White Flint Partnership: Bridge the Financing Gap

White Flint Partnership: Bridge the Financing Gap

On September 24, Montgomery County Executive Ike Leggett finally sent the County Council his proposals to finance infrastructure needed under the White Flint Sector Plan. Jaws dropped in White Flint. The Executive’s letter and the White Flint Partnership’s lightning-quick response are linked here.

Last night, having had more time to digest the proposal and discuss the problems with the County Council, the Partnership sent the Council another, more detailed letter with three attachments: a PowerPoint presentation explaining the financing numbers and issues; a copy of its Sept. 24 letter; and a discussion of the most promising financing mechanism to “fill the gap,” known as “Tax Increment Financing,” or TIF.

The County Executive’s financial analysis shows that the White Flint Plan will generate $7.3 billion in new County tax revenues over the 30-year life of the Plan. The new revenues come not only from the increased value of properties in White Flint, but also from the increased economic activity in the area (income and sales taxes, for example).

Value of White Flint Property

(Value of new properties in White Flint (green) increases, while old properties decline (blue) over time) 

But to get any of that value, White Flint needs infrastructure, both transportation (roads) and community amenities (parks, library, etc.). Otherwise no one will build there, and no one will want to live there. That infrastructure costs money.  The Planning Board worked with property owners, residents and businesses to craft a plan for a new Development District, with a special tax rate just for new development, instead of the existing “impact fees” developers have to pay. The developers agreed to pay the new taxes, at a rate THREE TIMES what they would have paid under the old “impact tax” system.

New Tax Revenues

But apparently the County Executive now is refusing to recognize that there is also a “timing” issue in funding. The biggest dispute is over funding the early phases of the Plan, when there is little new development but large infrastructure construction costs. This disconnect creates a “gap” in financing, when the expected revenue isn’t being generated, but the costs to produce the revenue have to be incurred (or nobody gets any money or any infrastructure).

The “Gap”

The Executive denies that there’s a gap at all, by the simple expedient of rejecting the most important parts of the White Flint Plan, such as the reconstruction of Rockville Pike (calculated to make up $32 million, or one-third of the “gap”). But without a new Rockville Pike, will the new White Flint be pedestrian-friendly, transit-oriented or walkable? Probably not.

In addition, the Executive’s proposal includes as White Flint infrastructure costs things that are not really part of White Flint, such as the Montrose Parkway. I doubt anyone would characterize the Montrose Parkway as “pedestrian-friendly” or “transit-oriented.” It’s a 1960’s project, designed for cars, and only for cars. Pedestrians who want to cross it, even at the bridge at the end of the White Flint Promenade on Rockville Pike, have a choice of a narrow concrete strip on one side of the bridge, or maybe walking in traffic. Again, this is not in keeping with the White Flint Plan.

If I were unkind, I’d see all of these decisions as automobile-oriented. They view roads as “pipes” for cars. The way, say . . . Montgomery Department of Transportation views Rockville Pike as a pipe running from NIH and Navy Med in Bethesda to Rockville, without any regard for things in-between, like White Flint. It’s just a way of telling people they’re handling traffic congestion, when they’re really not. The way to handle traffic congestion for the long run is not to build more lanes (and actually the Executive is proposing a narrower Pike, not a broader one), but to get people out of their cars, by making White Flint a walkable place where cars aren’t as necessary, for example. But, that would require actually recognizing the purpose of the White Flint Plan. . . .

The Partnership proposes three options to resolve the financing problem: Option 1 is the County committing to fund a “ratio of funding” for the “District Bucket of infrastructure.” In people-ese, this means the County makes a binding promise to pay its share, plus a little more of the “gap.” The problem is that Councils change, and this Council will have a hard time binding a future Council to keep its promise. This has always been the Achilles Heel of Montgomery County planning: the County, deservedly or not, has a reputation for promising boldly, and then reneging on its promises. Perhaps we should send the financing people to some romantic comedies to learn that commitment pays off in the long run?

Option 2 is for the County to shift the “gap” costs into the regular Infrastructure budgeting process. The problem with this is that it removes the connection with the White Flint funding source, meaning both that the funding for White Flint projects is left uncertain, and that White Flint revenues are just put into the general pot of County revenues, to be diverted at political whim.

Option 3 is the TIF, described in the Partnership’s White Paper. A TIF taxes the new (“incremental”) value created in White Flint as it is created, and diverts 10% of the new funding to fund the “gap.” This creates a dedicated and reliable funding source for infrastructure projects, but there are a few periods where the County will have to “forward fund” (or loan itself) some projects.

The Partnership says it has no preference between these options. At last night’s Friends of White Flint Board meeting, the FoWF Board of Directors agreed unanimously that it preferred the TIF option. More on this later.

The Council, which enacted the White Flint Plan, will have to make the final decision on financing mechanisms. It will hold a public hearing on October 26, beginning at 7:30PM in the Council office building in Rockville.

Barnaby Zall

[slides from White Flint Partnership’s Oct. 18 letter to the Montgomery County Council]

Barnaby Zall

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