QUARTERPATH COMMUNITY DEVELOPMENT AUTHORITY CITY OF WILLIAMSBURG, VIRGINIA SPECIAL ASSESSMENT REPORT Prepared By: MuniCap, Inc. October 25, 2011
QUARTERPATH COMMUNITY DEVELOPMENT AUTHORITY CITY OF WILLIAMSBURG, VIRGINIA SPECIAL ASSESSMENT REPORT Purpose of Report The Quarterpath Community Development Authority (the CDA ) is being created to provide public improvements for the property within the geographic boundaries of the Quarterpath Community Development Authority District (the District ). These improvements will provide a special benefit to the property owners in the District. The bonds are expected to be issued by the CDA to finance all or a portion of the costs of the public improvements, bond issuance costs, bond interest during construction and for a period after construction, and bank fees. The City of Williamsburg (the City ) will impose special assessments in amounts equal to the principal on the bonds issued by the CDA, interest on the bonds until repaid, and administrative expenses of the CDA related to the bonds. The annual installment of special assessments will be collected each year to provide funds for the payment of debt service on the bonds, the cost of administration of the CDA, and other costs related to the bonds. Alternatively, a property owner may pay the special assessments imposed on a parcel in full at any time without penalty. The CDA is being created, special assessments levied, and bonds issued pursuant to the Virginia Water and Waste Authorities Act, beginning with 15.2-5100 et seq. of the Code of Virginia, 1950 (the Act ), as it may be amended from time to time. The Act provides that the costs of improvements provided by the CDA may be assessed in a manner prescribed by the CDA upon property benefited by such improvements. This report explains the method of assessing the property in the CDA for the improvements to be provided by the CDA. Description of the District The Quarterpath Community Development Authority District consists of approximately 222 acres proposed to be developed as a mixed-use project. The property is located in the City of Williamsburg, Virginia at the intersection of US Routes 60 and 199 about two miles west of the Rt. 199 interchange with Interstate 64. A map of the District is attached to this report as Exhibit A. According to City assessment records, there is no improvement value for these parcels, indicating that no existing structures are within the District At the time of acquisition, the parcels in District were residentially zoned (RS-1). On February 7, 2005, the property owner submitted signed final proffers in connection with a re- - 1 -
zoning application filed with the City, which they City Council subsequently approved on April 14, 2005. The applications included areas of land outside of the District. The re-zoning provided for the following: Approximately 221 acres located north of Route 199, west of Route 60, east of Quarterpath road, and south of Tutter s Neck Pond and the central east-west flowing stream were re-zoned to ED Economic Development District Conditional; Approximately 1.09 acres of unimproved Wickre Street right-of-way were re-zoned to ED Economic Development District; and The proposed Quarterpath at Williamsburg (the name of the proposed development within the District) can be completed as planned under the current zoning requirements. The proposed uses within the Quarterpath at Williamsburg development are outlined below in Table A. Table A Proposed Development Building Area Property Type Units Sq. Ft. WSBGIb Retail 190,000 Hospital 190,000 Medical office 200,000 Condominiums 44 Townhomes 24 WSBGIa Retail 20,000 WSBGII Retail 309,000 Townhomes 243 Condominiums 418 Total 729 909,000 A map illustrating the proposed development within the District is included as Exhibit B, attached hereto. Proposed Improvements The purpose of the CDA, the special assessments to be levied in the District, and the bonds to be issued with respect to the CDA is to finance all or part of the costs of public improvements for the benefit of the District. These improvements include the design, planning, coordination, and/or construction related to the following: - 2 -
Battery Boulevard (East-West Access); Commonwealth Avenue; Sidewalks, bike trails, and public amenities; Water and sewer utilities; and Wastewater management These improvements, estimated at a total cost of $13,329,400, are described herein. Exhibit C provides the detailed costs of public improvements, while Exhibit D illustrates the location of the public improvements on a map. Costs may vary from the estimates shown in Exhibit C and the improvements built may be modified from those described herein. Battery Boulevard (East-West Access) Specific improvements include the addition of a south-bound turn lane on Rte. 60, demolition of Whiting s Funeral Home and related buildings, and the construction of two roundabouts and connectivity to those roundabouts. The improvements provide access to and connectivity within the District. Development plans also include the installation of landscaping along Battery Boulevard. Commonwealth Avenue Specific improvements associated with Commonwealth Avenue include the construction of a three-lane section from Battery Boulevard to the emergency department/service entrance of the hospital, providing necessary access. Development plans also include the installation of landscaping along Battery Boulevard. Sidewalks, Bike Trails, and Public