LELAND — A Special Assessment District proposed in Brunswick Forest would not put Leland at risk; that’s according to findings presented by Leland’s staff during a special meeting Thursday.
The largest and costliest Special Assessment District (SAD) in the state is planned on 1,643-acres of undeveloped land in Brunswick Forest.
In the SAD, Brunswick Forest’s developer, Funston Land and Timber, LLC, would be reimbursed for $16 million in infrastructure improvements. Reimbursements would be collected via annual assessments, attached through liens on future developed parcels.
At some time during the developer’s progress, Leland may issue revenue bonds — upon the developer’s request — to pay the developer back in full. Assessments would then be paid to Leland, rather than the developer, if revenue bonds are issued to cover the full improvement amount.
Funston Land and Timber LLC, owned by Jeff Earp, paid Leland $50,000 in May as part of a deposit reimbursement agreement. The costs are being used to reimburse legal and administrative costs incurred by the town. Since the developer first petitioned the SAD in February, Leland has used an estimated $20,000 of the developer’s initial payment.
Last month, the town was still parsing through its own risk factors in pursuing the rare financing mechanism. During Leland’s special Council meeting Thursday, Vidmar said the town is not at financial risk.
“The town does not put its own finances at risk for these assessments,” Gary Vidmar, Leland’s economic and community development director, said. “The security is the assessments themselves.”
Collected annually on the real estate tax bill, future property owners in Brunswick Forest’s proposed SAD will fund the developer’s improvements over a 25-year period. Though an exact amount is yet to be determined, Vidmar said the amount could range between $500 and $1,000 annually.
“If assessments are not paid by property owners, the town may foreclose on the property to collect the assessments,” he said. “That is what eliminates the risk for the town.”
When Leland’s Mayor Brenda Bozeman asked whether a failing market would impact the town’s ability to collect on assessments owed, Vidmar said it shouldn’t matter.
“The assessment holds irrespective of what the market does to the lot price and its value,” Vidmar said. “That assessment is established and fixed for the life of the property.”
‘Like a mortgage’
Leland’s mayor pro-tem, Pat Batleman, asked Vidmar if the assessment can be rolled into a loan. Vidmar told her, “probably not.”
“You can’t roll property taxes into a loan, however, if they want to make a lump sum payment of the assessments, they could built that into the loan,” he said.
Bob Hornik, the town of Hillsborough’s lawyer, said an assessment in a SAD is “like a mortgage.”
Hornik worked on establishing Hillsborough’s SAD, the state’s first. He said he later became subject to paying a special assessment after purchasing a home in the district. In Hillsborough’s case, property owners could roll the full assessment cost into the closing cost as a lump sum.
“It might make sense to pay it up front, and save yourself a few percent per year, in interest,” Hornik said.
During Thursday’s meeting, Council did not take any action to move the SAD further along. A market study, preliminary assessment role and additional public hearings are still required before the district is officially established and assessments are levied on property.
“There’s many more steps in this procedure before the actual district is established,” Vidmar said.
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