PHEDIMFP 1 & 2
November 16,2010
Worksession 2
This packet is the same as the one for the canceled November 9 PHEDIMFP worksession.
Committee members should bring any testimony from the October 26 public hearing that you will
refer to. Hearing testimony is not reprinted in this packet.
MEMORANDUM
TO:
Planning, Housing, and Economic Development Committee
Management and Fiscal Policy Committee
'\ Glenn Orlin, Deputy Council Staff Director
Go
\~arlene
Michaelson, Senior Legislative Analyst
FROM:
~W'
Michael Faden, Senior Legislative Attorney
,
~
SUBJECT:
Worksession 2:
Bill 50-10, Special Taxing District - White Flint Creation
Resolution to approve White Flint Development Tax District transportation
infrastructure improvements
Schedule:
This is the second of 3 scheduled joint Management and Fiscal Policy
Committee/Planning, Housing, and Economic Development Committee worksessions on Bill 50-10 and
the associated infrastructure list/tax policy resolution. Another joint worksession is scheduled for
November 16 at 9:30 a.m. The Transportation, Infrastructure, Energy, and Environment Committee
completed its work on the Capital Improvements Program amendment and appropriation request on
October 21. Council action on the entire White Flint financing package is tentatively scheduled for
November 23.
Summary of Staff Recommendations
• Support the Special Taxing District as the appropriate new financing vehicle for White Flint.
• Minimize risk to District property owners, but do not guarantee complete certainty since this
places too great a risk on other County taxpayers.
• Create a policy to cap District contributions, but do not set a cap in legislation.
• Determine funding to allow Stage 1 to proceed without delay and create a Capital
Improvement Program (CIP) amendment to fund all County and District infrastructure required
as a Stage 1 trigger or otherwise necessary for Stage 1 development.
• Identify strategies to ensure funding for Stages 2 and 3 (including forward funding by the
County of District obligations) to be refined as development proceeds. The Council should not
develop a specific plan to fund any long term gaps at this time. Do not use tax increment
financing.
• Retain the transportation impact tax, but require that the proceeds
be
used in White Flint and
allow it to be paid over 20 years.
• Revise the bucket lists to refine cost estimates, eliminate certain projects, and better reflect
master plan staging recommendations.
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Background
Executive package:
On October 5, the Council President introduced, on behalf of the County
Executive, a package of legislation and appropriations to finance the infrastructure necessary for the
development authorized in the adopted White Flint Sector plan. This White Flint infrastructure
financing program consists of:
• Bill 50-10, Special Taxing District - White Flint - Creation (see ©8-17);
• a Capital Improvements Program amendment and appropriation request (see ©29-33); and
• a resolution accompanying Bill 50-1 0 (see © 18-19) to approve a list of transportation
infrastructure improvements to be funded by a White Flint Special Taxing District. This
resolution also would articulate non-binding County goals regarding the tax rates to be
applied in the District.
Bill 50-10 would establish a White Flint Special Taxing District. The Bill would also authorize
the levy of an additional ad valorem property tax to fund transportation infrastructure improvements that
are specified in an implementing resolution and authorize the issuance of a certain type of bond to
finance those transportation infrastructure improvements. Council Staff added more general language to
the Bill's long title (purpose clause) to give the Council added leeway to restructure the financing
mechanism or otherwise amend the Bill as it sees necessary. The Executive's detailed memo on ©1-7
explains the background of and reasons for the proposals in this Bill and the related resolution and
appropriation request.
State legislation:
Bill 50-10 is based on recent state law amendments (2010 Maryland Laws,
Chapter 617, reprinted on ©24-28). County bond counsel had questioned whether added state authority
was needed to assure that the County can use special obligation bonds, which don't count against
County debt capacity, to pay debt service other than in a development District created under County
Code Chapter 14. This new state law answers that question, at least with respect to transportation
facilities.
It
also exempts any tax used to fund a Special Taxing District created to pay for certain
transportation improvements from the County Charter's limit on property tax revenue.
Reserved issues/special situations:
For this worksession, Council Staff will outline the major
policy issues that have been raised regarding the White Flint financing plan. We will reserve for
discussion at the November 16 worksession limited policy issues, such as whether to exclude currently
occupied apartment buildings from the proposed Special Taxing District, and special situations, such as
the approved North Bethesda Center development by LCOR, Inc., east of the White Flint metro station,
which involve unique circumstances and raise questions of fairness and equal treatment. Staff will also
include in our packet for the November 16 worksession any specific amendments to Bill 50-10 and the
implementing resolution that Council Staff recommends or the Committees request. We also expect to
discuss whether Bill 50-10 should be converted to a general enabling law to authorize this type of
Special Taxing District, with each specific District to be created by Council resolution, with the
implementation resolution proposed by the Executive being converted to create the District as well as
list the infrastructure items the District will fund.
"Buckets":
The most recent list of proposed infrastructure items in the White Flint Sector Plan
area, to be funded, respectively, by the White Flint Special Taxing District, the County itself, and the
developers as necessary to move their projects forward, as proposed by the County Executive are shown
on ©20-22. These lists are commonly called the White Flint "buckets". The numbers in these tables are
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highly preliminary cost estimates and cannot be relied on for anything more than order-of-magnitude
projections.
Council Staff has created a revised version of the bucket lists that are attached at © 34 to 36. To
ensure that the Committees have time to review each of the policy questions set forth below, Staff
recommends that any detailed discussion of the allocation of projects among buckets and stages be held
until other issues have been discussed. In summary, the Council Staff revisions do not significantly
change the allocation of costs among the County, the District, and developers (44.5% County, 29.8%
developer and 25.8% District), but significantly increase the County contribution and decrease the
District contribution for Stage
1.
To ensure that Stage 1 can proceed without delay, Staff recommends
that any County project not yet in the Capital Improvements Program (CIP) and the District projects
required as a Stage 1 trigger
(or deemed essential to allow development to proceed), be funded in an
amendment to the CIP, with a clear identification of funding sources. This recommendation is
addressed further below.
Major Policy Issues
Overview
The challenge: balancing the risks
Broadly defined, the challenge facing the
County in adopting a White Flint financing plan is how to balance the costs and risks among the various
stakeholders: County government and its taxpayers; property owners in the White Flint area, including
those who expect to redevelop their property and those who may not do so; and residents of the area.
The costs and risks that will need to be balanced are:
• the
overall share of costs
assumed by each "bucket";
• the extent of
cost overruns
in each bucket.
• the
projected
funding
gap
in the Special Taxing District "bucket" between the estimates of
infrastructure costs and property tax add-on revenues; and
• the risk that one of the taxes/fees will not produce the
expected level of revenues.
Property owners have asked for certainty, but providing complete certainty to anyone group of
stakeholders means an increased risk for another group. For example, guaranteeing certainty regarding
the cost of infrastructure to District participants means the cost of any overruns would be borne by
County taxpayers. Guaranteeing County resources for White Flint means they may not be available to
meet needs elsewhere in the County. Staff believes that the Council has created greater certainty for
property owners in White Flint than in any other area of the County:
• The Commercial-Residential (CR) zone provides property owners with greater certainty
regarding the cost of the requirements to obtain full density than any other high density mixed­
use zone (and provides them with a choice of how to obtain that density).
• There is no public facilities test that must be passed. Properties are exempt from local area
transportation review (LATR) and policy area mobility review (PAMR). Property owners no
longer face risks associated with whetherlhow they will meet facilities tests, the unknown cost of
needed transportation improvements, and the time delay associated with reviews and approvals.
• The payments to the Special Tax District will be spread over time, increasing as the value of the
property increases, as compared to unknown costs for infrastructure that must be paid upfront
before the property generates revenues.
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Development has many inherent uncertainties, many of which are not within the County's
control (the market and the unpredictability of when demand or supply for a certain type of development
will change). Staff believes it is appropriate for the Council to provide greater certainty to ensure the
success of White Flint, but it should not be expected to provide complete certainty or absorb all the risks
for the total build out of all infrastructure. Instead, Staff recommends in the discussion which follows
that the Council focus on ensuring that development ready to proceed immediately in Stage 1 be able to
do so without delay and identifying viable options to fund the infrastructure needs to Stages 2 and 3.
The increased net County revenue attributable to White Flint is one of many reasons why the
Council supported a new higher density, mixed-use vision for White Flint, but increased revenues
should not be the sole (or even primary) basis for making policy decisions. For example, if the Council
needed to choose between building a critical public facility that produced no new revenue (e.g.,
rebuilding a school or fire station destroyed by fire) or a road that would allow new development that
would generate net positive revenues, it may decide to build the public facility and defer funding for the
road.
The major policy issues that are ripe for Committee consideration include:
1) Should the primary financing mechanism to fund the selected infrastructure items be a
property tax-based Special Taxing District?
The Executive proposed in Bill 50-10 to create a Special Taxing District, as authorized in the
2010 state law amendments on ©24-28, to be the primary financing vehicle for those infrastructure
items listed in the District "bucket". The District would impose a supplementary property tax, proposed
to be an additional 10% above the otherwise applicable property tax on each taxable property in the
District. The District boundaries (see © 12, lines 81-94) were drawn to cover the White Flint Sector Plan
area but exclude existing single-family houses and residential condominium buildings in the Plan area.
l
This property tax supplement is the Executive's preferred funding tool. Under the state enabling
law, all this revenue is excluded from the County's Charter property tax limit? This supplement has the
benefits of being easy to apply (simply add the supplementary rate to the applicable property tax on each
property located in the District), predictable, and bondable (this tax yield can be relied on to payoff
County-issued bonds). Its yield will grow as property tax assessments rise as the District redevelops.
However, its flexibility is limited by the state Constitution's "uniformity" rule for property taxes; that is,
each property must be taxed according to its current assessed value, not (for example) its current use,
potential value, zoning category, or any other measure of current or future development.
Most of the funds to be raised from this District will be needed before the yield ramps up; i.e.,
the infrastructure to be paid for should be put in place before the developments that create higher tax
assessments are built.
Since the initial District tax rate
will
not legally be set until May 2011 (to
become effective July 2011), the Council
will
have time to analyze more detailed financial
projections before setting that rate.
However, it will be useful to have some idea ofthe relative orders
iExisting apartment buildings would be included because the property tax assessment system treats them as commercial
property. The Council staff memo for the November 16 worksession will discuss whether these buildings should also be
excluded from the district.
2See Maryland Code, Article 24, §9-1302(b), shown on ©26. Because the Special Taxing District proposed in Bill 50-10
would not meet the requirements for a "development district" under state law or County Code Chapter 14,
it
is not already
exempt from the property tax limit in Charter §305.
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of magnitude of each "bucket" when the Council makes the basic policy decisions on which financing
mechanisms the County will use (at least initially).
Some of those who testified before the Council indicated their view that the Special District Tax
was created to take the place of the Impact Tax. As indicated in the Executive memorandum on © 3, the
Special District Tax is meant to provide funding for infrastructure that would otherwise be built by the
private sector (e.g., infrastructure required for LATR). The District approach offers numerous benefits
to developers, including lower interest rates, financing linked to the value of the property, and the
opportunity to have those
in
White Flint who are not deVeloping (but will benefit from development)
subsidize costs that might otherwise have to have been paid solely by those developing.
2) Should the rate of the supplementary property tax in the Special Taxing District be
capped?
The White Flint Partnership in its testimony, and other speakers at the hearing, proposed that the
law should require that the maximum rate of the supplementary property tax in the White Flint Special
Taxing District be set in the implementation resolution, preferably at 10%, the rate proposed by the
County Executive. While doing so would enhance the certainty sought by developers in this area (at
least with respect to the add-on property tax), it would have the possibly unintended consequence of
shifting the burden of any cost overrun on any infrastructure item in the District "bucket" to someone
else, most likely County taxpayers.
It
has been asserted that 10% is the maximum contribution that
would not jeopardize the viability of redevelopment projects, but no data has been provided to support
this and it is possible that a larger tax would be more than offset by the increase in value resulting from
the change in zoning created by the Sector Plan.
3
A Planning Department staff memorandum on 37 to 41 provides a rough analysis of the cost
of the District compared to likely costs that would otherwise be assumed by developers.
They found
that the District costs were comparable to the per square foot costs that would otherwise be paid
for estimated mitigation costs.
Assuming that all LATR costs are credible toward impact tax
payments, the cost per square foot of the District (approximately $7) is comparable to the cost per square
foot of traffic mitigation measures for which property owners would otherwise be responsible
(approximately $6.5). (If not all LATR cost are credible the mitigation costs would like be higher than
the District costs.) The mitigation costs would have to be paid upfront but District costs are spread over
time. The cost per square foot does not reflect the added value to property owners of comprehensive
and coordinated construction of needed infrastructure (compared to the piecemeal approach of having
multiple property owners built necessary infrastructure. Their analysis also shows that property owners
who are redeveloping are subsidized by those who are not redeveloping with an approximate reduction
in District costs of $5 per square foot.
One principle that Council Staff recommends should be assumed in setting policy, and which we
believe all parties share, is that
each "bucket" should be prepared to cover its own cost overruns.
That is, if the cost of any infrastructure item in that "bucket" turns out to materially exceed the current
estimate, the funders of that "bucket" should continue to bear the cost of that item, rather than shifting
the excess cost to another "bucket" or set of stakeholders.
3
Planning Department staff note that one property increased
in
value from $2 million in 2007 to over $15 million after the
Sector Plan rezoning (see
©
41).
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The infrastructure list/tax policy resolution submitted by the Executive (see
©
18-19) would set
as "the County's goal...that the White Flint Special Taxing District special tax rate must not exceed
10% of the total tax rate for the District, except that the rate must be sufficient to pay debt service on any
bonds that are already outstanding". A practical result of applying the assumption in the preceding
paragraph is that
this goal would not become a binding restriction on the tax rate
the Council will set
each year for the Special Taxing District. This goal has been referred to as a "policy cap", as distinct
from the "legislative cap" that the Partnership and others proposed.
The resolution submitted by the Executive reflects this principle.
It
goes on to say:
If the revenues from the special tax at the level in the preceding paragraph are not
sufficient ... the County Executive, before recommending any increase to the tax rate
above the (10%) level ... , must consider alternative approaches, including the timing and
scope of each infrastructure item and the structure of the financing plan to pay for
it,
and
alternative revenue sources.
In
other words, before raising the Special Taxing District rate above 10%, the Executive must consider
certain alternatives (as he no doubt would in most circumstances), but he is not prohibited from raising
the rate as ultimately needed to cover the District "bucket's" costs. A firm legislative cap could"impact
the bond rating and lead to a higher interest rate.
Council Staff recommendation:
adopt this "policy
cap" but not a firm "legislative cap" on the Special Taxing District tax rate.
