6 - Use of city's Education Excise Tax (EET) revenue at Case Middle School _VIEMOR~DUl~1
TO: Mayor and Members of City Council
FROM: Stephanie Gnaulger, Interim City Manager
Paul Fetherston, Deputy City Manager
Jonathan Koehn, Office of Environmental Affairs Manager
Carl Castillo, Policy Advisor
DA'I'S: August 28, 2008 ~
SUBJECT: Study Session: September 9, 2008
Use of city's education excise tax revenue at Casey Middle School
for construction costs beyond those associated with achieving LEED
Gold certification
I. PURPOSE
On August 21, 2007, council authorized use of up to $ 1.8 million in educational excise
tax (EET) revenue for costs associated with achieving LEED Gold certification of the
rebuilding of Casey Middle School. On July 8, 2008, Council received an update on this
project and was informed that the estimated costs to achieve LEED Gold certification
was $1,285,752. Council's Boulder Valley School District (BVSD) Issues Committee
subsequently met on July 28, 2008 to discuss outstanding questions related to these costs.
Upon review and evaluation of updated information fiom staff, the committee agreed that
the estimated costs were appropriate. The information provided to the conunittee is
described and referenced in the background section of the memo below. Council will
have an opportunity to consider appropriating funds for the LEED Gold certification of
Casey Middle School during its consideration of the second budget supplemental
scheduled for October 7, 2008.
During the July 8~' update, council was also provided with information on a new proposal
to use any unexpended portion of the $ 1.8 million in city EET revenue for construction
I costs that, while in furtherance of city community sustainability goals, were beyond those
associated with achieving LEED Gold certification. The primacy purpose of this shady
session topic is for council to consider its interest in considering EET funding for this
purpose.
Council may also want to use this study session to discuss the existing process and
criteria for identifying future projects to conunit EET funds toward. Finally, after
goals?
i B. Does council have any questions about, or interest in changing, the city's existing
~ criteria and process for identifying projects to fund with EET revenue?
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C. Does co-aneil have an interest in directing staff to evaluate options for increasing
the EET rate beyond the Consumer Price Index or for eliminating the EET
altogether?
III. BACKGROUND ON CITY'S EDUCATION EXCISE TAX REVENUE:
A. Consideration of a School Impact Fee
On July 19, 1993, BVSD formally requested that the city take steps appropriate to
irnpleznent a school facilities impact fee. Impact fees are ozie-time assessments on new
development to help fund and pay for the construction or expansion of capital
improvements neecded to accommodate new growth.
On August 3, 1993, city council endorsed the concept of school impact fees and directed
staff to prepare an intergovernmental agreement with BVSD for the administration of
those fees. According to the minutes from the August 3, 1993 council meeting, the
proposed fee at that time was being considered "specifically for middle and elementary
schools and did not include high schools or centralized facilities."
Eventually, however, the city did not finalize air impact fee for various reasons. Chief
among them was an inability to achieve consensus among local communities to initiate a
funding strategy. According to a memo from then City Attonley Joe de Raismes to city
~ council dated August 30, 1.994, legal precedent required that local coznznunities collect a
uniform impact fee xate across the school district to ensure that the impact fee that one
commuiuty collected was not subsidizing school construction to satisfy the facility needs
that residential development in other coznnzwzities was creating. In addition, a Douglas
County District Court decision challenged tlae authority of local communities to collect
impact fees for school financing purposes. The decision held that Douglas County was
preempted by the State School Finance Act from imposing a school impact fee as a
~ condition of a building permit or a certificate of occupancy. Further, the district court
held that counties do not have express oz- implied autlaoz7ty to unpose such fees.
B. Consideration of Educational Excise Tax
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BVSD unsuccessfialy attempted to pass a X36 million bond measure.in November of
1993. Funding from that measure would have covered the cost of future school facility
needs from 1993 trrough the year 2000. Against the backdrop of that failed measure,
BVSD asked Local comrr_unities to revisit the issue of school impact fees.
After discussions among local community representatives, it quickly became apparent
that it would be difficult to broker a1i agreement to collect the required uniform impact
fees among all communities within BVSD. However, legal counsel for these
communities made some suggestions caneenung alten~ative funding mechanism. One
suggestion was an education excise tax on new residential development. This alternative
was seen as advantageous because it allowed conununities to asses the tax at any rate
they felt was appropriate without concern for maintaining uniformity with other
communities. It also allowed the communities the flexibility to determine how they
would appropriate the revenue they collected.
