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Department of Community Development
Reference: Residential Growth Pacing
To: Mayor Richard N. McLean and Members of City Council
Through: Manuel Esquibel, City Manager
Prepared By: Aja Tibbs, Long Range and Historic Preservation Planner
Date Prepared: October 27, 2016
BACKGROUND
The Residential Growth Pacing Ordinance (Ordinance 1620 as amended), typically referred to as “Pacing,” has been in place since the spring of 2000. At that time, Brighton had experienced rapid residential growth and the council enacted the ordinance to: 1) promote orderly growth and provide for harmonious development; 2) facilitate adequate provision of utilities and public facilities such as transportation, water, sewers, drainage, parks and open space, schools, libraries, and other public facilities; 3) promote a more balanced community where there is space to live, recreate and work; and 4) ensure that the community character was not eroded. In December of 2004, the City Council suspended Pacing for the year 2005 and has continued to suspend the Pacing ordinance each year thereafter, based on their findings that there is adequate infrastructure and services and based on the lessening demand for new housing.
DEVELOPMENT POTENTIAL
In consideration of the upcoming year, there are approximately 2,224 lots platted for residential development, which is up from the 2,048 lots platted last year. Of those platted lots, only 490 are either within a phase of active development or available for construction within the next year. These trends indicate that 2016 construction occurred on infrastructure-ready development, while other developers worked to install infrastructure to open up future phases of development.
In addition to the single family permits, 63 units for senior apartments was pulled early this year, and The Elements Apartments in Prairie Center pulled permits for all 288 residential units. Next year, we have a downtown project that we expect to bring 99 additional units to the market as well as a few potential affordable housing projects that are currently in the review phases. These projects indicate the continued demand for attached residential units in our market as anticipated in the recent Be Brighton Comprehensive Plan Market Study.
As observed last year, several of the subdivisions developing are exempted from Ordinance 1620, so any re-enactment of the pacing system would only limit a portion of those potential new units. Out of all 589 potential units (see attachment titled, 2016 Residential Development Potential), only 53 are located within subdivisions that could be limited through the enactment of a pacing system. 536 units are located within subdivisions exempted from the pacing ordinance and would remain unrestricted - that’s nearly 90% of units ready for development. For additional detail, please see attached exhibits for a breakdown of the lots by subdivision, and a map indicating their location throughout the City.
Without pacing restrictions, actual development will remain dependent on market demand as the units are built and sold. The State Demography Office within the Department of Local Affairs (DOLA) continues to predict a majority of the State’s growth within the Front Range, with a higher concentration of that growth in the northeast metro area.
As of the beginning of October the city has issued permits for 135 new single family detached residential units. Last year at the same time, the city had permitted 156 permits. However, the additional 351 multifamily permits have caused a large spike in the total number of residential permits for 2016. As expected, the single family detached market is relatively unchanged from the previous two years, but the demand for multifamily development has spurred significant growth in residential development. Please see the attached exhibit titled, Historic Residential Building Permit Trends, which charts historic permit trends going back to 2000.
DEVELOPMENT IMPACT
The potential impact of new residential growth on a city is two-fold. In general, residential development is more burdensome on a City because of the City’s responsibility to provide necessary services to the new residential units such as water and sewer, streets, parks, and schools. Conversely, new development brings in impact fees which help the city pay for those services. Additionally, new development often helps to make missing connections in our infrastructure such as streets and trails, and helps to spur economic development opportunities for retail and employment growth. For the analysis of these impacts, staff assumed the full amount of units are developed in 2016, which is the completion of all 498 residential units. While we may not see all of these permits pulled next year, it allows us to consider the maximum impact that might be observed in absence of a pacing restriction.
Finance:
The proposed budget for next year projects an increase of Impact Fees of only 2% which equates to $625,000. While residential development only accounts for a portion of the collected fees, a limitation on residential development would likely decrease the expected revenue for this fund.
Utilities:
There are no particular service capacity limitations to any of the identified subdivisions provided the required infrastructure is properly installed by the developers per the approved development agreements for each subdivision. Similarly, we do not have water or sewer limitations that are readily apparent for other platted residential areas, although there may be concerns identified by the Utility Master Planning efforts to be completed later in 2016. To that end, there may be water supply issues that would not be able to keep pace with an exceptional level of growth at this time. Annual growth in excess of 1,000 residential units may require a year’s advanced planning to ensure that water rights, well capacities, and treatment capacities are sufficient.
Transportation:
The subdivisions under development or likely to further develop have entered into development agreements with the city that require transportation improvements (such as signalization or street widening) depending upon the phase of development. As development occurs these improvements are completed. Slowing down the pace of residential construction would inherently lengthen the timeline in which these improvements are made. In addition, impact fees collected at the time of permit help to pay for additional transportation improvements needed for areas around town impacted by city growth.
