A sketch of one of the home models built by Chesterfield developer Emerson Builders. Owner George Emerson is opposed to the proffer system. (Photo courtesy of Emerson Builders)
A controversial real estate tax loathed by many developers could be on the chopping block in Chesterfield County.
Dorothy Jaeckle, chairman of the Chesterfield County Board of Supervisors, said Wednesday at a community meeting that the board will probably reevaluate the county’s cash proffer system this year, possibly in May.
The cash proffer issue was showcased Wednesday morning at a forum co-hosted by the Chesterfield County Chamber of Commerce and the Chesterfield Business Council.
The county uses proffers, a tax on new home lots that developers must pay at the time of rezoning, to keep pace with the cost of infrastructure tied to new development. The money helps finance public facilities such as roads, schools and parks.
Developers argue that the system inflates the cost of homes without adding value.
“I think it’s a much more complicated issue than people realize,” Jaeckle said. “I can see why the system was put in place after the explosive growth Chesterfield saw in the ’80s. But it’s time to look for alternative ways to raise revenue.”
Chesterfield has collected about $65.5 million in proffers on 11,000 lots since the county implemented the system in 1990, according to data from the county’s budget and management office. An additional 30,000 lots have outstanding proffers.
Chesterfield’s proffer rate of $18,966 per lot, which the board set last June, is the highest in the Richmond area. Richmond and Henrico County do not collect proffers, and the Hanover County Board of Supervisors voted to eliminate its $19,503 proffer in November.
Emerson Builders founder George Emerson said his company has developed hundreds of new homes and apartments in Chesterfield since the proffer system’s implementation. He said the cost of the proffer gets passed on to the home buyer.
George Emerson
“Proffers add no value to the home,” Emerson said. “You have to take amenities out to offset the cost. I think the Chesterfield Board of Supervisors recognizes that this is a broken system.”
He said if the proffer rate continues to increase, it could result in stalled developments, costing the county jobs.
“It’s going to completely kill the Chesterfield housing market,” Emerson said at Wednesday’s forum.
Former Chesterfield supervisor Jack McHale said during the forum that the proffer system helps the county maintain a high quality of life for its residents.
“Proffers are not the most wonderful thing I’ve ever heard of,” McHale said. “But without funding, the county cannot deliver the services residents have come to expect.”
McHale said eliminating proffers could lead to overcrowded schools and slower emergency response times.
Proffers are projected to generate about $18 million for the county’s capital improvement fund over the next five years, according to the budget office.
Should it eliminate proffers, the county would likely have to find additional income sources to account for the lost revenue.
A sketch of one of the home models built by Chesterfield developer Emerson Builders. Owner George Emerson is opposed to the proffer system. (Photo courtesy of Emerson Builders)
A controversial real estate tax loathed by many developers could be on the chopping block in Chesterfield County.
Dorothy Jaeckle, chairman of the Chesterfield County Board of Supervisors, said Wednesday at a community meeting that the board will probably reevaluate the county’s cash proffer system this year, possibly in May.
The cash proffer issue was showcased Wednesday morning at a forum co-hosted by the Chesterfield County Chamber of Commerce and the Chesterfield Business Council.
The county uses proffers, a tax on new home lots that developers must pay at the time of rezoning, to keep pace with the cost of infrastructure tied to new development. The money helps finance public facilities such as roads, schools and parks.
Developers argue that the system inflates the cost of homes without adding value.
“I think it’s a much more complicated issue than people realize,” Jaeckle said. “I can see why the system was put in place after the explosive growth Chesterfield saw in the ’80s. But it’s time to look for alternative ways to raise revenue.”
Chesterfield has collected about $65.5 million in proffers on 11,000 lots since the county implemented the system in 1990, according to data from the county’s budget and management office. An additional 30,000 lots have outstanding proffers.
Chesterfield’s proffer rate of $18,966 per lot, which the board set last June, is the highest in the Richmond area. Richmond and Henrico County do not collect proffers, and the Hanover County Board of Supervisors voted to eliminate its $19,503 proffer in November.
Emerson Builders founder George Emerson said his company has developed hundreds of new homes and apartments in Chesterfield since the proffer system’s implementation. He said the cost of the proffer gets passed on to the home buyer.
