Agenda Item 8
October 5, 2010
Introduction
MEMORANDUM
TO:
FROM:
SUBJECT:
County Council
~Michael
Faden, Senior Legislative Attorney
Introduction:
Bill 50-10, Special Taxing District - White Flint - Creation
Bill 50-10, Special Taxing District White Flint - Creation, sponsored by the Council
President at the request of the County Executive, is scheduled to be introduced on October 5,
2010. A public hearing is tentatively scheduled for October 26 at 7:30 p.m.
Bill 50-10 would establish a White Flint Special Taxing District. The Bill would also
authorize the levy of an ad valorem property
tax
to fund transportation infrastructure
improvements that are specified in an implementing resolution (see Item
4H
today) and authorize
the issuance of a certain type of bond to finance certain transportation infrastructure
improvements. The Executive's detailed memo on ©11-17 explains the background of and
reasons for the proposals in this Bill and the related resolution and appropriation request (see
Item 4G today).
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.
A letter to the Council from the White Flint Partnership (see ©21) raised questions about
some policy decisions that are incorporated in the Executive's proposal.
This packet contains:
Bill 50-10
Memo from County Executive
Fiscal Impact Statement
Letter from White Flint Partnership
F:ILAWIBlLLS\IOS0 White Flint Creationllntro Memo.Doc
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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:
April 5, 2012
Enacted: _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ __
Sunset Date:
-,NC2:o~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)
establish a White Flint Special Taxing District;
(2)
authorize the levy of an
ad valorem
property tax to fund certain
(3)
(4)
(5)
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]
Double 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
Sec 1. Chapter 68C is added as follows:
Chapter 68C. White Flint Special Taxine; District.
68C-1.
Definitions.
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3
4
5
6
7
For purposes of this Chapter, the following tenus have the meanings indicated:
Bond
means a special obligation or revenue bond, note or other similar
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:
8
9
10
ill
the
construction,
reconstruction,
and renovation of any
including
the
~
transportation
infrastructure
improvement,
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12
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15
acquisition of any land, structure, real or personal property,
right-of-way, franchise, or easement, to provide g transportation
infrastructure improvement for the District;
ill
ill
all machinery and equipment needed to expand or enhance g
transportation infrastructure improvement for the District;
financing charges and debt service related to g 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
16
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20
ill
ID1Y1
and replenishment of
21
debt service reserve funds for any bond that finances g
transportation infrastructure improvement for the District;
22
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ill
reserves for principal and interest, the cost of bond insurance, and
any other
~
of financial guarantee, including any credit or
25
liquidity enhancement, related to g transportation infrastructure
improvement for the District;
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o
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ill
2 Intro.DOC
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BILL No. 50-10
27
ill
architectural, engineering, financial, and legal services related to
providing
District;
~
28
transportation infrastructure improvement for the
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®
any plan, specification, study, survey, or estimate of costs and
. revenues related to providing
improvement for the District;
~
transportation infrastructure
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33
ill
any administrative expense incurred
Qy
the County necessary or
incident to determining whether to finance or implement
transportation infrastructure improvement for the District; and
~
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37
LID
any other expense incurred
Qy
the County necessary or incident
to building, acquiring, or financing
~
transportation infrastructure
improvement for the District.
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District
means the White Flint Special Taxing District created under
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Section 68C-2.
Transportation infrastructure improvement
means:
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ill
the construction, rehabilitation, or reconstruction of
~
road, street,
or highway that serves the District, including any:
CA)
ill}
(Q}
right-of-way;
roadway surface;
roadway subgrade or shoulder;
median divider;
drainage facility or structure, including any related
stormwater management facility or structure;
45
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47
48
CD)
lID
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50
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ill
(G)
(H)
roadway cut or fill;
guardrail;
bridge;
highway grade separation structure;
ill
o
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BILL
No. 50-10
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68C-2.
ill
(K)
tunnel;
overpass, underpass, or interchange;
entrance plaza, approach, or other structure that is an
integral part of
~
street, road, or highway;
OJ
eM)
bicycle or walking path;
designated bus lane;
sidewalk or pedestrian plaza;
streetscaping and related infrastructure; including placing
utilities underground; and
llil
(Q)
ill
(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:
(A)
track;
right-of-way;
bridge;
tunnel;
subway;
rolling stock;
station or terminal;
parking area;
related equipment, fixture, building, structure, or other real
or personal property; and
lID
(Q)
.em
®
®
(Q)
(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.