3) Is it necessary to identify the specific source of funds for any gap between the total cost
of all infrastructure needed for complete build-out of master plan allocated to the District and
funds that can be raised by the Special Taxing District?
The Council received testimony suggesting that it must identify the specific funding that would
be used to close the potential gap between the revenue likely to be raised by the Special Taxing District
(assumed at $150 million) and the total cost of infrastructure assigned to the District ($218 million based
on the Council Staff cost estimate on
©
34). Staff rejects this premise for several reasons. First,
estimates of the revenue to be generated by the Special Taxing District and the cost of infrastructure are
both likely to change. The revenue will depend on the timing of development, the value of the
properties once improved, and the discount rate. (If the value of property increases faster and at a
greater rate than assumed or the discount rate is less than the 6% assumed, revenues could be
significantly higher; the reverse would lead to the opposite outcome.) Cost estimates for the
infrastructure projects are of limited value until the preliminary planning and engineering has been
completed.
In short, it is impossible to project with any degree of confidence the magnitude of any
gap at this time.
Second, infrastructure needs in a planning area almost always change over the course of build­
out, particularly due to the fact that not all property owners build out at their full zoning capacity or
because County policy or practice regarding specific facilities changes.
It is very typical to not build
all infrastructure recommended in a master plan.
Moreover the plan will most likely be
reconsidered long before full build-out occurs.
Since no other master plan
in
the County identifies how the needed infrastructure will be funded,
every master plan has a "gap". In most planning areas, the gap is the equivalent of the total cost of
needed infrastructure. The question for the Council to consider is whether it needs to identify at this
time how to fund all of the proposed infrastructure in White Flint while not having even begun to
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address this question for every other planning area. Rather than attempt to define or fund a long­
term gap now, Staff recommends the Council instead commit to funding all immediate needs,
identifying viable strategies for longer-term needs and refining those longer-term strategies as
development progresses.
While Council Staff does not believe it is necessary now to determine how the full build-out of
White Flint will be funded (particularly since much of the infrastructure is not likely to be needed for
many years), it is critical for the Council to determine the immediate funding needed to allow Stage I
development to proceed without delay.
A
similar assessment should be undertaken before each stage
proceeds, with a Council commitment to identify all funding necessary to allow development to
proceed. The Council Staff recommended changes to the bucket lists indicate that Stage
I
infrastructure
costs can be easily covered by the Special District with no need for additional funding.4
Staff recommends that the Council undertake an amendment to the Capital Improvements
Program (CIP) to fund all Stage
I
trigger infrastructure that are the responsibility of the County or the
District and ensure that there will be no delays for projects ready to proceed.
4)
What other revenue-raising or cost-shifting options are worth further consideration to
address longer term funding needs?
While there does not appear to be a Stage
1
problem, the Committees may want to consider
options to ensure that future gaps can be filled. Options to close a funding gap, listed in the Planning
Board's testimony at the hearing, include:
• a higher Special Taxing District tax rate, so that the District can fund more items assigned to
it;
• the County forward-funding some infrastructure items, with the District repaying the County
when its tax base is adequate;
• shifting some infrastructure items from the District to the County "bucket" i.e., adding to
the costs paid by all County taxpayers; or
• a "complementary source of financing", which could include tax increment financing (TIF)
which diverts District property taxes from the General Fund, or another tax entirely (e.g.,
transportation impact tax, parking excise) paid from the District or certain elements of the
District.
Some of these options would effectively keep the costs where the Executive originally assigned
them --- i.e., White Flint property owners continue to pay for the items in their "bucket". Others shift
costs or risks, directly or indirectly, to others, mainly County taxpayers. Staff recommends that any
strategy continue to allocate costs within the assigned bucket, rather than reallocating them to
another entity.
To provide any future missing District funding, Staff recommends that the Council agree to
forward fund infrastructure that will not be covered by the District special tax, with the costs of those
improvements to be repaid by the District at a later time. Forward funding using traditional County
financing vehicles such as general obligation bonds will be less expensive than tax increment financing.
This may require collecting the special tax for a longer period of time or increasing the rate.
4
Assuming revenues that
will
be generated over the life ofthe bonds, not during the build-out of Stage 1.
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Some have suggested that the TIF be used to fund the difference between the costs in the District
bucket and the revenue raised by the Special Taxing District. A TIF diverts revenues otherwise
available for the general fund for capital improvements in a specific area.
It
does not create additional
revenues, but does ensure that some portion of revenues associated with increased property values will
be used for the infrastructure needs in a specific area. Councilmember Berliner believes that a TIF is an
appropriate mechanism to ensure the successful development of \Vhite Flint and has drafted an
amendment to Bill 50-10 for the Committees' consideration, which is attached beginning at
©
42.
Staff does not support the use of a TIF for several reasons summarized below. (Executive staff
are preparing additional information that was not available in time for this packet.)
• TIPs divert revenue that would be otherwise available to the entire County for the operating or
capital budget and instead limit its use to capital projects only in White Flint. This shifts the
responsibility for some portion of District funding from the District to the County taxpayer.
• TIFs limit the Council's flexibility to shift resources when necessary (e.g., if development stalls
in White Flint, delaying the need for infrastructure at the same time that there is a critical need
elsewhere in the County) and can have a negative impact on areas outside the TIF District.
5
• TIF revenue is unreliable since it is based on the rate of growth in property values, which is not
certain. TIFs are usually backed up by another funding source.
• The designation of an area for TIF fmancing usually requires a finding that development would
not take place "but for" the creation of the TIF. TIFs are more commonly used in blighted areas
where there appears to be no alternatives. Given the alternatives available in White Flint, Staff
does not believe that White Flint passes the "but for" test.
• TIFs are more expensive than other financing mechanisms available to the County.
5) Should the transportation impact tax be retained in the White Flint Special Taxing
District?
Transportation impact taxes have been levied on new development in White Flint since 2001.
The rates differ by size and land use category, roughly in proportion to the relative amount of traffic
generated. By policy, the rates in Metro Station Policy Areas (including White Flint) are set half as high
as they are levied elsewhere. Furthermore, affordable housing units do not pay the tax.
The purpose of transportation impact taxes (like school impact taxes, which were first levied in
2004) is for the development to provide its fair share of the cost of new infrastructure that adds capacity.
When the Council last revised the tax rates in 2007, it set them so that development would pay for
roughly 90% of the cost of added transportation capacity which is needed to serve development
generally. With few exceptions, there is no geographic nexus between the location of the development
that pays the tax and where the proceeds are used. The same is true for the school impact tax, but it has
no geographic exceptions.
The Executive's memo (see ©2, 6) noted that he expects to propose another Bill for Council
consideration that would maintain the transportation impact tax in the \Vhite Flint area at 50% of the
A 2006 study by the Lincoln Institute of Land Policy (one of the top research organizations on land use and taxations
issues) found that "the non-TIF areas of municipalities that use TIF grow no more rapidly, and perhaps more slowly, than
similar municipalities that do not use TIF" and "evidence shows that commercial TIF districts reduce commercial property
value growth in the non-TIF part of the same municipality".
5
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County-wide rate, but require the proceeds to be used only to benefit the White Flint area and allow
taxpayers to pay the tax due over 10 years, instead of before the building permit is issued, as is now
required.
6
Many who testified at the hearing urged the Council not to "add" the impact tax on top of a
Special District tax. (This is, of course, incorrect: what they meant is that the existing transportation
impact tax should be eliminated.) One reason the Executive would retain the impact tax is because it
would generate more revenue to pay for projects in the County "bucket". In the past decade, impact
taxes contributed about $17.6 million to the cost of Montrose Parkway West; in the next six years, the
Council has programmed about $21.2 million of impact tax revenue for
Montrose Parkway East,
Chapman Avenue Extended,
and
Nebel Street Extended,
all of which serve White Flint.
It
is clear that
White Flint has been the recipient of impact tax revenues, with more spent on improvements there than
has been generated by development there.
The other main reason the Executive would retain the impact tax is that it provides more equity
between developers and non-developers in White Flint. Consider two White Flint office buildings with
the same size and same locational advantage (e.g., distance to the Metro Station), but one was built in
the last few years and the other has yet to be built. Under the Executive's scenario, the latter will pay
the impact tax, just as the former did. But both will also have to pay virtually the same Special District
tax since their assessed values will be almost identical, even though the first building does not need the
infrastructure the Special District tax would fund. The owner of the first building would have a valid
complaint, but the Executive's response is that it will also benefit from the new infrastructure because
the type of denser development planned will likely raise the value of existing property. But if the new
development does not pay the impact tax, the existing building owner is put at a further competitive
disadvantage.
Several of the property o\\'ners who testified indicated that the combination of the Special Taxing
District and impact taxes would create too great a financial burden on property owners and would deter
development. Staff has not yet received any data from property owners to provide evidence of this
assertion. Any analysis of the cost of impact taxes should include the likely credits available from
developer projects (see discussion in the following section).
Planning Department staff have prepared a rough analysis of the cost· of the District
37 to 41)
and is doing further work regarding the combined cost of the District tax and impact tax, the results of
which may be available for the meeting. Their preliminary conclusion is that both costs combined
would be within the range of costs of other mixed-use developments in the County.
In
deciding whether developers in the White Flint area would be overtaxed, as some claim, if
they remain subject to transportation impact taxes, the Council should not forget that under the Sector
Plan and its implementing Subdivision Staging Policy
7
amendments, once the Council adopts a White
Flint sector financing mechanism, the normal policy and local area transportation requirements (P AMR
and LATR) do not apply.
Relieving developers of those requirements will, of course, reduce their
development costs, often by large amounts, and perhaps more important, reduce the time needed
to bring projects to full development.
6
A
ll
parties acknowledge that the school impact
tax
would continue to apply to residential developments in White Flint.
7Formerly County Growth Policy.
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Absent more concrete information to show that the combination of the two taxes would have a
detrimental impact on development, Staff believes it should be continued. Should the Council later
determine that the combined costs are in fact negatively impacting development, it will be far easier to
reduce or eliminate the cost of the impact tax. If the Council eliminates the tax and later determines it
does not have sufficient County resources to fund necessary infrastructure, it may be too late to recover
lost revenue.
Council Staff recommendation: retain the transportation impact tax in the White Flint
Special Taxing District at its current rates with proceeds to only be spent in White Flint. As a way
of softening the blow, the Executive recommended stretching out the impact tax payment over 10 years,
with a small adjustment for the time value of money and a lien placed on the property. Council Staff
would go as far as stretching the payment out over
20
years, with the same type of adjustment.
Either option would require conforming the impact tax law, which probably could be done in the context
of Bill 50-10.
6) What role would potential impact tax credits play in funding each "bucket"? How
would the use of impact tax credits reallocate costs?
If, as the Executive proposed, the County transportation impact tax remains in effect in the White
Flint Special Taxing District and is limited to funding infrastructure in that District, this impact tax
revenue will pay for some portion of the gap in the County "bucket". However, some of the developer­
paid "bucket" will be capacity-adding improvements that qualify for impact tax credits.
Attorney Steve Elmendorf, among others, argued that retaining the impact tax would be worse
with a Special District
tax
than under the current PAMRILA TR APFO requirements since, under the
current system, impact tax credits may be granted, while credits cannot be taken against the Special
District tax because of the uniformity rule for property taxes.
8
However, several projects in the
Developer "bucket" would be creditable against impact tax. For example, the $33.9 million project 41
and the $9.5 million project 36 (if
it
remains a public street, and perhaps even as a private street with the
Sector Plan's conditions) are on White Flint Mall's property and presumably would be built by the
developer; Council Staff thinks both would be impact tax-creditable. Therefore, if the impact tax in this
District were retained, it would be reduced by a $43.4 million credit. For Federal Realty, projects 43
and 53 would be creditable, reducing its impact tax payment by $25.5 million. So not only is there a
disparate effect between developers and non-developers, there is also a disparate effect among
developers.
7) Are projects properly allocated to the correct bucket and correct stage of development?
Council Staff reviewed the three "buckets" of projects proposed by the Executive and we
recommend revising them as displayed on 34 to 36. Many of the changes are minor and technical,
such as more accurately describing the names and scope of projects, and some are formatting, such as
assuring that the aggregate costs of the three stages equals the total cost. At this point, all the cost
estimates are extremely soft; because these projects have not been designed, the real costs-in constant
dollars--could be as much as 50% higher. All costs displayed in the bucket lists are in 2010 dollars.
8Historically, pay-and-go exactions have not been creditable against the transportation impact tax, whether they were the
Development Approval Payment in the mid-1990s, the Expedited Development Approval Excise Tax in the late 19905, the
Alternative Review Procedure used by LeOR in the middle of this decade, the PAMR payments initiated in 2007, or the
Executive's recently proposed TPAR payment.
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The substantive revisions we recommend to the bucket lists are:
District Bucket:
• Add $10,000,000 to the right-of-way cost for Project
#7. This is the estimated cost of
acquiring land and a building from the VOB parcel to build Executive Boulevard Extended
between East Jefferson Street Extended and Marinelli Road. The road cannot be built without
this acquisition.
• Shift
80%
of the costs of the western and eastern workaround projects from Stage
1
to
Stage
2;
the
20%
retained in Stage
1
would be for design and permitting costs.
This
recommendation sterns from a discrepancy in the Sector Plan approval resolution. On Page 23 of
the resolution, under Phase
1:
"Work around road projects west of Rockville Pike, including the
streets for the civic core, should be contracted for construction during Phase 1 and completed
before commencement of Phase 2." This language is inconsistent with the bullets underneath
("contract for construction") and the bullets in Phase 2 ("complete ... "). Council Staff believes
what makes the most sense is what is contained in the bullets: that the workaround is under
contract before Phase 2 commences, and that
it
be completed during Phase 2. If
it
is contracted
before Phase 2 commences, that means the project will be under construction at the same time
the Planning Board could approve preliminary plans in Phase 2. Construction for the western
workaround would take no more than 2-3 years (since rights-of-way would already have to be
clear before a construction contract is granted), which is probably the minimum amount of time
for a Phase 2 development to proceed from preliminary plan approval to construction and
occupancy. In other words, Phase 2 development would not be realized until the western
workaround is completed.
These revisions bring the total cost of the District Bucket to about $218 million.
County Bucket:
• Delete the $130,500,000 associated with the bus depot (Project
#24). A new upcounty depot
is programmed and will provide capacity for expanding bus service throughout the county. Its
purpose is not based solely or mainly on the needs of White Flint.
• Show an estimate of $90,000,000 for the CLATR intersections outside the Sector Plan area
(Project
#28). As soft as the estimates in these lists are, this is by far the softest. This estimate
is the midpoint of costs that could range from as low as $45 million to as high as $135 million.
