Community Development Authorities (CDAs) were designed to allow public-private partnerships for the development of public infrastructure and other public improvements necessitated by private development in Virginia. CDAs permit more timely or comprehensive public infrastructure development than the traditional process.
The authorizing legislation in Virginia for CDAs, often called “Special Tax Districts” in other states, was approved in 1993. Enacted as an amendment to the Virginia Water and Waste Authorities Act, this legislation was designed “to provide an additional method for localities to finance infrastructure associated with development and redevelopment in an authority district." (2006 Op. Va. Att‘y Gen. 89, 90).
At the request of the majority of property owners in the area, CDAs are organized with local government approval to issue bonds for public infrastructure. The requesting parties may retain majority control of the CDA board, but the local governing body also appoints board members. The CDA board is formed in accordance with local government processes and public hearings. The local government has no liability or pledge for repayment of debt issued by the CDA.
The CDA is a public body politic and corporate and a political subdivision of the Commonwealth, subject to many of the requirements that are imposed upon such a public entity, including, without limitation, requirements for public hearing and the Freedom of Information Act.
Cities in Virginia are automatically eligible, but counties and towns are eligible only if they so elect by ordinance following a public hearing. For districts in two or more localities, a CDA may be formed by concurrent ordinances of each locality.
CDAs may be used to finance commercial or residential projects, but the reality is that a locality may have a policy or ordinance requiring specific ratios or, in some instances, prohibiting particular uses.
III. ADOPTION OF ORDINANCE
A petition to create a CDA must come from at least 51% of the landowners (measured by land area or assessed value) of the land to be located in the proposed CDA district. The locality does not have the authority to initiate a CDA without the petition of the landowners. The petition must contain, among other things, the name and boundaries of the proposed district, a description of services and facilities, a financing plan, the expected benefits, and the means of selecting board members.
A public hearing is required prior to the adoption of the ordinance (or resolution) by the governing body creating the CDA. The required notice details are located in the statute, which include advance publication and the mailing of the proposed ordinance to the petitioning landowners to allow any landowner 30 days to withdraw its signature from the petition.
After completion of such procedure, the ordinance creating the CDA is adopted by the governing body. The ordinance must properly document the appropriate legislative findings with respect to the necessity and nature of improvements to be financed, particularly in the redevelopment context. The ordinance is then filed in the land records for each tax map parcel in the district.
The CDA’s Articles of Incorporation are prepared and filed with the State Corporation Commission, which then issues a charter.
IV. TYPES OF PROJECTS PERMITTED
Upon establishment of a CDA, it is then (i) authorized to finance, fund, establish, acquire, construct, equip, operate and maintain public infrastructure improvements that are enumerated in the ordinance, (ii) as necessary to meet (iii) increased demands placed upon the locality as a result of private development within the district.
Public infrastructure improvements may include:
- Roads, bridges, parking facilities, curbs, gutters, sidewalks, traffic signals, storm-water management and retention systems, gas and electric lines, and street lights.
- Parks and facilities for indoor and outdoor and recreational, cultural and educational uses, security facilities, fencing and landscaping.
- Fire prevention systems and rescue vehicles.
- School buildings and related structures, when authorized by the locality and the school board.
- Infrastructure and recreational facilities for age-restricted active adult communities with a minimum population of 1,000 residents.
Further, special services provided by the CDA may include trash removal and disposal, street cleaning, snow removal, extra security personnel and equipment, recreational management and groundskeeping.
CDAs are authorized to issue revenue bonds to pay the costs associated with the infrastructure improvements, subject to restrictions enumerated in the ordinance. Bonds are payable solely from the revenues of the CDA (special tax, special assessment, fees/charges, etc.). The locality is actually prohibited from paying debt service on CDA bonds unless otherwise provided in the ordinance.
The bonds are secured by a special tax on the real estate where the improvements will be constructed, and/or a special assessment. [DOES THE TAX APPLY ONLY TO THE REAL ESTATE WHERE THE IMPROVEMENTS WILL BE CONSTRUCTED, OR TO ALL REAL ESTATE WITHIN THE CDA DISTRICT?] These bonds are tax-exempt.
The CDA may request annually that the locality levy and collect an annual special ad valorem real estate tax on property within the district to collect the funds needed to repay the bonds. The taxes are levied and collected by the locality, not the CDA.
The tax is limited to 25 cents per $100 of assessed value, unless a greater tax is requested by all the landowners in the CDA district, typically in an amount needed to meet the principal and interest obligations of the bonds on an annual basis, plus authorized expenses. The locality collects the taxes and then pays the proceeds to the CDA. The payments of special taxes from the locality to the CDA are “subject to appropriation.”
Taxes or assessments imposed on behalf of the CDA constitute tax liens. However, there are no provisions for giving general taxes a priority over CDA taxes or assessments.
If authorized by the locality, the CDA may also finance the services and improvements it provides to property abutting the CDA district by special assessment imposed by the local governing body. The special assessment, however, may not exceed the benefit provided to the assessed property or the full cost of the improvements. The special assessment is levied at one time, up front, by the governing body, but may be collected in installments for up to 40 years. The special assessments are collected by the locality and paid, subject to appropriation by the governing body, to the CDA.
Finally, if the enabling ordinance so permits, the CDA can also have the authority to purchase development rights to be dedicated as easements for conservation or open space, the power of eminent domain, and the power to fix, charge and collect user fees for services that it furnishes (e.g., fees at parking facilities).
The locality may also put parameters or limitations on the CDA through the enabling legislation creating the CDA, through the documents creating the CDA or upon the sale of the bonds. Such limitations may include the amount of bonds to be issued, the improvements to be financed, and the priority of completing various phases. In no case is the CDA ever granted the independent power to tax or levy a special assessment (but the CDA has the power to charge and collect user fees).
CDA contracts are exempt from the Virginia Public Procurement Act, conditioned on the fact that only the special taxes or assessments are used for payment (and not other public monies).
The use of CDAs can be a very effective financing tool to assist development as well as provide for public improvements and infrastructure in a way that will allow it to occur quicker, more effectively and with better quality. While CDA financing may not be appropriate for every transaction, when used correctly and effectively, it can provide substantial project cost savings.