The Laurel Commons developers presented their plans for the revitalized mall tonight. I arrived late but here is what I heard:- They have settled on the following anchors for the project, a Regal 14-screen cinema complex, a new Burlington Coat Factory store, the existing Macy's, and an 400 unit apartment complex located in the old Montgomery Ward's garage area. (My original number of 1100 was quite wrong. - grw)
- The developers are asking the city and the county to kick-in to help finance the project. This is called a TIF, or tax increment financing program. A TIF is a common tool for redevelopment projects. A TIF creates a public-private partnership for the purposes of obtaining public capital investment for infrastructure improvements.
The Storyline
The TIF story is pretty straightforward. For example, assume today that the mall owners pay $250 thousand dollars a year in city property taxes. This is based on the mall's value today. The developers are going to make investments in revitalizing the mall such that the mall's value increases along with the property taxes paid to the city.
Let's say that the mall reopens in 2010 and the owners now pay $1 million dollars in property taxes on the drastically improved property. Then the new increment in taxes would be $750 thousand ($1 million less the original $250 thousand we get today).
The developers want the city to use 60% of that increase (~$450 thousand) to pay off a bond that will be used for improvements. The city will still get the original $250 thousand plus the $300 thousand from the remaining increment ($750 - $450). The TIF is set at this 60% level for thirty years. After 30 years, all of the taxes then go into the city's coffers.
In reality, the developers are looking for the city and the county to pay for a $36 million bond ($18 million each). The bond money will be used to pay for infrastructure improvements such as road and utility enhancements and new parking garages on the property.
It will cost the city approximately $47 million over 30 years to buy the $18 million dollar bond at a predicted 7.75% annual interest rate. But keep in mind, the city is paying the off this debt with the property tax increase (increment). Another way to think of it is that for every dollar in new property tax, the city keeps 40 cents and 60 cents goes to pay off the infrastructure debt.
My Conclusions
I'm a little disappointed in the anchor stores, but I'm realistic. The developers were stuck with the legacy of the smallest Macy's in the world and a long term lease with Burlington. Neither of those stores are currently useful to me or my family.
But in today's market, Laurel simply can't support the same stores as Columbia or Annapolis. Maybe over time, we could grow into more high-end stores. Redevelopment now could provide us with that opportunity later. I think the new Mall will be an attractive addition to the city. I'm looking forward to walking to the movie theaters and eating in the new restaurants.
I also support the TIF. If we do nothing, the mall continues to deteriorate and our tax base continues to erode. The deal they offered us tonight is significantly better than any other option we have and we might just find ourselves in a very strong position 5-10 years out.
I also don't think of the mall revitalization as a single isolated decision. In my opinion, it's the first move in a long-term strategy involving scores of properties along U.S. 1 from the Patuxent river south to Contee road. I see these properties as chess pieces on the city's game board. We have to plan our moves well today if we are going to thrive in the future.
Today, there are powerful development forces blowing through our region like BRAC, Green Line extended, Konterra, ICC and skyrocketing energy prices. These forces are rapidly changing our commercial and residential environment. We can't afford to wait. Have you seen Konterra? Those are billion dollar footsteps pounding just behind us. If we delay our revitalization decisions, we will lose. We must be smart and courageous.
We must look to the long term and plan multiple, mutually supporting, redevelopment moves today. We must be prudent. We must doggedly ensure the developer and the county comply with their parts of the deal. We must ruthlessly verify every detail. But we simply cannot afford to remain frozen in place. Laurel must have innovative redevelopment in our commercial core.
My Bottom Line
I want to see all of the fine print, but I believe that the Laurel Commons redevelopment proposal is a very reasonable and exciting first step. I also encourage the Mayor, City Council and the Prince George's County Council to support the TIF legislation.
Sorry for the long winded post. The story is complicated and I had to do some math. My 30 year bond payment calculation was based on the following fixed rate mortgage formula: c = (r / (1 − (1 + r) ^- N))P *N
The comments section is now open for you. What do you think about the Mall? Do you support the TIF? Please take the poll on the upper left side of this web page.
Full Disclosure: I served on the City's 2006-2007 Master Plan Advisory Committee.
24 comments:
I wasn't able to be at the meeting tonight, but I seriously doubt that attending would have done anything to dispel the feeling in my gut that this TIF request is a shakedown.
Were the following questions brought up at the meeting?
Why wasn't this need for bond money for improvements brought up earlier, like, say, before they bought the place?
