Exclude apartment complexes from MSDs

Cole McMullin, an active member of Raleigh Democratic Socialists of America spoke to City Council on March 12, 2024: 

I attended the community engagement meetings for the Blue Ridge MSD (Municipal Service District) and I am still opposed.

Historically, MSDs, also known as business improvement districts, have excluded residential properties, which this MSD does. However, because apartment complexes are legally zoned commercial properties, there are a couple thousand tenants caught in the net of the Blue Ridge MSD. The additional property tax levied likely will be passed on to the tenants when their lease is up for renewal.

The purpose of an MSD is to bring new amenities. But as city staff has already explained when talking about bus rapid transit corridors, this leads to the “amenity effect” in which additional amenities makes an area more desirable to live, driving up property values and the value of fair market rent.

The Blue Ridge Corridor Alliance has not done any forecasting to estimate what the cost-of-living increase will be as a consequence of the additional amenities they plan to provide; they admitted as much during the engagement meeting. This means that there is an unknown indirect cost of this MSD that will impact not just the tenants, but the nearby homeowners as well. This MSD will drive up the cost of living in the corridor and lead to displacement of low-income residents that are barely getting by as it is.

Whether or not that is intentional on the Alliance’s part is irrelevant. What is relevant is that you as a Council will vote knowing the impact that this MSD will have on low-income residents. And a vote to approve is a vote to knowingly and intentionally displace low-income tenants.

In the past city staff have stated the purpose of an MSD is to increase equitability, to make sure that all businesses that benefit from amenities are paying for them.

However, that assumes that the MSD is solely composed of businesses and not residents. This assumption is not met for this proposed MSD, and I submit that this MSD would be extraordinarily inequitable. Tenants will be paying for amenities that don’t benefit them like economic development, business support, and tourism.

To me this is completely backwards. Since West Raleigh has a higher level of tourism than even downtown Raleigh, it should be the out-of-town tourists that should be paying for additional amenities via a sales tax that will help the current residents with amenities like additional trash pickup at the bus stops and along roadways. However, state law prohibits the use of a sales tax for an MSD.

I think the only way this MSD works is if the Alliance redraws the boundaries such that apartment complexes are excluded, or they go to the state legislature and get permission to implement an MSD on a sales tax basis and not a property tax basis.

But the onus should be on the alliance to address the problematic aspects of the MSD BEFORE it is implemented and should not be a burden placed on residents AFTER the MSD is implemented.

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