The $45 million low estimate is based on three assumptions: an average cost/intersection
improvement of $20 million (the lower end of the BRAC intersection average); 3 intersections to
be improved (the bare minimum noted by Planning staff); and
75%
of the need for the
improvements associated with White Flint (as contrasted with the need generated by other
neighboring developments, such as at Rock Spring Park).
The $135 million high estimate is based on: an average cost/intersection improvement of $25
million (the higher end of the BRAC intersection average); 6 intersections to be improved; and
90% of the need for the improvements associated with White Flint.
11
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Lacking better information, we have assumed that the $90 million will be split evenly between
Stages 2 and 3.
• Delete the $2,031,348 land cost associated with the County portion of the streetscaping
project on Nicholson Lane (Project #30). The land along County agency property should be
assumed as having no cost.
• Increase the estimate for the elementary school to $25 million. The Executive's $20 million
estimate was based on modernizing and reopening the Rocking Horse Center as an elementary
school. The Sector Plan calls for a new school south of the current White Flint Mall. The $25
million does not include the cost of land, so it assumes the land would be dedicated.
If
the land
must be purchased, the cost would be higher, of course.
These revisions reduce the County Bucket from about $414 million to about $376 million.
Developer Bucket:
• Delete all the right-of-way costs (about $145 million) from the grand total. These are
assumed to be dedications that will not require acquisition. They will not affect the build-ability
or profitability of the developments.
• Delete the $5.9 million construction cost for Project #46. Project #46 would be done as part
of Project #13 in the District Bucket.
These revisions reduce the Developer bucket from about $403 million to about $252 million.
With these revisions, the District Bucket proportion of White Flint's infrastructure cost would be
25.8%, while the County/State Bucket proportion would be 44.5% and the Developer Bucket share
would be 29.8%. However, a change in one assumption would change these ratios. The Executive
assumes that some development on Rockville Pike will proceed earlier than when the District can fund
the Rockville Pike improvement; his assumption is that 25% of the improvement's cost will be covered
by exactions. While this is certainly a guesstimate, we have no rationale to assume a different share. If,
however, assuming that development proceeds even faster (or the District slower), then perhaps 50% of
the cost might be funded through exactions, which would shift about $20 million from the District
Bucket to the Developer Bucket.
In Stage 1 there would be a much lighter contribution from both the District and Development
Buckets. The District Budget projects require about $39 million of funding in Stage 1, about 16.7% of
the Stage 1 total (compared to 25.8% across the entire buildout). Such a reduced funding requirement,
plus the fact that most of the costs are for design (which are much more reliable than construction costs)
strongly suggests that there will be no funding gap in Stage 1. The Developer projects require about $52
million in Stage 1, about 21.9% of the total (compared to 29.8% across the entire buildout).
On the other hand, the County/State Bucket funding needs are much more frontloaded:
County/State Bucket projects require about $145 million in Stage 1, about 61.5% of the Stage 1 total
(compared to 44.5% across the entire buildout). Therefore, the need for significant resources will have
to come in the form of G.O. Bonds, impact taxes, and other such sources.
12
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This packet contains
Memo from County Executive
Bill
50-10
Infrastructure list/tax policy resolution
Infrastructure lists
with
cost estimates ("buckets")
District "bucket"
County/State "bucket"
Developer "bucket"
County Special Taxing District tax rates
New state Special Taxing District enabling law (2010 SB 828)
CIP amendment and appropriation request
Council Staff Recommended Infrastructure List
District "bucket"
County/State "bucket"
Developer "bucket"
Planning Staff Analysis of Fiscal Impact
Draft TIF legislation prepared by Councilmember Berliner
Circle
1
8
18
20
21
22
23
24
29
34
35
36
37
42
G:\MISC\MARLENE\White Flint Financing\PHED-MFP 11-9-10,Doc
13
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OFFICE OF THE COUNTY EXECUTIVE
Isiah Leggett
ROCKVILLE, MARYLAND 20850
County Executive
MEMORANDUM
September 27, 2010
TO:
FROM:
SUBJECT:
Nancy Floreen, President, County Council
lsiah Leggett, County
ExOCutiVe--f
~
~
White Flint Development Tax District:
Legislation; Legislative Report Form; Fiscal Impact Analysis
Amendment ($9.835
M)
to the FYll-16 Capital Improvements Program and
Special Appropriation #4-E11-CMCG-3 to the FY11 Capital Budget
Montgomery County Government
Department of Transportation
White Flint District West: Transportation (No. 501116), $385,000
I am pleased to transmit for introduction a package of legislative items necessary
for the County to commence implementation of the transfonnational White Flint Sector Plan.
This sector plan, a model for smart growth, will be a platform for exciting new redevelopments
that will make the White Flint area more pedestrian and bicycle friendly as well as inviting for
residents and businesses.
Enclosed for introduction is legislation creating the new White Flint Development
Tax District which will implement the financing vehicle envisioned by the recently adopted
White Flint Sector Plan. If implemented this district will help fund some of the extensive public
infrastructure called for in the Sector Plan. A resolution accompanies the draft legislation. The
resolution identifies the specific list of transportation infrastructure to be funded by the White
Flint Development Tax District and includes a district funding and rate setting policy statement.
With the legislation and the resolution, I am transmitting an amendment to the
FYl1-16 Capital Improvements Program and a supplemental appropriation
in
the amount of
$385,000 to the FY 11 Capital Budget for the new White Flint District West: Transportation
project (No. 501116) to enable design to begin on infrastructure to
be
paid for from White Flint
Development Tax District funds. This work is critically important to refine the assumptions
relative to the district for roadway improvements in the first stage of the recently approved White
Flint Sector Plan. This project is needed to accelerate the preliminary engineering for one new,
one relocated and three existing roads, and one new bikeway, so that more accurate designs and
cost estimates can be established. Funds to pay for analysis and studies necessary to implement
CD
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Nancy Floreen, Council President
September 27, 20 I 0
Page 2
the district are also included. The recommended amendment is consistent with the criteria for
amending the ClP in that this project supports significant economic development initiatives,
which in
tum
will strengthen the long term fiscal capacity of the County government. The new
growth planned for the White Flint area in accordance with the recently approved Sector Plan
will revitalize the region and strengthen the County as a whole. These road and bikeway
improvements will greatly aid and expedite the planned development for the area
Other specific Capital Improvements Projects for development district
infrastructure will be transmitted with the FYl2 amendments in January. To address
transportation impact taxes in White Flint, I intend to send a second bill to the Council that will
modify the transportation impact tax as it relates to the White Flint Sector Plan Area. The
modifications that I will be recommending are to retain the 50 percent metro station policy area
rate that applies throughout the district, but require that the tax be applied only for infrastructure
within or related to the development within the White Flint Sector Plan.
This
would include
intersections identified through the comprehensive local area transportation review that require
improvement due to development within the district. I believe that the opportunity to pay
this
tax over time rather than as a lump sum payment up front should be available provided that
property owners who are benefitting provide a
first
lien to the County.
The packet that is transmitted with this memorandum reflects many months of
meeting with stakeholders and interested parties. Executive staffhas held a series of meetings
with developer and resident stakeholders, along with Planning Board and County Council staff,
to develop the list of improvements that will be funded by the special district tax and the key
elements ofthe district enabling legislation. While the attached
draft
legislation does not
necessarily reflect a consensus of the stakeholders, it does reflect significant input from
all
ofthe
interests represented.
To assist the Council in its deliberations and to facilitate the public discussion
regarding this package, I am providing the Council with some ofthe key considerations that went
into the funding plan that is reflected in the attached package.
The Special Tax District
One ofthe underpinnings of the White Flint Sector Plan is that there be a new funding
mechanism to pay for some ofthe significant transportation infrastructure that is called for in the
plan, including the creation ofworkarounds, street grids, streetscaping and bike lanes. With the
limitations of Charter Section 305, it is important that the new
tax
be structured so that it does
not use up fiscal capacity within that limitation and thus preclude the availability of these funds
for other important projects in the County.
The development tax district is simple, straightforward and can be easily implemented
- all important considerations for the timely realization ofthe redevelopment of White Flint.
The development tax district also provides for certainty ofrevenues and spreads the burden
equally over the entire plan area - except for existing residential which is to be outside of the
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Nancy Floreen, Council President
September 27, 2010
Page 3
district. The legislation, which is to be adopted under recently enacted Senate Bill 828, gives
bond counsel, and the bond market greater certainty in the County's authority to implement the
district and impose an ad valorem tax on all properties except for existing developed residential.
In
addition, under this special authority, the bonds can be issued as special obligation bonds, the
debt service of which will not compete for capacity with other County debt. The development
district tax is intended to be implemented in time for the FY12 tax bill.
The development district tax provides substantial benefits to property owners within
the plan area while protecting the County taxpayer from the greater fiscal burden. The County
has historically required that development pay for itself With development density doubling
throughout the sector plan area, the special tax district provides a means of assessing properties
to ensure the government's lower rate of financing for infrastructure that would historically have
been required of developers to meet transportation capacity requirements. The County's
financing rates are less than rates that the private sector could obtain.
In
addition to the near
doubling of development density, the
quidpro quo
for this additional tax is that properties that
are being redeveloped will not be required
to
go through the transportation capacity reviews that
are generally required to satisfy adequate public facilities review. With the steady flow of tax
revenues, there is better certainty that the district roads will be built rather than relying on
piecemeal development to drive the delivery of needed improvements and capacity. This
certainty benefits the property owners as well as the residents and businesses ofMontgomery
County who must navigate the area. Another benefit ofthe special district tax is that it is simply
fairer. The entire sector plan area picks up the expenses rather than those that are first-in with a
development application being charged disproportionately.
Other tax mechanisms were considered but all in all, for the certainty, reliability, ease
ofimplementation and fairness, the special tax district is the better way to go for the White Flint
Sector Plan area. Some of the other revenue raising mechanisms that were evaluated but rejected
in favor of the recommended funding plan included:
Tax Increment Financing (TIF).
This was an approach that had been initially
suggested by some in the development community and was discussed by Planning Board staff.
This mechanism has been rejected for a number ofreasons.
As
a funding source it has issues of
reliability, constraints on fiscal management and equity concerns. Tax increment financing
pledges increases in tax revenues to pay for infrastructure. As evidenced by recent history, the
development cycle and reliability ofprojections can be difficult to predict and sometimes wrong.
TIFs are dependent upon development moving forward on a predictable schedule. If
redevelopment does not occur, the remainder ofthe County - and in this case the general fund­
would have to pick
up
the fiscal obligations of the debt. This particular funding approach is
more typically used in blighted areas and is better suited to large tracts ofland that will be
redeveloped rather than piecemeal property ownerships reflected in the White Flint Sector Plan
area. The lack of assurance of a critical mass of redevelopment occurring is challenging for the
issuance of debt, particularly in the context of the sector plan where improvements and capacity
are critical to the implementation and staging ofthe plan.
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Nancy Floreen, Council President
September 27,2010
Page 4
It
is also worth pointing out that a TIF would use tax revenues that are subject to
Charter Section 305 limits and would therefore force the funding for these roads to compete with
schools, libraries, fire stations, community centers, etc. throughout the County. A TIF also raises
fundamental equity issues. Developers would be paying increased taxes based on increases in
assessments if they redevelop. They would not be paying for infrastructure as has been
historically and is currently required throughout the County. This would be a departure from the
general and longstanding policy that development must pay for itself. While the rest of the
county would bear the overall total expenses from redevelopment and the risk of carrying up to
the full load of that funding if development did not take place as represented, there would be
little risk to the development community and their revenues would be pledged to bettering White
Flint only, rather than other areas of the County. Further, the County would lose significant
flexibility as it manages through difficult fiscal years. Pledging revenues right off the top, while
retaining the burden of providing the infrastructure is ill-advised, particularly given recent
experiences with our economy.
Some within the development community have proposed
both
a TIF and a special tax
district with the special tax district being a back up only if the taxable base for the TIF fails to
increase as projected when the debt is issued. For a number of reasons, such an approach is
unworkable and impractical and will create financial uncertainty. Implicit in the suggestion is
the fact that the TIF is in itselfrisky. The district tax would by necessity have to be higher up
front because it would be bailing out a failed TIF pursuant to which debt had already been
incurred. This would be a significant hardship for the residents and businesses that moved to
White Flint under the expectation of a TIF only and then find themselves facing a district tax that
would need to be set high enough to bailout the failed TIF. The simplicity of the straight
development district tax that I am recommending is a far better approach as it can be set at the
outset before new development proceeds in White Flint and revenues can begin to be generated
before any debt is issued. It provides greater stability and certainty to the County taxpayer, the
residents and property owners.
Special Assessments:
This was
r~ected
because under current law it is based upon
front footage and would be an extremely inequitable way of funding the needed infrastructure.
Chapter
14
Development District:
This form of district funding is more cumbersome
and requires multiple council actions.
It
inherently has points following creation where
controversy can arise and create uncertainty.
It
is dependent upon the votes of participants and
by design would capture less than the entire district, reducing the equity of the district and
increasing the likelihood of the rate increasing to ensure the revenues to be generated. In sum, it
would be more difficult to put in place, and is better suited to large tracts ofland that
will
be
redeveloped rather
than
piecemeal property ownerships reflected in the White Flint Sector Plan
area.
It
will also be sigllficantly more time consuming to implement, calling into question
time1ines that are assumed or necessary to begin implementation of the White Flint Sector Plan.
History calls into question whether the district would ever be realized.
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Nancy Floreen, Council President
September 27, 2010
PageS
Excise Tax:
Excise taxes were also evaluated.
It
was concluded that an excise tax
would be more difficult to implement as the targeted stakeholders may have concerns about
fairness oftaxation and the bond markets would need to understand the nuances of a newly
developed excise tax. Additionally, the taxing of an activity that would occur in other locations
within the County could generate interest and concerns on the part of similar enterprises. The
County's recent experience with a proposed tax on surface parking lots illustrates the concern.
Issues Discussed
Seven primary areas of concerns were raised by the stakeholders in worksessions:
I)
the tax is to be spent only in the White Flint Sector Plan area; 2) the tax is to be for a defined list
ofinfrastructure; 3) the period of time during which the tax is to be collected is to be finite; 4)
the tax should not exceed 10 percent of the current rate; 5) existing residential should not be
charged; 6) the tax should replace transportation impact taxes; and 7) if the tax is insufficient
to
fund all ofthe infrastructure in the list during any stage ofthe plan, the County should commit to
funding the difference.
I am not recommending everything that was raised by all of the stakeholders; I am
however recommending much of what was raised. I very much appreciate the commitment,
level of effort,
and
forthright and informed discussions and support provided by developers,
residents, and staffs of the Planning Board, the Council and the Executive Branch throughout the
stakeholder worksessions over the spring and summer. These efforts have resulted in a funding
plan that can be readily implemented and have helped to focus the issues that will likely be
raised for discussion at the County Council.
