment charge low as well.

Timeliness: This funding source is not considered to be timely from a funding perspective because it would take a number of years to receive the funds generated by the assessment, regardless of when the actual improvement is constructed.

Predictability: There is no history of use of this funding source in Morrisville, but the Municipal Service District is very similar. The source is believed to be fairly predictable, but the predictability may be affected by the location where it is used. If the town were to use special assessments, the Commission agreed that charging the assessment on the property tax bill would be the most secure method to ensure payment.

Equity: This funding source is not considered to be equitable, because it does not take into account the assessed property owners’ ability to pay, and there may be more that benefit from the improvement paid for by a special assessment than just the properties that pay the assessment.

Suitability: The Commission agreed that this funding source is appropriate to small projects with a clearly-defined benefit area, while it would be much more difficult to use for larger infrastructure projects. This funding source is most likely limited in the amount of funding it can generate as well.

Cost: There would be a cost to the town if the town were to pay for the improvement funded by the special assessment up front, with the assessment used to refund the town. If the town were to use special assessments to pay for financed debt, there would be financing and interest costs. There may also be non-monetary costs associated with the decision to use special assessments to fund an improvement or maintenance project.

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C. Recommendation The Commission recommends the town review special assessments for future use in limited circumstances – particularly in a small, targeted area where there is a clear benefit to the assessed properties, and the improvement is such that the town could not construct it otherwise, or the assessment were used to expedite an improvement project.

X. IMPACT FEES Impact fees are charges to new development for major local capital projects necessitated by new development. The fees Impact fees can be used to pay for road or utility infrastructure, or, in some areas, used to fund construction of schools. Impact Fees are generally charged per new residential unit (sometimes varying based on the type or size of unit) and, when charged for commercial property, the fees are based on square footage. The revenue from these fees is collected in a specific capital reserve fund until enough funding exists to either fund construction or receive financing to fund construction. In 2008, 26 states had legislation authorizing impact fees – many of the states are located in the western United States, the Great Lakes region, or on the Atlantic coast. Where impact fee authority exists, there is usually a requirement for a jurisdiction to complete a study prior to charging impact fees to determine at what level the fee should be set based on funding need.

A. History of Use Several local jurisdictions have received specific local authority for certain types of impact fees, such as transportation or schools. Chatham County has authority to charge an impact for school construction, and the Town of Cary has authority to

charge transportation impact fees. Other jurisdictions in the state also have local authority, and those jurisdictions that have received the authority have been fairly successful with their impact fee programs. In 1999, Morrisville requested authority from the legislature to levy transportation impact fees, but was not successful.

B. Evaluation The Commission evaluated impact fees using the six criteria mentioned in the Evaluation Criteria chapter:

Sufficiency: The sufficiency of impact fees may be dependent on the size or type of the development that is expected to pay the fee, as well as the size and type of the infrastructure project(s) funded by the revenue from the fee. While impact fees would most likely generate enough revenue to fund maintenance, impact fees can generally only fund new capital construction or improvements

The legislature has not granted general impact fee authority in North Carolina.

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that address an impact of new development. Two other factors affecting the sufficiency of impact fees are how large the fees could be (and how much revenue they could expect to generate) and how much new development could occur in the town if it were granted the authority to charge impact fees.

Timeliness: Impact fees are considered to be relatively timely for development projects, since it is a known fee paid up front. However, they may not be a timely funding source for transportation improvements, since it would most likely take several years to accumulate enough fee revenue to fund an improvement project. How much and how quickly the town could accumulate impact fee revenue would also be dependent on the level of new development in the town.

Predictability: Impact fees are not currently legal in Morrisville and many North Carolina local jurisdictions, but where they are authorized, they have been a fairly secure and somewhat predictable funding source, especially when there is a lot of development activity. One other important note is that impact fees may also provide predictability for developers when they are preparing their development plans.

Equity: There was some discussion of how impact fees may not be considered equitable when comparing the infrastructure users and developers (i.e., those using the infrastructure are not directly funding improvements), but they may be considered equitable when viewed as funding needed improvements based on the impact new development has on infrastructure. Impact fees, can generally be equitable across development types, if the impact fee program is structured properly.

Suitability: While the Commission believes impact fees may be a suitable funding source for some infrastructure improvements in the town, there is no statutory authority for the fees.

Cost: Impact fees have a relatively low cost for collection, but there may be costs associated with how infrastructure improvements are funded with the impact fees – whether the town waits until enough impact fee revenue has accumulated to fund a project, or the town funds a project up front and use the impact fee revenue to pay back the cost of the improvement.