What have they been doing with the Mall since they bought it? Why no movement? That kind of delay causes the cynic in me to feel that there was no actual intent to complete a project, that it was just a paper project; that they speculated, timed it wrong, and are just waiting to sell.
Unless they can shake us down, that is.
I live right behind the mall and can't wait to see something done with that property. But the delay and the timing of the TIF request doesn't pass the smell test for me.
Mike:
I was 30 minutes late for the meeting, so I'm sure I missed the opening explanations. The briefing drew a nice crowd. Some folks seemed hostile to the developers, which surprised me. These guys may be shaking us down, but I don’t think so.
It seems to me that their biggest problem is that they come off as too slick and overproduced. I think it makes people think they are getting fooled. These guys should tone it down at least two f-stops.
They also obviously set everyone’s expectations way too high with the original focus groups and their first big splash, dog and pony show. Last year, we were getting swept off our feet by Prince Charming building us an Emerald City on Baltimore Ave. Last night the honeymoon was over and the reality set in that they are just redeveloping yet another shopping center.
Last night I also felt that they were still trying to sell the community on the project based on fabric swatches and color chips. I think the crowd was looking for more substantial information like detailed construction schedules and a negotiated tenant list.
They said last night that they were always going for a TIF. I do remember a brief comment about public financing at the first briefing. They also admitted that the current economic conditions are making the project more difficult. I did not hear any other explanation for the delay.
I still believe that it's a good deal for the city.
Thanks.
When the Gazzette interviewed me after the meeting, I explained that TIF is a useful means to provide supplemental financing and given the need for this project, it seems entirely reasonable to me. The TIF, in a way, is part of the down payment for the greater financing sought from lenders by the developers. Lenders would be very unlikely to approve the basic financing without additional cash in from other sources.
The TIF money would be used only would public infrastructural work, such as road improvements and the like. It would not be used at all for the Mall structure, as I understand the plan.
By the way, to put this into some financial perspective: The total amount of improvements was cited as somewhere between $300 - 450 million. The total TIF would be $36 million, half each from the county and the city. The TIF percentage, we were advised, is enough to tip the project from being an ongoing investment loss to a profitable one. This is of course essential for the rest of the lender financing.
I did point out at the meeting that we must be mindful of the assumptions, the greatest of which is the appreciation in value of the property due to the improvements. Although it is certainly true that there will be increased value (and thus increased property taxes to the City), it is also true that the amounts of appreciation are speculative; thus, the increased property tax amount is also a guess.
One of the responses during the meeting to my several TIF questions was that the developers are using a nationally recognized consultant. Similarly, after the meeting Mr. Smalls told me that the City is using a consulting attorney. These are reassuring certainly, but the financials remain speculative.
Statistically, one may not assume that one project's outcome will be the same as others. Stats may not be applied to individual cases.
Residential property in the past year has largely depreciated in value. The same could happen here. The following questions are important if you accept that possibility. I did ask the question: "Do you know of any TIF projects that have defaulted?" They could not cite any.
Let me say that I support the project wholeheartedly, but there are questions to which we should want answers. Chief among them: Who is liable in the event of default? And what could be the general impact of a default on the completed development?
In most bond settings, the bondholders take the hit. I would like to know if Maryland statute allows for any other possibility, such as our tax coffers having any liability.
I do commend the developers for their preparation. They did a good job. Now let's get to the details.
Dave Mann
Orchard Towne
Laurel
please, this is a total shakedown... why should the taxpayers pay for the malls redevelopment and not for hawthorne etc.?
I have two problems with the TIF, one in concept and one in specifics.
It's an advantage being given to a large business that isn't available to smaller competitors. Almost every business planned for the redeveloped mall will be competition for some existing business in the city or county. Personally, I'd love to have a portion of my taxes 'earmarked' for adding a high-speed fiber optic internet connection directly to my home, but it ain't gonna happen.
Secondly, it's impossible to judge whether this is a good idea without being able to compare the benefits with a "no-TIF" alternative. The developers weren't interested in discussing a "Plan B" last night, but if the city hasn't asked and received that information, they're seriously neglecting their fiduciary responsibility.
I screwed up. The correct number of apartments is 400. Sorry for the error.
Rick wilson
how about a TIF for Olivers recent renovations? I bet that'd make him happy!
Why are we paying people just so we can go and make them richer by buying merchandise from their tennants?