On August 30, 1994, Council passed Ordinance Number 5662, which referred Ballot
Issue 2D to the citizens of Boulder. Relevant portions of that ordinance are reproduced
below:
W13'EREAS, the city council is of the opinion that an education
excise tax should be imposed in lieu of a schvol impact fee, previously
endorsed by the council, and expended for education related purposes or
for property tax credits to offset future educative taxes, but without
dedication of the tax.
Now, rxExEFO.~, .
Section 2. The official hallot punch card and the official
absentee ballot shall state . .
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SHALL CITY OF BOULDER TAXES BE INCREASED BY
' UP TO $3, 000, 000 ~WNZIALLY (IN THE FIRST YEAR) BY
I.1~IPOSING AN ED UCA770N EXCISE TAX ON NET~T~
RESIDE~'VTIAL DEVELOPMENT IN THE AMOUNT OF
UP TO $3.43 PER SQUARE FOOT OF HABITABLE
FLOOR AREA FUR EACH NEYY RESIDENTIAL
D WELLI!'VG UNIT AND OF POTENTIAL HABITABLE
FLOOR AREA FOR EACH NEW MOBILE HOME PAD,
imposed by the`Douglas County District Court decision. According to a summary of a
statement ir~ade by then Ciry Attorney Joe de Raisxnes, as captured in the minutes of the
August 30, 1994 Council discussion of the EET, the intent of the tax was that "it be used
in a flexible way to deal with the impacts of schools by new residential construction."1
During that same meeting, in response to a question by Mayor Durgin on what level of
school would be built and the purview o`the city to give feedback in that regard, the
minutes summarized the following response from then City Attorney de Raismes:
. 1llr. de Raismes said it is the intention that the City wild collect this money
and keep it in an interest bearing account. The City will then determine
how to spend the money. It will never be in the coffers of the School
District until the City and the School District reach an agreement about
how the money i~ to be used.
C. Post-.Ballot Measure: EET Ordinance, Policy, and I3'istory.of Disbecrsement
On November 8, 1994, Ballot Issue 2D was approved by the voters. On April 4, 1995, in
ozder to implement the EET, the City Council approved a conforming ordinance, known
as Ordinance No. 5689. According to that ordinance, the intent of the tax was codified in
the city code as follows:
3-ZI-1 LE~ISLAT.IVEINTENT
IT IS THE PURPOSE OF THIS CHAPTER TO PROMOTE THE
DEVELOPMENT OF PUBLIC EDUCATIONAL FACILITIES AIV'D
SER DICES IN THE G'ITY, REVE_N UES FROr?I THE TAX, TOGETHER
WITH ANY EARNINGS THEREON, SHALL BE DEPOSITED IN A
DESIGNATED ACCOUNT OF THE GENERAL FUND AND SHALL
THEREFORE BE AVAILABLE TO PAY ,FOR T.FIE GENERAL
EXPENSES U.F GOVERNMENT. HOWEVER, ALTHOUGH THE CITY
COUNCIL RECOGNI7.ES THAT IT CANNOT BIND FUI7~RE CITY
COUNCILS, IT NONETHELESS DECLEARES .ITS INTENTION THAT
TIIE REVEI~'UE GENERATED BY THE EDUCATION EXCISE TAX BE
APPROPRIATED BY FUTURE CITY COUtI~'CILS ONLY FOR
EDUCATIONAL RELATED PURPOSES, IiVCL UDI~'lTG, WI7H0 UT
LLIrIITATION, DEVELOPMENT OF PUBLIC EDUCATIDf~'AL
~ At the time BVSD expected that it would be necessary to conshvct new school buildings in the noitll part
of the city to meet capacity needs at the e;ementary and secondary school levels.
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FACILIIlES AN7~ SERVICES OR TAX REFUNDS OR SETOFFS
RELATWG THERETO. [Emphasis Added]
In the Apri14, 1995 staff memo for council's consideration of dais resolution, staff
provided council with a list of some, bat not all, of the options relative to disposition of
these funds. Stafflisted the following: (1) direct dispersal to BVSD; (2) construction of
school facilities in Boulder, and; (3) property tax rebates. Staffs memo on this point did
not make a recommendation but concluded by stating "[fJuture City Council bodies will
need to make decisions regarding this matter in Light of a variety of factors, including the
condition of school facilities in Boulder and the City's relationship with the School
District."
Pursuant to the implementing ordinance, fne EET became effective on April 4, 1995, at
the rate of $0.95 per square foot of floor area, up to a cap of 6,000 square feet. This
amount was set based on an analysis of the relative financial impact of new residential
development on BVSD facilities. That amount has since been adjusted annually based on
the Consumer Price Index.
