The Top Eight Ways Taxpayers Subsidized Developer Profits in 2021
Hiruy Hadgu
The 2021 Howard County Executive and Legislative Score Summary
As the County Council and County Executive wrap up their third year in office, here is their legislative record scored along four metrics.
Below is a highlight of the eight county council and county executive actions that had the largest adverse impact on the budget. The eight actions listed below led to $288 to $317 million in adverse impact on the county’s budget. Every single one of these actions provide an outsized benefit to Howard County developers at the expense of taxpayers.
ONE: County Debt (CB35 thru CB41) - $126 million in debt service.
For FY2022, Howard County will issue nearly $300 million in debt to pay for capital projects. Developers will cover just under 1% of the county's capital expenditure.
TWO: Increasing Density and Allowable Heights on Transit-Oriented Development (TOD) - $60 million
CB7-2021 is a Zoning Regulation Amendment (“ZRA”) requested by Developer Annapolis Junction Town Center, LLC for its ongoing project next to the Savage MARC Station. The legislation nearly doubled the allowable building height on land there—and anywhere else in the County “within 750 feet from a MARC Station platform,” meaning also at the Dorsey and/or Laurel MARC Stations—from 100 feet to 180.
The Developer received a massive increase in density without the required mitigation for schools and other infrastructure. The Route 1 corridor is the hardest hit region in the county when it comes to school quality and other infrastructure such as roads.
As reference, The Residences at Annapolis Junction has 123 two-bedroom units, 248 one-bedroom apartments and 45 studios for a total of 416. According to the latest HoCo By Design fiscal assumptions this would yield 46 students, which recent Board of Education discussions revealed that this number is very low compared to actual student yields, by as much as 4.2-times. So in reality this is closer to 193.2 total students.
Doubling the height of the building would at a minimum increase the number of students by 1.5-times or 100 students extra.
The cost to add a seat in an existing school is more than to build one - anywhere from $100,000 to $150,000 per student. Using the lower value would lead to a minimum of $10 million per apartment building.
The County’s analysis showed there were six undeveloped pieces of land that met the zoning criteria, translating to $60 million in extra cost associated with the doubling of building heights.
Final vote:
YES: Councilmembers Opel Jones, Christiana Rigby, and David Yungmann.
NO: Councilmembers Liz Walsh and Deb Jung.
THREE: New Cultural Center - $55 million
$54.6 million.
That’s the price tag for Howard County’s latest boondoggle project in Down Town Columbia. That’s equivalent to about half the cost of a high school before taking into account land value.
The so-called New Cultural Center is a solution in search of a problem. Many advocates conflated it with affordable housing. This is not about affordable housing, which has a different stream of financing. Also, Howard Hughes Corporation was given over $90 million in TIF, 5500 units of market rate units, and other highly favorable zoning and land-use waivers in exchange for 1000 units. Do you know how many of those that have come online are affordable units? ZERO.
The financing for the NCC comes from TIF revenue that should be used to pay off the $90 million TIF debt, new additional TIF debt, and other varieties of debt. The bankers in 2008 called the practice of spending other people’s money without regard for protecting against risk “moral hazard.”
Final vote:
YES: Councilmembers Opel Jones, Christiana Rigby, and David Yungmann.
NO: Councilmember Liz Walsh.
ABSTAIN: Councilmember Deb Jung.
FOUR: MIHU Fee-in-Lieu - $30 to $35 million
It was revealed at the 2020 budget adoption vote that the county has been paying over ONE HUNDRED TIMES what it charges developers to provide affordable housing.
In 2020 the developer fee-in-lieu was $2.67 per square foot, while the county paid $265 per square foot. This has been taking place since at least 2013.
This year the fee increase by a whole 16 CENTS to $2.83.
In 2020, the county received approximately $3.64 million in MIHU fee-in-lieu for approximately 250 homes. If the county had collected what it pays to run its program, the fee would amount to $36.4 million. In other words, the county under-collected by at least $32 million.
Final vote:
YES: Councilmembers Opel Jones, Christiana Rigby, and David Yungmann.
NO: Councilmember Liz Walsh and Deb Jung.
FIVE: County Fees (CB73 and CR75) - $7 to 10 million
According to the 2021 budget voting session, Councilmember Liz Walsh exposed that DPZ collected $1.6 million in fees, which was approximately 2.7 to 4.7x less than its cost of doing business. At this rate, DPZ under-collected by as much as $6 million.
Final vote: unanimous approval.
Additionally, in 2019 the county under collected overtime costs for police work from for-profit event promoters by as much as $1.11 million.
These are just the known and under-collected fees. For purposes of this analysis the aggregate amount is $7 to $10 million.
Final vote:
YES: Councilmembers Opel Jones, Christiana Rigby, Deb Jung, and David Yungmann.
NO: Councilmember Liz Walsh.
SIX: Erickson Living - $6 million to $25 million
The County Council functions as the Zoning Board, which passed the measure that would subsidize the developer’s project. The developer’s fiscal impact report suggests this project will have an annual benefit to the taxpayer of $4.11 million. The net present value (NPV) of such a benefit assuming it is a perpetuity at an interest rate of 3% (inflation rate) would result in $137 million.
But the fiscal impact makes some unrealistic assumptions. Removing these assumptions would lead to an annual loss of -$180, 000 the tax payer would incur. The NPV would lead to -$6 million.
The upper limit of $25 million includes estimates to mitigate the impact of the project on roads.
Final vote:
YES: Councilmembers Opel Jones, Christiana Rigby, Deb Jung, and David Yungmann.
NO: Councilmember Liz Walsh.
SEVEN: CAC Corridor (CB-8) - $2.4 million to $3 million
CB8 proposes to make a bad situation worse.
First, it would allow a project that was initially approved under the basis of a mixed-use project to be completely residential. Before the bill’s passage, the commercial space requirement would not be less than 20 square feet per dwelling. So it goes from a baseline of 70 square feet to 20 square feet to none at all.
Second, decision to allow the profit subsidy was made based on a market study prepared by the developer, which is a clear conflict of interest.
CB8-2021 reduced the fee required from a developer by half, where a single developer will gain $2.4 million to $3 million in profit subsidy.
This fee-in-lieu legislation represents another abuse of a mechanism intended to provide flexibility to developers. Just like other fee-in-lieu provisions, the proposed fees appear to be pulled out of thin air.
A review of the 2016 legislation that implemented the fee-in-lieu shows that the fee was suggested by developer. In fact, the fee-in-lieu DPZ’s technical staff report said:
“The fee level of $50 as proposed by the Petitioner is considered to be too low for the large CAC developments mentioned by the Petitioner, and it is recommended that it be increased.”
Final vote:
YES: Councilmembers Opel Jones, Christiana Rigby, and David Yungmann.
NO: Councilmembers Liz Walsh and Deb Jung.
EIGHT: Forest Conservation (CB56, CB57, CB78 and CB79) - $1.3 to $2.6 million
The combination of these bills added categories of trees to be retained by expanding the scope based on the period of clearance, size of trees, and other factors. It also required enforcement of penalties and added more stringent penalties for violation of the Forest Conservation Act.
In FY2020 alone, the county reported nearly 59 acres of forest cleared. According to the updated 2019 Forest Conservation Act, a Forest is defined as having a coverage ratio of 100 trees per acre. The act, which also updated the fines underestimates the cost to the county by as much as 50 cents to $1 per square foot.
This leads to an under-collection of $1.3 to $2.6 million in one year alone.
Final vote:
YES: Councilmembers Liz Walsh and Deb Jung.
NO: Councilmembers Opel Jones, Christiana Rigby, and David Yungmann.