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Raleigh staff propose tax‑increment reimbursement program to pay developers for public improvements
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Summary
City planning staff outlined a proposed Tax Increment Reimbursement Program (TURP) to replace an unused May 2021 tax‑increment grant policy; the tool would reimburse developers from future property tax increases to fund public amenities, with a 2% levy cap, a $200,000 minimum agreement value and reporting requirements.
Ken Bowers, Planning and Development, told the Raleigh City Council at a work session that staff propose replacing the city’s unused May 2021 tax increment grant policy with a Tax Increment Reimbursement Program, or TURP, to reimburse developers from the future property tax increment generated by a project.
The program is meant to let the city leverage private development to deliver public benefits that go beyond what regulation can require, Bowers said: "partnerships allow the city to shape and leverage development in a way that you can't do with regulations alone." He described TURP as a site‑specific reimbursement arrangement in which the developer builds improvements and the city repays a negotiated share of the annual tax increment over time.
Staff say the tool would let the city act quickly when opportunities arise because reimbursements are tied to actual tax receipts that start only after a project is assessed and producing taxes. Under the proposal staff described, the program would include a minimum agreement value of $200,000, a citywide cap that would prevent more than 2 percent of the annual ad valorem tax levy being committed to outstanding agreements, and budget reporting showing outstanding reimbursements.
How it would work: Bowers used a worked example to show the mechanics. He said a 200‑unit multifamily site with land valued at about $6,000,000 could be assessed after construction at roughly $60,000,000 (about $300,000 per unit in recent local assessments), producing an estimated annual city tax increase from roughly $21,000 pre‑development to $213,000 post‑development and an annual tax increment of about $192,000. "That increment ... is the source potentially for financing stuff," he said, explaining that reimbursements would be benchmarked against those future payments and negotiated by share and term so payments “are never reimbursing more than is flowing in in new property taxes.”
Staff emphasized legal and policy changes that enable the approach. According to Bowers, the city’s original tax increment grant policy adopted in May 2021 was never used. An October 2023 ordinance broadened authority to enter reimbursement agreements for certain transportation projects and capital program items, and an April partnership policy sets the evaluation, due diligence and council‑involvement process that would govern TURP agreements.
Council members raised questions about assessment projection, county participation, overlap with other tools and budget impacts. Councilor Silver asked how future assessments are determined; Bowers said agreements must build in adjustment mechanisms because exact assessments are unknown until the county assessor completes an evaluation after construction. Councilor Patton asked whether Wake County has a comparable program; Bowers responded that the county has a 2007 policy related to tax increment finance but not an exact match, and staff have had conversations with the county while drafting the policy.
Finance staff said the accounting is similar to PAYGO budgeting. Lisonbee Bradshaw, Finance Department, described the mechanics: increased assessed value raises ad valorem receipts and a portion of that incremental growth would be allocated to the reimbursement similar to how PAYGO funds are programmed. Bradshaw also said administratively the finance department can manage the program but that planning staff might eventually request additional staff if many agreements required negotiation.
Council members also asked how TURP differs from development agreements and other reimbursements. Bowers said TURP is a subset of reimbursement agreements that is explicitly pegged to a future tax increment and is typically paid over multiple years rather than as a one‑time lump sum. Pat Young, Planning and Development, noted council would review and approve each agreement and said private contractors often deliver such work faster and cheaper than the city due to existing contractor relationships.
Housing advocates and some council members asked whether TURP could be used to support affordable housing or funded inclusionary zoning. Bowers said staff had not written the policy specifically for that purpose and that using public money to subsidize housing typically requires relatively high inclusion thresholds—he mentioned about a 20 percent inclusionary threshold—so TURP may not by itself fund that level of affordability, but it could be considered.
Staff repeatedly described the program’s risk profile as low because the city would not borrow money, reimbursements would not begin until the tax increment exists, and reimbursements would never exceed the increment. Bowers said the proposal is modeled in part on Charlotte's long‑standing practice and that no local government commission approval is required because the city would not borrow against future revenues.
Next steps: staff said the draft replacement policy could be returned as a special agenda item if council is amenable; there were no votes or formal council actions recorded at the work session.
Ending: If the council directs staff to proceed, the city will return the proposed TURP policy and implementing ordinance for council consideration, with specific agreements brought to council for approval on a case‑by‑case basis.
