Council Budget Committee Tuesday, December 13, 2016,...

Council Budget Committee Tuesday, December 13, 2016, 2:00 – 3:30 p.m.

Charlotte-Mecklenburg Government Center CH-14

Committee Members: Greg Phipps, Chair

Ed Driggs, Vice Chair Patsy Kinsey

Vi Lyles LaWana Mayfield

Staff Resource: Kim Eagle, Management & Financial Services

AGENDA

Distribution: Mayor and City Council Katie McCoy Marcus Jones Robert Hagemann Ron Kimble Robin LoFurno Debra Campbell Sandy D’Elosua Ann Wall Jason Kay Randy Harrington Hyong Yi

Page Time Frame

I. Review of the Agenda 5 minutes Staff: Kim Eagle, Management & Financial Services

II. City/County Real Estate Ledger 1 20 minutes Staff: Gina Shell, Engineering & Property Management

(Attachment 1: Presentation) (Attachment 2: Interlocal agreement for the ledger system)

Action requested: Discussion and Feedback

III. Management of City Real Estate Portfolio 11 30 minutes Staff: Tony Korolos, Engineering and Property Management

(Attachment 3: Presentation) Action requested: Discussion and Feedback

IV. Sales Tax Redistribution Overview 19 20 minutes

Staff: Matt Hastedt, Management and Financial Services (Attachment 4: Presentation)

Action requested: Discussion and Feedback

V. Questions and Comments 5 minutes

NEXT Group Discussion: January 25, 2017 City Council Retreat

Page Intentionally Left Blank

Attachment 1

December 13, 2016

City/County Real Estate Transfer Ledger

SystemCity Council Budget Committee

CHARLOTTE-MECKLENBURGPLANNING

Gina ShellDeputy Director, Engineering & Property Management

City Manager referred Real Estate Transfer Ledger to Budget Committee via October 21st Council Manager Memo to:

• Review the purpose of the “Ledger”

• Determine if it is working as intended

• Determine if it is effective in transferring land between City and County

Referral to Committee

2

Council Budget Committee December 13, 2016 1Council Budget Committee December 13, 2016 Page 1

Attachment 1

Purpose of the Transfer Ledger System

• Established in 2001 to:1. Encourage joint use facilities and operations2. Maximize use of public properties3. Enhance capital asset coordination4. Reduce need for capital funding5. Incent purchase of property for joint use

• Use of Ledger is voluntary

• City Council approves all transactions

• Transfers reflect Fair Market Value of properties

• Council receives annual update on transactions

• Ledger balance cannot exceed $5 million without mutual agreement

3

Real Estate Ledger Transactions

Transfer From City to CountyTrans. # Description/Intended Use Value Goals

Met2002-01 Evergreen Cemetery/Park $ 2,300,000 1, 2, 42006-04 Vacant 1st Ward prop./1st Ward Park $ 3,144,672 2, 3, 42011-01 Vacant 1st Ward prop./1st Ward Park & parking $ 717,094 2, 3, 42011-02 Library contingency $ 1,400,000 42016-01 Spratt St./Food bank $ 388,300 1, 2, 3, 4

Transfer From County to CityTrans.

# Description/Intended Use Value GoalsMet

2005-01 Dearmon Rd./Road ROW $ 446,175 2, 3, 42006-01 Ellington St./Affordable housing $ 40,000 3, 42006-02 Beatties Ford & Rosa Pk./Community Transit Ctr. $ 74,625 1, 2, 3, 42006-03 Former 1st Ward Park/Mixed use redevelopment $3,758,592 2, 3, 42013-01 N. Tryon St. property/BLE ROW $ 437,500 2, 3, 42014-01 N. College St. property/ BLE ROW $ 317,000 2, 3, 42014-02 N. Tryon St. property/BLE ROW $ 105,725 2, 3, 4

2014-03 Independence hotel/ Open space & Storm water management $ 730,000 1, 2, 3, 4, 5

2017-01 Pearl Park project $ 1,344,591 2, 3, 4, 5

Balance: $2,040,449 (credit = City)