Amenities Specific improvements include the construction of sidewalks along Battery Boulevard and Commonwealth Avenue, a multi-use/bicycle paths across the District, park vistas along the path, and a Town Square. These improvements provide connectivity throughout the development and provide public amenities necessary for the project to be competitive in attracting residents and tenants. Water & Sewer Utilities and Storm Water Management Specific improvements include the construction of a water line from Quarterpath Road to the City water tower near the northeast portion of the District, the relocation of an existing force main which traverses the District, the construction of sanitary sewer lines and a pump station, and the construction of facilities to treat and manage storm sewer for the District. These improvements provide essential water, sewer, and storm water management services to the development. In addition to these specific improvements, other anticipated expenses include certain costs associated with the creation of the CDA and the issuance of bonds. - 3 -
The public improvements described herein are all provided to meet the needs of the property in the District that result from the proposed development of the property. The aforementioned improvements provide road enhancements, public amenities, and water, sewer, and storm water management facilities that do not currently exist and will be necessary for the proposed development of the property. A map illustrating the public improvements to be financed is included as Exhibit D, attached hereto. Projected Issuance of Bonds The bonds are projected to be issued by the CDA to finance the costs of the public improvements in a maximum amount of $15,000,000. It is anticipated that the CDA will issue tax-exempt bonds and will be repaid with levy of special assessments over a 30-year period. Bond proceeds may include the costs of constructing improvements, issuance costs, bank fees, and capitalized interest. Interest income on the bond proceeds will act as a supplement to the bond proceeds before they are fully expended. Table B shows the estimated sources and uses of funds for the issuance of the bonds. Table B Projected Issuance of the Bonds Source and Uses Proceeds Sources: Bond proceeds $15,000,000 Interest earned in the improvement fund $0 Total sources of funds $15,000,000 Uses: Public improvements $13,329,400 Issuance costs $200,000 Bank fees (20 bps) $30,000 Capitalized interest $1,440,600 Rounding $0 Total bond proceeds $15,000,000 The actual issuance of the bonds may vary from these estimates depending on the interest rate on the bonds, the date the bonds are issued, the cost of issuing bonds, reinvestment rates on the bond proceeds, and other factors. Bond issuance costs include legal fees, financial consulting fees, cost of studies, the setup and first year s fee of the trustee, trustee s counsel, City expenses, document printing costs, and other miscellaneous costs related to the issuance of the bonds. Capitalized interest will fund the interest on the bonds for approximately three years after the issuance of the bonds. Capitalized interest allows time for the public improvements to be constructed, for the property to be added to the property tax roll, and special assessments to be collected from the property and applied to the payment of debt service on the bonds. - 4 -
Projected Debt Service and Administrative Expenses A schedule showing projected debt service and administrative expenses is attached to this report as Exhibit E. Interest is assumed to be 3% per year during the capitalized interest period and 7% thereafter on the outstanding principal on the bonds. Administrative expenses are estimated at $30,000 annually. Administrative expenses are assumed to be adjusted annually for inflation at two percent per year. Total principal, interest, and administrative expenses of the special assessments are shown in Table C. Table C Total Special Assessments Proceeds Principal $15,000,000 Interest $22,881,580 Administrative expenses $1,193,767 Total special assessments $39,075,347 Determination of Special Assessments The reasonable basis for the special assessments levied in the District is based on the following: (i) (ii) (iii) The public improvements to be provided by the District provide a peculiar and special benefit to the property in the District and this benefit exceeds the cost of the special assessments; The bonds are issued to pay for all or a portion of the public improvements that provide a peculiar and special benefit to the assessed property and the special assessments collected each year are equal to the amount required to repay the bonds and to pay administrative expenses related to the bonds; and The special assessments are allocated to parcels within the District on a basis that reasonably reflects the benefit each parcel receives from the public improvements. The following sections of this report explain how the Special assessments as levied pursuant to the Rate and Method of Apportionment of the Special Assessments for the CDA are consistent with these concepts. - 5 -
