Baltimore County to legalize/impose impact fees on new development

The only reason I am writing about this is in the draft document I created for the Western Baltimore County Pedestrian and Bicycle Access Plan, I had a section on potential revenue sources to pay for additions to pedestrian and bicycle infrastructure.

One of the potential sources I listed was development impact fees, which are assessed in other Maryland jurisdictions such as Montgomery and Prince George's Counties.

That section was excised in complete, from the document.

-- "Bills would let Baltimore County impose fees on developers to help build schools," Baltimore Sun
-- "Developer fees won't solve all of Baltimore County's problems, but that's no reason not to enact them," Baltimore Sun

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Baltimore County is famed for it's "pay as you go" financing system for infrastructure.  They don't, although this is starting to change because of the redevelopment of the old Bethlehem Steel Sparrows Point facility, do "Tax Increment Financing" or the selling of bonds to pay for infrastructure, to be paid off by future revenues leveraged by development of lands "opened up" by the new infrastructure.

This also came up wrt a proposed redevelopment of an area near the Falls Road Light Rail Station, which was park proximate, with trail potential, of an area used for industrial purposes but was otherwise surrounded by residential.

I explained that without putting in the road network first, you'd never get it to happen.  The person who is now planning director discussed somewhat tangentially how $10,000 facade grants can lead to subsequent private investment...

The advantage of PAYGO is that when faced with recession, the County usually isn't encumbered by obligations it is then unable to pay. 

But now that the County's greatest period of economic growth is over, and the once successful industrial enterprises are closing as firms consolidate, go out of business, or relocate, the County has less money coming in, and will need to look to different funding sources to fund newly needed infrastructure, as well as to fund repairs and maintenance of existing infrastructure.

Revisiting impact fees (versus "community benefits") for cultural uses

There is a big debate amongst residents about real estate development, and the idea that any new development should provide "community benefits." Sadly, I never took any anthropology courses, but I think this concept is related to the idea of paying your way in to be part of a new community and has some basis in anthropological theory.

In "In lower income neighborhoods, are businesses supposed to be "community organizations" first?," (2012), I wrote:

Years ago, I had a conversation with Mari of In Shaw, where we discussed ANC and community involvement with regard to new businesses opening up in the community, and how the community groups were much more focused on what they could get from the businesses. Mari made a comment to the effect that they are businesses not social welfare organizations (I can't remember the specifics, we're talking about a 7 year old or older conversation).

This comes up all the time when you read in the local media about business presentations at various community meetings.

Note that this isn't a phenomenon exclusive to "poor" neighborhoods. Years ago I was at a meeting of CulturalTourismDC and at the meeting, a representative from a theater that had recently opened in Penn Quarter, announced how they were looking for donations from local businesses, inducements for patrons, etc. I countered, why not think about how this can be "mutually beneficial" instead of all one way?

The reality is that in lower income communities, community ties, social networks, and other relationships are much more important and vital to every day living, and so when you look at businesses entering the community from the standpoint, you can understand why people would look at businesses not so much as entities trying to survive and make a profit, but instead as merely another actor-participant, different sure, within the web of existing community ties, and their expectations that all members of the community contribute within the web of social networks. Contributions to the community are the price that a business entrant has to pay in order to be allowed to participate and be considered a co-equal actor within the community network.

Are impact fees-community benefits more akin to "entry fees"?  But now I think this kind of thinking and expectation isn't limited to lower income communities.

That's the basis for thinking about impact fees in more rigorous ways, which I've been meaning to write about in the context of a different piece about "community benefits," which are handed out to facilitate development, but often not in a structured and transparent fashion, but in a more semi-corrupt way ("D.C.'s Insidious Culture of Developer Influence Won't End With Campaign Finance Reform," Washington City Paper).

Community benefits versus impact fees: Community benefits come in return for benefits.  In most places a requirement for the provision of "community benefits" is only triggered when the property owner seeks extranormal benefits such as waiver of fees and taxes, free land, tax incentives, etc., or zoning relief such as more density, a change in zoning, waiver of requirements, etc. 

So community benefits are conditional payments, awarded in return for specific, monetizable benefits.

