Goldilocks and the Three Taxes

Goldilocks and the Three Taxes

At its regular meeting on Tuesday, September 28, the Montgomery County Council will consider ways to finance the infrastructure needed under the new White Flint Sector Plan. After almost two years of consideration, the County Executive’s staff may finally present some definitive proposals for financing. Then the Council will have to decide how much tax is too little, too much or just right.

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The Council staff has prepared a memo providing some background. In the memo, Michael Faden, a senior counsel to the Council, describes what happened over the last few months, but adds a pessimistic note about future action:

[County] Executive staff held a series of meetings with Council and Planning staff and a broad range of stakeholders over the summer and shared drafts of legislation to create a White Flint special taxing district and lists of infrastructure items that the proposed district would entirely or partly fund. We expect to receive that legislation for introduction in the coming weeks.

Faden also suggests four policy issues should be considered, but notes “none of [these issues] need to be resolved today,”

1) Should any new special taxing district include and tax existing residential properties?

2) Should a supplementary property tax be the only tax used to finance the special taxing district and White Flint development generally?

3) Should County transportation impact taxes continue to be charged to new development in the White Flint special taxing district?

4) Should this legislation only apply to a White Flint special taxing district, or should it be drafted as general enabling legislation, with the White Flint and each other special taxing district established by Council implementing resolution?

Thus, as noted in the prior two posts, the issue of taxing current residents remains very much alive.

Just as important are issues 2 and 3, ironically dealing with triple taxation. The principle behind the self-taxation agreed to by the White Flint developers was that the new taxes (which would be double the impact taxes otherwise imposed) would be in lieu of impact taxes. Item 2 asks for more taxes and Item 3 seems to add impact taxes to the new development taxes, making triple taxes on new and possibly current developments in White Flint.

This isn’t how it was supposed to be. We thought we had worked out a pretty good deal. Back in 2008, the Planning Board got the developers to agree to self-tax themselves at TWICE the impact fee rate. And, of course, the developers would also provide some 44% of the needed infrastructure at their own cost on their own properties; that includes new roads, libraries, community centers, daycare centers, and the like. The additional taxes would fund only the public infrastructure, like new roads, parks, schools and the like. The developers even said they would forward fund the initial stages, taxing themselves before their developments went on-line. The estimate was that the new development tax (twice the old rate) would generate SEVEN BILLION dollars in new property taxes for the County.

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But double taxes, generating $7 billion, appears not to be enough. First the County Executive’s staff complained about “fairness” and how White Flint shouldn’t get anything because it was a “wealthy” area. Then it was that a development district, successfully used in St. Louis, Chicago, and elsewhere, would tread on the Executive’s ability to shift White Flint’s revenue to other parts of the County. Then it was that the Executive’s high-priced consultant couldn’t figure out how development bonds work, or maybe it was how forward funding worked, or some such conundrum. Now the County Executive appears to be pushing to have its cake and eat it too. Executive staff wants to have both impact taxes and the new development taxes.

The problem is that it’s a pretty big jump to ask those operating developments in White Flint to shut down, spend billions of dollars on new construction, and then pay triple taxes. White Flint is a huge economic engine right now; it’s sprawled out over a big area, which is why it looks deceptively quiet. But those Rockville Pike parking lots bring in big bucks for the State and County already; rents are sky-high, even in the recession, showing that businesses want even the enormous grey parking lots, overhead wires and old strip malls, because they make money there. It was already a big sell to get these businesses to see the value of transit-oriented, sustainable development, and then we put new CR Zone obligations on them to build day-care centers, green buildings, and so on, plus help shift their workers to transit commuting. But, for whatever reason, they agreed to double their own taxes.

Now add triple taxes?

Likely to be the straw that broke this camel’s back. It would sure be a lot easier to keep all those asphalt parking lots along Rockville Pike. All it would take is just to renew those expiring leases which have been suspended for the five years the White Flint planning process has taken. Once that’s done, the County’s dreams evaporate for the ten or fifteen years it will take for this latest round of leases to run their course.

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And that seven billion dollars? Only a little bit, less than ten percent, would have been needed for everything in White Flint. The rest, $6 billion, could have been used, as we’ve talked about in Friends of White Flint for years now, to bring workers from East County to the new jobs in White Flint, for rapid transit, for County services.

Now it won’t. Won’t be used to renovate Rockville Pike, so traffic will just get worse and worse and worse. Won’t be used for new libraries, parks, schools. Won’t be used to fund new dreams in Wheaton, the Route 29 corridor and beyond. Won’t be used for anything. Because it won’t exist.

Just because triple taxes are too much more than double taxes.

Meanwhile, Arlington County has booming corridors in Ballston and Courthouse. Ten percent of Arlington County is in those development corridors, but they produce half the County’s tax revenue. And they are transit-oriented, where people take the Metro everywhere. And they’re attracting business like crazy. We can see right next door what smart growth does: protect existing communities, throw off money to help other areas, and bring jobs and housing in balance next to transit. But here we just can’t seem to move ourselves beyond immediate greed, short-sighted power grabs, or some other form of blinders.

So like Goldilocks, the County Council is faced with three bowls of porridge. One is too cold (the original impact taxes); one is too hot (triple taxes = new taxes or impact taxes plus the new double-high development taxes). One seems to be in the middle and just right: the new development taxes.

We’ll see on Tuesday what the Council wants to eat.

Barnaby Zall

Barnaby Zall

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