Balance: $ 695,858 (credit = City)

4


Attachment 1

Real Estate Ledger Transactions

Transfer From City to CountyTrans. # Description/Intended Use Value Goals

Met2002-01 Evergreen Cemetery/Park $ 2,300,000 1, 2, 42006-04 Vacant 1st Ward prop./1st Ward Park $ 3,144,672 2, 3, 42011-01 Vacant 1st Ward prop./1st Ward Park & parking $ 717,094 2, 3, 42011-02 Library contingency $ 1,400,000 42016-01 Spratt St./Food bank $ 388,300 1, 2, 3, 4

Transfer From County to CityTrans.

# Description/Intended Use Value GoalsMet

2005-01 Dearmon Rd./Road ROW $ 446,175 2, 3, 42006-01 Ellington St./Affordable housing $ 40,000 3, 42006-02 Beatties Ford & Rosa Pk./Community Transit Ctr. $ 74,625 1, 2, 3, 42006-03 Former 1st Ward Park/Mixed use redevelopment $3,758,592 2, 3, 42013-01 N. Tryon St. property/BLE ROW $ 437,500 2, 3, 42014-01 N. College St. property/ BLE ROW $ 317,000 2, 3, 42014-02 N. Tryon St. property/BLE ROW $ 105,725 2, 3, 4

2014-03 Independence hotel/ Open space & Storm water management $ 730,000 1, 2, 3, 4, 5

2017-01 Pearl Park project $ 1,344,591 2, 3, 4, 5

Balance: $2,040,449 (credit = City)

Balance: $ 695,858 (credit = City)

Goals:

1. Encourage joint use facilities & operations2. Maximize use of public property3. Enhance capital asset coordination4. Reduce need for capital funding5. Incent property purchases that can be used jointly

5

Has the Ledger been effective?

• Has enabled achievement of goals established in the inter-local agreement

• Provides flexibility and agility for staff and Council when planning and approving transactions

6


Attachment 1

• Questions and discussion

City/County Real Estate Transfer Ledger System

7


Attachment 2

Council Budget Committee December 13, 2016 Page 5

Attachment 2


Attachment 3

Management of City Real Estate Portfolio

Tony Korolos

Engineering & Property Management, Real Estate Division

Budget Committee MeetingDecember 13, 2016

Outline

• Overview of City-owned property

• Status of 1994 Guidelines for Asset Management

• Development of City Council Policy Directives and Goals

Background

• September 7: Housing & Neighborhood Development Committee recommended repeal of the 1994 “Guidelines for Asset Management” and consideration of new City Council policy directives regarding property management, including affordable housing options.

• October 6: Privatization/Competition Advisory Committee (PCAC) supported repeal and replacement

• November 4: Interim Manager Kimble referred issue to Budget Committee via Council-Manager Memo

2


Attachment 3

City-owned Property by Departmental Use

Department Acreage

Aviation* 5,350

Charlotte Water 1,472

Engineering & Property Management 1,338

Charlotte Area Transit System 226

Charlotte‐Mecklenburg Police Department 178

Neighborhood & Business Services 125

Charlotte Fire Department 89

Charlotte Department of Transportation 66

Solid Waste Services 44

Management & Financial Services 9

Innovation & Technology 1

FY16 Comprehensive Annual Financial Report (CAFR) values City-owned assets at nearly $5 billion

3

*Aviation adheres to federal regulations in property management

Attachment 3

Representation of Current Portfolio

Public safety• 42 fire stations, 2 boat houses• 5 police stations• Police/Fire training campus

Public amenities • 14 cultural facilities• 5 sports/entertainment venues • 6 parking decks• 7 overhead walkways• 7 cemeteries • 9 Tree Canopy Preservation properties• 3 park properties, 1 closed landfill used

as park

Administration/Operations• 23 administrative buildings • 18 maintenance facilities • 11 warehouse facilities• 71 sheds, shacks, and shelters• 14 water/sewer treatment facilities

