Spotsylvania Co.: Infrastructure as a constraint

There is an article today in The Free-Lance Star in Virginia that brings up a few different topics relevant to infrastructure. The article (available here) is specifically focused on the Board of Supervisors upcoming decision on whether to approve a new 1,060 housing development.

That, in itself, isn’t terribly relevant to the infrastructure world. However, one of their concerns about approving the new development is that the County doesn’t have capacity in its school system – social infrastructure – for the children that this development would likely bring. A referenced staff report has concluded that the County doesn’t have school capacity for the residential developments that have already been approved. Adding this one on top of those would only further complicate the problem.

So, here’s a perfect example of how a lack of good infrastructure can be a tremendous constraint on future growth. Spotsylvania County, like most US counties, relies upon rooftops and property tax collections to generate most of their revenues. In this case, they aren’t able to generate more rooftops because they don’t have the infrastructure. They are potentially trapped, capping their growth potential as a function of available classroom seats.

Another interesting component of this article is the discussion of proffers. For the uninitiated, a proffer is a per unit cash fee paid by the developer to the County to help offset the infrastructure impacts the development will create. In this case, the developer is offering to pay $18,600 per detached home, $13,500 per townhouse and $6,500 per apartment. In total, the payments add up to $15.7 million. That’s not chump change, and it is paid upon substantial completion – potentially before a buyer has been secured.

Spotsylvania has decided, for all of its received proffers, that 70% will go to transportation and 30% will go to the school system. In this case, that would mean that $4.7 million (30% of $15.7m) would go to the County’s school system. If we assume that each of the 1,060 houses has 2.5 children, then the County would have to educate an additional 2,650 children. $4.7 million certainly wouldn’t cover the entire incremental cost of adding these students, but when combined with the increased property tax revenues, sales tax, etc. the development will bring, it should go a long way.

In the infrastructure world, there are an increasing number of discussions about Value Capture and how localities can/should use this to help pay for new infrastructure (transit usually). The theory says that these new infrastructure assets will have a positive impact on the land values surrounding it and the locality should participate in the value it is creating. The exact timing and mechanisms of how this value would be captured and who would pay it (selling land owner, developer, new tenants, etc.) are unclear.

However, the Spotsylvania proffers are an interesting form of this Value Capture concept in practice. Here you have a developer who is able/willing to pay a flat “fee” to the County to help them pay for infrastructure. The developer just passes these costs on to the new buyers and renters of the units, but at least they are coordinating the transfer. They have an ultimate effect of making housing in the area more expensive and less competitive with surrounding markets. But, that’s a discussion for another day…

All in all, Spotsylvania County’s housing development issues prove to be an interesting (for me at least…) look into the impacts that infrastructure can have on a community.