C. Recommendation The Commission recommends the town review impact fees for use in the future, if the legislature ever grants the town the authority to charge the fees.

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XI. STATE GRANTS This category includes funds granted directly by the state to the town. The grants in this category generally come from state agencies, such as the Departments of Transportation (DOT) and the Department of Environment and Natural Resources (DENR). Some of the grant programs include the Parks and Recreation Trust Fund (PARTF) grant program administered by the North Carolina State Parks Division of DENR, the Bicycle and Pedestrian Planning grant program, the Safe Routes to Schools grant program and several transit grant programs administered by DOT. While the PARTF and Safe Routes to Schools programs can provide funding for infrastructure, the Bicycle and Pedestrian Planning program only provides funding for developing plans. The transit grants primarily provide operating and capital funding for rural transit providers and matching funds for federal transit monies for urban and regional transit providers.

A. History of Use Morrisville received a Safe Routes to Schools grant in 2011 to provide automated warning flashers and speed feedback signs in the school zones in town. The Safe Routes to Schools program can also provide funding for small infrastructure projects

that improve and provide safe access to schools. In addition to parks and related facilities, PARTF can also provide funds for greenway construction. Applicants must match dollar for dollar or the total cost of the project.

B. Evaluation The Commission evaluated state grants using the six criteria mentioned in the Evaluation Criteria chapter:

Sufficiency: This funding source is not sufficient for many transportation projects, since the funding is generally very limited. This source may be sufficient for small, generally lower-cost transportation projects such as sidewalks and greenways.

Timeliness: Funding from state grants is generally considered to be timely, but the timeliness could be dependent on the process to request and receive the funds.

Predictability: The Commission agreed that this funding source is not predictable or necessarily secure, due to the fact that the grants are usually awarded on a competitive basis as funds are available.

Equity: State grants are considered to be equitable, since most jurisdictions can apply for the funds.

Morrisville has received PARTF funds in the past for parks and recreational facilities.

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Suitability: Funding from state grants is generally suitable for smaller projects eligible for the grant funds, but they generally require matching funds from the jurisdiction.

Cost: There may be an application cost involved with applying for some grant programs, in addition to the local matching funds many grants require. There may be an additional cost for administration of some grants.

C. Recommendation The Commission recommends that the town continue to review grant opportunities as they become available, if there are specific projects that are eligible for the grant funds.

XII. PERMITS/FEES/SALES & SERVICE This is a generalized category that primarily includes fees for town services, development fees and privilege license tax revenue. The town collects a variety of fees for different kinds of permits, as well as for various recreational programs. The privilege license tax is a fee charged to businesses operating within the town limits, and varies dependent on the type of business. In 2014, the legislature changed the statutes to greatly reduce the ability of towns to charge businesses for privilege licenses for the current fiscal year, and, at this time, eliminate the authority for privilege licenses altogether beginning in July 2015.

A. History of Use In FY 2015, this category of revenue is estimated to generate just over $5 million, or about 19% of the town’s overall general fund revenue. Of this amount, privilege license revenue was initially expected to be over $800,000, but after legislative action, was expected to drop by approximately

$135,000 for FY 2015 before being eliminated for FY 2016. The remaining revenue in this category is generally divided among parks and recreation programs and facility fees and development services permits and fees (including planning, engineering and building inspections). Much of this revenue has generally been considered unrestricted in the budget, and is used to fund general town operations and services.

B. Evaluation The Commission evaluated permits, fees, sales, and services using the six criteria mentioned in the Evaluation Criteria chapter:

Sufficiency: The Commission agreed that this revenue source might be sufficient for small improvement projects or maintenance, but it would require a change in how the town currently uses these revenues. There may be a potential for increasing certain fees, and earmarking that revenue specifically for transportation, but there were questions about how much additional revenue could actually be generated from increasing certain fees.

Revenue generated by building permits has generally indirectly paid for the Building Inspections department, though no formal policy exists.

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Timeliness: Revenue generated by sales, service, permits and other fees is collected throughout the year, generally as services are rendered or permits are issued, but are also affected by the economy (especially development services fees and permits).

Predictability: As the town discovered in the 2014 legislative session, some fees may be less secure and predictable, such as the privilege license tax. Other fees can be unpredictable because they are more directly affected by the economy and level of development activity in town; long-term, there may be a question of the Predictability of development services fees as the town gets closer to a build-out condition.

Equity: The Commission considered this funding source to be highly inequitable if used to fund transportation improvements, since there is not a direct correlation between this funding source and transportation improvements.

