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SALEM -- Mayor Cyndi Baronzzi Dickey announced a new proposal from the city to Perry Township to resolve ongoing annexation issues moving forward in Tuesday's city council meeting.
During her report, Dickey said the 90-day halt on the enforcement of deed restrictions implemented by council in July was ending, and that the city had developed a proposal to potentially solve the issue and ease future collaboration.
"Before the new year we had some discussion about this annexation issue in Perry Township. At that time council voted to put a freeze on the annexation so that we would have time to try to find a solution. That freeze is up at midnight [Wednesday]. In the meantime we have been working on this problem," said Dickey. "Mr. (Jake) Gano with the economic development committee, and (Utilities Commission Chairman) Mr. (Bob) Hodgson with the utilities department, we've all been putting out heads together and trying to find a solution, and speaking with Mr. (Steve) Bailey from the township trustees, so what we have done as a city and as the utilities department is make an offer to Perry Township to try to solve part of this problem at least and make our relationship more equitable and easier to navigate."
The proposed arrangement would see Perry Township buy into the utilities department as a partner at a 22% share of the department, transitioning the department to a regional utility. In addition to the cost of the initial buy-in, which department officials estimated at just over $12 million, the city and township would both be responsible for the department's future expansion at the same 22/78% split. Those properties with existing requirements to annex at the time of the agreement include the property of Laurie Butcher, which served as the terminus for the recent dispute regarding mandated annexations of on Beechwood Road, Countryside Drive, and Hampton Place, which would have seen upwards of 33 properties mandated to annex into the city one by one. Township residents would also continue to pay the increased non-residential rate and hook-up fees, and the township would continue to be responsible for providing the same services to residents that it did prior to the buy-in.
In exchange, moving forward any new expansions or developments into the township would be required to be completed under a Joint Economic Development District, (JEDD), or other economic development agreement which allows for an income tax to be established. This means the property remains part of the township while receiving city utilities but pays income tax up to the city's tax rate in addition to real-estate tax, with the township and city splitting both the income and real estate tax at a rate of 22% to 78%. Should the property not be eligible for income tax collection even under the JEDD it will pay the increased out-of-city rate on its utilities.
Dickey said that the proposed agreement would allow for future growth without annexation and would create and retain increased real estate taxes for both the city and the township and a mechanism for the township to collect income tax and promote a "non-competitive" relationship between the city and the township. Dickey also argued that the agreement creates a contract for JEDDs and similar entities to be developed more easily, helps attract future development and "puts the department int a better position to attract grants because it will become a regional utility which is preferred at this time for grant awards."
Dickey cited the disadvantages of the plan as the significant up-front expense to the township, the split in responsibility for any debt accrued by the department, a need for increased communication, and that the department would "need to assess its staffing to meet the growing need of the new regional area."
"You can see there's give and take on both sides, but there's great advantages on both sides and according to the SOD Center we have over 200 projects that have come our way recently wanting land and wanting infrastructure to grow, and we don't have the land, and they don't have the infrastructure, so we lose out on that income and those projects that would benefit our entire area, and that's not what we want; we want to work together and all of us profit," said Dickey.
Dickey and Gano said that trustees had expressed interest in the proposal, but needed to do additional research, and would need to acquire the necessary financing for a purchase of that magnitude.
"Mr. Gano did hear back from the Perry Township trustees, and they are extremely interested in this if they can get the financing. So we have reached out to the SOD Center and to some other entities to try to help them to find the financing," said Dickey.
"The conversation I had with Steve Bailey was they're interested. They obviously have to do a lot more research that's a pretty significant number, so they're digging into it. Basically, they didn't look at it and say, 'no way, we're not doing this.' They said, 'there's some definite merit to that we want to explore further, and we want to pursue it.' Could there be roadblocks further down? Maybe, but at this point in time they want to do their due diligence and see if it's feasible," said Gano.
Hodgson explained that the 22% buy-in, and equivalent share of future expenditures, was assessed based on the department's capital improvement expenditures over the last decade and next four years and the percentage of the department clientele which were township residents.
"In initial discussions of whether this idea would even be something to pursue, the mayor asked me to put together the value of the total asset. Just to replace waterlines in the city is in excess of $100 million, so that number was immediately thrown out. So, what we landed on was the amount of money we have spent for capital expenditures for improvements over the last 10 years and what is coming over the next four. That number is $52 million. We looked at the number of clients that we have overall, which is a little over 6,400. Perry Township represents 22.4 or 22.6 percent, I believe, of that number, so what we said to the chairman of the trustees was that the buy in would be 22.-whatever that percentage was of the capital expenditures that we have already done and will be doing over the next couple of years," said Hodgson.
Dickey said that moving forward the city would like to do "something similar to a purchase agreement with the details in it for everyone to sign to show we are serious about moving forward on this contingent on financing," noting that it was "a big ask," and "a lot of money."
Councilman Ron Zellers questioned who had "put together" the proposal, and Dickey explained that while the initial idea had been hers, she had worked with Gano and Hodgson to develop it into its current state. Zellers also said that he felt an expert with experience in mergers of this type should be part of the process moving forward.
"I'm not belittling anyone's expertise in this, but I don't see how we can move forward on this unless we have an expert in this field," said Zellers.
City Law Director Brook Zellers questioned how the potential deal would affect the makeup of the utilities commission, and Hodgson explained that he proposed a five-member board, with one member representing the township.
"We really need to keep the commission in an equal proportion, and obviously one of three members is 33%; that's not workable. What I suggested to Perry Township is we become a five-member board, and five, 20% to 80%, is close to the numbers and would still allow us who own the asset to maintain the control," said Hodgson.
Steve Bailey could not be reached for comment Friday night.
"We really want to work together to make this work for all of us because we're kind of in a no-win scenario otherwise. Either we're going to gobble them up or we're never going to grow, and then we'll fail because you can't maintain a 1% income tax and do the same services forever," said Dickey.
City council will meet next at 7 p.m. Feb. 6. The Perry Township Board of Trustees will meet next at 4 p.m. today.
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