Creation; Boundaries.
eJ
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ILLS\ 1050 White Flint - Creation\1050 Bill 2 Intro.DOC
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BILL No.
50-10
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[Q}
The White Flint Special Taxing District is cotenninous 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 Wood glen Drive, 11207
Woodglen Drive, 11209 Wood glen 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.
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68C-3.
Levy
of
Tax;
Limits.
Each tax year the County Council may
~
W
against all the assessable
~
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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.
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[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.
W
The
tax
imposed under this Chapter must be levied and collected as
other County property taxes are levied and collected.
o
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BILL
No. 50-10
107
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@
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.
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111
68C-4.
(ill
Transportation Infrastructure Improvement Resolution.
After holding
f!
public hearing, the Council may approve
f!
resolution
that lists each transportation infrastructure improvement that would be
entirely or partly paid for.Qy
f!
tax imposed under Section 68C-3.
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ili2
{f1
The resolution must indicate the estimated cost, including
f!
contingency
amount, for each listed improvement.
The Council may amend the resolution after holding
f!
public hearing.
The Council must present the resolution and each amended resolution to
the Executive for approval or disapproval. If the Executive disapproves
f!
resolution within 10 days after it is transmitted to the Executive and
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@
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~
the Council readopts the resolution .Qy
f!
vote of
2
Councilmembers, or if
the Executive does not act within 10 days after the resolution
transmitted, the resolution takes effect.
Before the Council holds
f!
public hearing under subsection
(ill
or
{£1
the Executive should transmit to the Council:
IS
ill
f!
list of recommended transportation infrastructure improvements
to be entirely or partly paid for .Qy
f!
tax imposed under Section
68C-3;
ill
ill
the estimated cost, including
f!
contingency amount, for each
listed improvement; and
an estimated tax rate for each tax to be imposed under Section
68C-3.
®
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BILL
No.
50-10
132
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68C-S.
ill}
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.
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®
W
The Director of Finance must use this fund only to
~
the cost of any
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transportation infrastructure improvement related to the District.
If in any fiscal year
~
balance remains in the fund, the Director of
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Finance may use the balance to:
ill
ill
~
the cost of any transportation infrastructure improvement for
the District;
create
~
reserve to
~
the future costs of any transportation
infrastructure improvement for the District;
ill
ill
~
~
bond-related obligations or retire bonds then outstanding; or
into
~
sinking fund required
Qy
the tenns of bonds which
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finance the cost of any transportation infrastructure improvement
for the District that may be incurred or accrue in later years.
68C-6.
ill}
Issuin2 Bonds.
Before the County issues any bond payable from ad valorem taxes
levied under Section 68C-3, the Council must adopt
~
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resolution
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authorizing the issuance of bonds that meets the requirements of this
Section.
®
Each resolution under this Section must:
ill
ill
describe the
typ§
of transportation infrastructure improvements
and related costs to be financed; and
specify the maximum principal amount of bonds to be issued.
156
157
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BILL No. 50-10
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!£}
Each resolution may specify, or authorize the Executive
Qy
executive
order to specify:
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165
ill
ill
ill
ill
ill
®
ill
the actual principal amount of bonds to be issued;
the actual rate or rates of interest for the bonds;
how and on what tenus the bonds must be sold;
how, when, and where principal
QL
and interest on, the bonds
must be paid;
when the bonds may be executed, issued, and delivered;
the fonu 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;
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lID
{2}
the nature and size of any debt service reserve fund;
the pledge of other assets in and revenues from the District to
lli!Y
the principal of and interest on the bonds;
U.ID
any bond insurance or any other financial guaranty or credit or
liquidity enhancement of the bonds; and
QD
any other provision consistent with law that is necessary or
desirable
to
finance
any
transportation
~
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infrastructure
improvement that has been identified in
approved under Section 68C-4.