Impact fees are the price to pay to join an existing community.  On the other hand, in communities that charge impact fees, such fees are mandatory for every property whether or not the developer seeks extranormal benefits or zoning relief.

Impact fees on new development pay towards infrastructure investments, usually for schools and transportation, and sometimes for other civic facilities and functions.

I think we could think of them as comparable to "membership fees" to join a food co-operative (e.g., the Takoma Park Co-op) or a golf club.

But instead of going towards private benefits -- discounts on food purchases, access to an otherwise private facility -- development impact fees pay towards the provision of public goods.

In the DC metropolitan area, DC doesn't charge impact fees, while counties like Montgomery and Prince George's do. DC elected officials argue that by not charging impact fees, we encourage and incentivize development in the city.

-- "Development impact fees," 2014
-- "Times have changed with regard to funding infrastructure improvements that make land more valuable," 2011

Montgomery County charges a fee for schools and a fee for transportation, while in addition to those, Prince George's charges impact fees for public utilities and public safety.

It does add a lot to the cost of a dwelling unit, but it's reasonable to ask for new developments to pay towards the sunk costs of creating and maintaining existing infrastructure and required expansions to meet the needs of the new residents being added to the community by new development because it uses and/or adds to the "load" on the infrastructure.

In DC, because of base of developable land is so small, as properties are developed in certain ways other uses are crowded out.  That's where planning is required, to provide for such uses, to step in where "the market doesn't work," and to ensure that the range of amenities and facilities in a community has both breadth and depth.

How about impact fees for cultural uses?  Cultural uses and space is an area not typically addressed through impact fees. But why not?

Last week's Washington City Paper has an article, "Artists' Collective," about the development of some temporary cultural space on a fallow lot which is slated for further development. It discusses the lack of cultural spaces in the city and Martin Ditto, principal of the company that owns the lot featured in the story, suggests that all new developments be required to provide cultural space. From the article:

There are potential remedies to the disappearing of cultural spaces. The website for the yet-to-be-released D.C. Cultural Plan lists “addressing rising real estate costs that affect artists’ abilities to find affordable space in the District” and “better leveraging of public land and infrastructure,” as key areas of focus. Ditto suggests a rule that anywhere from one to ten percent of new development space be earmarked for arts space.

How to use a cultural facilities impact fee.
While Martin Ditto's idea is interesting, I don't think that is the best way to go about "getting what we want."

1.  I do think we need more cultural space, but we shouldn't leave it up to the vagaries of property development to create the space.  This would likely result in lots of little underpowered spaces like at the Atlantic Plumbing multiunit apartments there is a 1,500 s.f. space for Washington Project for the Arts ("WPA Signs Lease on a New Home in U Street Corridor Cultural District," press release), and a surfeit of space in the districts experiencing the most development and no facilities in the districts with little development.

2.  Instead, it's better to have fewer, powered, well-located spaces. 

3.  And rather than expect developers to provide such spaces "on their own," and focused more on meeting their particular needs, let's plan and provide these spaces through the city, community development corporations, and other means.

4.  To fund it, how about impact fees to support cultural and civic infrastructure?

5.  Backed up by good cultural/neighborhood master plans.


Their use should be directed by various master plans covering needs at the city-wide, district/sector, and neighborhood scales ("Whose space...," 2012;  "Arts, culture districts, and revitalization," 2009; and "Ground up (guerrilla) art #2: community halls and music (among other things," 2011).

6.  With a high-powered implementing organization functioning at the city-wide scale, with sub-organizations focused on individual neighborhoods. 

To make this work and to build capacity, having a city-wide cultural nonprofit backing up neighborhood efforts would be best, functioning not like Cultural Development Corporation DC ("When BTMFBA isn't enough: keeping civic assets public through cy pres review," 2016), but more comparable to:

• the Playhouse Square Foundation in Cleveland ("Real estate value capture and the arts," 2010; "Playhouse Square plans 34-story apartment tower in downtown Cleveland's theater district," Cleveland Plain Dealer)
• SEMAEST in Paris ("BTMFBA: the best way to ward off artist or retail displacement is to buy the building," 2016)
• the Pittsburgh Cultural Trust ("Pittsburgh Cultural Trust maintains diverse real estate portfolio to support arts," Pittsburg Post-Gazette; "How the Arts Drove Pittsburgh's Revitalization," The Atlantic)
  

Examples of fundable projects in DC neighborhoods Examples of projects that either happened or didn't, I can see such impact fees on H Street going towards the Atlas Performing Arts Center, a new community library, the Fringe Theater Group, and new uses.