The bill that I am sending to you requires that the tax be spent only in the White Flint
Sector Plan and only for the list ofinfrastructure in the accompanying resolution.
It
is also for a
finite period of time and will expire when sufficient revenues have been raised to pay for all of
the infrastructure items on the list. The boundaries of the district have been set to exclude
existing residential properties. I am not recommending a cap on the tax rate in the bill, but I
have recommended a stated policy in the resolution that the tax rate should not exceed 10 percent
of the total tax rate not including the development
tax.
The
reason I have not included a cap in
the legislation is that I am concerned that doing so will result in a less favorable rating on any
bonds that are issued, which
in
turn would result in a higher interest rate on the bonds. This
would make the infrastructure more expensive to the
tax
payers. I believe that concerns over the
level ofthe
tax
rate can be addressed through the implementation process and adherence to a 10
percent policy goal.
The two areas I am not prepared to recommend at this time are that the transportation
impact tax not apply and that the County commit to fund any gap if the district revenues are not
adequate to cover the projected costs for the development tax district infrastructure. The cost
projections that are identified for the district infrastructure are estimates. The County's estimates
and the White Flint Partnership's (a group of White Flint developers) are fairly consistent, and
both include many assumptions which ifnot borne out will result in changes to the projected
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Nancy Floreen, Council President
September 27,2010
Page 6
costs for the infrastructure. One key area where this can occur is in the area of the costs ofright­
of-way for the many roads provided for in the plan. These roads carve through properties and
the White Flint Sector Plan is predicated on an optimistic assumption that the grid ofroads as
they cut through properties will result in new blocks ofproperties that can serve as the basis for
exchanges of lands.
It
is also assumed that there will be extensive dedications of rights-of-way for these
roads. If these assumptions are wrong, the risk of potential gaps in cost versus revenue
generation will be greatly increase and the County could be at risk for a substantial sum of
money. Likewise, these assumptions reflect current construction prices, which may be more
favorable
than
in a recovered economy. Another area that impacts costs is how the Planning
Board views the state of some ofthe existing roads.
As
part of the stakeholder worksessions
Planning Board staff, a representative ofthe White Flint Partnership and representatives from the
Department of Transportation and the Department of General Services walked some of the
existing Sector Plan roads to get a sense ofwhat is needed to complete streetscaping along these
roads for purposes ofauthorizing moving from one stage of the plan to the next. TIlis
collaborative effort resulted
in
conclusions that some roads are satisfactorily completed for that
purpose and the costs could therefore be removed from the development tax district.
Significant
staff
and stakeholder effort was spent developing an understanding of the
above described assumptions and any potential gap between the costs ofthe infrastructure and
the revenues projected to be generated by the district.
It
has been suggested that the County
commit up front to cover any "gap." Among other problems, this request is for an as yet
undefined amount ofmoney
in
an as yet undefined C1P budget. I cannot commit an undisclosed
amount ofmoney for future years, nor can the Council. I also believe that it would be
ill
advised
to commit to fund an amount ofmoney that mayor may not be needed - particularly given the
many important needs throughout the County that must compete for that same money.
As for the transportation impact tax, I weigh the fact that development density in the
White Flint Sector Plan area was just doubled or nearly doubled for a majority ofproperties; that
development is relieved ofthe need for transportation capacity review; and that the entire plan
area is a Metro station policy area which translates into an already reduced rate of 50 percent of
the transportation impact tax rate. I believe that, at least at this point in time, it would be
imprudent to recommend elimination of the tax. However, I am recommending that those tax
revenues be committed to being spent within the White Flint Sector Plan area or for
improvements needed due to the increased development recently authorized for this area. I
recognize that we are in the throes of- and hopefully emerging from - a significant recession
and that the private financing realm will be different particularly at the outset. Therefore, I do
think
that it makes sense to allow developers the opportunity to pay the tax over a period oftime
(perhaps 10 years to get to project stabilization) if they are able to provide the County with a
first
lien to assure the payment of the deferred transportation impact tax.
I recommend that the County Council approve the legislation, resolution and
amendment to the FY11-16 Capital Improvements Program and special appropriation in the
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Nancy Floreen, Council President
September 27, 2010
Page 7
amount of$385,000 and specify the source of funds as Current Revenue General with repayment
in
FYl2 from White Flint Development District tax funds. These efforts will allow us
to
implement the White Flint Sector Plan which, as I mentioned at the outset, will be
transformational, smart growth of which we can all be extremely proud.
I
appreciate your prompt consideration ofthese actions.
IL:ad
Attachments: Legislation to create the White Flint Development Tax; Infrastructure and Policy
Resolution; Amendment to the FYII-16 Capital Improvements Program and
Special Appropriation #4-EII-CMCG-3; Fiscal Impact Analysis
cc:
Jennifer Barrett, Director, Department ofFinance
Joe Beach, Director, Department of Management and Budget
Kathleen Boucher, Assistant Chief Administrative Officer
Mike Faden, Senior Legislative Attorney, County Council
Marc Hansen, Acting County Attorney
Ken Hartman, Director, BCC Regional Service Center
Art
Holmes, Director, Department ofTransportation
Diane Schwartz Jones, Assistant Chief Administrative Officer
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Bill No.
50-10
Concerning: Special Taxing District ­
White Flint - Creation
Revised: 10-1-10
Draft No. 2
Introduced:
October 5.2010
Expires:
April5,2012
Enacted: _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ __
Sunset Date:
-!..,!;No~n.:.::::e~
_ _ _ __
Ch, _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council President at the Request of the County Executive
AN
ACT
to:
(1)
(2)
(3)
(4)
(5)
establish a White Flint Special Taxing District;
authorize the levy of an
ad valorem
property tax to fund certain
transportation infrastructure improvements;
authorize the issuance of a certain type of bond to finance certain
transportation infrastructure improvements;
generally authorize a White Flint Special Taxing District; and
generally amend or supplement the laws governing the use of
infrastructure financing districts and similar funding mechanisms,
By adding
Montgomery County Code
Chapter 68C, White Flint Special Taxing District
Boldface
Underlining
[Single boldface brackets]
.QQ.uQle
underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act.'
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BILL No. 50-10
1
2
Sec 1. Chapter 68C is added as follows:
Chapter 68C. White
Flint
Special Taxing District.
68C-1.
Definitions.
3
4
For purposes of this Chapter, the following tenns have the meanings indicated:
Bond
means a special obligation or revenue bond, note or other similar
5
6
instrument issued by the County that will be repaid from revenue
generated by ad valorem taxes levied under this Chapter.
Cost
means the cost of:
7
8
9
ill
the
construction,
reconstruction,
and
renovation
of any
the
lO
transportation
infrastructure
improvement,
including
11
12
acquisition of any land, structure, real or personal property, right,
right-of-way, franchise, or easement, to provide
f!
transportation
infrastructure improvement for the District;
l3
14
ill
ill
all machinery and equipment needed to expand or enhance
f!
transportation infrastructure improvement for the District;
financing charges and debt service related to
f!
transportation
infrastructure improvement for the District, whether the charge or
debt service is incurred before, during, or after construction of the
transportation infrastructure improvement, including the cost of
issuance, redemption premium
15
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ill
m:!Y1
and replenishment of
debt service reserve funds for any bond that finances
f!
transportation infrastructure improvement for the District;
ill
reserves for principal and interest, the cost of bond insurance, and
any other
~
of financial guarantee, including any credit or
liquidity enhancement, related to
f!
transportation infrastructure
improvement for the District;
26
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F:\LAW\BILLS\1050 White Flint· Creation\\050 Bi1I2 IntroDOC
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BILL
No.
50-10
27
ill
architectural, engineering, financial, and legal services related to
providing
District;
~
28
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transportation infrastructure improvement for the
®
any plan, specification, study, survey, or estimate of costs and
revenues related to providing
improvement for the District;
~
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transportation infrastructure
m
®
any administrative expense incurred
Qy
the County necessary or
incident to determining whether to finance or implement a
transportation infrastructure improvement for the District; and
any other expense incurred
Qy
the County necessary or incident
to building, acquiring, or financing
improvement for the District.
~
35
36
37
transportation infrastructure
38
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40
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District
means the White Flint Special Taxing District created under
Section 68C-2.
Transportation infrastructure improvement
means:
42
ill
the construction, rehabilitation, or reconstruction of
!!
road, street,
or highway that serves the District, including any:
43
44
45
®
{ID
right-Df-way;
roadway surface;
roadway subgrade or shoulder;
median divider;
drainage facility or structure, including any related
stormwater management facility or structure;
46
(Q
ill.)
47
48
.em
.eEl
(ill
49
50
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roadway cut or fill;
guardrail;
bridge;
highway grade separation structure;
-3-
F:\LA\V\BILLS\l 050 W'hite Flint - Creation\1050 Bill 2 Intro.DOC
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BILL No. 50-10
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80
ill
(K)
tunnel;
overpass, underpass, or interchange;
entrance plaza, approach, or other structure that is an
integral part of
~
street, road, or highway;
OJ
(M)
bicycle or walking path;
designated bus lane;
sidewalk or pedestrian plaza;
streetscaping and related infrastructure; including placing
utilities underground; and
ili)
(Q)
(£)
(Q}
other property acquired to construct, operate, or use
~
road,
street, or highway; and
ill
~
transit facility that serves the needs of the District, including
any:
®
lID
(Q
@
track;
right-of-way;
bridge;
tunnel;
subway;
rolling stock;
station or tenninal;
parking area;
related equipment, fixture, building, structure, or other real
or personal property; and
®
®
{ill
(H)
ill
ill
service intended for use in connection with the operation
of
~
transit facility, including rail, bus, motor vehicle, or .
other mode of transportation.
68C-2.
Creation; Boundaries.
-4 -
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BILL
No. 50-10
81
82
ill
(Q}
The White Flint Special Taxing District is coterminous with the
approved and adopted White Flint Sector Plan area.
The following properties, identified
Qy
street address, are not included
in the District: 11700 Old Georgetown Road, 11701 Old Georgetown
Road, 11750 Old Georgetown Road, 11800 Old Georgetown Road,
11801 Rockville Pike, 5800 Nicholson Lane, 5802 Nicholson Lane,
5809 Nicholson Lane, 5440 Marinelli Road, 5503 Edson Lane, 5505
Edson Lane, 5507 Edson Lane, 5509 Edson Lane, 11201 Woodglen
Drive, 11203 Woodglen Drive, 11205 Woodglen Drive, 11207
Woodglen Drive, 11209 Woodglen Drive, 11200-11219 Edson Park
Place, 11222 Edson Park Place, 11224 Edson Park Place, 11226 Edson
Park Place, 11228 Edson Park Place, 11230 Edson Park Place, 11232
Edson Park Place, 11234 Edson Park Place, 11236 Edson Park Place,
11238 Edson Park Place, and 11240 Edson Park Place.
83
84
85
86
87
88
89
90
91
92
93
94
95
96
68C-3.
!&!!
of Tax; Limits.
Each tax year the County Council may
~
ill
against all the assessable
~
97
98
99
real and personal property in the District
sum on each $100 of
assessable property that does not exceed an amount sufficient to cover
the costs of transportation infrastructure improvements that have been
identified in
~
Council resolution approved under Section 68C-4.
100
101
(Q}
Under Section 9-1302 of Article 24, Maryland Code, the limit in
Charter Section 305 on levies of ad valorem taxes on real property to
finance County budgets does not
mmlY
to revenue from any tax imposed
under this Chapter.
102
103
104
105
106
W
The tax imposed under this Chapter must be levied and collected as
other County property taxes are levied and collected.
-5-
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BILL
No. 50-10
107
108
109
110
@
The tax imposed under this Chapter has the same priority, bears the
same interest and penalties, and in every respect must be treated the
same as other County property taxes.
68C-4.
Transportation Infrastructure Improvement Resolution.
After holding
£!
public hearing, the Council may approve
£!
resolution
that lists each transportation infrastructure improvement that would be
entirely or partly paid for.Qy
£!
tax imposed under Section 68C-3.
111
112
ill
113
114
(hl
The resolution must indicate the estimated cost, including
£!
contingency
amount, for each listed improvement.
115
116
W
@
The Council may amend the resolution after holding
£!
public hearing.
The Council must present the resolution and each amended resolution to
the Executive for approval or disapproval. If the Executive disapproves
£!
resolution within 10 days after
117
118
119
i!
is transmitted to the Executive and
IS
120
121
122
the Council readopts the resolution .Qy
£!
vote of
Q
Councilmembers, or if
the Executive does not act within 10 days after the resolution
transmitted, the resolution takes effect.
123
124
125
126
ill
Before the Council holds
£!
public hearing under subsection
the Executive should transmit to the Council:
W
or
(f1
ill
g
list of recommended transportation infrastructure improvements
to be entirely or partly paid for .Qy
£!
tax imposed under Section
68C-3;
127
128
129
ill
the estimated cost, including
£!
contingency amount, for each
listed improvement; and
130
131
ill
an estimated tax rate for each tax to be imposed under Section
68C-3.
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BILL No. 50-10
132
133
134
135
136
68C-S.
District Fund.
The Director of Finance must establish
~
separate fund for the proceeds
collected from any tax imposed under this Chapter. The proceeds of
any tax imposed under this Chapter must be pledged to and paid into
this fund.
W
137
138
139
®
(£}
The Director of Finance must use this fund only to
mY
the cost of any
transportation infrastructure improvement related to the District.
If in any fiscal year
~
balance remains in the fund, the Director of
140
141
Finance may use the balance to:
ill
ill
ill
ill
mY
the cost of any transportation infrastructure improvement for
the District;
create
~
142
143
144
145
146
reserve to
mY
the future costs of any transportation
infrastructure improvement for the District;
mY
bond-related obligations or retire bonds then outstanding; or
mY
into
~
sinking fund required
Qy
the terms of bonds which
147
finance the cost of any transportation infrastructure improvement
for the District that may be incurred or accrue in later years.
148
149
68C-6.
Issuing Bonds.
Before the County issues any bond payable from ad valorem taxes
levied under Section 68C-3, the Council must adopt
~
150
W
151
152
153
resolution
authorizing the issuance of bonds that meets the requirements of this
Section.
154
155
156
®
Each resolution under this Section must:
ill
ill
describe the
~
of transportation infrastructure improvements
and related costs to be financed; and
specify the maximum principal amount of bonds to be issued.
