Sunday, March 23, 2014

Davidson Needs a PILOT Program

After what can best be described as an act of high-dollar "NIMBYism", The Pines has shown the real need for a PILOT program here in Davidson.

As reported in, last week The Pines purchased the neighboring 31 acre Chartwell estate which was likely to be developed into a "high-density" development under the town's Village Infill zoning designation.  That's something the Pines did not want, and they were willing to pay to prevent it.  Rather than let the property develop and bring additional revenue to the town, The Pines had different ideas about who should benefit from the property as stated in its announcement posted along with the story.  See the below excerpt as an example.  (The previous owners were there Fishbacks.)

"In order to assure that the Fishback Property is maintained and would someday be used in a way that meets the best interests of The Pines and its current and future residents, The Pines purchased the Fishback Property from the developer for a purchase price of $2,837,500."

What exact form development of the Chartwell property would have taken is just speculation, but most certainly any development would have brought significantly increased tax revenues to the town and would have met the town goals to increase density in areas walkable to the town center.  The Chartwell estate currently generates about $12,000/year in taxes for the town.  The Pines purchase will take it off the books as The Pines is a non-profit organization.  However, the $12k/year is just a drop in the bucket when compared to the various possibilities if the property was developed.

The below chart outlines various development scenarios for the 31 acres off of Avinger lane.  It includes current development, various development scenarios as 2 acre lots, and development as higher end town homes with roughly 50% open space.  The three single-family lot scenarios are presented based on the values of several nearby properties that are roughly 2 acres a piece.

What the above chart shows is that The Pines just cost the Town of Davidson much more than the current $12,000 per year in taxes.  The true opportunity cost to the town is more likely somewhere in the range of $50-$100k per year.  That's real money for a town that has huge subsidies for Mi-Connection on its books, the highest tax rates in the area when compared to neighboring towns, and a need for a new fire station looming in our near future.

Add this to the recent cost of adding CHS as another tax exempt major land owner as well as the perpetual cost to the town from the College, and you have the makings of a real problem for our town.  Currently, Davidson receives Payments in Lieu of Taxes (PILOT) payments from the College and the Pines.  However, the town receives nothing from CHS.  Also, the amounts paid are wildly inconsistent based on the services received.
  • Davidson College PILOT - $62,500
  • The Pines PILOT- $106,000 ($8000 is designated to the Fire Department, $20,566 goes to Solid Waste Fund to pay for trash collection pick-up)
  • Carolinas Healthcare System PILOT - $0.00
A solution to this problem is available.  A model does exist that encourages non-profits to pay their fair share for the benefits they receive.  The City of Boston implemented a formal PILOT program and in FY2013 received a 53% increase in payments over what had been received in FY2011. It has been a huge success in getting major non-profits to pay their fair share toward the expenses they incur for the City.  Here are some highlights of the program.
  • It is aimed only at major non-profits, not smaller organizations.  In Davidson that would mean only CHS, The Pines, and Davidson College - not, Ada Jenkins, churches, or any of the smaller operations like the Davidson Cornelius Child Development Center.
  • It accounts for both cash and intangible benefits these large non-profits provide the municipality. 
  • It provides a transparent formula for non-profits and local government to operate under when it comes to PILOT payments.  It removes one-off side deals from the picture which is good for both sides of this situation.  The government is not in the position of negotiating with multiple entities, and the non-profits can not be accused of receiving favorable treatment which is bad for their image.
Rather than spending the next year looking at if there's a need for a program, or how other town's handle this situation, Davidson's Town Board should immediately direct the Town of Davidson Staff  to contact the City of Boston for some real-world feedback on this type of program and begin implementing something similar here based on their proven model.  The wrong option here is to continue letting major non-profits take advantage of the town by buying up property and continuing to not cover the costs of basic services like police and fire protection.

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