Special Benefit The property will receive a peculiar and special benefit from the public infrastructure improvements to be provided by the CDA. The public improvements are located in the District and provided specifically to meet the demands of the property in the District. The public infrastructure to be funded by the CDA includes road improvements; sidewalks, parks, and trails; water and sewer utilities; and storm water management. These improvements are required for the proposed use of the property as previously described. Without these improvements, the proposed use of the property would not be legally permitted or adequately supported by public infrastructure. Accordingly, the public improvements to be funded by the CDA provide a peculiar and special benefit to the property in the District. The peculiar and special benefit of the public infrastructure improvements to be provided by the CDA will be equal to or greater than the cost of the special assessments levied on the property. The value of peculiar and special benefit is confirmed by two means. First, the owners of all of the property in the District have requested the City to impose special assessments on the property for the purpose of providing the public improvements. It is reasonable to believe the owners are acting in their interest and making this request because the benefits they receive from the public improvements exceed the cost of the special assessments. Second, the special assessments are being levied to provide improvements that are necessary for the highest and best use of the property (i.e., the use of the property that is most valuable, including any costs associated with that use). Highest and best use can be defined as The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. (Dictionary of Real Estate Appraisal, Fourth Edition.) The four criteria for highest and best use are (i) legal permissibility, (ii) physical possibility, (iii) financial feasibility, and (iv) maximum productivity. The owners of the property to be assessed have analyzed various options for the use of the property, taking into consideration the legally permitted uses, the physical constraints of the site, financial parameters, market demand, and other relevant factors. The owners are understandably interested in maximizing their return on the property. Based on this analysis, the highest and best use of the property, including any costs required for that use, is the proposed uses for the property. The proposed uses of the property will require the public improvements that are to be provided by the CDA. Without these improvements, the property could not be put to its highest and best use. The financing provided by the CDA is long-term financing and pays interest which is exempt from income taxes to bondholders, resulting in a lower rate than other available financing on comparable terms. The bonds also have a longer term than other available financing. As a result of these advantages, the financing provided by the CDA is the most beneficial means of financing the public improvements. In summary, the peculiar and special benefit to the property is greater than the special assessments imposed on the property for the following reasons: - 6 -
1. The improvements to be provided by the CDA are required for the highest and best use of the property; 2. The highest and best use of the property is the use of the property that is most valuable (including any costs associated with the use of the property); 3. The financing provided by the CDA is the most beneficial means of financing the improvements; 4. As a result, the special benefits to the property from the improvements to be provided by the CDA will be equal to or greater than the cost of the special assessments that will finance the improvements necessary to achieve the highest and best use of the property. Assessments Collected Each Year The annual installment of special assessments are shown in the Special Assessment Roll, Appendix A of the Rate and Method of Apportionment of the Special Assessments and Exhibit E attached to this report. After the issuance of the bonds, the annual installment is projected to be paid over approximately thirty years. The annual installment includes the principal to be repaid, which is equal to the estimated principal of the bonds to be issued, interest on the unpaid principal, and administrative expenses of the CDA as shown below in Table D. As described above, the annual installments as shown on the Special Assessment Roll have been set each year in the amount necessary to pay the debt service on the bonds, which are to be issued to finance the public improvements that provide a peculiar and special benefit, and the administrative expenses related to the repayment of the bonds by the CDA. Table D Total Special Assessments Proceeds Principal portion $15,000,000 Interest portion $22,881,580 Administrative expenses $1,193,767 Total special assessments $39,075,347 The actual expenses of the CDA may be less than estimated herein. The Rate and Method of Apportionment of the Special Assessments provides for the annual installment collected each year to equal the actual amount required to pay debt service on the bonds and administrative expenses of the CDA. Additionally, the Rate and Method of Apportionment of the Special Assessments provides for special assessments to be reduced to equal the actual costs of providing the public improvements, including the costs related to issuance and repayment of the bonds. In summary, the special assessments are set in a manner consistent with the estimate of - 7 -
