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HomeMy WebLinkAboutMinutes - City Council - 06/30/1997CITY COUNCIL 30 JUNE 1997 The South Burlington City Council held a special meeting Monday, June 30, 1997 at 12:00 noon in the large Conference Room, City Hall, 575 Dorset Street, for the purpose of considering approval of a tax stabilization agreement between the City and EZP Golfco, L.P. Members present:William Cimonetti, Chair, Joan Britt, David Austin, Terrence Sheahan, James Condos by Conference Telephone. Also present:Charles Hafter, City Manager; Peg Strait, Assistant City Manager; Dean Zoecklein, EZP Golfco, Inc.; Steve Stitzel, City Attorney; Randall Kay and Stephen Stoddard, South Burlington residents. Chairman Cimonetti opened the meeting by describing the tax stabilization agreement with EZP Golfco, L.P. as an effort by the City to promote development of approximately 400 acres of land in the City in a manner which maintains open space on about half the parcel through construction and operation of an 18-hole golf course. Theoretically, the alternatives to this use include maximum residential density at 400 acres of 1/4-acre lots. The City prefers the open-space approach and initially considered the possibility of a municipal golf course on the property. This option was dismissed due to the substantial expense to the City--$10 to $12 million in land acquisition and golf course construction. In addition, although the City can borrow below commercial market rates, this type of project would still be a "heavy bonded debt drain" for the City, particularly in the first few years when the course itself would produce a negative cash flow. The City never totally discarded the idea of some level of participation, but the developer gravitated toward construction of a private course. In the interest of maintaining open space in that section of the City, Council has offered a tax relief plan to the developer in the form of a tax stabilization agreement. The current stabilization methodology maintains the current level of tax revenues on the property for a period of 5 years. At the end of year 5 the stabilized property is to be reappraised to 100% FMV. In each of years 6 through 10, an additional 1/5 of the fair market value which exceeds the stabilized value is to be recognized and taxed at the same rate as the rest of the City. The current tax revenue level is $9151.76. Substantiating this number by review of the tax records requires some research, since one portion of the golf course is on property leased from an adjacent landowner in such a way as to require that 16.9/42nds of that owner's property tax be included in the stabilization agreement. It was agreed at the previous Council meeting (June 26, 1997) to include $300,000 of the yet-to-be-built golf course clubhouse in the stabilization agreement. In the second 5-year period 1/5 of year 5's FMV of the clubhouse in excess of $300,000 will be picked up each year so that in year 10 the clubhouse is taxed at 100% FMV. The State is currently in flux regarding property tax reform, however Mr. Cimonetti believes that the intent of the legislature is to honor tax stabilization agreements legally in effect as of today's date--June 30, 1997. It is Mr. Cimonetti's opinion that the "safest and most conservative interpretation of the legislative intent is that the State will collect $1.10 on all grand list value throughout the State, including stabilized values." He proposes to stabilize revenues at $9,151.76, but notes that not all of this will come to the City--"$1.10 on the grand list goes to the State." This means the City will take in approximately $3,000 less that the $9,151 it collects today on the stabilized property. Mr. Stoddard introduced himself to the group and voiced the opinion that the previous meeting (June 26) was not adequately warned and the formulation of the stabilization agreement was being rather "hurried." Further, he understands that memberships will cost approximately $18,000, which could potentially give the golf course owners about $6.5 million up front. Given this, he doubts the club will take 5 to 7 years to "turn a profit" and feels a "tax break" is unnecessary and unfair to the residents of the City. Mr. Cimonetti pointed out that the June 26 meeting was properly warned, that the requirements of the law were met. Mr. Condos interjected that the special June 26 meeting was announced at the regularly scheduled June 16 Council meeting. As to Mr. Stoddard's reference to the developer's cash position, Mr. Cimonetti observed that the City has "not tried to dig in and analyze the proposed financial performance of the actual project being built today." Rather, "we learned from the beginning that this kind of effort, unlike a manufacturing plant, takes a much longer time to grow and be successful commercially. The conclusion we reached, along with the developer, is that if we want to encourage that land use (and we really do want to encourage it to the best of our ability), then there needs to be 1) relief from taxation, and 2) predictability." Due to the State's tax reform