In Takoma, it could have paid towards acquiring the Takoma Theater (which was instead purchased by a for profits developer who ripped out the cinema/theater function) and towards the Electric Maid community arts space.

In Dupont Circle, it could help pay for redevelopment of the Dupont Underground space ("Dupont Underground looking for donors to build on initial success, Washington Post).

In Southwest DC, it could help pay towards the creation of new combined library-cultural center and the development of an organization like Brooklyn's BRIC, which recently opened the multifaceted BRIC House  ("BRIC Arts | Media House opens in Brooklyn," Theatre Projects) and a television studio in the Coney Island branch of the Brooklyn Public Library.

In Downtown/Penn Quarter it could have funded keeping the Goethe Institut there, when it faced a rent increase.

Etc.

Development impact fees

One policy that DC and Seattle share is not charging development impact fees on new development projects.  The general idea is that new development "uses" existing infrastructure--not just roads but transit, and if residential, various civic facilities including schools--and the increased "load" eventually exceeds the current "carrying capacity" of the civic and transportation infrastructure and it will have to be expanded, which costs money.

Seattle Times' Danny Westneat suggests in the column, "One Seattle tax solution: impact fees," that Seattle should consider adopting impact fees to reduce the various taxing initiatives that the city resorts to to support parks, libraries, road and transportation facilities, transit, etc.  He contrasts Seattle to suburban Bellevue, which has impact fees and a program for facilities expansion funded mostly by the fee revenue stream.

Most of DC's suburbs, especially Montgomery County, charge impact fees.  DC does not and most of the elected officials believe that this gives DC a competitive advantage.  I wrote about this a few years ago here, "Times have changed with regard to funding infrastructure improvements that make land more valuable." This 2013 report, County Development Impact Fees and Building Excise Taxes in Maryland Amounts and Revenues from the Maryland State Assembly Department of Legislative Services lists the fees levied by each jurisdiction across the state and it's pretty eye opening.

In Maryland, the counties aren't systematic in the fees they charge.  For example, many don't have a fee for parks and recreation expansion, but some do.  Most charge fees for transportation infrastructure and schools.  Others may charge for public safety (most don't) and more specific fees for certain areas.

On the other hand, in DC we are running up against debt ceiling limits and there are proposals to change the city's practices with regard to taking on debt to be able to issue more bonds and for all of the money that the city has--the annual budget is about $11 billion--the city scrapes hard to identity a million here and a million there to accomplish various tasks, such as buying new garbage cans.

Development impact fees could help support the provision of robust infrastructure.

For example, while I do believe that DC has an obligation to support the provision of public space and facilities in all of its districts, many residents believe that it is "unfair" that the NoMA district (north of Union Station) is "getting a lot of money from the city to build parks" ("With $50 Million in Hand, NoMa Looks to Close “Parks Deficit”," Washington City Paper) while other areas have the same needs but no programs for addressing those needs.

On the other hand, were there a set of development impact fees, a goodly portion of the money needed to provide such facilities in NoMA could have been "self-generated" from such fees, given that the NoMA district is adding millions of square feet of office and 6,000 or so residential units in multiunit buildings.

Note that a few years ago when DC's Zoning Commission eliminated certain recreation facilities provision requirements for downtown properties, I recommended instead that those properties should have to pay parks and recreation space impact fees, and that DC should develop a plan for enhancing such facilities in the downtown district, including the development of an "urban" recreation center.

Athough many of the apartment buildings do provide those kinds of facilities, although on a privatized limited or no public access basis.

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Speaking of impact fees, in a separate editorial, "Gorge Amphitheatre should pick up medical tabs from events like Sasquatch!," the Seattle Times suggests that the operator of the Gorge Amphitheatre, should charge a fee to concert goers to help subsidize the costs imposed on a local medical center for providing services for events.  Also see the ST article "Proposed $1 fee on Gorge tickets would pay for emergency services."

