Attachment B – Methodology for Projecting Service District Revenues
Defining the Service District:
In order to project potential revenues from a service district, first, the service district boundary must be defined. For purposes of this revenue projection, maps from the Places 29 master planning process were utilized to identify commercial parcels in the broader RT29 N service district (Attachment A). Revenues were projected also for an alternative service district boundary that included only the Albemarle Place and Hollymead Town Center developments.
Projecting the Type and Timing of Developments:
Once establishing the boundary of the district, staff classified the identified parcels within the district boundary into three categories to project the type and timing of developments. The categories are as follows: 1) existing commercial properties 2) commercial properties yet to be fully developed through approved rezonings and 3) potential commercial properties to be developed / redeveloped through potential rezonings.
Category 1: For existing commercial properties in the service district, such as Fashion Square Mall or Rio Hill Shopping Center, the type and timing of development is presently defined. Staff used the County’s real estate database to determine the existing assessed values of properties.
Category 2: For commercial properties to be developed through approved rezonings, such as Albemarle Place and Hollymead Town Center, staff attempted to estimate both the type of and when development would occur. Specifying the type of development is important because the value of the property, as assessed by the County, will vary depending on the type. For example, the value of a big box development will be different from a strip center development consisting of small retail shops. Information on the expected type of development was obtained either through the rezoning itself, or site plans that are approved or are presently under review. From this information on the type and scope of development, staff conservatively estimated the approximate amount of commercial development that will be in place for each project in five (2012) and ten (2017) years.
To approximate an assessed value once the property is developed, staff estimated the identified properties’ values if they had brand new structures today, given current market conditions. For example, an expected big box retail on a parcel was compared with a current new big box to estimate an assessed value. From these estimates, assessed values were then projected based on when the property would likely be developed. As another example, if a project planned for 100,000 square feet of office space and 50% was estimated to develop within 5 years, then 50% of the estimated assessed value would be accounted for in year 5 of the revenue projections.
Category 3: For potential commercial properties to be developed / redeveloped by potential rezonings, such as area A of Hollymead Town Center or further expansion of office space in North Fork Research Park, staff again attempted to project both the type of and when development would occur utilizing the same methodology used for “Category 2.”
Projecting Assessed Values:
Staff has available the assessed values for existing commercial properties and can also estimate the assessed values (in today’s dollars) of properties to be developed based on current economic conditions. However, staff does not have a good basis to project the future assessed values of commercial properties due to their appreciation. The development of new, large commercial properties, such as Albemarle Place and Hollymead Town Center, creates much uncertainty as to how these projects may impact the assessed values of existing commercial properties.
While the County’s 5-year financial model does project an average change in assessed values, the projections are driven primarily by residential properties’ assessed values and may not be a good indicator of changing commercial values. The model also provides only 5 years worth of data, which is insufficient for this scenario. Because of the uncertainty and complexity in projecting commercial assessed values, staff presents the projected revenues in today’s dollars.
After defining the service district boundary and projecting how and when projects could develop, an additional tax rate of twenty-five cents per $100 of assessed value was applied to project annual revenues. Revenues were projected after five and ten years for both the broader RT 29N commercial area and the Albemarle Place and Hollymead Town Center projects. Again, please note all revenue projections are in today’s dollars and do not account for any appreciation in existing commercial properties.
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