While BVSD originally expected that the EET revenue would be necessary to construct
new school buildings in north Boulder, since the ballot measure passed, decluaing
enrollment combined with open enrollment have resulted in north Boulder student growth
being accommodated through available capacity in schools throughout the city.
The only disbursement of EET funds since the city began collecting the tax in 1995 was
$1,898,000 for the installation of synthetic iaarf at Boulder and Fairview High Schools on
March 4, 2003. Vv'hile not yet disbursed, on April 9, 2007, Council also authorized EET
revenue in an amount not to exceed $300,000 for design, engineering, and construction of
field lights to be installed at Boulder High School's Recht Field and Fairview I~igh
School's athletic field. That authorization was conditioned upon the City Manager's
receipt and assessment of information indicating that the work has been perfonaaed as
proposed by BVSD, inchiding successful completion and responsiveness to a public
process to solicit feedback on the proposal to add field lights to Fairview High School's
athletic field.
On 7uly 10, 2007, City Council approved the following policy guidelines for future use of
Education Excise Tax revenues:
1. EET revenues shall be used only for one-tune capital and non-capital
,,,,~...,.,I:t.........,..b... ~.....,,..,f.,a t,..
the City of Boulder or the Bouldc-r Valley School District. In either
event, both organizations shall be informed of any proposal, and
direction provided first by Council's Boulder Palley School District
Issues Committee then from the full City Council, prior to the
commencement of any formal evaluation or consideration of such
proposal. As may become necessary, Council may direct
. consideration of one or more proposal to occur in a forum where
input by the community and the Boulder Palley School District may
be solicited.
S. )xrhenever feasible capital expenditures of
EET revenue shall be
prrogrammed as part of the city's Capital Improvement Programming
process.
D. Council's Authorization of EET B'uncls for Costs Associated with X.E$D Gold
Certification at Casey 1Y.£iddle Sc)zool
On August 21, 2007, Council approved a motion to:
A. Authorize tlae use of the Education Excise Tax revenues in an
amoacnt not to exceed $1, 800, 000 to support the Boulder Valley School
District's rebuilding of Casey Middle School to a United States Green
Building Council's LEED for School's Gold certification level, upon the
finding that the school district.'s proposal is consistent with City Council
approved policy guidelines regarding EET
funding requests. These funds
shall be conditioned vpon the City Manager's receipt and assessment of
information indicating that the worlc has been performed to meet the
LEED for School Gold certification level, as generally described in the
BYSD proposal; and
B. City staff shall use its role on the Casey Design Advisory Team to
advocate for building performance featz+res consistent with the city's .
community stcstairzability goals and policies, inclzeding the Climate Actt'on
Plan a~zd Waste Reduction 1t~Iaster Plan, and histor°ic preservation2
approaches consistent with the Boulder Palley Comprehensive Plan
historic preservation policies.
On July 8, 2008, Council received an update on this project and was told that the
estimated costs to meet L)r>?D Gold cerification were $1,285,752. Council had some
questions that were ~~ot resolved during this update. Council's Bouldex Valley School
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District Issues Committee subsequently met on July 28, 2008 to discuss the outstanding
questions. Upon review and evaluation of updated information from staff, the committee
agreed that the estimated costs were appropriate. The information shared with the
committee is described below.
On July 8, council had questions related to the following elements of LEED Gold and
EET analysis:
1. Changes between the LEED consultants 6/17 and 7/03 cost estimates, alzd
2. Clarification in the EET analysis matrix describing applicable EET costs
Staff and YRG. developed a matrix which summarized }3VSD's base case buildiig
guidelines along with the enhanced elements of Casey that would achieve LEED points.
This matrix was presented to council on July 8. During the discussion, council
questioned the increase in costs from the draft to the final council memo packet. The
increases in costs were a result of refining the design costs in order to present the most
accurate figures to council. Attachment A shows the specific changes between the two
estimates.
Staff believes that items that go beyond BVSD's base case and result in LEED points are
appropriate for EET funding. Based on the current design, a total of 56 LEED points are
identified at a cost of $1,285,752, or 4.2 percent of the $30 millior: project budget. This
is Less than the $1.8 million that was originally estimated as being necessary to achieve
LEED Gold. A simplified matrix showing the actual design elements paid by EET is
included as Attachment B.
In addition, roughly $900,000 of the total is for aggressive upgrades in energy efficiency
such as nechaalical systems, lighting and envelope upgrades that have a 9-10 year
li payback with energy savings of nearly S 100,000 per year. The design is on track to
exceed the ~0 percent emission reduction target of the 2030 Challenge, which was one of
the strongly desired outcomes of tl7e project.
