– Stormwater – January 13, 2016 – How to address stormwater flooding, financing issues, some background on service districts in NC

Ocean Sands & Crown Point Stormwater Committee

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FINANCING ISSUES TO ADDRESS STORMWATER FLOODING

Background
The Storm Water Committee of Ocean Sands and Crown Point is evaluating the best resolution to the flooding situation in our community. There are aspects of the potential technical engineering solutions that need to be further investigated, validated and confirmed.  The Committee is also studying a number of issues in the administrative, legal and financial areas.

Of paramount importance is recognizing and understanding that our two communities have ongoing pervasive flooding problems, to which none of us is totally immune.  Even if your house hasn’t directly experienced flooding, perhaps your yard, your street or your immediate neighborhood has been flooded. This then harms your (or your renters’) ability to access the property.  The impact on property values, rental opportunities, and hassle of repeated cleanup and repairs and potentially your health is significant and costly.  There is also the standing and reputation of the community: when potential renters/visitors (or buyers) hear about ‘flooding in Ocean Sands’, they likely don’t know where it is and won’t bother to investigate further whether a particular property has flooding issues, but will simply look at another community in which to rent or buy.

Creation of a Special Service District
Regardless of the ultimate technical solution, there will be an associated cost for the needed improvements and consequently the need to figure out how to fund it. One way to fund the improvements is to create a Special Service District (more info below*) which gives the community the ability to pay for the studies, design, construction, and ongoing operation and maintenance of the chosen flood control solution.

What is a Special Service District? In brief, a special service tax district is created at the request of affected property owners and administered publicly by the County Commissioners sitting as the Board of the Service District, with guidance and input from an advisory board consisting of property owners. This is the same way the Ocean Sands Water & Sewer District operates.

How a Special Service District is Funded
Service district taxes are set annually at a rate by the service district board (on the recommendation of the advisory board) to fund the activities of the special district.  Rates are typically low in the early years when the engineering work takes place, increase during the construction phases and then decrease markedly when funds are only needed for operation and maintenance of the stormwatersystem.  The early years are sometimes used to build up capital to better level out rates during the construction period.  Service district taxes are fully tax deductible to the property owners.  This Service District (through County professionals) manages the long term operation and maintenance of the flood control system.  This approach was successfully utilized by our neighbors in Whalehead to fund and implement their stormwater system.  Whalehead’s system performed exceptionally well during the recent flooding events.

Moffatt &Nichol (M&N), the engineering firm that designed Whalehead’s system, did a preliminary feasibility study for Ocean Sands.  M&N also investigated potential funding streams from federal agencies but nearly all of them require costly detailed economic studies and benefit/cost analyses to receive funding.  As the project progresses, the issue of federal subsidies will be revisited.   NC Department of Transportation will also be approached for assistance with flooding problems on NC 12.

Information from the County tax office shows that the tax value of the study area (including Ocean Sands North, Coastland’s undeveloped Sections G & T, and Crown Point) is $499,323,104. Each $0.01 tax per $100 valuation would provide $49,810 per year in revenue.

The next phase of the project which includes data gathering and master plan completion is estimated to cost $220,000.  This work needs to be done before a solid cost projection for constructing a system can be developed.  Additionally, there is a near-term solution which could be put in place and used in an emergency to lower the lake and wastewater treatment system’s moats, at an estimated cost of $50,000.  Using the revenue assumptions above for these two projects would yield a stormwater district tax rate of $0.054/per hundred valuation.  On a property valued at $350,000 this would mean an additional $189 in taxes per year or roughly $0.50/day.

As noted above, rates would increase during the construction phase.  It is likely, however, that the construction of the system can be accomplished in phases, which would allow for system implementation over time. Whalehead subdivision followed this approach and has two loans that will sunset at various times. They began with a $0.02-0.03 assessment many years ago to begin studying the issue and are currently paying an assessment of $0.155 that will drop by $0.047 in 2019 and another $0.08 in 2023.

It should be recognized that there will be a $0.02-0.03 tax needed for operations and maintenance (County staff operation of system, pump replacements, system maintenance, etc.) in perpetuity for the Whalehead system. The same can be said for Ocean Sands if a similar system is chosen.  This is a cost of enhancing and maintaining property values and peace of mind.

Currituck County has experience with special districts such as the Ocean Sands Water and Sewer District (OSWSD)http://www.co.currituck.nc.us/Ocean-Sands-Water-Sewer-District.cfm as well as 5 existing stormwater service districts.

The county will create a Stormwater Service District for Ocean Sands and Crown Point when we are able to obtain support for the concept from our property owners.  Our goal is to demonstrate this by May of 2016.  This will allow for the tax component to be issued with the July tax bill; it would be listed as a separate line item like, e.g., OWSWD fees and trash collection fees.  .

All property owners within the boundaries of Ocean Sands North and Crown Point, including Coastland owned lots and undeveloped sections would share in the cost.

Other Options
We have prepared a spreadsheet comparing two different funding mechanisms:  POA special assessment vs. the Service District option.  Coastland is in favor of the private bank loan/POA special assessment funding mechanism, while the Ocean Sands StormwaterCommittee and the four owner representatives on the two POA boards feel strongly that the Special District financing method is the option in the best interests of individual property owners.  You can view the spreadsheet here:  https://dl.dropboxusercontent.com/u/23058515/FINAL%20Service%20District%20vs.%20POA%20Assessments2.pdf


*OVERVIEW OF SPECIAL SERVICE DISTRICTS:
In 2008 there were 39,000 Special Purpose Districts in the US.  Currently there are nearly 300 in North Carolina.  So this is not something unique or different.  The reason for them is the reality of inadequate tax bases and competing demands for existing taxes which make it hard for cities and counties to provide all the services their citizens desire or need. When residents or landowners want new services or higher levels of existing services, they form a district to pay for them.

Service districts are allowed and defined under state law.  In North Carolina they are authorized by NCGS Chapter 130A; articles 2 or 12; Chapter 153A; Article 16; and Chapter 162A; articles 4 and 5.  In plain language, a special district is a separate local governmental entity that delivers a specific public service within defined boundaries.  Fire districts, drainage districts, sewage and waste water and pest abatement districts exist today because taxpayers are willing to pay for services they needed.

Special districts enjoy many of the same governing powers as municipalities and counties. They can enter into contracts, employ workers, and acquire real property through purchase or eminent domain.  Special districts have both corporate power and tax power.  The corporate power is the ability to “do things,” like constructing public works projects such as dams and sewers or “ground waterleveling systems”.  The tax power is the authority to raise money to pay for these projects and services.  Raising funds is a primary objective of service districts and is accomplished by levying incremental tax or issuing bonds.


The Flooding & Stormwater Feasibility Study by Moffatt and Nichol is available here:
https://www.dropbox.com/s/jj7hit87knz84o6/20150615%20OCEAN%20SANDS%20FINAL%20REPORT.pdf?dl=0

OR

on the “Corolla Stormwater” closed Facebook page which you are invited to join.  The Fb page has other stormwater related information as well as our previous mailings to the community.


Ocean Sands & Crown Point Flooding Pictures are here:

ERNESTOhttps://www.dropbox.com/sh/bwo7tcs79uxj0hv/AAAwi0QiSu3xFZiBT-ePPrnea?dl=0

APRIL 2015https://www.dropbox.com/sh/jncpxc92ckzru51/AABDiOCAL-KqiP7dm8OCqnNta?dl=0

OCT. 2015 Nor’easter & Joaquinhttps://www.dropbox.com/sh/hvqpf0uq0q1qnam/AADVk-2YqFMoJC7RS0biRv8la?dl=0