Leases/Licenses• 91 City as lessor• 28 City as lessee • 34 telecommunications

Property not needed for City Purposes • Approximately 40 acres undergoing

analysis for affordable housing• Future redevelopment opportunities:

Statesville Avenue Landfill, former Eastland Mall

4


Attachment 3

1994 Asset Management Guidelines

• Privatization/Competition Advisory Committee (PCAC) created these Guidelines to address an accumulation of property no longer used for City purposes

• Guidelines directed sale of property to maximize revenue and tax base

• Highly successful process and achieved Guideline goals

5

Current Status of 1994 Asset Management Guidelines

• Minimal inventory of properties that are not used for City purposes

• Guidelines do not address full scope of current City Council priorities– Affordable housing – Tree Canopy Preservation Program– Public-private development opportunities

• Guidelines do not address the full life cycle of property management

• Guidelines do not facilitate a long-term strategic analysis of property and facility needs

• Transition to Portfolio Management approach

6


Attachment 3

Best Practice Framework for Portfolio Management

City Council Policy DirectivesBrief statement of Policy Directives for management of City-owned real estate

City Council GoalsSet of goals for Portfolio Management

by property category

Attachment 3 7

Purpose of Portfolio Management Approach

• Clearly articulate Council expectations for acquiring, managing and disposing of properties

• Establish goals for each category of City-owned property

• Ensure consistent and informed decision-making

• Provide basis for regular reporting regarding property portfolio

Attachment 3 8


Attachment 3

Draft Policy Directives

• Ensure the acquisition, use, management, and disposition of city property provides optimal financial and community value to Charlotte

• Consider city operational needs and community service goals to create a holistic strategy for managing city real estate portfolio

• Support public service initiatives such as housing and economic development, environmental conservation, and cultural amenities

• Comply with applicable federal, state and other property encumbrance requirements in management of properties

Attachment 3 9

Categories of City-Owned Property

• Service Provision/Government Function

• Cultural Facilities

• Community & Economic Development

• Underutilized/Interim/Remnant

Attachment 3 10


Attachment 3

Goals by Property Category: Service Provision

Category includes• Office space, service provision, infrastructure

• CMGC, police stations, water treatment plants, airport terminals

Draft Goals• Maximize efficiency of workspace

• Minimize operation costs through preventative maintenance, energy management, and innovative technology

• Critically assess space needs and standardize space allotments

• Reflect city professionalism and capacity to govern

• Locate facilities balancing costs and proximity to service areas

• Partner with community and utilize public meeting spaces

• Assess life cycle costs and alternatives to ownership Attachment 3 11

Goals by Property Category: Cultural Facilities and Community & Economic Development

Draft Goals• Partner with community to address needs

• Quantify and maximize community value and return

• Evaluate and target subsidies

• Engage in innovative public/private/non-profit partnerships

• Quantify and maximize economic benefits for economic development properties

Cultural Facilities• Museums, green space,

sports facilities

• Discovery Place, Polk Park, Bojangles’ Coliseum

Community & Economic Development• Housing, conservation, economic

development

• Affordable housing, Tree Canopy Preservation Program, Eastland Mall

Attachment 3 12


Attachment 3

Goals by Property Category: Underutilized/Interim/Remnant

Category includes• Holding for future city use, Remnant parcels from road-widening

• Belmont Center, Property transfer program

Draft Goals• Generate revenue through leases and property disposition

• Reduce costs associated with ongoing maintenance

• Analyze for alternative uses in City Council Priority Areas prior to disposition such as affordable housing and tree canopy protection

Attachment 3 13

Next Steps

• Staff seeks Budget Committee guidance regarding further development and approval of Policy Directives

Attachment 3 14


Page Intentionally Left Blank


Attachment 4

Sales Tax Overview

Matt HastedtManagement & Financial Services

December, 2016

First Voter-Approved Sales Tax in North Carolina in 1967!