Council resolution
@
ill
The County covenants to
k.Yy
ad valorem taxes against all
assessable real and personal property in the District at
~
rate and
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183
amount sufficient in each year when any bonds are outstanding
to:
(A)
provide for the payment of the principal
QL
interest on, and
redemption premium if any, on the bonds;
184
o
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BILL
No. 50-10
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.cID
{g
replenish any debt service reserve fund established with
respect to the bonds; and
provide for any other purpose related to the ongomg
expenses of and security for the bonds.
ill
The County further covenants, when any bond is outstanding, to
enforce the collection of all ad valorem taxes under this Chapter
as provided.Qy applicable law.
.cru
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
interest on, and
redemption premium if any, on the bonds.
ill
The bonds issued under this Chapter:
ill
are special obligations of the County and do not constitute
f!
general obligation debt of the County or
f!
pledge of the County's
full faith and credit or the County's general taxing power;
ill
ill
@}
may be sold in any manner, either at public or private sale, and on
terms as the Executive approves;
are not subject to Sections
1.Q
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
lL
Maryland
(g)
the extent provided
Qy
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 oftaxation .Qy the State of Maryland and any
county or municipality in Maryland.
o
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BILL
No. 50-10
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(h}
The bonds must be payable from the fund required under Section
68C-5
or revenue of the District pledged toward their
payment. When any bond is outstanding, the monies in the fund are
pledged to
!mY
the costs of any transportation infrastructure
improvement funded entirely or partly by the proceeds of the bonds,
including the costs of issuing the bonds and payment of the principal
Qt
interest on, and redemption premium if any, on the bonds. In addition
to ad valorem taxes, the bonds may be secured by any other asset in or
revenue generated in the District.
Any ad valorem tax imposed under this Chapter must not be accelerated
because of any bond default.
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68C-7.
Expiration of district.
Any special taxing district created under this Chapter expires by operation of
law 30 days after the cost of all transportation infrastructure improvements identified
in
f!
Council resolution approved under Section
68C-4,
including all outstanding
bonds and cash advances made by the County, have been paid.
Approved:
229
Nancy Floreen, President, County Council
230
Date
Approved:
231
Isiah Leggett, County Executive
Date
®
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OFFICE OF THE COUNTY EXECUTIVE
Isiah Leggett
ROCKVILLE, MARYLAND 2085"0
County Executive .
MEMORANDUM
September 27,2010
TO:
FROM:
SUBJECT:
Nancy Floreen, President, County Council
Isiah Leggett, County Executive--f
~~
White Flint Development Tax District:
Legislation; Legislative Report Form; Fiscal Impact Analysis
Amendment ($9.835
M)
to the FY11-16 Capital Improvements Program. and
Special Appropriation #4-EI1-CMCG-3 to the FYl1 Capital Budget
Montgomery County Government
DeprurtInentofTr~ortation
White Flint District West: Transportation (No. 501116), $385,000
I am pleased to transmit for introduction a package oflegislative items necessary
for the County to commence implementation of the transformational 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
FY11-16 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
(jj)
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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 CIP in that this project supports significant economic development initiatives,
which in
turn
will strengthen the long tenn 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 staff has 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 ofthe White Flint Sector Plan is that there be a new funding
mechanism to pay for some of the 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 of the 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 ofneeded improvements and capacity. This
certainty benefits the property owners as well as the residents and businesses of Montgomery
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
of implementation 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
(TlF).
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 of reasons.
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 of the County - and in this case the general fund­
would have to pick up the fiscal obligations ofthe 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 offthe 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 itself risky. 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 rejected because under current law it is based upon
front footage and would be an extremely inequitable way of funding the needed infrastruct:u:re.
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 ofparticipants and
by design would capture less
than
the entire district, reducing the equity of the district and
increasing the likelihood ofthe 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 sigrllficantly 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
Sep~ber27,2010
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: 1)
the tax is to be spent only in the White Flint Sector Plan area; 2) the tax is to be for a defined list
of infrastructure; 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 of the 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 ofthe 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 of infrastructure in the accompanying resolution.
