Financing Options for White Flint

Financing Options for White Flint

Live-blogging from the January 26, 2010 joint meeting of the Planning, Housing and Economic Development Committee and the Management and Fiscal Policy Committee of the Montgomery County Council. The topic is financing of the White Flint Sector Plan, a key component in any master plan, and critical in an innovative, complicated and multi-stage Plan such as for White Flint.

Councilmember Marc Elrich: we need to be cognizant of the danger of putting in the development before the infrastructure. Heard from residents, but the biggest divide is whether they’re going to put in the infrastructure. Optimists believe it will be in place, and the pessimists believe the County won’t do its job. Developers have to accept that there’s not going to be a whole Plan for what’s going to be in front of your property. We’re going to need a broad and comprehensive approach which is different from what we’ve done in the past.

Council Staff Mike Faden: public sector will be expected to pay about $300 million, or one-third of the overall costs of the infrastructure. County Executive Staff Jennifer Barrett: options for financing. Impact taxes, paid at the time of permit applications, are an existing mechanism, but they are an unreliable source of funding. Have talked about making it more reliable by imposing a higher rate, but allowing it to be paid over time. Possible to secure a revenue stream for bonds that way, but not a highly attractive option. Council Staffer Glenn Orlin: impact taxes are usually reserved for general obligation bonds, so if you take them here, they won’t be available for other projects. Barrett: every dollar you take here will take away from something else.

Councilmember Nancy Floreen: this is what we do now. We’ve haven’t built the county infrastructure that we need now. We’re going to have to come to grips with this. Anything we collect from this environment won’t be available elsewhere, and other communities are in need as well. There’s no silver bullet that will eliminate these kinds of trade-offs. Only question is how you can create incentives so that the financing vehicle makes things happen in a way that works for the private sector? This is the problem. This is a tried and tested mechanism.

Floreen: what about the Montrose Parkway? We need to finish that. Orlin: we already have $42 million for that. Barrett: we already included that piece in our claculations.

Committee Chairman Mike Knapp: we need to look at the complementarity of these. Floreen: is that word?

Barrett: another option is other taxes, including specific taxes. Parking tax. Voluntary consent taxes, as in development district. Will be difficult and complex, but we’re trying to be creative. Unlikely to do this to secure debt. Elrich: could you create an excise tax on square foot on the ground? Faden: can’t be a property tax. Could because it’s offered for rent, but not just to have it. Orlin: how you use it. Trip generation rates, possibly. Elrich: wouldn’t that be similar to stormwater tax? Faden: it’s actually a fee, not a tax. Elrich: could you generate something on trip generation rates? Faden: no.

Barrett: Development districts. Two now in Germantown are working well. Small districts, all residential rental and some commercial. Require consent so are hard to get. Special obligation bonds. Increment above existing taxes. So nothing taken away from county budget, because everything else is still available. This floats above the county tax rate. Need consent of 80% of owners and 80% of value. Faden: bond counsel thinks the new state development district is needed, and he has the last word. Elrich: do we have any idea of what percentage of property owners are interested and engaged in this? Barrett: haven’t had that conversation. Council staffer Marlene Michaelson: don’t know if it’s 80% but have had more property owners come forward in this Plan than in any other Plan in my experience to say they would share in the costs. Barrett: usually a long negotiation process. Elrich: need to have highly-motivated people to make this happen.

Barrett: Special taxing districts, which are a little different. A couple of noise abatement districts to pay for noise walls by the Beltway. Faden: line-drawing is critical. You can exempt residential just by drawing a line around it. Berliner: don’t have the consent issue here, so we could get a secure revenue stream based on build-out? Barrett: would have to tax at existing assessed value. Faden: parking and urban districts are special taxing districts. Berliner: are you considering going to the Attorney General for an opinion on legality? Faden: it’s irrelevant to bond counsel, so no. Historically, the last time around the Attorney General agreed with us, but it didn’t matter. Bond counsel had their own ideas.

Barrett: Tax Increment Financing (TIF): generally used for blighted areas. Reaching into your own resources to fund this; so typically used in urban blighted areas. Faden: there’s a provision that it doesn’t count against County Charter limit. Elrich: doesn’t generate new revenues. Barrett: no, just uses what’s there.

Barrett: Special Assessment: long and complicated. We haven’t used this in some time. Very problematic. General County Funding Sources: useable for some specific projects.

Floreen: bring up Dave Freishtat, who’s our expert on financing. [Note: Freishtat is a member of the Board of Directors of Friends of White Flint, representing the Bethesda-Chevy Chase Chamber of Commerce.] Freishtat: bond counsel thought that revenue financing could be used in at least some parts of this Plan. Floreen: flesh these out between different approaches to revenue. Freishtat: there are a lot of possible sources. Floreen: I’d like to explore those. Barrett: my list was for lease payments. Elrich: isn’t it a question of what you’d use as a revenue stream? Could they secure it with a particular mechanism? Freishtat: there’s a whole laundry list of sources, and what you can use the bonds for. Elrich: I’m good with that. But question is who’s going to pay you back? I’m still not clear. Whose property is paying for this? Staff: if we run into problems with special obligation bonds, we can go through a couple of steps, create a revenue authority, and then pay for them that way.

Trachtenberg: I’m sure when we reconvene in a couple of weeks, we’ll go through all those. Council President [Floreen] made it clear that we would deal with that. Interest in having conversation around staging and timing of infrastructure in relation to fiscal formula. Choice on development districts, at least in general terms and on opinion of bond counsel. Examples of practices in other jurisdictions. Potential for revenue authority.

Berliner: unanimous view that financing plan will not be part of the WF Plan itself? Trachtenberg: yes. Berliner: I would like an agreement on what level of specificity we are seeking, so we can assure our community that we have a firm commitment for a financing plan. Trachtenberg: reasonable part of the conversation. Another part would be the oversight of a few weeks ago. Planning Board Chairman Royce Hanson: we’ll prepare a presentation on our thinking about timing and staging.

Barnaby Zall

Barnaby Zall

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