efforts, predictability is difficult on any property at this time. The City also required that the developer provide benefit to the City and its residents. Benefits to residents and the City in general have taken the form of reduced greens fees for the first 1000 rounds each season, $10 reduction in greens fees, 24-hour advance tee times, 2 to 3 miles of additional recreation path, improvements to the existing recreation path, support of the high school golf and cross-country ski teams, and the ability to use cart paths for sledding. "We have not debated absolute necessity of tax stabilization for economic viability. We have said we want it to happen, we believe we are getting some benefit." Mr. Austin remarked that the two most important benefits in his opinion are the creation of "manicured" open space in an area contiguous to the largest City recreation area ("we could not afford to buy it ourselves"), and the willingness of the land owner to avoid cluttering the area with residential units. The benefit of stabilization is to "attract development advantageous to the City, which can be in varied forms." He sees a "clear value in the lack of housing that could otherwise be there." Mr. Stoddard pointed out that the course will bring more people into the City, thereby creating a need for additional City services which will not be paid for by the project. Mr. Cimonetti responded by noting that part of the planning approval for the area requires that traffic lights and intersection improvements at the entrance to Dorset Park and at Swift/Spear be made by the developer of the first project which builds out in that section. Additionally, that same developer is to pay for all water and sewer extensions to the project with title to all such improvements ultimately passing to the City at no cost. Mr. Condos remarked that the project would include about 250 new homes, all paying 100% share of City taxes. Mr. Cimonetti added that by preserving a large portion of this property as open space, there is little or no increased service demand. Mr. Zoecklein commented on the project's cash flow situation by pointing out they expect about 1/3 membership in the first year while approximately $8.5 million will go into the course, so "even if we could collect all of the $6.5 million in year 1 we could not pay for everything." In addition, there will be debt service in the first year. Mr. Cimonetti added that as long as the Council could feel "justified" in the decision to stabilize, they are not opposed to the owner making a profit. Attorney Stitzel pointed out that the State will tax on grand list value, allowing the stabilization of a dollar amount of taxes, then backing into a property value which they will put into the State grand list for the imposition of $1.10. Therefore, "if the agreement is based on tax revenue, the property pays more than they thought when they signed the agreement." In this case, it has been calculated that the $1.10 will reduce the City's $9,151 by about $3,000. "I have tried to nail this down, but at this point a lot of folks are scratching their heads. I am giving you my best assessment of how the State will apply the new statute." Attorney Stitzel's final draft agreement has three components added since the previous (June 26) version and is crafted to ensure that the State will benefit to the same extent it does with any other property in the City, thereby reducing the risk that the State will throw it out because the City gets a disproportionate share of the tax benefit. Attorney Stitzel's modifications are summarized as follows. 1. The first $300,000 clubhouse value is exempt--not on the City's grand list for five years. "City gets no taxes, State gets no taxes. Exemptions work fine--the legislature wants the same benefit as the City...if the City gets nothing, the State is satisfied with nothing." 2. The base value of the land generates $9,151.76 in tax revenue in year 1. For the first five years the property pays this amount and the State gets its share (+\- $3,000). At the end of year five, the base value methodology continues, but fair market value is determined, and the incremental portion is taxed the same way all other property is taxed in the City, with recognition of 20% of the increment for each of the five ensuing years. 3. Any change in the interpretation of the tax laws terminates the agreement. Mr. Zoecklein consented to admit the proposed modifications. Mr. Cimonetti questioned whether the agreement would allow EZP Golfco to purchase the now-leased portion without terminating the agreement. It is the opinion of Attorney Stitzel that the 16.9 acres of leased land could be purchased under the current version of the agreement with no adverse impact. Mr. Sheahan moved to approve the tax stabilization agreement as presented, Ms. Britt seconded, motion passed unanimously. Mr. Austin moved to authorize the chair to sign the agreement, when complete, on behalf of the Council, Mr. Sheahan seconded, motion passed unanimously. Meeting adjourned at 1:35. Council Clerk Published by ClerkBase ©2019 by Clerkbase. No Claim to Original Government Works.