It
is also for a
finite period oftime 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. 1bis
would make the infrastructure more expensive to the tax payers. I believe that concerns over the
level ofthe tax rate can be addressed
throu~
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 ifthe 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 of roads 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 of the 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 ofthe
existing Sector Plan roads to get a sense ofwhat is needed to complete streetscaping along these
roads for purposes of authorizing moving from one stage of the plan to the next. This
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 ofthe
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 of money
in
an as yet undefined CIP 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 of money 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) ifthey 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 FYII-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 FY12 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 FY11-16 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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OFFICE OF MANAGEMENT AND BUDGET
Isiah Leggett
County Executive
Joseph F. Beach
Director
MEMORANDUM
September 27, 2010
TO:
FROM:
SUBJECT:
Nancy Floreen, President, County Council
Joseph F. Beach, D i r e c , *
Bill XX-IO, White Flint Development, Tax District - Creation
The purpose of this memorandum is
to
transmit a fiscal and economic impact statement to
the Council on the subject legislation.
LEGISLATION SUMMARY
The Bill would establish the White Flint Development Tax District by adding Chapter 68C,
Sections 68C-l - 68C-6
to
the Montgomery County Code. The bill would authorize the levy ofan 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; and generally provide for
a White Flint Development Tax District.
FISCAL
SUMMARY
The legislation would allow the County Council to levy a property
tax
against all assessable
real and personal property in the Tax District. The
tax
imposed as a result of this bil1 would be used to cover
the costs oftransportation infrastructure improvements identified by Council resolution that lists each
transportation infrastructure improvement, its estimated cost, and estimated completion date.
The transportation infrastructure improvements in the White Flint Development District will
support the White Flint Sector Plan development The proposed White Flint Sector Plan area covers
approximately 430 acres located approximately
:y..
mile around the White Flint metro station. Upon
completion, the Sector Plan contemplates 14,341 residential units and approximately thirteen million square
feet of commercial space. Redeveloped and proposed new commercial development is projected to include
office, retail. industrial and hotel uses. Fiscal and economic impact projections of the Sector Plan are
contained in a study prepared by MuniCap, Inc.
in
October 2009. In that study, the net projected 40 year
cumulative County surplus of the White Flint Sector Plan is $6,857 milIion, while the private development
grows from about $2 billion today, to about $29 billion
in
2050.
of the Director
101 Monroe Street, 14th Floor· Rockville, Maryland 20850 • 240-777-2800
www.montgomerycountymd.gov
@
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Nancy FIoreen, President, County Council
September 27,20]0
Page 2
Projected Net Surplus - 40 year cumulative total
Revenues
County Public Services
Montgomery County Public Schools
Total
E~enditures
• Net Montgomery County Revenues
I Capital Costs
. Net Montgomery Coun!i' Surplus
$
millions
$9,871
1,261
1,224
2,485
7,386
529
$6,857
This bill allows the County to begin the implementation of the White Flint Sector Plan by
establishing a new special
tax
to fund approximately $200 million in transportation improvements (in 2010
dollars) that are necessary to serve the transportation needs of that area of the County over the next few
decades. The next two tables show the direct impact of the enactment of the special
tax
authorized by the
subject legislation ($208 million) and the impact on the County's CIP program ($378.1 million) funded
by
general obligation bond and other County resources. These are order-of-magnitude, FYI0 estimated capital
costs which have not been inflated and need to
be
further refined.
WHITE FLINT DEVELOPMENT TAX DISTRICT
DISTRICT FUNDED IMPROVEMENTS
(Direct Impact of the Legislation:)
1
Improvement Description
• Old Georgetown Road (MD 187): Nicholson Lalfilden La. to Executive Blvd.
Old Georgetown Road (MD 187); Hoya St. to Rockville Pike
(MD
355) (25% of project)
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.: Marinelli Rd. to Old Georgetown Rd (MO 187)
Second Entrance to Metro
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
Main
StJMarket St.: Old Georgetown Rd. (MO 187) to Executive Blvd. Extended (Bikeway)
Main St.lMarket Sf.: Old Georgetown Rd. (MD 187) to Executive Blvd. Ext.