Council will have an oppoi-tu:~ity to consider appropriating fiends for the LEED Gold
certification of Casey Middle School during its consideration of the second budget .
supplemental scheduled for October 7, 2008.
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IV. ISSL7ES
A T7 n n~'rL.n l'i~Fs.~o r:'TJT U n Fn.~ ~nrnntc.srnfinr~ ~ncfa+ ire l'ncn~~ A/fid~'ln C'nlsnn/
would not result .in LEED points but would support city sustainability priorities, and/or
may achieve a higher LEED certification. If council chooses to authorize this amount, it
could be applied to non-LEED design elements at Casey, or toward achieving a LEED
Platinum Certification at Casey.
Non-LEED Elements
The design team considered environmental enhancements at Casey that will support the
city's Climate Action Plan (CAP) by achieving an aggressive 50 percent reduction in
greenhouse gas emissions relative to the project's baseline. The current design for Casey
is on track to exceed the 50 percent carbon reduction to*get. This reduction will serve as
an excellent quantifiable model for other commercial structures as new buildings are
required to lower their carbon footprint. Any additional project elements would also
strongly align with the CAP and Master Plan for Waste Reduction (MPWR).
Further, the design team determined that in addition to LEED Gold certification, desired
sustainability elements of the Casey project should:
1. Create an optimal learning and teaching environment that serves to specifically
teach and inspire in the areas of sustainable development and operations,
2. Inforn future design and construction of school facilities within Boulder Valley
and throughout the State, by creating a new "floor" for future District projects,
i 3. Directly contribute to the city's Climate Action Plan goals by reducing Casey
,Middle School's emissions footprint by 50 percent per the 2030 Challenge,
4. Indirectly contribute to the city's Climate Action plan by reducing greei~liouse gas
emissions in the connmercial sector. The coanznercial sector represents 30% of
total citywide emissions, ~.at including associated transportation emissions. The
Casey project has the potential to impact the fixture design of all coz:~niercial
building (including the school dzstrict's buildings) as lessons learned regarding
costs, benefits, tecru~ology and strategy feasibility, etc. will serve as a model for
regional green building efforts,
5. Indirectly contribute to the city's Climate Action plan in all sectors. The students,
parents, and community members can take the inspirat;on and actionable
measures and iniplezment these at home, tluough energy efficiency, renewable
energy, water conserving tecluiologies, ef5cient vehicle purchasing, using non-
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automobile transit, sucscribing to wind power, etc. High profile public facilities
like Boulder Community Hospital, the North Boulder Recreation Center, and
especially educational facilities such as Casey have the unique opportunity to
inspire, demonstrate, and learn on behalf of the larger community,
6. Contribute to the city's Master Plan for'GVaste Reduction (MPWR) and Zero
Waste Resolution by researching the feasibility, pus'ning the limits of regional
construction waste diversion, and enacting a cor^~prehensive procurement,
recycling, and composting program (collecting hard to recycle materials on behalf
of the community such as cell phones, batteries, and computers, investigating the
possibility of a composting program; and facilitating the convenient recycling of
more traditional materials such as plastic, glass, metal and paper) as part of the
school's ongoing operation to potentially serve as a case study of a true zero waste
facility, and
W 7. Serve as an example for future school development commercial development, and
remodeling of buildings within the Boulder community in all areas of
environmental impact (stozm-water, transportation, light pollution, landscape
design, water efficiency, materials and resource efficiency, low-toxicity, natural
daylighting, etc,) and contributing to the evolution of the Green Points program.
The principles listed above were used when considering non-LEED items which could be
funded through the EET. Many of the elements below do typically contribute to LEED
points; however, the current design has maximized the point options in the associated
categories. The design team and the District's LEED consultant YRG identif ed the
following elements for council's consideration:
I 1. Green roof, $1.85,000: A green roof provides an opportunity for students to learn
about local and regional climate through plant ecology of roof plantings.
Specifically, how the application reduces building energy use, the heat island effect
and improvements to stone-water quality.
2. Solar pliotavaltaie strneture over bike racks, $121,000: A highly visible example
of sustainability that provides covered bike racks for students, some shading for the
I east building facade and dee~•eases cooling loads. While staff is not inclined to
support EET Banding of pl2otovoltaics because of the availability of additional
farlding sources such as third pasty financing, this option has several tangential
benefits, as mentioned above.
Council could choose one or more of the above design elements to be funded by the EET.