Suitability: Overall, this funding source was considered to be unsuitable for funding transportation improvements due to the fact that this funding source currently has no direct correlation to transportation, and if used for transportation, mostly likely would affect other portions of the town’s budget.

Cost: There is little cost to the town to collect fees from sales, service and permits, since these fees are collected as services are provided.

C. Recommendation The Commission does not recommend this funding source for current or future use to fund transportation infrastructure, unless the town is able to levy a fee that is in direct correlation to transportation needs.

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Conclusion In evaluating the different financing methodologies and funding sources, the Commission discussed how each methodology or source could be used by the Town, and how it might affect future Town budgets. While the Town clearly has capacity for funding transportation projects, that capacity can vary year-to-year and is largely based on the tax rate and level of current debt obligations. The Town’s debt ratio policy is the Town will have no more than 15% of debt when compared to revenues. For FY 2015, the Town’s debt ratio is 8%, which means there is approximately $1,928,224 in debt capacity under the policy. According to projections from the Town’s Budget Manager, the Town’s debt capacity under the existing policy is expected to shrink to approximately $756,429 by FY 2019.

Funding transportation improvements on a “pay-as-you-go” basis can avoid the debt capacity issue, but it can be difficult for the Town to fund larger, more expensive projects this way. The Town does have capacity to raise the Property Tax rate from its current level ($0.39 per $100 valuation), but the property tax rate is limited by state statute to no more than $1.50 per $100 valuation.

After evaluating the five financing methodologies, the Commission recommends that the Town continue to use General Obligation Bonds as a way to fund transportation projects, since the Town has been successful in the past with using this form of financing for transportation projects. The Commission recommends reviewing Installment-Purchase Debt for future use to finance transportation projects, since the Town has some history with this method of financing, and has used it in the past on other types of projects. The remaining three financing methodologies, Revenue Bonds, Tax Increment Debt and Special Assessment Debt, are not recommended for use because of legal or statutory concerns, and because there is limited history of use of these financing methodologies in North Carolina.

In its evaluation of the 12 funding sources, the Commission recommends the Town continue to use Property Tax revenue, Motor Vehicle Registration Fee revenue, Powell Bill funds, Development Requirements, NCDOT STIP Funding, CAMPO and other Federal Funding, and CDBG Infrastructure Grants where possible. The Commission realizes some of these sources are primarily used to fund maintenance of Town-maintained roadways, and where that is the case, the Commission recommends continuing that practice, and expanding the use of some of these sources where practicable to fund improvement or non-highway projects as well. The four funding sources the Commission recommends the Town review for future use include Local Sales Tax revenue, Special Assessments – Private Property, Impact Fees and State Transportation Grants. While the Town may not have used these sources in the past, or may not have statutory authority for using these sources, the Commission believes that they may be beneficial to the Town, and recommends the Council continue to look at how these sources may be used in the future. The Commission recommends that the Town not use Permits/Fees/Sales and Service revenue to fund transportation projects, since this funding source is currently used to fund other operations in the Town budget, and this source can fluctuate year-to-year.

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Using Table 2 below, the Town will be able to evaluate different financing methodologies and funding sources when deciding how to fund a particular transportation project. Table 3 provides an overview of the approximate level of investment and type of project each financing methodology or funding source the Commission recommends the Town continue using or review for future use can provide.

Table 4-Summary Evaluation Matrix – Transportation Financing Methodologies and Funding Sources

The evaluation conducted by the Commission, and summarized in this table, was subjective, and based on Commission discussion. For more information on how the Commission evaluated each item and how they came to their recommendation, please see the appropriate section of the Report.

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Table 5- Approximate Level of Investment by Financing Methodology/Funding Source

Sources: Fiscal Year 2014-2015 Operating Budget, 2014 NCDOT Powell Bill Report

FINANCING METHODOLOGIES & FUNDING SOURCES

Fund

ing

Sour

ces

Installment-Purchase DebtProperty Tax

CAMPO/Federal FundingCDBG Infrastructure Grants

Impact Fees

NCDOT STIP Funding

State Transportation Grants

Motor Vehicle Registration FeePowell Bill

Local Sales Tax

Development Requirements

Special Assessments - Private Property

General Obligation Bonds

Approximate Level of Investment

Fina

ncin

g M

etho

ds

Recommended Type(s) of Projects

$10,000,000+

$1,000,000 - $5,000,000

$0.01 Generates $373,000 (FY2015 Est.)$15 Generates $255,000 (FY2015 Est.) Maintenance; Bike/Ped; Transit

Bond Debt; Maintenance; Bike/Ped; Transit

Land Acquisition; Bike/Ped

New Roads, Major Road Widening

$502,929 (FY2015)$2,274,000 (FY2014 Est.)