Parks:
Similarly, construction of new parks is dependent upon the development of new residences through the development agreement process, and/or the impact fees collected at building permit. In addition, a majority of the parks within these subdivisions are maintained by a private district and would create minimal impact (if any) on the current maintenance staff in the next year. Therefore, restricting residential growth would further delay the development of new park land within the subdivisions under construction.
Schools:
If the maximum projected growth were to occur, 27J currently has space for the elementary school growth in all schools impacted. The expected student generation for the middle school and high school level will have a greater impact because several of these schools are already overcrowded. With the school bond approval last November, the district is already working to address school capacity with the construction of the new high school in Thornton. Scheduled to open in 2018, the new school will modify the high school and potentially, middle school attendance boundaries to alleviate the current and future concerns. A subdivision breakdown chart and three enrollment boundary maps for all schools within 27J have been attached for reference.
Contrary to attendance impacts, new development also collects Capital Facility Fees (CFF) for the schools. Several of the developers for these subdivisions have signed agreements with 27J to pay the voluntary CFF payment associated with each residential unit developed. Limiting residential growth would additionally limit the impact fees collected by 27J through the City’s building permit process.
ANALYSIS OF PACING ORDINANCE
In addition to a review of this year’s upcoming need for pacing, staff has additionally evaluated the effectiveness of the pacing Ordinance. With the suspension of pacing for over 10 years which occurred during both high and low markets, staff would ask that the City Council consider the need for retaining this additional regulation. Looking at the lot development table it is obvious that the majority of subdivisions under construction and several of the future subdivisions are exempt from pacing requirements. A vast majority of the exemptions either pre-existed or have been granted to larger subdivisions with the largest number of lots that would impact city services. With only a small number of subdivisions participating in the Ordinance, staff brings to question the equity of the ordinance and the futility of enacting such a regulation.
Over the last decade, we have also seen a trend to address the infrastructure needs of each new subdivision through development agreements and impact fees. These two tools combined link the number of permits issued with the service needs new residents would have. So, slowing the rate of growth by enacting pacing actually inhibits our ability to collect impact fees and see infrastructure installed. With that said, the short turn around between building permit and the need for water and sewer will not align if the service needs are significant (over 1,000 permits, each year, for subsequent years). Therefore, staff has been coordinating to create excess water and sewer treatment options through the water and sewer master planning process, and will continue to perform an annual review of current and future needs should concerns arise.
Lastly, there is a constant struggle to write regulation which will create the community that our resident’s desire with a balance between the costs of those regulations and a reasonable need to remain competitive with our surrounding area. The staff recognizes that pacing often creates apprehension for developers and builders interested in Brighton. Many builders base their expected revenues from projected market demand, which is difficult when regulations exist that might limit the number of permits they can obtain. Because enacting pacing could limit the cash flow needed to repay construction loans, it requires a developer to take a certain amount of financial risk. When weighing the effectiveness of the pacing ordinance it seems that the limited protection it offers (89% of residential units are exempted), is out of balance with the potential risk that a developer must assume when building in Brighton. Additionally, this risk seems doubly unequitable when compared with competing subdivisions that are exempt from the ordinance requirements.
SUMMARY
The current market trends, forecasting, and lot availability indicate that Brighton could continue to see a large number of residential permits in 2017. Fortunately, the overall impacts of residential growth provide additional funding for our schools and city budget, and the services needed for the development is either available or will be constructed as part of the development process. However, the vast majority of the active development is exempt from pacing requirements and would remain unrestricted. This leads staff to question the need to keep the pacing ordinance in effect.
DISCUSSION
In accordance with the existing pacing ordinance, staff will prepare the necessary documents prior to the end of the year based on Council’s direction at the study session meeting. Below are a list of options for the Council to consider in regards to giving staff direction as to how to proceed:
1. Direct staff to draft a resolution suspending the Pacing ordinance for 2017, but keep the pacing Ordinance unchanged;
2. Direct staff to draft a resolution implementing the Pacing requirements for the second quarter of 2017, and keep the pacing Ordinance unchanged; or
3. Direct staff to draft an Ordinance repealing Pacing.
ATTACHMENTS
Ø 2017 Residential Development Potential
Ø 2017 Residential Build-Out Map
Ø Historic Residential Permit Trends
Ø Finance Supplement: Revenues & Impact Fee Fund
Ø School District Supplement:
o School Attendance Estimates
o Elementary School Attendance Areas
o Middle School Attendance Areas
o High School Attendance Areas