LEED Platinum
Council could also choose to fund one or more of the options below, which would
achieve additional LEED points. By accruing additional points, there is the possibility of
achieving the highest LEED platinum certification. An additional budget of $354,720
would achieve a LEED Platinum certification; making it one of four public schools in the
nation to receive such designation. The total expense for LEED Platinum would be
$1,640,472 oz 5.4 percent of the total project budget. The following elements were
identified by YRG to reach the LEED Platinum level:
1. On-Site Renewable Energy (80 kw solar), $200,000: This would include solar
photovoltaics for a significant portion of the buildings energy requixernents.
2. Measurement and Verification Monitoriuxg $30,000: This option integrates
measurement of all energy/water systems to continuously improve performance over
the life of the building.
3. Increase daylighting to 90 percent $124,720: This option increases daylighting to
90 percent of Casey classrooms through the use of solar-tubes, and other daylighting
sources.
Council may choose to allocate all or a portian of the remaining $1,800,000 for achieving
LEED Gold certification at Casey. The balance of $514,248 could be used for any
combination of above design elements.
B. EET'Disbujsement
According to the ballot language approved by the voters, EET revenue can be
used "witl2out limitation or condition:' The city's EET ordinance implementing
the approved ballot states that the funds are available "for the general expenses of
govenunent." Consequently, Council has very broad legal latitude an liow it may
choose to use the EET funds.
' However, Council adopted a policy which created criteria for appropriate uses of
EET revenue. That policy requires t:~at funds be used only far one-time purposes.
~ This requirement recognizes that the EET is levied on a one-tune basis on new
~ development and can not be depended to fund ongoing programmatic needs.
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Council's policy also requires that fizrding be limited to: serving new growth;
improving or renovating existing facilities; enhancing the viability of existing
facilities, including recreational facilities; funding tax refiuids or set-offs relating
to education purposes, or; purchasing properties to preserve them for future
educational purposes. This criteria carries forvvazd the expectation of the voters
during consideration of the EET. .
As originally approved in 2001, Council's EET policy also required that funding
be limited to capital projects. This decision recognized that the concept behind
the EET originated during consideration of an education impact fee and that such
fees were only to be used for capital costs. In 2007, however, Council chose to
provide additional flexibility in how EET funds could be used by modifying its
policy to allow for one-time non-capital expenses.
Council's policy also describes the process by which projects can be considered
for EET funding. According to the policy, project proposals can originate from
either the city or BVSD. In either event, the othez entity has to be informed that a
proposal is under consideration. Council then has the final decision-making
authority on whether to pursue that proposal and whether to authorize funding for
it.
This process recognizes that the city has the ultimate authority to disburse EET
revenue. It also recognizes the importance of collaborating with BVSD to assure
that proposals considered are for educational related purposes, as was originally
envisioned during passage of the tax.
It is important to note that Council's policy can be changed at any time. This
includes changes to its criteria for how the funds are used and the process for how
projects are considered.
C. E.ET Collections
TI~e current EET rate on residential development is $1.18 per square foot of residenrial
development, up to a cap of 6,000 square feet. As of July 1, 2008, the EET fluid balance
was $4,884,417. This does not account for the up to $300,000 in funding authorized and
appropriated but not yet disbursed for new athletic field lights for Boulder and Fairview
High Schools or for the up to $1,800,000 authorized but not yet disbursed for Gold LEED
certification of the Casey Middle School rebuild. Accountu~zg for those corrunitments, the
availa.hlo_~,ala,~r..p_t~_~.7~7Qa-.d1.'1.__,.---- . -
Council's EET ordinance allows the city to charge up to 53.43 per square foot on new
residential development. Since first implemented in 1995, the city's policy has been to
increase the rate each year by the Consumer Price Index (CPI and to levy the charge
only on the first 6,000 square feet. There is no legal restriction, however, precluding
Cow.~ci1, from increasing the rate by an amount greater than the CPI so long as it stays
beneath the voter approved limit of $3.43. Nor is Council legally limited from having the
rate apply only to the first b,000 square feet of residential development.
Council will have an opportunity to comprehensively consider changes to the city's
development and excise taxes at its October 14U' study session. In preparation for the
meeting, Council may wish to direct staff to evaluate options for increasing the EET rate .
beyond the CPI. Conversely, council may wish to direct staff to evaluate options far
discontinuing the tax altogether.
V. CONCLUSION /NEXT STEPS
Any follow-up directed by Council on these matters will be brought back for
consideration at a business meeting as appropriate.
Attachments:
Attachment A: Casey LEED and EET: chauges between b/17 and 7/03
Attachment B: Simplified design matrix for items paid by EET
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