Main St.lMarket St.: Executive Blvd. to Rockville Pike (MD 355)
Main Street Bridge
I
Executive Blvd. Ext. (East): Rockville Pike (MD 355) to Nebel S1. Ext. (South)
Nebel Sf. Ext. (South): Nicholson La. to Executive Blvd. Ext. (East)
TOTAL
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Nancy Floreen, President, County Council
September 27, 2010
Page 3
WHITE FLINT SECTOR PLAN
COUNTY FUNDED
ClP PROJECTS
Improvement Description
Estimated Cost •
$2,200,000
5,043,000
72,156,000
13,931,000
27,075,000
19,104,000
29,960,000
130,530,000 •
11,390,000
20,000,000
37,420,000
1,925,000
7,344,000
TBD
$378,078,000
Marinelli Rd.: Citadel Ave. to Wentworth PI.
Randolph Rd.: Nebel St. to CSX Tracks
I
Montrose Pkwy. Phase 2 (MD 355 Interchange): Chapman Ave. to Parklawn Dr.
• Nebel St.Extended (North): Randolph Rd. to Plan Area Boundary
I
Chapman Ave. (CitadellMaple): Old Georgetown Rd. (MD 187) to Plan Area Boundary
Montgomery Aquatic Center (MAC) Expansion
Fire Station with Police Substation and Urban District Office
Bus Depot
Civi.c Green
Elementary School
Recreation Center at Wall Park
Old Georgetown Road
(MD
187): Hoya S1. to Rockville Pike
(MD
355) (25% of project)
Nicholson
La:
Old Georgetown Rd.
(MD
187) to CSX Tracks
• CLATR Intersections Outside of District
TOTAL
The scope of the White Flint Sector Plan has required more analytical resources than are
currently available in the Executive Branch. In order to perform the in-depth analysis required by the Plan,
the Executive contracted with one of its financial advisors to perform the Fiscal Impact Analysis of the Plan,
and to provide preliminary financial analyses of the special taxing district that would be implemented under
this bill.
In
FYII,
the Executive expects that these analyses and studies necessary to implement the district
will approximate at least $35,000. These funds have been recommended
in
an amendment to the FYII-16
Capital Improvements Program and special appropriation to the FYI
I
Capital Budget for the new White
Flint District West: Transportation project number 501116. This amount does not include the many hours
that Executive staff have spent on complementary fiscal, financial and
tax
analysis and outreach to interested
parties in the White Flint Sector Plan area.
The following contributed to and concurred with this analysis: Alex Espinosa and
John Cuff, Office of Management and Budget; and David Platt and Mike Coveyou, Department of Finance.
JFB:jc
c: Kathleen Boucher, Assistant Chief Administrative Officer
Dee Gonzalez, Office of the County Executive
Jennifer Barrett, Director, Department of Finance
David Platt, Department of Finance
Alex Espinosa, Office of Management and Budget
John Cuff, Office of Management and Budget
Jacqueline Carter, Office of Management and Budget
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THE WHITE FLINT PARTNERSHIP
September 24, 2010
Ms. Nancy Floreen, President
And Members of the Montgomery County Council
Montgomery County Council
100 Maryland Avenue, 6th Floor
Rockville, MD 20850
Re: September 28, 2010 County Executive update on White Flint financing
Dear President Floreen and Members ofthe Montgomery County Council:
The members of the White Flint Partnership have negotiated in good faith with the County Executive for
the past six months and have reviewed the latest draft ofthe proposed White Flint district legislation.
Unfortunately, if the draft legislation in its form submitted to us by County Executive Staff is approved
by the County Council, White Flint's redevelopment in all likelihood will not happen. Three of the four
core issues, which the private sector raised at the beginning of this process two years ago, have not
been addressed by the Executive's draft legislation; resulting in a financing plan that is not economically
feasible or acceptable to the community.
