North Raleigh News

As Hillsborough Street flap clears, Raleigh discusses new tax districts

The new year could bring discussion of new taxes and services for several Raleigh neighborhoods as the noise of a City Council controversy fades.

Hundreds of property owners in the city’s two “municipal service districts” – in downtown Raleigh and along Hillsborough Street – already pay hundreds of thousands of dollars collectively for special services such as cleaning, events, marketing and security for specific blocks.

Local organizers have long talked about extending that concept along Oberlin Road and, perhaps, to Blue Ridge Road and eventually even New Bern Avenue. However, the topic was derailed by criticism and questions about an attempted expansion of the Hillsborough Street district’s borders.

At the time, Councilman Russ Stephenson argued his land shouldn’t be taxed by Hillsborough Street Community Services Corp., though some adjacent land would be. Stephenson cited the earlier exclusion of residences from the district.

Critics asked whether the councilman had received special treatment – he says it’s just the opposite – and the council in June delayed the expansion.

Since then, the city has drafted a set of rules to smooth the creation of new taxing areas. The proposal, now under consideration by the council’s Law and Public Safety committee, would be the city’s first written policy about who should and shouldn’t be included.

“People felt it was unfair that a city councilor’s property would be taken out, but their property would not be,” said Councilwoman Mary-Ann Baldwin, who leads the committee.

“We wanted to bring as much clarity to that as we possibly could.”

Approval of the new rules could put an end to last year’s to-do, clearing the way for new discussion of municipal service taxes. Baldwin said she’s already hearing from some organizers.

And while some say the service organizations have brought new business and new life to their neighborhoods, one council member has reservations about where the conversation’s heading.

“Are we going to start going into other areas with (service districts), and start putting them all over the city of Raleigh? I’m very nervous about all this,” said Councilman John Odom, expressing doubts about whether residential neighborhoods should pay for the services.

“I’m sure that others will want to do it, no doubt about it,” he added in an interview.

Storm brewed

All this talk began last March, when the Hillsborough Street corporation was considering an expansion northward on Oberlin Road, toward fast-developing Cameron Village, and east toward downtown.

Before the draft expansion plan went to the city for consideration, corporation leaders scheduled a meeting with Stephenson and told him his 1.2-acre property would be included.

Members of the district pay an extra tax of 15 cents per $100 of property value. (Downtown owners pay about 7.9 cents per $100 valuation.)

Stephenson argued that he should not be included, because single-family residences were not included in 2008, when the Raleigh City Council created the district. So while neighboring commercial properties were to be included, Stephenson said past precedent shouldn’t include his land.

“I have never asked to be an exception to the rules, as they were explained to me,” Stephenson said.

Furthermore, Stephenson said, his property was on the edge of the proposed addition, meaning its exclusion wouldn’t punch a hole in the map. (The corporation had already decided not to include residences across the street.)

The Hillsborough services board at the time split on the matter, with some members agreeing that owner-occupied homes should be exempt and others questioning Stephenson’s request. Eventually, the board unanimously excluded his lot from the final proposal to the City Council.

“I think that that puts the services corporation in a difficult situation. … I think it’s better for the City Council to be making that decision,” Baldwin said.

The confusion was the result of a lack of written rules, Stephenson said.

“My whole predicament is only based on the fact that one informed (services district) board member said I didn’t meet the standard for inclusion, and others said I did,” Stephenson said in an interview Wednesday.

“ … Everybody thought they had rules, but if you asked them, they came up with different opinions,” he added later.

New rules’ effects

The council in June postponed the Hillsborough district expansion. But if it takes the matter up again, the proposed rules might not favor Stephenson’s case for exclusion, fellow council member Baldwin said.

For one, the draft rules say that “no exemptions” should be made for homes with offices; Stephenson runs his architecture practice from home. The lot also includes two rental residences that he owns.

The new proposal, written by city staff, also says that district boundaries should be based on zoning areas. Baldwin thinks that since Stephenson’s home is zoned for office and institutional use, it can’t be carved out of the district.

“What the rules clearly say is that everybody pays, and it’s done based on zoning,” she said on Thursday.

Stephenson said that if the new policy calls for his property’s inclusion, he’ll abide by it, he said.

The new rules, which go to City Council in the coming months, may make it harder to exclude homes anyway.

The draft policy states that “all residential properties … within the designated boundaries,” including single- and multifamily buildings, shall be part of the district.

“I would argue that residents do benefit, and there is an economic impact for residents,” said David Diaz, president of the Downtown Raleigh Alliance, at a committee discussion of the rules on Wednesday.

The proposal closely mirrors the requirements state law sets for such districts, according to city staff. It’s under consideration by the Law and Public Safety Committee, after which it likely will head to the council.

Talk of new districts

The argument is moot, for now, because the city never got around to expanding the Hillsborough tax district. The council in June allowed the Hillsborough district to increase its tax rate from 10 cents up to 15 cents per $100 valuation, but it postponed the request for new boundaries.

However, the topic is bound to come up again. Organizers on New Bern Avenue, east of downtown, and Blue Ridge Road to the west have been talking about creating their own districts, Baldwin said.

Both discussions are formative; the Blue Ridge group is much further along, having formed the nonprofit Blue Ridge Corridor Alliance last year. The group includes representation from N.C. State University to Rex Healthcare and major property holders, said organizer Stuart Levin.

“There has been conversation, but no movement forward on (a municipal service district) at this time. We are early on in the infrastructure of the Blue Ridge Corridor Alliance,” he said.

Any new district would go through the council and the public hearing process.

Meanwhile, the idea of expanding the Hillsborough district isn’t dead either. Jeff Murison, director of the Hillsborough corporation, said he didn’t know when the boundary push might come up again.

“I think that’s at the discretion of the City Council,” he said.

The delay has not affected the corporation’s budget, he said. The new tax revenue from the expansion would have gone to providing services in the new territory, he said. And the group’s expansion process already hews close to the proposed policy, he said.

Meanwhile, unhappy customers of the current districts are plotting their next moves.

Bryan Andersen, who owns four rental units in the downtown Raleigh taxation district, plans to move for his own exemption.

The new proposal says such requests must go to the City Council. Andersen argues that he already pays condominium fees for services similar to the downtown district’s. He rarely sees the promised services on his condos’ blocks, he said.

“We’re not talking about a great deal of money per person,” he said. “It’s a principle thing.”