George Emerson
“Proffers add no value to the home,” Emerson said. “You have to take amenities out to offset the cost. I think the Chesterfield Board of Supervisors recognizes that this is a broken system.”
He said if the proffer rate continues to increase, it could result in stalled developments, costing the county jobs.
“It’s going to completely kill the Chesterfield housing market,” Emerson said at Wednesday’s forum.
Former Chesterfield supervisor Jack McHale said during the forum that the proffer system helps the county maintain a high quality of life for its residents.
“Proffers are not the most wonderful thing I’ve ever heard of,” McHale said. “But without funding, the county cannot deliver the services residents have come to expect.”
McHale said eliminating proffers could lead to overcrowded schools and slower emergency response times.
Proffers are projected to generate about $18 million for the county’s capital improvement fund over the next five years, according to the budget office.
Should it eliminate proffers, the county would likely have to find additional income sources to account for the lost revenue.
Chesterfield needs to get a clue and take notes from Henrico Co. We need to lure better businesses and stop being a “bedroom community.”
Look at the county’s Capital Improvement Plan to find out the importance of proffers. They provide about $.07 out of every $1 of funding for the CIP. Meantime, they add almost $.09 of every dollar to the cost of the median priced county home. YES, EVERY HOME, because all home prices are set on values of all homes including new. Proffers force people to pay artificially high property taxes and they pay for practically no improvements. They are a double tax on anyone who buys a new home in the county. They need to die a swifter death than they… Read more »
What about the people in Hanover who bought their house last year? I would hate to be one of them. They basically just lost $20,000 of value on their homes. I don’t see how the removal won’t affect housing values in Hanover as a whole. Which would also affect the existing tax base and tehrfore budget. While cash proffers are an added cost localities that do have them should be very cautious about removing them in a hasty manner. At least wait a year and see what the impacts in Hanover are. Looks initially like it is having serious impacts… Read more »
Scott- Don’t worry your home value will go not down. Developers will just make $20,000 more and keep their prices in line with existing market values.
Actually, it has been widely reported and promoted by developers that they have lowered the prices of their new homes in Hanover by the same amount as the old proffers. So no, they didn’t actually pocket it, but they may have screwed every homeowner in Hanover, especially those that just bought there (see Jack’s comment below).
I would love to see an example of this. Why would developers do this? They are competing with properties on the market that were built with proffers.
Here are a couple articles:
http://www.timesdispatch.com/news/local/hanover/hanover-developers-jump-at-chance-to-avoid-proffers/article_7bfb3bbe-278d-5f21-9a44-a45b3440796c.html
http://www.richmondbizsense.com/2012/12/12/hanover-county-proffers-a-big-tax-change/
On top of that the Hanover Board is trying to make that revenue up by charging everyone more for their cars.
I live in Hanover county. My assessment just came and my house lost value overnight after the proffer change. My father-in-law bought a house a few months before the proffer change, so he may as well have taken $20,00 and lit it on fire. The schools are scrambling for funds and this is without the proffer elimination impact. What does all this mean? Ultimately our tax rates will go up to make up for the proffers. They’ll raise property tax rates and probably impose another fee for each vehicle you own. There’s no easy solution — there’s no way to… Read more »
Jack is right, you don’t just eliminate a funding source just because people are opposed to it & especially without finding a new source of funds. I read a lot about the elimination of the Proffer system in Chesterfield in this article but not a whole lot to talk about what would replace the revenues that would be lost. The County would still be responsible for building schools, roads, and utilities- as well as the maintenance of all these systems. They’d just be expected to do more with less, which unfortunately seems to be an increasing trend across the Commonwealth.
One really illuminating point that was presented by ted Balsalmo, of Village Bank is the impact that the proffers have on mortgage payments. He cited that the average price of a house in Chesterfield County last year was $311,000. That equates to an extra $1152/year at a 4.5% interest rate; $1224/year at a 5% interest rate and $1296/year at a 5.5% interest rate, for as long as the morggage is in place ! Add that to the proffer that the home owner pays, that adds no value to the house, and it’s quite clear that the homeowner pays dearly to… Read more »