2015-2025 Draft STIP: $86,386,000Up to $5,000,000/Project

$333,000 FY16-FY21$3,810,000 (FY2015 Est.)

UnknownUnknownUnknown Bike/Ped; Transit

Capacity ImprovementsTargeted Improvements

Bond Debt; Maintenance; Bike/Ped; TransitBike/Ped; Small Roadway ProjectsRoad Widening; Bike/Ped; Transit

New Roads; Road Widening; Bike/Ped; TransitThoroughfare Improvements; Bike/Ped

Maintenance; Bike/Ped

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APPENDIX A

OVERVIEW OF TOWN FUNDS SPENT ON TRANSPORTATION IMPROVEMENTS General Obligation Bonds 1992 Street Improvements Bond: $900,000 Funded resurfacing and repair work for several Town streets, including work on Stella Court and Carolina Street

2004 Street Improvement Bond: $4,000,000 Funded construction of Jeremiah Street and Morrisville-Carpenter Road Railroad Crossing Improvements. Final Project Cost was $5,952,239

2012 Street Improvements Bond: $14,300,000 Will fund construction of the NC 54 Bypass/McCrimmon Parkway Extension from NC 54 to Aviation Parkway

See other projects funded with Town funds on the following pages.

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Year Agency Project Total Estimated Cost Town Share % Source

2009 NCDOT Airport Boulevard Sidewalks $104,580 $103,100 $104,580 100% General Fund

2010 NCDOT Davis Drive Sidewalks $134,120 $134,120 $26,824 20% General Fund (encumbered)

FY10 Town International Drive Repairs

(Triangle Drive to dead end) $408,000 $374,000 $408,000 100%

Powell Bill & General Fund

FY11 STP-DA NC 54 at NC 540 Multi-use Paths $211,920 $122,500 $64,976 30% Parkland Payment

in Lieu Funds

FY11 STP-DA Shiloh Greenway North $507,237 $507,237 $101,447 20% Parkland Payment

in Lieu Funds Town Shiloh Greenway North - Design $40,000 $40,000 $40,000 100%

FY12 STP-DA Shiloh Greenway South $360,525 $360,525 $144,210 40% Parkland Payment

in Lieu Funds Town Shiloh Greenway South - Design $54,000 $54,000 $54,000 100%

FY12 STP-DA Morrisville-Carpenter Road Widening and Davis Intersection Improvements

$1,159,786 $1,159,786 $347,935 30% Grace Park PIL &

General Fund

FY12 CDBG Barbee Road/Fiona Circle

Paving and Sidewalks $502,563 $502,563 $170,383 33%

Shiloh Grove Townhomes PIL

FY12 Town Morrisville Market Greenway $57,367 $50,000 $57,367 100% Parkland Payment

in Lieu Funds

FY12 Town Morrisville-Carpenter Sidewalks $50,000 $50,000 $50,000 100% Bond Capital

Project

FY12 Town Morrisville-Carpenter/Town Hall Signal $140,000 $140,000 $140,000 100% Bond Capital

Project FY13 CMAQ

Crabtree Creek Greenway $4,200,000 $443,154 $110,788 20% Parkland Payment

in Lieu Funds FY15 CMAQ $2,954,360 $738,590 20%

FY14 STP-DA Church Street Sidewalk – Town Center

Walking Loop $303,700 $109,900 $193,800 65% General Fund

FY15 CDBG Cedar Fork Elementary Sidewalk

(Church Street) $464,083 $371,266 $92,817 20% General Fund

Source: June 2012 Transportation Projects Quarterly Report

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APPENDIX B

APPROXIMATE COST ESTIMATES FOR ROADWAY PROJECTS Based on NCDOT Construction Cost per Mile

Roadways on New Location 2 Lane Roadway with Curb & Gutter: $4,000,000 Per Mile

3 Lane Roadway with Curb & Gutter: $4,700,000 Per Mile

4 Lane Roadway with Curb & Gutter: $5,300,000 Per Mile

4 Lane Roadway with Curb & Gutter and Raised Median: $6,200,000 Per Mile

5 Lane Roadway with Curb & Gutter: $6,100,000 Per Mile

Widening of Existing Roadways Widen from 2 to 3 Lanes with Curb & Gutter: $2,900,000 Per Mile

Widen from 2 to 4 Lanes with Curb & Gutter: $4,232,000 Per Mile

Widen from 2 to 4 Lanes with Curb & Gutter and Raised Median: $5,300,000

Widen from 2 to 5 Lanes with Curb & Gutter: $4,700,000 Per Mile

Widen from 4 Lanes w/ Median to 6 Lanes with Curb & Gutter and Raised Median: $6,000,000 Per Mile