157
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BILL
No. 50-10
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
if}
Each resolution may specify, or authorize the Executive
Qy
executive
order to specify:
ill
ill
ill
ill
ill
®
ill
LID
(2)
the actual principal amount of bonds to be issued;
the actual rate or rates of interest for the bonds;
how and on what tenns the bonds must be sold;
how, when, and where principal
must be paid;
when the bonds may be executed, issued, and delivered;
the fonn and tenor of the bonds, and the denominations in which
the bonds may be issued;
how any or all of the bonds may be called for redemption before
their stated maturity dates;
the nature and size of any debt service reserve fund;
the pledge of other assets in and revenues from the District to
mY
the principal of and interest on the bonds;
2t.
and interest on, the bonds
173
174
175
176
177
178
179
180
181
182
183
184
.Q.ID
any bond insurance or any other financial guaranty or credit or
liquidity enhancement of the bonds; and
{ill
any other provision consistent with law that is necessary or
desirable
to
finance
any
transportation
~
infrastructure
improvement that has been identified in
approved under Section 68C-4.
@
Council resolution
ill
The County covenants to
1m
ad valorem taxes against all
~
assessable real and personal property in the District at
rate and
amount sufficient in each year when any bonds are outstanding
to:
®
provide for the payment of the principal
2t.
interest on, and
redemption premium if any, on the bonds;
-8-
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BILL No. 50-10
185
186
187
188
189
190
191
192
193
194
195
196
197
ill)
replenish any debt service reserve fund established with
respect to the bonds; and
.cg
ill
provide for any other purpose related to the ongomg
expenses of and security for the bonds.
The County further covenants, when any bond is outstanding, to
enforce the collection of all ad valorem taxes under this Chapter
as provided
by
applicable law.
ill
All proceeds received from any issuance of bonds must be applied
solely towards costs of the transportation infrastructure improvements
listed in the resolution adopted under Section 68C-4, including the cost
of issuing bonds and payment of the principal
QL.
interest on, and
redemption premium if any, on the bonds.
ill
The bonds issued under this Chapter:
198
199
ill
are special obligations of the County and do not constitute
~
general obligation debt of the County or
~
pledge of the County's
full faith and credit or the County's general taxing power;
200
201
202
203
204
205
206
207
208
209
210
211
ill
ill
(1)
may be sold in any manner, either at public or private sale, and on
terms as the Executive approves;
are not subject to Sections 10 and
Code; and
must be treated as securities to the same extent as bonds issued
under Section 9-1301 of Article 24, Maryland Code.
11
of Article 31, Maryland
(g)
To the extent provided
by
law, the bonds, their transfer, the interest
payable on them, and any income derived from them, including any
profit realized on their sale or exchange, must be exempt at all times
from every kind and nature of taxation
by
the State of Maryland and any
county or municipality in Maryland.
-9-
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BILL NO.
50-10
212
213
(h)
The bonds must be payable from the fund required under Section 68C-5
and any other asset or revenue of the District pledged toward their
payment. When any bond is outstanding, the monies in the fund are
pledged to
ImY
the costs of any transportation infrastructure
improvement funded entirely or partly
Qy
the proceeds of the bonds,
including the costs of issuing the bonds and payment of the principal
interest on, and redemption premium if any, on the bonds. In addition
to ad valorem taxes, the bonds may be secured
Qy
any other asset in or
revenue generated in the District.
214
215
216
217
218
219
220
221
222
223
224
225
226
227
228
ill
68C-7.
Any ad valorem tax imposed under this Chapter must not be accelerated
because of any bond default.
Expiration of district.
Any special taxing district created under this Chapter expires
Qy
operation of
law 30 days after the cost of all transportation infrastructure improvements identified
in
~
Council resolution approved under Section 68C-4, including all outstanding
bonds and cash advances made
Qy
the County, have been paid.
Approved:
229
Nancy Floreen, President, County Council
230
Date
Approved:
231
Isiah Leggett, County Executive
Date
- 10 -
F:\LAW\BILLS\! 050 White Flint· Creation\1050 Bill 2 Intro.DOC
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Resolution No. _ _ __
Introduced: October 5, 2010
Adopted:_ _ _ _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council President at the request of the County Executive
SUBJECT:
White Flint Development Tax District Transportation Infrastructure
Improvements
Background
1. County Code Chapter 68C establishes the White Flint Special Taxing District, authorizes the
levy of an ad valorem tax to fund transportation infrastructure improvements in the District,
and authorizes the issuance of bonds to finance the transportation infrastructure
improvements.
2. Chapter 68C-4 requires a resolution that lists each transportation infrastructure improvement
that is to be paid for by the District special tax, and the estimated costs of each improvement,
which must include a contingency amount.
Action
The County Councilfor Montgomery County, Maryland approves thefol/owing resolution:
1.
The County's goal is that the White Flint Special Taxing District special tax rate must not
exceed 10% of the total tax rate for the District, except that the rate must be sufficient to
pay debt service on any bonds that are already outstanding.
If the revenues from the special tax at the level in the preceding paragraph are not sufficient
to afford additional infrastructure improvements as are necessary and ready for
implementation to execute the White Flint Sector Plan, the County Executive, before
recommending any increase to the tax rate above the level in the preceding paragraph, must
consider alternative approaches, including the timing and scope of each infrastructure item
and the structure of the financing plan to pay for
it~
and alternative revenue sources.
For the tax year that began on July 1, 2010, the total base real property tax rate in the White
Flint Special Taxing District is $1.027 per $100 of assessed value.
For the tax year that begins on July 1, 2011, the rate of the White Flint Special Taxing
District special tax is estimated to be $0.103 per $100 of assessed value.
2.
3.
4.
@
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5.
The specific transportation infrastructure improvements that will be financed by the White
Flint Special Taxing District are listed in Exhibit A, along with an estimated cost for each
improvement, including a contingency amount.
This is a correct copy of Council action.
Linda M. Lauer, Clerk of the Council
EXIllBIT A
WHITE FLINT SPECIAL TAXING DISTRICT
DISTRICT-FUNDED IMPROVEMENTS
Improvement Description
Old Georgetown Road (MD 187): Nicholson La.lTilden La. to Executive Blvd.
Old Georgetown Road (MD 187): Hoya St. to Rockville Pike (MD 355)
Hoya Street (formerly Old Old Georgetown Rd.): Executive Blvd. to Montrose
Pkwy.
Rockville Pike (MD 355): Flanders Ave. to Hubbard Drive
Nicholson Lane: Old Georgetown Rd. (MD 187) to CSX tracks
Nebel Street: Nicholson La. To Randolph Rd.
Executive Blvd. Ext.: Marinel1i Rd. to Old Georgetown Rd (MD 187)
Second Entrance to Metro
Main St.lMarket St.: Old Georgetown Rd. (MD 187) to Executive Blvd.
Extended (Bikeway)
Main St.lMarket St.: Old Georgetown Rd. (MD 187) to Executive Blvd. Ext.
Main St.lMarket St.: Executive Blvd. to Rockville Pike (MD 355)
Main Street Bridge
Executive Blvd. Ext. (East): Rockville Pike (MD 355) to Nebel St. Ext. (South)
Nebel St. Ext. (South): Nicholson La. to Executive Blvd. Ext. (East)
TOTAL
F:\LAW\BILLS\1 050 White Flint CreationlWhite Flint Sector Plan Infrastructure Resolution - 09-27-10 (2).Doc
Estimated Cost
$17,774,000
1,789,000
15,344,000
64,261,000
12,942,000
9,200,000
13,500,000
35,000,000
1,713,000
4,933,000
4,661,000
2,000,000
16,700,000
8,200,000
208,017,000
2
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White Flint Sector Plan Executive Branch Cost Estimates· Distric1
Assumes Property Dedications
(County Estimates Assume No Property Dedications)
ROW Estimates Based Solely
on
FAR
at
White Flint Partnershlp's estimated $50 per FAR foot
N.B. land values are assumptions and not based
on
appraised values
October 13. 2010
Ea., Jofferson SI E>d (Md '87)
Old Old Georgeto\Ml Rd
Phase 1: Fund
&
Design
25% of To,.1
[
~Pha5e
1, .cOn$l.rocbOtl
Cunnel
Ph.au 2· ComJiete
Reabgrnnent
Phase 2; Fund
Phalla
P~e
t
Construdton
Conttac!.
2,
Com~te
ReaJlgnment
Eastern Work
Around
®
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White Flint Sector Plan Executive Branch Cost Estimates - County
Assumes Properly Dedications
(County Estimates Assume No Property Dedications)
ROW Estimates Based Solely
on
FAR at White Flint Parlnership's estimated $50 per FAR foot
N.B. land values are assumptions and not based
on
appraised values
October 13. 2010
Phase l' Fund: StreetseapeJ
SulewalksJBjkaways
Phase 2: ConsIrud S/SIS
~
NOTE: Figures
do
llot
include Operating Budget Impacts.
Some
PrjJj~ts
not reflected
ill
StagJng. ROW eosts
nat
included in Staging.
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White Flint Sector Plan Executive Branch Cost Estimates - Developer
Assumes Property Dedications
(County Estimates Assume No Property Dedications)
ROW Estimates Based Solely
on
FAR at White Flint Partnership's estimated $50 per FAR foot
N.B. land values are assumptions and not based
on
appraised values
October 13. 2010
-~~a~e
1:
Fund 4 Design
'
[
----_ _
~ml
~~
1_ __
Phast'i Fund: Slteeh;(;1IIf)4'
Sidewafksl8ikeways
Phas~
2: Construct
SJSi8
@)
NOTE: SIQ!,Je
~mates
do
not
lI~dude
ROW co!;ls,
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FY 2011 Special District Tax Rates
per $100 of Assessed Value
Proposed White Flint Rate
$0.103
Parking Lot District Rates for Commercial Properties
Bethesda
Montgomery Hills
Silver Spring
Wheaton
$0.104
$0.240
$0.317
$0.240
Urban District Rates
Bethesda
Silver Spring
Wheaton
$0.024
$0.012
$0.030
Development District Rates
Kingsview Village
West Germantown
$0.079
$0.163
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Martin O'Malley, Governor
Ch.617
Chapter 617
(Senate Bill 828)
AN ACT concerning
Special Taxing Districts - Transportation Improvements - Exemption from
County Tax Limitations
FOR the purpose of exempting certain taxes imposed only within a special taxing
district for the purpose of financing the cost of transportation improvements
from county tax limitations; authorizing a county to issue, by law, certain bonds
for certain infrastructure improvements; authorizing a county to sell certain
bonds secured by certain revenues; providing that certain bonds may not be
secured by the full faith and credit or taxing authority of a county; providing for
the construction of certain provisions of this Act; defining certain terms; and
generally relating to special taxing districts and county tax limitations.
BY adding to
Article 24 - Political Subdivisions - Miscellaneous Provisions
Section 9-1302 and 9-1303
Annotated Code of Maryland
(2005 Replacement Volume and 2009 Supplement)
SECTION
1.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF
MARYLAND, That the Laws of Maryland read as follows:
Article 24 - Political Subdivisions - Miscellaneous Provisions
9-1302.
(A)
(1)
IN THIS
MEANINGS INDICATED.
SECTION THE
FOLLOWING WORDS
HAVE
THE
"COST" HAS THE MEANING STATED IN
§
3 191(D)
~
TRAl'TSPQR'l'JRIQl'f AB'l'ICIsE THIS SUBTITLE.
(2)
§
9-1301
OF
"COUNTY TAX LIMITATION" MEANS A PROVISION OF A
COUNTY CHARTER THAT LIMITS:
(I)
MAY IMPOSE; OR
THE MAXIMUM PROPERTY TAX RATE THAT A COUNTY
(3)
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Ch.617
(II)
REVENUES.
2010 LAWS OF MARYLAND
THE RATE OF GROWTH OF COUNTY PROPERTY TAX
"HIGHWAY FACILITY" HAS THE MEANING STATED IN
3-101(F) OF THE TRANSPORTATION ARTICLE.
(4)
§
"SPECIAL TAXING DISTRICT" MEANS A DEFINED GEOGRAPHIC
AREA DESIGNATED BY A COUNTY WITHIN WHICH AD VALOREM OR SPECIAL
TAXES ARE IMPOSED FOR THE PURPOSE OF FINANCING THE COST OF
INFRASTRUCTURE IMPROVEMENTS.
"TRANSIT FACILITY" HAS THE MEANING STATED IN
§
3-101(K)
OF THE TRANSPORTATION ARTICLE.
(5)
(6)
TRANSPORTATION
STATE
IMPROVEMENTS" INCLUDES HIGHWAY FACILITIES, TRANSIT FACILITIES, AND
RELATED INFRASTRUCTURE.
ill
"COUNTY TRANSPORTATION IMPROVEMENTS" INCLUDES:
ill
FOR COUNTY ROADS AND HIGHWAYS:
COUNTY RIGHTS-OF-WAY. ROADWAY SURFACES,
ROADWAY SUBGRADES, SHOULDERS, MEDIAN DIVIDERS, DRAINAGE FACILITIES
AND STRUCTURES. RELATED STORMWATER MANAGEMENT FACILITIES AND
STRUCTURES. ROADWAY CUTS, ROADWAY FILLS. GUARDRAILS. BRIDGES.
HIGHWAY GRADE SEPARATION STRUCTURES, TUNNELS, OVERPASSES,
UNDERPASSES, INTERCHANGES, ENTRANCE PLAZAS, APPROACHES, AND OTHER
STRUCTURES FORMING AN INTEGRAL PART OF A STREET, ROAD. OR HIGHWAY,
INCLUDING BICYCLE AND WALKING PATHS. DESIGNATED BUS LANES,
SIDEWALKS,
PEDESTRIAN
PLAZAS,
STREETSCAPING.
AND
RELATED
INFRASTRUCTURE; AND
2.
ANY
OTHER PROPERTY ACQUIRED
CONSTRUCTION, OPERATION, OR USE OF THE HIGHWAY; AND
FOR
THE
1.
FOR COUNTY TRANSIT FACILITIES, ANY ONE OR MORE
OR COMBINATION OF TRACKS. RIGHTS-OF-WAY, BRIDGES, TUNNELS, SUBWAYS,
ROLLING STOCK. STATIONS, TERMINALS, PORTS, PARKING AREAS. EQUIPMENT.
FIXTURES. BUILDING STRUCTURES. OTHER REAL OR PERSONAL PROPERTY, AND
SERVICES INCIDENTAL TO OR USEFUL OR DESIGNED FOR USE IN CONNECTION
WITH THE RENDERING OF TRANSIT SERVICE BY ANY MEANS. INCLUDING RAIL,
M
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Martin O'Malley, Governor
Ch.617
BUS, MOTOR VEHICLE, OR OTHER MODE OF TRANSPORTATION BUT DOES NOT
INCLUDE ANY RAILROAD FACILITY.
