The issue of cash proffers, otherwise known as infrastructure finance, has become a contentious issue recently. Builders want the $18,966 cash proffer, paid per new home, dropped or somehow altered to allow them to remain competitive. County officials say that without cash proffers there will be no Capital Improvement Program (CIP) and county infrastructure, will suffer.
A committee has been seated and to date have had two meetings. A third has been scheduled for March 21 at which the five members of the committee believe they will be able to make a recommendation to the Planning Commission and the Board of Supervisors (BOS).
There are two pots of money that the county operates from. One is the general fund, which pays for salaries, maintenance, utilities, building permits, economic develop and a number other county services.
The second is called the CIP, which pays for big projects such as new schools, renovations, new and expanded libraries and parks, new fire stations and additional road improvement that the state doesn’t pay for.
The cash proffer system requires or requests builders/developers to pay for the impact that new homes/condos/apartment units will have on the infrastructure of the county. In addition these improvements still have additional funding financed through General Obligation Bonds, voted on by citizens and pay for some of the CIP costs. In fact about 68 percent of them. Cash proffers pay about 21 percent and the rest are taken from the general fund.
A bond issued by the county is really a loan, and that is an option to replace cash proffers, but interest and regular payment have to be made on the bonds/loans. But according to county officials, as revenue decreases for the county, paying interest on the payment on such a bond is untenable and would place the county in a compromising position. “It’s like going out and buying a house when you just lost your job,” said one official.
But there is pressure being brought to bear. Local organizations such as the Home Builders Association of Richmond (HBAR), Richmond Association of REALTORS® and the Chesterfield Chamber of Commerce. have stated that they would favor the removal of cash proffers because it cuts into the local economy.
“A cash proffer is a tax and is paid for by the homebuyer,” said Craig Tolson, Executive vice president, HBAR. “Ninety-nine percent of the time I guarantee the homebuyer has no idea they’re paying this tax.”
Builders say that the $18,966 that they pay in proffers when transferring a home to its buyer is added to the price, thereby increasing the price. There are also utility hookup fees to pay as well, and without proffers the economy would fare better.
“One common argument that we see is that residential construction is not an economic driver and does not pay for itself,” Tolson said. The impact of building 800 homes in Chesterfield County in one year is $169 million in local income, $16.7 million in tax revenue and 2,570 jobs. “If there were 2,500 jobs brought to Chesterfield there would surely be a ribbon cutting,” Tolson said.
But when the cost of a home in Chesterfield, which includes cash proffers, is compared to that of our northern neighbor Henrico County, they are just about the same. Henrico does not have a cash proffer system.
During a cash proffer forum hosted by the Chesterfield County Chamber and the Chesterfield Business Council, Allen Carmody, director of Chesterfield’s budget and management department, indicated that the cost of homes in Chesterfield are comparable to Henrico in a number of cost levels.
“What the data shows you that for various ranges of house sizes that the price of a home in Chesterfield County is at or lower than that of Henrico County,” Carmody said. “Similarly, in terms of volume of sales, sales in Henrico [have been comparable to that of Chesterfield].”
Former Bermuda Supervisor Jack McHale, who also attended the forum, offered an important question. “Why do families move to Chesterfield County? They come here because homes offered here are across a large spectrum of prices. They come here because schools have an excellent reputation. We have a first rate fire/EMS and police services, and we have parks, libraries and other services that produce a quality of life that is excellent. To remain competitive Chesterfield County must invest [through the CIP] in improvements that add to our quality of life.” Cash proffers is an instrument to insure that continues, McHale said.
George Emerson, Emerson Builders and a developer said “What I want to say is that if you’re a land owner and you own land in Chesterfield County and you’re in an area designation for growth; if you’re a large land owner and you have to pay a proffer, the value of that property drops dramatically,” Emerson continued. “When a banker takes land at foreclosure and you consider the proffers, the property is worthless.”
While these arguments were made a week or so before the cash proffer committee began its work, the issues brought to the table were much the same. The committee was offered eight possible outcomes that their committee may present to the planning commission and the BOS. At the last meeting, three of those items were abandoned and one was added. The committee is consuming massive amounts of information and the cash proffer discussion will move to the next level.