Other Cost Considerations Add Turn Lane: $405 Per Linear Foot

Utility Construction:

$105 Per Linear Foot for Water Lines

$75 Per Linear Foot for Sewer Lines

New (or replacement) Culvert Over Stream: $150 Per Square Foot

Roadway Grade Separation over Road and Railroad: $18,500,000

Construction Engineering & Contingency: 30% of Construction Cost

Project Design: 10% of Construction Cost

*Installation or Moving of Other Public Utilities, and Right-of-Way Acquisition Costs not included

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EXAMPLES 1. Widen 2 miles of existing 2 lane roadway to a 4 lane, curb & gutter with raised median

road; include replacement of 2 stream crossings of 3,000 square feet each and installation of 2,500 linear feet of water and sewer lines.

Road Widening $10,580,000Widen 2 Stream Crossings $427,500 Installation of Water and Sewer Lines $447,500 Total Construction Cost $11,777,500Construction Engineering & Contingencies $3,533,250Design $1,177,750Total Approximate Project Cost $16,488,500

2. Construct 0.35 mile of a new 3 lane roadway with curb and gutter; include 1 new stream crossing of 2,850 square feet, and install 1,885 (~0.35 miles) linear feet of new water and sewer lines.

New Road Construction $1,645,000New Stream Crossing $427,500Installation of Water and Sewer Lines $339,300Total Construction Cost $2,411,800Construction Engineering & Contingencies $723,540Design $241,180Total Approximate Project Cost $3,376,520

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APPENDIX C

SOURCES Financing Street, Road and Related Transportation Projects in Morrisville, Presentation by Jack Vogt, Adjunct at UNC-CH School of Government, to Morrisville Blue Ribbon Commission on Transportation; March 20, 2014.

UNC School of Government Coates’ Canons Blog Post: Two-Thirds Bonds, Kara Millonzi; Accessed online: http://canons.sog.unc.edu/?php=3542; Posted November 18, 2010.

UNC School of Government Coates’ Canons Blog Post: Debt Financing Primer for Local Governments: Installment Finance Agreements, Kara Millonzi; Accessed online: http://canons.sog.unc.edu/?php=4695; Posted June 2, 2011.

UNC School of Government Coates’ Canons Blog Post: What is a Synthetic Project Development Financing (aka Synthetic TIF)?, Kara Millonzi; Accessed online: http://canons.sog.unc.edu/?php=7067; Posted April 5, 2013.

UNC School of Government Coates’ Canons Blog Post: Levying Special Assessments to Fund Public Infrastructure, Kara Millonzi; Accessed online: http://canons.sog.unc.edu/?p=7917; Posted November 26, 2014.

Progress in Motion – Town of Morrisville FY 2015 Budget Report, Town of Morrisville; Accessed online: http://www.townofmorrisville.org/index.aspx?nid=691; Adopted by Town Council June 24, 2014.

Town of Morrisville FY 2014 Budget Report, Town of Morrisville; Accessed online: http://www.townofmorrisville.org/index.aspx?nid=691; Adopted by Town Council June 25, 2013.

THE FOLLOWING PRESENTATIONS WERE MADE TO THE COMMISSION AS THEY BEGAN WORK ON THIS REPORT: Transportation Overview – Presented by Town Staff, January 2014

Morrisville Transportation Overview – Presented by Town Staff, February 2014

Financing Street, Road and Related Transportation Projects in Morrisville – Presented by Dr. Jack Vogt, March 2014

Town of Morrisville Road Maintenance Report – Presented by Town Staff, April 2014

Evaluation Criteria Overview – Presented by Town Staff, April 2014

For more information on transportation in the town, including this report and the presentations listed above, visit: www.townofmorrisville.org/transportation.

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Appendix D

ACKNOWLEDGEMENTS

Town of Morrisville Staff

Martha Wheelock, Town Manager

Tim Gauss, Senior Director of Development Services

Julia Ketchum, Senior Director of Business Management

Tony Chiotakis, Senior Director of Community & Emergency Services

Ben Hitchings, Planning Director

Jeanne Hooks, Budget Manager

Blake Mills, Public Works Director

Amy Lindley, Development Services Coordinator

Tamera Holliman, Development Services Senior Administrative Support Specialist

The Commission would like to extend a special thanks to Dr. Jack Vogt, Adjunct Professor at the UNC-CH School of Government for lending his expertise to the Commission.