(B)
A
COUNTY TAX LIMITATION DESfEf!1
.*,~q:'
THAT WOULD OTHERWISE
APPLY TO AD VALOREM OR SPECIAL TAXES IMPOSED ONLY WITHIN A SPECIAL
TAXING DISTRICT DOES NOT APPLY FOR THE PURPOSE OF FINANCING THE COST
OF STATE TRANSPORTATION IMPROVEMENTS AND COUNTY TRANSPORTATION
IMPROVEMENTS.
9-1303.
IN THIS
MEANINGS INDICATED.
1M
ill
SECTION THE
FOLLOWING WORDS
HAVE
THE
"BOND" MEANS A SPECIAL OBLIGATION BOND, NOTE, OR
OTHER SIMILAR INSTRUMENT ISSUED BY A COUNTY UNDER THIS SECTION.
"COSTS" MEANS ANY EXPENSE NECESSARY OR INCIDENT TO
ACQUIRING, BUILDING, OR FINANCING ANY TRANSPORTATION IMPROVEMENT
AS MAY BE PROVIDED BY THE LOCAL LAW AUTHORIZED UNDER SUBSECTION (B)
OF THIS SECTION.
"SPECIAL TAX" MEANS AN AD VALOREM OR SPECIAL
TAX, ASSESSMENT, FEE, OR CHARGE IMPOSED BY A COUNTY WITHIN A SPECIAL
TAXING DISTRICT.
"SPECIAL TAX" DOES NOT INCLUDE AN AD VALOREM OR
SPECIAL TAX, ASSESSMENT, FEE, OR CHARGE LEVIED UNDER CHAPTER
20A
OF
THE MONTGOMERY COUNTY CODE.
"SPECIAL TAXING DISTRICT" MEANS A SPECIAL TAXING
DISTRICT.
SPECIAL
ASSESSMENT
DISTRICT.
OR
SIMILAR
DEFINED
GEOGRAPHICAL AREA WITHIN A COUNTY IN WHICH THE COUNTY IS AUTHORIZED
TO IMPOSE A SPECIAL TAX.
"SPECIAL TAXING DISTRICT" DOES NOT INCLUDE A
DEVELOPMENT DISTRICT CREATED UNDER CHAPTER
20A
OF THE
MONTGOMERY COUNTY CODE.
"TRANSPORTATION IMPROVEMENT"
MEANS A
STATE
TRANSPORTATION
IMPROVEMENT
OR
A
COUNTY
TRANSPORTATION
IMPROVEMENT AS DEFINED IN
§
9-1302
OF THIS SUBTITLE.
00
00
ill
ffi
M
ffi
ill
M
!ill.
@
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Ch.617
2010 LAWS OF MARYLAND
IN ADDITION TO OTHER POWERS A COUNTY MAY HAVE. AND
NOlWITHSTANDING THE PROVISIONS OF ANY OTHER PUBLIC LOCAL LAW,
PUBLIC GENERAL LAW, OR THE COUNTY CHARTER OF A COUNTY THAT HAS
ADOPTED HOME RULE POWERS UNDER ARTICLE XI-A OF THE MARYLAND
CONSTITUTION, A COUNTY MAY ENACT A LAW TO PROVIDE FOR THE ISSUANCE
OF BONDS TO FINANCE THE COSTS OF TRANSPORTATION IMPROVEMENTS FOR
WHICH THE PRINCIPAL, INTEREST, AND ANY PREMIUM SHALL BE PAID FROM
AND SECURED BY SPECIAL TAXES COLLECTED BY THE COUNTY IN A SPECIAL
TAXING DISTRICT.
BONDS ISSUED UNDER THIS SECTION ARE SPECIAL
OBLIGATIONS OF THE COUNTY AND DO NOT CONSTITUTE A GENERAL
OBLIGATION DEBT OF THE COUNTY OR A PLEDGE OF THE COUNTY'S FULL FAITH
AND CREDIT OR GENERAL TAXING POWER.
BONDS ISSUED UNDER THIS SECTION MAY BE SOLD IN ANY
MANNER, EITHER AT PUBLIC OR PRIVATE SALE AND ON TERMS AS THE COUNTY
DEEMS BEST.
BONDS ISSUED UNDER THIS SECTION ARE NOT SUBJECT TO
ARTICLE
31,
§§
10
AND
11
OF THE CODE.
BONDS ISSUED UNDER THIS SECTION, THEIR TRANSFER, THE
INTEREST PAYABLE ON THEM. AND ANY INCOME DERIVED FROM THEM,
INCLUDING ANY PROFIT REALIZED ON THEIR SALE OR EXCHANGE, SHALL BE
EXEMPT AT ALL TIMES FROM EVERY KIND AND NATURE OF TAXATION BY THE
STATE. A COUNTY, OR A MUNICIPAL CORPORATION.
BONDS ISSUED UNDER THIS SECTION SHALL BE TREATED AS
SECURITIES TO THE SAME EXTENT AS BONDS ISSUED UNDER
§
9-1301
OF THIS
SUBTITLE.
IN ADDITION TO THE SPECIAL TAXES, BONDS ISSUED UNDER THIS
SECTION MAY BE SECURED BY OTHER REVENUES GENERATED WITHIN THE
SPECIAL TAXING DISTRICT.
THE POWERS GRANTED UNDER THIS SECTION SHALL BE REGARDED
AS SUPPLEMENTAL AND ADDITIONAL TO POWERS CONFERRED BY OTHER LAWS,
AND MAY NOT BE REGARDED AS IN DEROGATION OF ANY POWERS NOW
EXISTING, INCLUDING POWERS TO ISSUE SPECIAL OBLIGATION DEBT UNDER
THIS ARTICLE, ARTICLE 25, ARTICLE 25A, OR ARTICLE 25B OF THE CODE.
.rn.l
{Ql
ill
00
ill
ill
ill
!ill.
00
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Martin O'Malley, Governor
Ch.617
THIS SECTION, BEING NECESSARY FOR THE WELFARE OF THE
STATE AND ITS RESIDENTS, SHALL BE LIBERALLY CONSTRUED TO EFFECT ITS
PURPOSES.
ill
SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect
October 1, 2010.
Approved by the Governor, May 20, 2010.
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Resolution No:_ _
~
_ _ __
Introduced:
Adopted: _ _ _ _ _ _ _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council President at the Request of the County Executive
SUBJECT:
Amendment ($9.835 M) to the FYII-16 Capital Improvements Program and
Special Appropriation #4-E11-CMCG-3 to the FY11 Capital Budget
Montgomery County Government
Department of Transportation
White Flint District West: Transportation (No. 501116), $385,000
Background
1.
Section 308 of the Montgomery County Charter provides that a special appropriation: (a) may
be made at any time after public notice by news release; (b) must state that the special
appropriation is necessary to meet an unforeseen disaster or other emergency or to act without
delay in the public interest; (c) must specify the revenues necessary to finance it; and (d) must
be approved by no fewer than six members ofthe Council.
2. Section 302 of the Montgomery County Charter provides that the Council may amend an
approved capital improvements program at any time by an affirmative vote of no fewer than six
members ofthe Council.
3. The County Executive recommends the following capital project appropriation increases:
Project
Name
White Flint District
West: Transportation
Project
Number
501116
Cost
Element
PDS
Source
of Funds
Current Revenue
General
Amount
$385,000
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Special Appropriation #4-E ll-CMCG-3 and Amendment to the FY 11-16 Capital hnprovements
Program
Page Two
4. This project is needed to accelerate the preliminary engineering for one new road, one relocated
road, improvements to three existing roads, and one new bikeway in the White Flint
Development Tax District so that more accurate designs and cost estimates can be established.
Funds to pay for the analysis and studies necessary to implement the district are also included.
The recommended amendment is consistent with the criteria for amending the CIP in that this
project supports significant economic development initiatives, which in tum
will
strengthen the
fiscal capacity of the County government. The new growth planned for the White Flint area in
accordance with the recently approved Sector Plan will revitalize the region and strengthen the
County as a whole. These roadway and bikeway improvements will greatly aid and expedite
the planned improvements for the area.
5. The County Executive recommends an amendment to the FYll-16 Capital hnprovements
Program and a special appropriation in the amount of$385,OOO for White Flint District West:
Transportation (No.501116), and specifies that the source of funds will be Current Revenue
General with repayment in FY12 from White Flint Development District tax funds.
6. Notice of public hearing was not given and no public hearing was held.
The County Council for Montgomery County, Maryland, approves the following actions:
1. The FY 11-16 Capital hnprovements Program of the Montgomery County Government is
amended as reflected on the attached project description form and a special appropriation is
approved as follows:
Project
Name
White Flint District
West: Transportation
Project
Number
501116
Project
Element
PDS
Cost
Amount
$385,000
Source
of Funds
Current Revenue
General
2. The County Council declares that this action is necessary to act without delay in the public
interest, and that this appropriation is needed to meet the emergency.
This is a correct copy of Council action.
Linda M. Lauer, Clerk of the Council
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White Flint District West: Transportation·- No. 501116
Category
Subcategory
Administering Agency
Planning Area
Transportation
Roads
Transportation
Nortfl Bethesda-Garrett Park
FY09
~Th~
0
8.
1,
Est.
FY10
0
0
lotal
6 Years
Date Last Modified
Required Adequate Public Facility
Relocation Impact
Status
September 27, 2010
No
None.
Preliminary Design Stage
EXPENDITURE SCHEDULE
(SOOOL
Cost Element
Design, and Supervision
Land
Site Improvements and Utilities
Construction
Other
,Total
Current Revenue: General
Development District -White Flint
Total
Totat
FYll
350
FY12
FY13
FYi4
FYi5
8,800
1,000
0
0
35
0
0
35
9835
0
0
0
0
0
0
0
0
0
0
35
1.250
0
0
500
600
0
0
0
0
0
0
0
2,200
0
0
0
0
2,200
200
0
0
1
Beyond
FY16
6Years
0
2,3001
0
0
1,250
~
01
0
0
1,100
0
1,100
9,835
0
385
385
Ot
2.200
0
0
2,400
2~
0
01
FUNDING SCHEDULE ($000)
-385
1,635
1250
1
9,835
9835
0
0
0
0
9,Sas
9835
2,200
2200
38sL
2,~
24001
1100
25001
01
DESCRIPTION
This project provides for completing preliminary engineering, to 350/0 plans, for one new road, one relocated road, improvements to three existing roads. and
one new bikeway in the White Flint District area for Stage 1. Various improvements to the roads will include new traffic lanes, shared-use paths,
the
undergrounding of overhead utility lines, other utility relocations and streetscaping.
The proposed projects are as follows:
o
Main StreetfMarket Street (B-1 0) - Old Georgetown Road (MD187) to Executive Boulevard Extended -
New 2
lane 700 foot roadway.
o
Executive BOulevard Extended (B-15) - Marinelli Road to Old Georgetown Road (MD1S7)· Reconstruct gOO feet of
4
lane roadway.
o
Old Georgetown Road (MD1S7) (M-4) - From Nicholson LanelTaden Lane
to
Executive Boulevard - Reconstruct 1,600 feet of
6
lane roadway,
o
Hoya Street (formerty 'Old' Old Georgetown Road) (M-4A). From Executive Boulevard to Montrose ParKway - Reconstruct 1,100 feet of 4tane roadway.
Rockville Pike (MD355) (M-6) - Flanders Avenue to Hubbard Drive - Reconstruct 6,300 teet of 6-S lane roadway.
o
o
Main StreetfMarket Street (LB-l) • Old Georgetown Road (MD1S7) to Executive Boulevard Extended - Construct 1.250 feet of bikeway.
The proposed projects will
be
White Flint Development Tax District funded and are located primarily in the western side of the White Flint Development District.
All the roadway segments except for the Rockville PiKe are specified for completion in Stage 1 of the White Flint Sector Plan and will be designed in FYll-13
with land acquisitions in FY13. The Rockville Pike segment will
be
designed in FY14·16 with land acquisitions In FYI5-16. The Rockville Pike segment will
be
constructed during Stage
3
of the Sector Plan.
This project also provides for consulting fees for the analysis and studies necesary to impiement the district. which are programmed in the 'Other" cost
element
ESTIMATED SCHEDULE
Design is expected to commence on all projects except the Rockville Pike section in the Spring of 2011(FY11) and to conclude in the Spring of 2013 (FY13).
Some property acquisition may occur in 2012-13 (FY13). Design on the Rockvilie PiKe section will begin in the Fall of 2013 (FY14) and
be
complete in the
Spring of 2016 (FY16). Some property acquisition may ocour on this section in 2015 (FY15) and 2016 (FYI6).
JUSTlFICA
TlON
The vision for the White Flint District is for a more urban core with
a
walkable street
grid,
sidewalks, bikeways, trails, paths. public use space, parks and
recreational facilities, mixed-use development, and enhanced streetscape to improve the areas for pedestrian circulation and transit oriented development
around the Metro station. These road improvements, along With other District roads proposed to be constructed to be funded and constructed by developers
will fullill the strategic program plan for a more effective and effICient transportation system. The proposed improvements are in conformance With the White
FUnt Sector Plan Resolution 16-1300 adopted March 23. 2010.
FISCAL
NOTE
The funding source for these projects
will
be White Flint Development District Tax revenues and related bond Issues. Debt service on the bond issues will be
paid soley from White Flint Development District revenues.
The advanced funds (Current Revenue: General) in FYl1 will
be
repaid by While Flint Development District Tax funding soorces In FY12.
The project cost estimates are based on FYl0 costs and exclude escalation factors. Final construction costs will
be
determined after the preliminary
APPROPRIATION AND
EXPENDITURE DATA
Date
First Appropriation
First
Cost
Estimate
Current
Sea
Last FY's Cost
Estimate
COORDINATION
FY11
FY11
M-NCPPC. White Flint Sector Plan
WMATA
City of Rockville
MSHA
Town of Garrell Park
Neighborhood Civic Associations
Developers
MAP
9,a35
o
FYi1
Appropriation Request
o
1,750
Appropriation Request Est.
FY12
Supplemental Appropriation Request
Transfer
385
See Map on Next Page
o
o
o
o
Partial
Closeout Thru
New Partial Closeout
Total Partial Clcseout
FYOa
FY09
o
o
o
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White Flint District West: Transportation - No. 501116 (continued)
engineering phase. The total project cost the for Stage 1 'Nest-side White Flint Development Tax District -funded projects is anticipated to approximate $59
million.
The total project cost for White Flint Development Tax District-funded projects planned for Stages
1.
2, and 3 of the White Flint Sector Plan are estimated at
$208 million
OTHER DISCLOSURES
- A pedestrian impact analysis has been completed for this projecl
@
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WHITE FLINT DISTRICT WEST
TRANSPORTATION
CIP. NO. 501116
@
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White Flint Sector Plan Project Buckets (Council staff recommendation)
DISTRICT BUCKET
November 9. 2010
Comments
Phase
t;
Contract.
