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HoCo is overpaying

July 14, 2016

What a very loaded July schedule for the Council.  The Downtown Columbia (DTC) development issues are front and center, and the sole subject of the public hearing tonight (7/14) at 6PM.  There are the County’s plans, worked in collaboration with Howard Hughes (HH), and others versus Council Member Jen Terrasa’s plans, addressing concerns about density and affordable housing.  Then there’s the TIF, which is confusing even to our intelligent and involved citizenry.

 

People will have five minutes to testify tonight; six minutes if you are talking about affordable housing and the TIF.  Most likely this legislation will be tabled, and hopefully another public hearing will occur in September to give those with summer schedule conflicts another chance. It will also give people more time to absorb the voluminous details before testifying.  The public hearing on July 18th will cover the whole agenda – same time limits apply to DTC testimony.

 

Let’s look at the details of these plans. The County’s plan claims to provider a larger number of affordable units than Terrasa’s plan.  I don’t see that.  Yes, the County number of 900 units is higher than Terrasa’s 825 units (which is 15% of the first 5500 units); however, if the higher density is approved, then the number of Terrasa’s affordable units rises to 960, whereas the County’s plan stays stagnant at 900.  This is just math.  Also, given that the County’s 900 affordable units is a goal and not a guarantee, and that a large percentage of the 900 units are on County property not HH’s,  Terrasa’s plan is clearly more favorable with providing affordable housing.

 

Rules need to apply to all.  Other developers are expected to provide 15% affordable housing, so there should be no exception here, especially given the largesse of the project.  At 5500 units, we are looking at a project exceeding $1 Billion.  Columbia market rates are going to be very profitable, and sought out.  I do not believe that this development needs to be incentivized to happen.  This is not a blighted community, or a risky project as far as marketability of units goes.  Weighing the probability of what will be built, and where, I support Terrasa’s plan.  It seems her plan also creates less consolidation of affordable units as well.

 

Now, the Tax-Increment Financing (TIF) has two main issues.  First, the County defines a district, where the new public services will be placed, and then that district is expected to have an increase in property values, and from that, an increase in the tax revenues to the County.  The new units are 100% new tax revenue.  We are talking property taxes here, not any other taxes.  Second, the County takes those estimates and finances bonds, which are County debt, and uses those funds to pay for capital improvements needed by the district.  These are not funds used to help the developer’s project costs, or give them cheaper financing of their own debt.  So what is the cost to the County, and what is the benefit to the developer?

 

The County uses the increased tax funds to pay for infrastructure the developer should be paying for, so the cost is the County doesn’t have those funds to use elsewhere.  TIF’s are usually needed to incentivize developers to improve a blighted area.  That is not the case here, obviously.  So why is this incentive here?  It is a package deal, and a big one.  In 2010, Ken Ulman and the 2010 Council allowed the 5500 units to be built without any affordable housing required.  A fee was paid instead but that never turned into actual units being provided.

 

HH now wants more density, so they went back to the table.  Let’s start measuring the scale for the County’s plan.  On HH’s side: they get 900 more units; TIF financing offsets their need to fund infrastructure; most of the affordable units are provided elsewhere (not by them, what they are actually providing is more like 5%); and they receive lowered parking requirements (so the max units can fit).  On the other hand, the County gets from this deal…….um, the fact that the development will happen?  Was that truly in question?

 

Terrasa’s plan, assuming the higher density is approved, provides more affordable units, provides them in a more spread out way, and is more balanced for what the developer should be paying. So, easy choice there, but what about the TIF?  My decision on the TIF is that I am supporting it.  Sounds surprising, but here’s why.  I think it is too much of a benefit to the developer with nowhere near enough in return, yes, but I am being realistic and trying to make the most of what is going to be the end result.

 

Howard County, for decades, has NOT required development to slow its pace to meet with the County’s ability to provide infrastructure.  We also require far less fees from developers than our neighboring counties with similar growth.  These are some of the reasons why we are so attractive to developers.  Knowing this, and knowing that the DTC development plan is going to happen, then I figure the TIF is the only way the infrastructure is going to get done in any kind of timely fashion.  So, should the developer pay more?  Should we pace things more slowly to keep the quality of life decent for those here and those coming?  Of course, but knowing, without the TIF, the development will come and the upgrades won’t happen, that’s not acceptable.

 

So, I will be asking the Council for two big changes to consider in this legislation.  If they pass the County’s plan, then please remove the 40 year halt on changes, as that is too big a price to pay (Is HH really going to walk away from doing this? Be real here.)  They should not shackle themselves and their future legislators from fixing possible problems in the future.  I can’t fault HH for asking, but the answer needs to be NO.

 

The second change I want to see is in the TIF.  If they pass the TIF, then it needs stronger language to have clear, and immediately enforceable, without cap, having the developer pay for any gap in the TIF funds from the tax-increments and the actual cost of providing the services needed and the affordable housing gap financing. This would safeguard against tax increases, and have the developer take on the risk of these benefits.

 

Sorry, I couldn’t testify in person.  I am down with a torn Achilles tendon, and will hopefully see you all again with the September round of hearings.  Have a great summer folks.

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