The White Flint Sector Plan is an unprecedented opportunity for the County. Eleven property owners
control almost all of the developable land within the Sector Plan, which means that if implemented
correctly, White Flint could be one ofthe most user friendly new communities in the country, with
increased mobility and built in sustainability. Even more important to the County is that seven of these
eleven property owners are local Montgomery County based companies. We live in this community and
we care about the future of our County. Below is a description of the core issues of concern to the
business community, and suggestions for how these issues can be resolved.
1.
THE CASE FOR WHITE FLINT: The County Executive's own economic analYSis projects that White
Flint will produce $7 Billion in net new tax surplus and over 30,000 jobs for the County with
minimal up front County investment. To afford to pay for the costs of other needed economic
development in areas such as Wheaton and the Route 29 corridor, the County should view
White Flint as a funding source rather than a liability. Just as Bethesda was the economic engine
that enabled the County to redevelop Silver Spring in the 80's and 90's, White Flint is where the
revenue will come from to pay for other County priorities.
Secondly, White Flint is already part of a large Science Triangle that exists in the County today.
The Triangle stretches from NIH and Bethesda Naval Medical Hospital, through White Flint and
Twinbrook, and then northwest to West Gaithersburg along Shady Grove Road. It turns easterly
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September 24, 2010
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to White Oak, where FDA's presence is critical to the future of economic development in the
Eastern County. White Flint and TWinbrook are already home to the Department of Health and
Human Services, the Nuclear Regulatory Commission, and the largest percentage of NIH and
FDA office space outside their main campuses. White Flint is a critical piece of the Science
Triangle because of its proximity to Metro's Red Line, which will enable it to attract both non­
taxpaying federal agencies and research tenants, as well as high tax paying private sector
tenants. This Science Triangle can work symbiotically to be an incredible economic engine and
job creator for the County, but it requires some upfront investment in infrastructure by the
County, and a commitment from the County to see it through.
2. TRIPLE TAXATION WILL NOT LEAD TO A NEW WHITE FLINT: The business community has
agreed to replace impact taxes with a 10% special assessment tax to fund the lion's share of
infrastructure in White Flint. This special assessment is more than double the $50 million in
impact taxes the County would ordinarily receive from the development community in White
Flint. The County Executive now wants to charge both the special assessment, which is more
than double the impact taxes we would ordinarily pay, and on top of this still collect impact
taxes. The total of this crippling triple tax burden renders most new development in White Flint
economically infeasible.
The triple tax simply furthers the gap in the cost of doing business in Montgomery County as
compared to Northern Virginia. There are several reasons why Hilton, Northrop Grumman,
SAIC, Volkswagen, and most recently VeriSign have all chosen Northern Virginia over
Montgomery County for their headquarters in the past 2 years, but at least one major reason
relates to the actual and perceived lack of competitiveness of Montgomery County's business
climate versus Northern Virginia's. With the Silver Line ofthe Metro opening shortly in Fairfax
County, the competition for jobs will grow even stronger. The entire region is looking to White
Flint as the premier example of rebuilding our inner ring suburbs into vibrant places both
economically and forthe local community. Ifthe County is unable to take advantage of eleven
well capitalized locally based property owners who are willing to invest billions in the future of
the County, and to leverage the investment in public infrastructure that all of the property
owners in White Flint are offering to make, it will send another signal to the business
community that Montgomery County is simply not open for business.
RECOMMENDATION: As has always been discussed, the Special Tax Assessment must be in lieu
of paying transportation impact fees. School impact taxes, of course, should continue to be
paid.
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Council President Nancy Floreen and
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September 24,2010
Page 3
3.
NO COUNTY INVESTMENT IN WHITE FLINT INFRASTRUCTURE:
The total cost of additional road
and transportation infrastructure resulting from the recent White Flint Sector Plan approval is
roughly $640 million. The business community has agreed to fund $400 million (developer
bucket) of the $640 million (roughly 63%) directly as conditional requirements of individual site
plan approvals. On top of this, the business community has offered to accept a 10% special tax
in lieu of transportation impact fees in order to raise an additional $150 million! (private
contribution to district bucket) over the next 30 years for a total of $550 million (roughly 86%) in
privately funded new infrastructure. This leaves a gap of approximately $90 million in funding
(public contribution to district bucket).