Phase 2: Complete
thase 1 fund
&
D.'ign
Phase 1: Construction
Contract
Phase 2: Complete
Realignment
Phase 2: Fund
®
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White Flint Sector Plan Project Buckets (Council staff recommendation)
November 9.2010
COUNTY/STATE BUCKET
Pheoo 1: Fund: Skeets.c.apal
Sidow lk.sJBikeways
..
Phase 2; Construct SISIB
~
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White Flint Sector Plan Project Buckets (Council staff recommendation)
DEVELOPER BUCKET
November 9,2010
~D
TOTAL Cost Estimate
I
$826,801,124
!
$846,141,08!]$236.47Y3!-rS370,153,841
I
$239,515,809
®
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To: Marlene Michaelson
From: Jacob Sesker
Re.: White Flint Finance
November 4, 2010
Planning staff prepared the following initial responses to questions raised in the Council's public hearing
held on October
26
th
In order to provide a timely response, staff's used round numbers and several
simplifying assumptions-a reasonable approach given the long term time frame of master plan build
out and the magnitude of unknowns regarding the costs of transportation improvements and the future
of real estate values. Upon request, we would be happy to provide more detailed analysis for discussion
at subsequent work sessions.
1.
Compare (a) district bucket
to
(b) PAMR, LATR, Transportation Impact Taxes
Planning staff believes that the district concept represents the best approach to achieve the Sector Plan
vision. The "district" concept was intended to replace the PAMR/LATR process. The district concept has
advantages in White Flint because of the magnitude of several of the transportation projects involved,
the value of coordinating and aggregating the transportation improvements into buildable projects, and
the need to provide meaningful increments of capacity in the initial phase of the Sector Plan.
The cost of all projects designated as "district" projects is estimated to be $208 million. To compare the
cost of the district projects with an estimate of the total burden of PAMR, LATR, and transportation
impact taxes requires several assumptions.
The most significant assumption is that LATR costs would all be creditable against either PAMR or
transportation impact taxes. This effectively zeroes out LATR-using this assumption transportation
planners have estimated that the PAMR/LATR mitigation costs would be approximately $118 million
over the life of the Sector Plan (at $11,300 per trip with a 30% mitigation requirement).
A second assumption is that PAMR burdens would not be creditable against impact taxes. This has
generally been the case since PAMR was instituted in 2007; while recent PAMR projects have
significantly contributed to transportation infrastructure, they generally are not projects that add
capacity to major highways or arterial roads. Impact taxes for the three phases of White Flint are
estimated to be roughly $64 million (net of credits for MPDU and offsets for replacement of demolished
space).
When impact taxes are added to the mitigation cost the combined burden would be approximately $182
million. While lower than the district bucket amount, the figure is within the range of both error and
dispute. However, the County would probably use transportation impact tax revenues to fund
transportation projects other than those in the district bucket (e.g. CLATR projects).
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White Flint District Bucket
$208 million
White Flint PAMR/LATR Costs
$118 million
White Flint PAMR/LATR Plus Impact Taxes
$182 million
2.
Compare (a) costs of district infrastructure when costs are spread over all new development
to
(b) the costs of district infrastructure spread over all improved space (new and existing)
A significant distinction between the district approach and the current PAMR/LATR approach is that the
district approach, as recommended by the Executive, spreads the costs of district projects over all
properties whether or not they redevelop. In contrast, the PAMR/LATR approach places the full burden
of these transportation improvements on new development.
In White Flint, the total cost of district projects divided by the total additional density allowed in the
Sector Plan results in an amount close to $12 per square foot ($208 million divided by 18 million square
feet). Spreading that same cost over all improved space (new, approved, existing) results in a cost of
roughly $7 per square foot ($208 million divided by 30 million square feet). So, for properties that do
not redevelop the cost of infrastructure increases from $0 to $7 per square foot (of course, their
property values increase as well). Properties that redevelop benefit from spreading the cost of
infrastructure-doing so results in a drop in their transportation costs from $12 per square foot to $7
per square foot.
For comparison, the costs of mitigation under PAMR/LATR would amount to approximately $6.50 per
square foot of new development ($118 million divided by 18 million square feet).
I
White Flint "district bucket" costs spread over
new development allowed under Sector Plan
White Flint "district bucket" costs spread over
new and existing development
White Flint estimated mitigation costs for new
development (does not include impact taxes)
$12 per square foot
$7 per square foot
$6.50 per square foot
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3. Compare (a) the combined cost of district bucket and transportation impact taxes
to
(b) the cost
of the district bucket with no impact taxes
The combined burden of PAMR, LATR and transportation impact taxes varies by policy area, land use
mix, and other factors. In past studies, including studies pertaining to the economics of the TMX and
LSC zones, planning staff has found that the combined mitigation and impact tax burden generally falls
in a range between $8 and $13 per square foot.
In White Flint, that combined burden would be an estimated $10 per square foot ($118 million for
mitigation plus $64 million for impact taxes equals $182 million, divided by 18 million square feet of new
development).
General transportation mitigation cost and impact
taxes per square feet
Estimated White Flint transportation mitigation and
impact taxes
$8-$13 per square feet
$10 per square feet
If transportation impact taxes are paid by new development in the district and are not dedicated to
district projects then properties within the district (those developing and those that do not) would be
asked to bear both the cost of district projects ($208 million), while properties within the district would
bear an additional $62 million that the County could spend on non-district projects (including CLATR
intersections). Together this would create an overall burden of approximately $270 million for
properties within the district. However, that burden would not fall equally-all properties would pay a
special tax for district projects while only new development would pay the impact tax.
District bucket
District bucket plus transportation impact taxes
$208 million
$270 million
Using our $7 per square foot number from above, existing development (approximately 8 million square
feet) will contribute approximately $56 million towards district infrastructure. New development would
pay approximately $10 per square foot ($270 million less $56 million equals $214 million, divided by 22
million square feet of new and approved development equals approximately $10 per square foot).l This
$10 per square foot is both within the range ($8 to $13 per square foot) of what Planning staff has found
in other Twinbrook and Great Seneca Science Corridor, and similar to the $10 per squa re foot cost that
1
Assumes all approved development pays MSPA rate-the burden for projects that went through Alternative
Review (e.g. LeOR) would be higher.
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we would assume for the same projects if they went through the existing PAMR, LATR and
transportation impact tax process.
I
District bucket plus transportation impact taxes
Portion of cost borne by existing development
Remaining portion borne by new and approved
development
Square feet of new and approved development
Cost per square foot of new and approved
development
$270 million
8 million times $7=$56 million
$270 million less $56 million=$214 million
22 million
$10 per square foot
It is critical to note, however, that the promise ofthe district is to deliver complete projects rather than
mere pieces of projects. Because it is assumed that many of the improvements necessary to achieve the
vision of the White Flint Sector Plan are beyond what could be delivered by individual developers
through the mitigation process, it is reasonable to assume that developers would assign some added
value (reflected in added cost) to the district alternative as compared to the piecemeal results if the
Sector Plan were implemented using PAMR and LATR.
4.
School impact tax revenues
The theory ofthe school impact tax is that the impact tax captures the cost of each additional seat
necessary at every grade level, whether or not that additional seat causes capacity to reach a threshold
which requires the construction of a new school.
Assuming that all units built meet the definition of high rise units as established in the sector plan, the
total school impact taxes generated by both approved and new (staged) residential development would
be approximately $46 million.
New Dwelling Units
Approved Dwelling Units
School Impact Tax Per High Rise Unit
Total School Impact Tax Revenue (no school
impact taxes paid on MPDU)
9,800
2,220
$4,422
$46 million
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Some development may qualify as low-rise and thus pay a substantially higher rate. However, the code
(52-87) defines high rise as any building that is either (a) more than 4 stories tall or (b) anyone bedroom
unit. Based on those parameters, it is likely that the vast majority of units in White Flint will be high rise
units for purposes of the school impact tax.
5.
Cost of BL Ts
Using the sketch plan submitted by Federal Realty for the redevelopment of Mid-Pike Plaza as an
example, the cost per square foot is $0.42 (assuming the cost per BLT is $200,000).
• Total square feet (phases 1
&
2 plus future phases) , 3,442,888
BLTs to be purchased
Assumed cost per BLT
BLT cost per square foot
7.28
$200,000
$0.42
6.
Land values in White Flint
A recent sale of land (11503 Rockville Pike) in White Flint from JBG to BF Saul provides a data point for
land values. The site is 69,612 square feet and is zoned for an FAR of 4.0. The land sold for $15,050,000.
This constitutes $54 per FAR square foot. The same property was purchased in 2007 for less than $2
million.
In September of 2009, consultants working for the Planning Department estimated the residual land
value of a parcel zoned CR with maximum density of 4.0 to be between $51 and $78 per FAR square
foot.
Cc:
Francoise Carrier
Rollin Stanley
Glenn Orlin
Mike Faden
Diane Schwartz Jones
Dan Hardy
Glenn Kreger
Piera Weiss
Nkosi Yearwood
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MEMORANDUM
To:
Joint MFPIPHED Committee Members
From: Roger Berliner
Re:
q..Q;!
Consideration of Tax Increment Financing to Address Financing Gap
Date: November 5, 2010
Enclosed in your packet is an amendment to the County Executive's proposed
financing plan for White Flint that I requested Mr. Faden to draft for the Joint Committee and
our Council's consideration.
The amendment would use Tax Increment Financing (TIF) to meet the gap between
the $150 million in revenue to be raised by an additional commercial property surcharge in
White Flint and the projected total costs of infrastructure in the so-called Development
District bucket (approximately $250 million).
Like you, I have met with the County Executive's staff and heard their strong
objections to a TIF. After listening respectfully and seriously considering their objections, I,
for one, do not find them persuasive. To assist you in your own analysis, I posit below their
objections as best I can and my response:
Flexibility: The County Executive's Team wants to retain the flexibility to use the
additional revenue generated from White Flint for other worthwhile County objectives. From
my perspective, "flexibility" is synonymous with not making a real commitment to fund the
infrastructure necessary to make White Flint a national model for transit oriented
development and to fulfill our obligations to our community.
Equity: The County Executive's Team argues that taking this revenue stream before it
becomes available for general revenue purposes will cause "equity" concerns within the
county. I maintain that
it
is precisely the unprecedented level of revenue generated by White
Flint a projected $6.8 billion -- that provides the County the resources we need to address
pressing needs elsewhere.
Whose Responsibility Is
11
To Fund the Gap?: The County Executive's Team
maintains that the developers and commercial property owners in White Flint bear 100% cost
responsibility for all of the projects in the development district bucket (approximately $250
million) in addition to the developer bucket ($400 million). Their underlying assumption is
that the tax burden this would impose on the developers would not be too onerous given the
profits to be generated by development.
I don't agree with that conclusion and find
it
contradictory to their stated position in
support of a 10% property
tax
surcharge. If a 10% surcharge on White Flint commercial
properties for 30 years is the right level of taxation as the County Executive proposed, then it
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is disingenuous to then say that the developers have the sole responsibility to fill the projected
$100 million plus gap. We have heard repeatedly that the sum total of the county's exactions
on development is a major factor in determining whether the County will maximize the
unparalleled economic development opportunity presented by White Flint. If the County
Executive's Team believes that this argument from the business community is without
foundation, it should make that case and present the analysis that supports it.
Should There be Certainty that the Gap Will Be Filled?: The County
Executive's Team submits that there is always uncertainty regarding whether infrastructure
projects as envisioned by master plans will be built in a particular time frame, and that White
Flint is no different.
The contrary argument is that what makes certainty more relevant here is that property
owners are agreeing to pay for 30 years as long as they have the right to develop when it is
their turn, perhaps in year 20, and that the infrastructure improvements that are critical to their
development are funded. In that context, certainty becomes almost a quid pro quo for the
additional level of exaction. A TIF, by definition, provides more certainty than using the
traditional CIP process at some point in the future.
Precedent: The County Executive's Team argues that even if a TIP were appropriate
for White Flint, the Council would find the mechanism "addictive" and would apply
it
in
numerous instances, depriving the general fund of too much revenue.
The opposing view is that a TIF makes sense in White Flint because of the
combination of (1) a development district funded by a 10% commercial surcharge; and (2) the
extraordinary return on investment the County will earn (projected by one hearing participant
as 35-1). If there are other parts of the county that require a development district and where
our investment would yield similar returns, then it may be appropriate to consider TIFs then.
However, it is also possible that the conditions that make a TIF appropriate here will not be
replicated in the future. Any future financing plan would need to be evaluated in context in
order to determine the most appropriate financing tools.
While I do not share the Administration's objections to a TIF, I do believe that a TIF
should be limited to a specified amount, and that it should only be triggered if (a)
development is proceeding at a pace where the infrastructure to be funded is absolutely
needed and (b) the county as a whole is also benefiting from the enhanced property values
created in White Flint. The amendment as drafted seeks to address those concerns.
I do appreciate that using a TIF is but one way to "close the gap." However, I have
concluded that a TIF has substantial merit and therefore warrants our most serious
consideration.
If
there are other mechanisms that provide an acceptable degree of certainty
and county responsibility,
I,
like you, will be open to exploring them.
Thank you for your consideration of a TIF and your commitment to making White
Flint a reality, not just a promise.
~
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AMENDMENT
1
To Bill 50-10
By Councilmember Berliner
PURPOSE: authorize a special taxing district created under Chapter 68C to also function as a
tax increment financing district.
On
p.
10, insert after line 227:
6SC-S.
Tax Increment Financing District.
If so designated by a separate Council resolution under this Section. a district
created under this Chapter may also function as a development district as that
term is used . in the State Tax Increment Financing Act (Maryland Code.
Economic Development Article. Sections 12-201 through 12-213),
ill
lrL.uesQlution adopted under this Section or an amendment to that resolution, the
must take all actions required by the State Tax Increment Financing Act to
create and implement a tax increment financing development district and
to issue bonds as authorized by the Act:
must seta maximum amount of taxes on the tax increment that must be
paid into the special fund. subject to amendment if the Executive and the
Council find that the cost of the infrastructure improvements to be funded
by the special fund exceeds the maximulIu:u:nQUnJ.;.Jmd
must designate the following percentage of the taxes on the tax increment
that must be paid into a special fund established under Maryland Code.
Economic Development Article. Section 12-208:
50% up to $50 million: and
all
ill
33% up to the maximum amount:
if a special fund is created as provided in the preceding paragraph. must
specify the purposes for which the fund may be used from among the
purposes listed in Maryland Code. Economic Development Article.
Section 12-209;
®
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ill
must not permit the payment of the designated percentage of the taxes on
the tax increment into the special fund until the Montgomery County
Planning Board finds that the infrastructure improvements to be funded by
the special fund are needed based upon development in the district that:
£A:l
all
has been completed:
is under construction; and
is expected to begin in the immediate future.