the annual debt service on the bonds to be issued to finance the public improvements that provide a peculiar benefit to the property being assessed and the administrative expenses related to the repayment of the bonds by the CDA and are therefore set in a reasonable manner. Allocation of the Special Assessments This section explains how the special assessments are allocated to the property in the District in a reasonable manner that is representative of the benefit each property receives from the public improvements to be provided by the CDA. As previously stated, the owner of each parcel in the District has consented to the special assessments imposed on the property, including the method of allocating the assessments to the parcels, demonstrating the reasonableness of the allocation of the special assessments. The special assessments are imposed on all of the real property within the District, with the exception of non-benefited property and public property. Non-benefited property is property within the District that will not use the public improvements and will not increase in value as a result of the construction of the public improvements. Special assessments are fixed on a parcel once a parcel has been developed. At this time, the land use is known for a parcel, allowing the special assessment to be fixed on the parcel to accurately reflect the actual use of the property. For purposes of allocating assessments to developed property, there are two classes of development identified: commercial and residential. Each residential unit is allocated an equal amount of the special assessments and each 1,000 square feet of commercial development is allocated an equal amount of the special assessments. Each 1,000 square feet of commercial development is allocated 75% of the special assessment allocated to each residential unit. This allocation is estimated to be an approximation of the benefit received by each residential unit compared to each 1,000 square feet of commercial space based on the estimated use of the improvements, the value of the property, and the expectations of the owner. The formula in the Rate and Method of Apportion of Special Assessments for the allocation of special assessments to a parcel of developed property is as follows: Special Assessments shall be fixed on each Parcel at such time as the Parcel becomes Developed Property according to the following formula: A = (B C) D Where the terms have the following meanings: A = the Special Assessments for a Parcel of Developed Property B = the Equivalent Units of a Parcel C = the sum of the Equivalent Units of all of the Parcels in the District D = the total of the Special Assessments for all Parcels as shown in the Special Assessment Roll Special assessments are to be allocated to parcels on the basis of equivalent units. Equivalent units represent the ratio of estimated benefit of 1,000 square feet of commercial - 8 -
development to a residential unit, as described above. Based on the proposed development plan for the District, the sum of the equivalent units for all property in the district is shown by Table E. TABLE E Total Equivalent Units Proposed Development Equivalent Land Use Class Units/Per 1,000 Assessment Total Equivalent SF Factor Units Residential development 729 1.00 729 Commercial development 909 0.75 682 Total equivalent units 1,411 The calculation of the special assessment and the principal portion of the special assessment per equivalent unit is shown by Table F. TABLE F Special Assessment per Equivalent Unit Total special assessments $39,075,347 Total equivalent units 1,411 Total special assessments per equivalent unit $27,698 Total principal portion of assessments $15,000,000 Total equivalent units 1,411 Total principal portion per equivalent unit $10,633 Special assessments will be allocated to each parcel of developed property based on the equivalent units of the parcel and the special assessment per equivalent unit as shown above, although these calculations will be updated as appropriate. The special assessments are payable each year as the annual installments. The annual installments represent the principal and interest due each year on the bonds and annual administrative expenses of the CDA. Developed property pays annual installments in proportion to the special assessments allocated to developed property. The balance of the annual installments is allocated to undeveloped property (that is, property that is not developed property). Annual installments are allocated to undeveloped property based on its status within one of two classes of undeveloped property: platted property or unplatted property. This classification allows for an allocation of the annual installments to undeveloped property in a manner to better represent the benefit of the property. Property is able to be platted because of the availability of improvements. Property is platted as a step to the development of the - 9 -