Times have changed with regard to funding infrastructure improvements that make land more valuable

I went to an estate sale last weekend, and one member of the family had been avidly interested in transportation and historic preservation, so I ended up buy hundreds of dollars of books.

One book that I am reading now, Getting There: The Epic Struggle between Road and Rail in the American Century by Stephen Goddard, is a particularly excellent discussion of the development of an integrated system of roads in the U.S., how the integrated system of federal and state involvement was development, and how rail-based transportation was vanquished, while ensuring that the automobile industry would continue to enjoy a large market for the sales of new automobiles.

Except for what were minimal costs of gasoline taxes and registration fees, motor vehicle users didn't pay for the development of roads, unlike how railroads, interurbans, and streetcar systems had to pay franchise fees, provide other inducements (e.g., most of Connecticut Avenue in DC was built by Senator Newlands' streetcar company as part of the franchise agreement--Newlands built the streetcar system in order to ferry residents to and from his land development venture in Chevy Chase DC and Maryland), and pay property taxes on the land and infrastructure.

While taxes and fees to fund transit are fought by developers these days, in the old days it was just part of the business and process of making land valuable.

That's why it is almost hysterical to me that today's Post reports, in "Md. to pay for infrastructure improvements in settlement with Konterra Development," that the State of Maryland is paying $72 million for infrastructure development for the Konterra land development in northern Prince George's County, as a result of land seized for the Inter County Connector.

First, it's funny because THE INTER COUNTY CONNECTOR WAS BUILT IN LARGE PART TO MAKE KONTERRA ECONOMICALLY VIABLE--Land that yes is accessible to I-95 but is still almost 20 miles from Downtown Washington.

The east-west Connector makes Konterra's "4,500 residential units, 5.3 million square feet of commercial, retail and office space, and 500,000 square feet of hospitality space" twice as valuable.

But the owners pay little. Hell, they should have given the land to the State for the interchange, since it makes their development viable instead of just a bunch of land.

They should have had to pay tons of money towards the intersection, which converts the development potential of "4,500 residential units, 5.3 million square feet of commercial, retail and office space, and 500,000 square feet of hospitality space" to development actuality.

Now, it's not exactly true that developers pay nothing. Unlike DC, Prince George's County does charge developer impact fees, as well as impact fees for public safety and school facilities. According to one document:

The Prince George’s County school facilities surcharge in fiscal 2009 is $14,019 for development outside the beltway and $8,177 for development inside the beltway. The public safety surcharge in fiscal 2009 is $6,619 for development outside of the “developed tier,” as defined in the 2002 Prince George’s County Approved General Plan, and $2,207 within the developed tier. The surcharges are collected at the time a building permit is issued.

The fee for general impact on infrastructure is harder to calculate, because it's dependent on the type of use and construction material. The PG County permit group doesn't provide a master table of impact fees comparable to how Montgomery County does.

The way I calculate it, the cost of a building permit for 5.8 million square feet of commercial space is just under $4 million, but I don't know if that includes the developer impact fee that PG County is allowed to assess. I don't know how the public safety fee would be calculated and there wouldn't be a school facilities fee on commercial property.

The fee for housing ranges from about $800-$2,000 for single family houses, and is $500/unit for townhouses, plus a $20,638 fee/unit of housing for public safety and schools. So if it's 50/50, that would be total fees of $1,125,000 for building townhouses and a range from $1.8 million to $4.5 million for development impact, and a lot of money, almost $93 million, for schools and public safety.

Even so, especially considering that far more money will be invested in road infrastructure to support Konterra's not quite 500 acres of land than this $72 million down payment by the State of Maryland (not to mention some portion of the $2.256 billion spent on the Inter County Connector), it seems as if the developers are getting off easy.

In Montgomery County, the transportation impact tax on the commercial property would be about $32 million and maybe $25 million for the residential property. That gets a bit closer, but still is nowhere near covering the $72 million the State of Maryland will be spending.

(Image of one of the new MTA Commuter buses from Metro Magazine. I saw one on Friday on I-95 but I was driving and couldn't take a photo...)