F:\LA W\BILLS\1050 White Flint - Creation\TIF Amendment 5.Doc
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ADDENDUM
PHEDIMFPl&2
November 16,2010
Worksession 2
MEMORANDUM
TO:
Planning, Housing, and Economic Development Committee
Management and Fiscal Policy Committee
FROM: '"&Michael Faden, Senior Legislative Attorney
j~(~~arlene
Michaelson, Senior Legislative Analyst
SUBJECT:
Worksession 2:
Bill 50·10, Special Taxing District - White Flint - Creation
Resolution
to approve White Flint Development Tax District transportation
infrastructure improvements
After the original Staff packet was circulated, the Council received a revised proposal from the County
Executi ve for the financing of White Flint (attached at © 1
A).
The key changes in this new proposal are
as follows:
1.
2.
Transportation Impact Taxes will not
be
collected in White Flint.
The County will advance fund the design and construction of 3 specific projects and up to
$15 million in unspecified Stage 1 and Stage 2 projects. In paying the County back for
the 3 specific projects, the District will not pay any interest, but payback of the $15
million would carry interest.
The Executive will put certain projects in his recommended amendments to the Capital
Improvements Program.
Two projects will be funded by the County instead of the District (the second entrance to
Metro and the Nebel Street bike lane).
The County Executive will request that the Maryland Department of Transportation
(MDOT) designate the White Flint Sector Plan Area as a Transit Oriented Development
(TOD).
3.
4.
5.
Overall, the Executive's revised proposal significantly increases costs to the County because the County
will absorb the cost of two additional projects and cover the interest costs for repayment of the cash
advance. The revised proposal will also reduce revenues from the transportation impact tax. The
Executive estimated the cost of the two projects to now be paid for by the County at $44.2 million and
the interest cost to be absorbed by the County as $8.25 million (assuming $30 million in costs, 5%
interest and repayment in 10 years).l He did not estimate the lost revenue from transportation impact
No repayment period was specified in the Executive proposal and a longer repayment period would mean greater interest
costs.
l
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taxes. Council Staff has not yet seen any information to lead us to conclude that the shift in costs from
District property owners to the County is necessary to ensure viable redevelopment of this area.
Transportation Impact Taxes
As the Council Staff memo in the primary packet for this worksession indicated on pages 8-10, Council
Staff does not agree that a strong case has been made that levying the current level of transportation
impact taxes (50% of the County-wide rates) would inhibit the District's redevelopment. While the
White Flint Partnership points to the added cost of the special property tax in the Special Taxing
District, that tax is hardly a new exaction. Rather, as Council Staff noted,
it
would replace all adequate
public facilities requirements that would otherwise apply to developments in the District, a fair trade-off
in our opinion. Planning Staffs preliminary conclusion is that the combination of Special Taxing
District tax and transportation impact tax would be within the historic range of costs of other mixed-use
developments in the County.
As we articulated in the primary packet, retaining the impact tax would provide more equity between
early developers and later developers or non-developers in White Flint.
If developers in the District face cash flow problems because the impact tax is levied up front, when the
building permit is issued, that can be remedied by the Executive's original proposal to allow impact
taxpayers to defer payment for up to 10 years (which could be extended to 20 years, in our view).
If
the Council believes that some relief from the Transportation Impact Tax is warranted, Staff
recommends reducing the rate rather than eliminating all impact tax payments. Should the Council
agree with the Executive that payments should be eliminated, we concur with the recommendation to set
a $0 impact tax rate in the White Flint District (as the Council did several years ago for bioscience
developments), rather than to permanently repeal the County's authority to collect the impact tax in this
area. This would better preserve the Council's flexibility to meet changing needs.
Advancing Funding
Council Staff does not object to the concept of advance funding with repayment by the Special Taxing
District and recommended it in the Staff memorandum to the Committees. While Council Staff
estimated that the revenue generated by the Special Taxing District should be more than enough to cover
the debt service on the $39 million in infrastructure needed in Stage 1, the White Flint Partnership has
projected that the revenues may not be consistently high enough in the District's first years to cover debt
service
every year
on bonds for critical projects needed in the short term.
Council Staff supports the concept of advance funding with the following caveats:
County advance funding should only be used to the extent necessary to cover the gap between
debt service on critical projects and projected revenue from the Special Taxing District. The
need for this will depend on the estimated cost of the projects, the pace of development (and the
rate at which assessed values in the District grow), and the timing of the design and construction
of new infrastructure. At this point, the Council need only approve the concept of advance
funding and make sure that Bill 50-10 allows it on the terms needed to protect the County's
interest (e.g. including ensuring that any advance payment will be repaid by the District).
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Council signoff on details about specific infrastructure items will occur when the Council
approves an amendment to the Capital Improvements Program (CIP).
The Executive's intent is to structure the advance funding so as to not compete with other
County projects that receive general obligation bonds. This requires the finn commitment that
the funding will be repaid by the District in a timely manner. The details of how this will be
done are not yet clear, and the Council should request further infonnation on this before final
approval of a CIP project.
There will need to be a finite time for the repayment period, and the Executive's package does
not include any infonnation on this (other than an assumed lO-year payback in the estimate of
interest costs). Repayment of advanced funds is likely to lengthen the life of the District, but the
period of repayment and life of the District should not be unlimited or indefinite.
While repayment of the advance funding is outstanding, no new District-funded projects should
be approved unless the Council has detennined whether funding the new project takes
precedence over repayment of the advance funding. This consideration should be part of the
review of any CIP project.
Staff is unclear why the Executive believes it is necessary to exclude interest charges and to treat
the three specific projects different from the $15 million to be advanced for unspecified projects.
CIP Amendments
The Executive's recommendation to proceed with a CIP amendment is also consistent with the
recommendation in Council Staff's memorandum. The details of County versus District funding and the
need for advance funding will be detennined as part of this CIP amendment.
Projects to be moved from District Funding to County Funding
The Executive has recommended the County take responsibility for two projects that he originally listed
as District responsibilities. These projects are:
I
Project
, Estimated
Cost
I
Second Metro entrance
$35,000,000
i
Nebel Street Bike Lane
$9,200,000 .
Given questions about the scope, timing, and need for these projects, Council Staff does not object to
removing them from the District. Like every other capital project recommended in a master plan, the
capital budget process is the appropriate place to debate the specific merits of each project; that is not
likely to occur in the near tenn. Council Staff suggested in the previous packet that it is neither
necessary nor advisable to detennine how to fund all infrastructure identified in a master plan so far in
advance of full build out of master planned zoning capacity.
TOD Designation
The purpose of a TOD designation is to signal to the State where to concentrate its powers to promote
development. White Flint certainly merits TOD status, and this should be so noted in the next joint
CouncillExecutive State transportation priority letter, which will
be
produced in early 201 L However,
the letter should also clearly state that granting White Flint TOD status does not mean White Flint
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projects would supersede any others in the priority letter. The current letter includes a backlog of
unfunded projects - each with its own merits and constituency totaling more than $5 billion.
Speaking directly to the point: granting TOD status, without the caveat noted above, might imply a high
priority to the planned second (northern) entrance to the White Flint Metro Station. But this entrance,
which the Executive recommends removing from the District bucket, should be a very low priority.
Virtually all of the White Flint Sector Plan area is within a half-mile of the current entrance, so the area
is already transit serviceable without it. The benefit of a new northern entrance is very localized and
would only serve a few properties.
Other Issues
There are several issues in the original Staff memorandum that need to be addressed in addition to the
Executive's proposal. They include the following:
• Whether the Committees support the Special Taxing District as the primary means of funding
district obligations.
• Whether the rate of the supplementary property tax in the Special Taxing District should be
capped by legislation or resolution.
• Whether each primary source of funding will be responsible for covering cost overruns for the
projects in their bucket.
• Staffs recommendations for changes in the allocation of projects among the 3 buckets and
among the 3 stages.
G:\MISC\MARLENE\White Flint Financing\PHED·MFP 11·16·10 Addendum· 4'ooc
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OFFICES OF THE COUNTY EXECUTIVE
Isiah Leggett
Counry Executive
Timothy
L.
Firestine
ChiefAdministrative Officer
MEMORANDUM
November 15,2010
To:
From:
Subject:
Nancy Floreen, Council President
Timothy
L.
Firestine, Chief
A~~~
White Flint Sector Plan Implementation Strategy
We have been working with the White Flint Partnership to develop a
White Flint Implementation Strategy that would afford us the greatest assurance of the
implementation of the White Flint Sector Plan. Attached
to
this
memorandum is a
strategy that the County Executive and the White Flint Partnership have reached
agreement upon that will provide greater certainty to the success of the White Flint Sector
Plan. We will send by separate transmittal conforming amendments to the resolution that
is before the Council and will work with your staffto cover all steps required to
carry
out
the White Flint Implementation Strategy.
We recognize that the White Flint area
can
be a significant economic
engine
and
that the Special
Tax
District will help defray a portion of
the
costs to
transfonn the White Flint area into a pedestrian friendly. exciting urban
area.
All believe
that, at least at the outset, the special tax district will not generate sufficient revenues to
cover debt for the entire infrastructure that is called for to move through the stages ofthe
Sector Plan.
The White Flint Implementation Strategy has three elements. First, it
provides for a forward funping of certain projects until sufficient revenues from the
District
can
carry
the projects. Second, it removes two projects in Stage 2 from the
District. Third, it provides for setting a rate of $0 for transportation impact taxes within
the White Flint Sector Plan area.
While the White Flint Sector Plan
has
the potential to result in significant
economic development, it also has costly infrastructure. The Plan presents the circular
"chicken and egg" conundrum in which the development is llecessary to generate the
right level of special district taxes
to
pay for the transportation improvements and the
improvements are needed
to
get the development. For this reason, the forward funding or
advancement of some of the Special
Tax
District costs is critical to get development
within the Sector Plan moying.
101 Monroe Street· Rockville, Maryland 20850
240-777-2500 • 240-777-2544 TTY • 240-777-2518 FAX
www.montgomerycountymd.gov
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Nancy Floreen, Council President
November 15, 2010
Page 1 of2
Under the Strategy, the COlUlty will forward fund or advance the costs of
Rockville Pike design (COlUlty reference item 4 onp. circle 20 of the PHEDIMFP
Committee packet dated November 9,2010) and the costs ofMarket Street and the
realignment of Executive Boulevard (COlUlty reference items 7. 10 and lIon p. circle 20
of the PHEDIMFP Committee packet dated November 9.2010). The White Flint
Transportation Special Tax District would pay the County back for this forward funding
but would not be assessed interest for forward funding these projects. Additionally, if a
gap persists, the County will forward fund up to another $15 Million ofDistrict costs,
which would be repaid by the District along with all carrying costs.
Two projects that are currently reflected in Stage 2 ofthe District Bucket
are to be removed from the District list attached to the Resolution transmitted
in
connection with Bil150-10. Specifically, the second entrance to the Metro station will be
moved into the public funding bucket
and
we will look at other funding opportunities for
this entrance. Likewise, the bike lane on Nebel Street from Nicholson Lane
to
Randolph
Road will be moved to the County ledger.
To further incentivize the smart growth envisioned for the White Flint
Sector Plan area the County would set the rate for White Flint transportation impact taxes
at
$0. Given the extent of credits that could be available for developer constructed
streets, the amount of impact taxes that would actually
be
generated in White Flint is
questionable.
In
connection with management ofthe issuance of District supported debt,
we will be providing a revised resolution for the Council that would
clarify
the County's
intent to manage debt issuance so that the special district
tax
rate will not exceed a
10010
policy goal except as may
be
necessary to assure adequacy ofrevenues to satisfy
outstanding bond obligations.
In
January
we will also send the Council CIP amendments
that will provide for the above described projects.
With this strategy, we urge the Council
to
adopt Bill 50-10 immediately so
that we can move forward with implementation ofthe White Flint Sector Plan.
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Proposed White Flint Implementation Strategy
The White Flint Sector Plan has the potential to be an important economic engine for the
County and will be a model for smart growth and transit oriented development. To ensure
successful implementation of the White Flint Sector Plan, the County proposes the following
implementation strategy to maximize growth within the plan and to move from Stage 1 to
Stages 2 and 3.
1) The financing mechanism is to be a special tax district that is adopted under SB828
authority with a special tax that does not count against I) the County Charter limits, or II}
debt capacity.
2) The financing mechanism must not pledge any portion of the County's general tax base.
3) The special tax district shall be adopted with a resolution that states a rate setting policy
objective of not having a rate of more than 10% above existing tax rates (currently
$0.103/$100 of assessable base) but that can be set higher to assure adequacy of
revenues to satisfy outstanding bond obligations; The resolution shall also acknowledge
that debt issuance will be managed in a manner that plans for a rate that will not exceed
the 10% policy goal except as may arise to assure adequacy of revenues to satisfy
outstanding bond obligations.
4) Transportation Impact Taxes will not be assessed in White Flint Sector Plan area (e.g. a
rate of
O)
5) District Bucket
a) To manage a potential gap between district revenues and implementation of
transportation projects to be funded by district revenues, the County will forward
fund or advance funds for design and construction of:
i)
the portion of Market Street from Old Georgetown Road to Woodglen Road
(County reference numbers 10 and 11)
ii} the realignment of Executive Boulevard from Marinelli Road to Md. 187 (County
Reference number 7)
iii)
the design of Rockville Pike (County reference number 4)
iv) up to $15 Million for district bucket projects in stages 1 and 2
b) Forward fund or advance Funds means
i)
For items
(i),
(ii), and
(iii)
above that the County will include these projects in the
County CIP and pay for them and the District will, on a dollar for dollar basis
exclusive of interest, repay the County as District funds are available
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ii}
For item (iv) above that the County will coordinate with planned development and
include these projects in the County CIP and the District will reimburse the County
for all costs incurred in connection with any such advance including interest costs
c) Cost estimates
i) The realignment of Executive Boulevard and Market Street from Old Georgetown
Road to Woodglen Road are estimated to cost between $24.8 Million and $32.2
Million exclusive of ROW which is assumed to be dedicated.
ii)
The design of MD355 is estimated to cost $5 Million
d) The County will include the projects noted above in section (4)(a}(i), (ii) and
(iii)
in its
January 2011 CIP Amendments with initial expenditures in FYs 15, 16 and beyond until
completed.
6) Two items will be removed from the District Bucket and move into the county/public
funds bucket
a) The second entrance to Metro which is estimated to cost $35 Million
b) The Nebel Street bike lane which is estimated to cost $9.2 Million
7) The County Executive confirms his intent that the joint County Transportation Priority
letter include a request to MOOT that the White Flint Sector Plan Area receive an MOOT
TOO Designation