2


Attachment 4

Sales Tax Overview

• Purpose of presentation – Outline current sales tax structure and key elements of

legislation that altered sales tax distribution beginning in FY17

• What is sales tax? – A tax levied on the sale of goods and/or services that is

usually calculated as a percentage of the purchase price and collected by the seller (Merriam-Webster)

• Why is sales tax important to the City of Charlotte?– Over $110 million to the City

• 2nd largest General Fund revenue source • Funds essential services such as Police, Fire, Solid

Waste, and Transportation– Over $86 million to Countywide Transit services

3

1. Distribution from State to counties• Point of delivery: allocation based on the location that

a good or service was delivered • Per capita: allocation based on a county’s population

percentage of entire state

2. Distribution between counties and municipalities (County chooses one of the following methods)• Ad valorem: allocation based on property taxes levied

by each entity within county in relation to cumulative total within county

• Per capita: allocation based on entity’s population in relation to cumulative total of all entities within county

4

Sales Tax OverviewDistribution


Attachment 4

Sales Tax OverviewKey Terms

• Adjustment factor– Ratio that adjusts up or down a portion of sales tax

distribution from State to counties • Article

– Reference to local option sales tax authorizations within General Statute 105

• Hold harmless (re: Article 44)– Provision intended to maintain a prior level of Article 44

sales tax to cities/towns that went away with the State Medicaid sales tax swap with counties in 2007

• Redistribution– Occurs when sales tax revenue is generated locally, but is

distributed statewide

5

Recent Expansion

• Base Expansion– FY2016 State Budget

• Added the maintenance, repair, and installation of certain services and products

• Set the statewide impact of the expansion to be $84.2 million

• Allocation– $84.2 million will be redistributed to primarily rural counties

on a percentage established in the State Budget– It is anticipated that Mecklenburg County will contribute

approximately $10.9 million to other counties, as a result of the $84.2 million base expansion

6


Attachment 4

Recent Expansion

• General Revenue Impact– According to the State the base expansion is intended to

be revenue neutral

• CATS Revenue Impact– The CATS sales tax is not subject to the statewide

allocation and is estimated to receive approximately $2.0 million additional revenue in FY17 due to base expansion

7

Sales Tax Components

Category Rate Sales Tax Article

State 4.75%

Local option* 2.00% 39, 40, 42, and 44 hold harmless

Transit 0.50% 43

Total 7.25%

8*Hold Harmless is not included in in the 2% local option tax rate but is included in the distribution of sales tax revenues.


Attachment 4

General Sales Tax Components**

Current AuthorizationsArticle 39

1-centArticle 40½-cent

Article 42½-cent

Article 44 Medicaid

Hold Harmless

Total

Statutory Allocation from State to County

Point of Delivery Per Capita Point of Delivery

Redistribution within County

N/A

Adjustment Factor

No Yes (Mecklenburg

=0.89)

No No N/A

Allocation within County (allocation to

county and cities in county)

Per capita or ad valorem per county’s sole

discretion (Mecklenburg

allocates by ad valorem)

Same as Article 39

Same as Article 39

Blend of Per Capita and

Point of Delivery

N/A

Amount received by the City in

FY2016*$55.5million

$17.6 million

$27.2million

$10.5 Million

$110.8 million

9*Based on FY16 annual report from State**CATS Article 43 generates $86.5M

Sales TaxFlow of revenues using FY2016 Actuals*

Consumers in Mecklenburg County pay 7.25¢ sales tax; $1.35 billion collected

by State

$430.2 million to Mecklenburg County; County keeps $217.5

million

State keeps $886 million;Other Counties receive

$34.0 million

CATS $86.5 million

City of Charlotte $110.8 million

Mecklenburg Towns $15.4 million

*In Millions; Based on FY16 annual State report 10


Attachment 4

Sales Tax Distribution

Local 2.0%

7.25%

State4.75%

Transit0.5%

*In Millions; Based on FY16 annual State report 11

$886

$217.5

$110.8

Mecklenburg County

City of Charlotte

$15.4 to Mecklenburg Towns

$34.0 to Other Counties

$86.5

Sales Tax Overview

December, 2016


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