(NOTE: In addition to the $640 million in transportation infrastructure costs discussed
above, there is roughly $105 million (County Bucket) in public life safety and community
amenities that are required as part of the Sector Plan. The County has agreed to fund
these non transportation related costs which includes the police and fire station, the
Civic Green, the renovation of Wall Park and the Aquatics Center, and a new community
recreation facility. This brings the total capital cost of the plan to $745 million. If the
County were to cover the $90 million gap in the district bucket as proposed by the
White Flint Partnership plus the $105 million they have already agreed to fund as part of
the county bucket, they would still only be paying for 26% of the capital costs necessary
to make White Flint happen.)
As expected, the $90 million gap is largest in phase
I,
because it will take a number of years for
new development to get started and to increase the assessed base of the property on which the
tax is computed. Over time, the tax revenue will grow exponentially both from inflation on
existing tax paying properties and from the assessment of newly added development within the
taxing district. For two years, we have discussed the need for White Flint to have both private
and public investment in order for infrastructure to generally keep pace with new development.
The $90 million gap in funding is only a small fraction of the $7 billion net tax surplus that
Montgomery County expects to earn in White Flint from new development alone. It is an
investment in the future ofthe County, with a return on that investment that would be the envy
of every jurisdiction in the country.
Because there is a quantifiable gap in infrastructure funding, ifthe County does not invest in
White Flint, the construction of needed infrastructure will be delayed. Ultimately, if White Flint
is going to be successful, it needs to remain economically competitive. The property owners are
offering to pay three times the impact taxes normally collected from development and offering
to begin funding that amount in ADVANCE of development. In order for the public private
1 $150 million represents an average of the County and the White Flint Partnership's estimates of the revenue that can be
generated from the special tax.
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partnership that we have talked about for the past two years to be successful, a partnership
must in fact be formed. This requires both sides to make an investment and take the up front
risk necessary to secure future opportunity.
The Executive will argue that revenue earned from the District after significant development
takes place will be sufficient to pay for all the improvements contemplated. Therefore, we
should impose the tax today and then proceed with those improvements in a decade when the
revenues catch up. Unfortunately, beyond the basic concept that adding too much cost to
future development will kill it before it gets started, this "wait until the revenue is raised"
strategy is antithetical to the original concept of providing the infrastructure generally
concurrently with new development. If this theory is implemented, the District will break down
before it has a chance to start. Development will not occur with any rapidity, infrastructure will
not be sufficient to support and encourage future growth, and the County will be left behind in
the regional race for jobs and long term fiscal security.
RECOMMENDATION: The County should either invest alongside the development community in
each phase, or move some infrastructure improvements to the County's bucket so that they can
be funded as CIP projects. This would reduce the bucket of District infrastructure improvements
to a level that could be adequately funded by the special tax.
4. BUSINESS COMMUNITY HAS UNLIMITED RISK: The final major concern to the business
community is that the Executive's legislation allows for the tax rate to change on an annual basis
(e.g. exceed 10%) in order to cover the full cost of the infrastructure in the district bucket. This
leaves the business community's cost exposure completely up in the air over the life of the plan,
and means that the County could simply increase the tax rate rather than invest in White Flint.
We propose a reasonable 10% increase in ad valorum taxes as a special tax as the target for
sizing the bond traunches, along with an agreement with the County to help fund any
unprecedented shortfalls or funding gaps, particularly in Phase
1.
RECOMMENDATION: Create a covenant that states that the bonds will be sized so that the tax
rate should not exceed 10%. This will allow the legislation to be more flexible as is necessary for
marketing the bonds. We agree that if assessments drop, the tax rate would have to rise in
order to cover the debt payments in place; however, our concern is that the County should not
issue bonds initially knowing that the tax rate for them will exceed 10%.
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September 24,2010
PageS
Thank you for your consideration.
Very truly yours,
The White Flint Partnership
Combined Properties
Federal Realty Investment Trust
Gables Residential
Lerner Enterprises
The Holladay Corporation
The JBG Companies
The Tower Companies
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