property. As a result, platted property receives greater value from the improvement than unplatted property. This is typically represented by higher assessed values for platted property. The annual installments to be paid by undeveloped property are allocated to the platted property and unplatted property classes on the basis of the assessed value of each class. The value of the property in each class is a representation of the ability to utilize the improvements, and therefore, the value each class of property is receiving from the improvements. Within each class of platted and unplatted property, the annual installments are allocated to each parcel on a per acre basis. This approach is estimated to result in a each parcel of platted and unplatted property being responsible for annual installments that reasonably reflects the benefit each parcel receives from the improvements. This approach has been agreed to by the property owners. Summary of Reasonable Basis of the Special Assessments Special assessments are imposed on the assessed property in the CDA according to the provisions of the Rate and Method of Apportionment of the Special Assessments in a reasonable manner. This report explains the reasonable basis of the special assessments. The reasonable basis may be summarized as follows: 1. The public improvements are being provided specifically for the use of the property in the District, and as a result, provide a peculiar and special benefit to the property within the District; 2. The special benefit of the public improvements to the property subject to special assessments exceeds the cost of the special assessments; 3. The bonds are issued to finance the costs of the public improvements, which provide a special benefit to the property in the District, and other costs related to the issuance of the bonds; 4. Special assessments collected on all of the property in the District each year are equal to the amount required to pay the debt service on the bonds and administrative expenses of the CDA related to the bonds; 5. Special assessments are to be allocated to each parcel within the District in a manner that is reasonably representative of the benefit each property receives from the public improvements to be provided by the CDA. For these reasons, the special assessments are imposed on the assessed property in the District in a reasonable manner. - 10 -
Exhibit A Quarterpath Community Development Authority CDA Map - 11 -
Exhibit A Quarterpath Community Development Authority Map of CDA District
Exhibit B Quarterpath Community Development Authority Map of Proposed Development - 12 -
WSBG Ib Route 60 Entry WSBG Ia Quarterpath Entry WSBG II
Exhibit C Quarterpath Community Development Authority Estimated Costs of CDA Improvements to be Funded by Bonds Estimated Improvements Construction Costs Infrastructure design Plans $185,000 Permits $11,000 Inspections $130,000 Survey $65,000 Previous design work $1,461,576 Construction management $500,000 Sub-total $2,352,576 Demolition and site preparation Demolition/clearing $187,500 Security $18,500 Laydown areas $48,000 Sub-total $254,000 Grading, erosion, sediment control Erosion and sediment control $218,210 Borrow add $38,400 Rough grading $319,300 Final grading $217,000 Sub-total $792,910 Biofilers/BMPs Biofilers $171,475 BMPs $376,300 Sub-total $547,775 Utilities Sanitary sewer $312,500 Waterline $856,250 Storm sewer $1,483,600 Electric $609,500 Gas $0 Telecommunications $46,000 Pump station $675,000 Force main relocation $80,000 Miscellaneous utility construction $70,640 Sub-total $4,133,490-14 -
Exhibit C Quarterpath Community Development Authority Estimated Costs of CDA Improvements to be Funded by Bonds Estimated Improvements Construction Costs Roadways Base stone $485,118 Under drain $69,132 Curb and gutter $267,720 Base/intermediate asphalt $532,681 Surface asphalt $152,712 Striping $17,875 Sub-total $1,525,238 Bridges Culvert 1 $542,500 Culver 2 $324,750 Sub-total $867,250 Landscaping and finishing Landscaping and finishing $261,250 Sidewalks $301,108 Special areas $22,860 Roundabout $100,000 Town square $250,000 Bike trail and parks $400,000 Sub-total $1,335,218 Total $11,808,457 Repairs and bond release $403,283 Sub-total public improvements $12,211,740 Previous CDA related expenses $132,076 Contingency $985,584 Total public improvements $13,329,400-15 -
Exhibit D Quarterpath Community Development Authority Map of Public Improvements
Exhibit D Quarterpath Community Development Authority Map of Public Improvements
Exhibit D Quarterpath Community Development Authority Map of Public Improvements
Exhibit E Quarterpath Community Development Authority Projected Debt Service and Administrative Expenses Assessment Administrative Annual Year Principal Interest Expense Installment 2012-13 $0 $450,000 $30,000 $480,000 2013-14 $0 $450,000 $30,000 $480,000 2014-15 $0 $450,000 $30,600 $480,600 2015-16 $0 $1,050,000 $31,212 $1,081,212 2016-17 $0 $1,050,000 $31,836 $1,081,836 2017-18 $25,000 $1,050,000 $32,473 $1,107,473 2018-19 $48,000 $1,048,250 $33,122 $1,129,372 2019-20 $73,000 $1,044,890 $33,785 $1,151,675 2020-21 $101,000 $1,039,780 $34,461 $1,175,241 2021-22 $131,000 $1,032,710 $35,150 $1,198,860 2022-23 $163,000 $1,023,540 $35,853 $1,222,393 2023-24 $198,000 $1,012,130 $36,570 $1,246,700 2024-25 $237,000 $998,270 $37,301 $1,272,571 2025-26 $278,000 $981,680 $38,047 $1,297,727 2026-27 $322,000 $962,220 $38,808 $1,323,028 2027-28 $371,000 $939,680 $39,584 $1,350,264 2028-29 $423,000 $913,710 $40,376 $1,377,086 2029-30 $479,000 $884,100 $41,184 $1,404,284 2030-31 $540,000 $850,570 $42,007 $1,432,577 2031-32 $606,000 $812,770 $42,847 $1,461,617 2032-33 $676,000 $770,350 $43,704 $1,490,054 2033-34 $753,000 $723,030 $44,578 $1,520,608 2034-35 $835,000 $670,320 $45,470 $1,550,790 2035-36 $923,000 $611,870 $46,379 $1,581,249 2036-37 $1,019,000 $547,260 $47,307 $1,613,567 2037-38 $1,121,000 $475,930 $48,253 $1,645,183 2038-39 $1,232,000 $397,460 $49,218 $1,678,678 2039-40 $1,351,000 $311,220 $50,203 $1,712,423 2040-41 $1,478,000 $216,650 $51,207 $1,745,857 2041-42 $1,617,000 $113,190 $52,231 $1,782,421 Total $15,000,000 $22,881,580 $1,193,767 $39,075,347-19 -