The idea that the "anchors" are the apartments is a bit fuzzy to me...
Rick,
Why do we have to swallow whatever the developer says is right? Thye bought it, they should fix it up. Why the support for corporate welfare?
I think the real issue - and its sad - that for several reasons Laurel is just not ready to support a decent mall. The developers, city and residents are not looking at the right issue...its not the TIF. Macy's can be a decent store, but the version in Laurel sells mostly low end products, and is not typical in size and merchandise to others thrououghout the area. Burlington Coat factory sells junk. Laurel also cannot attract even a decent grocery store. In spite of all the higher end construction, we are still dominated by a belief that shoplifting and crime prevent a business from operating like those in Columbia. No matter how financed, hohw will this mall be any different if it cannot attract better stores?
Steve
Agree 100% with Steve.. I'm in favor of giving the developers everything they want if they can guarantee this new mall will have stores and amenities I want to use. It doesn't sound like they're saying anything new, and that worries me. -Dan
What ever happened to a different grocery store chain. Harris Teeter just opened up in Kings Contrivance
last week. What about Trader Joes, & MOM's. What about the Dutch Farmers market. They have a large following. They have not moved yet?
My family is happy about the regal cinema's. But we do need a real good reason to shop there.
Back to the TIF: So if the property taxes do not go up to 1 million dollars and only go to half a million. That means the increase is only 250 thousand.
So there would be nothing to pocket in the city coffers. We would actually be in the hole 200 thousand. How would that all play out? Karen Schembari
Folks:
First, let me thank everyone for their thoughtful comments.
RE: TIF - There is no doubt about it, a TIF is a government subsidy. It was designed to finance big redevelopment projects. Max at Pasta Plus or Billy Miles at the Meat Market would be hard pressed to take advantage of it.
Laurel cannot survive financially without a successful mall, and the rest of the RT 1 commercial core doing well. This corridor provides significant tax revenue to the city and county.
The mall property is small by today's standards at 44 acres. I've been told that the minimum size for a mall today is 100 acres.
A TIF provides an incentive to the developer. We can decide against a TIF, but we might be sending a signal that our community is not supportive of redevelopment. This could slow or stop redevelopment, or it may not.
Developers have lots of opportunities, they may decide to take their investments elsewhere. This is the crux of decision for our elected officials. Subsidy now or not.
Like I said in the original post, the Laurel Commons project is not an isolated decision. It's the first of many redevelopment decisions. We must decide now how we are going to use future tax revenues for investments today.
While I'd disagree with the statement that "Laurel cannot survive financially without a successful mall" (it's been quite a while since we had a successful mall and there's a thriving commercial presence in the mile south of the mall), it's not the kind of success we'd all like to see.
For all the reasons Rick mentions and based on the lack of any kind of negative comments coming out of the city council, it's safe to assume that this is gonna happen - with the TIF.
On the other hand, we should make sure that the TIF funds are used in ways that benefit the whole area and not just the developers of the mall. At Thursday's meeting they kept talking about how the parking garages, etc would be "ours" - in that case the design of all these "amenities" should be done to "our" satisfaction. That means there should be lots of emphasis on how the design connects the Commons with the surrounding communities and the nearby retail areas that are future redevelopment candidates.
And you can make all the noise you want about the types of stores that they're trying to attract, but you're only going to see those businesses that know they can be successful in our environment. It looks like we could end up with a modernized version of the Laurel Mall of 10-20 years ago, with the addition of a megamovieplex and more of an emphasis on eateries. There's no reason why that can't be "decent", even with a Burlington Coat Factory on site.
Financially speaking, the City benefits greatly from the TIF, by the undoubted increased tax base. Are the new owners allowed to benefit, too, by relying on other financial sources? Of course, they should. That is the essence of a public-private partnership. Both parties benefit. Laurel citizens also benefit by having to spend less gas money to drive to shop (many can actually walk to the mall).
Frankly, the previous owner did the City no favors and has been a very bad neighbor. Any vitriol that citizens have should be directed at the previous owner for standing idly by as the mall decayed. In addition, past City administrations sat on the hands and did nothing, too, while the largest and most-visible commercial parcel in the city got worse and worse. If somera is putting in $450M, the city and county can defer $36M in future taxes (taxes that they otherwise wouldn't be getting, by the way, because of the mall's long slow decline in value). Finally, laurel citizens should keep pressure on the City and the mall owners to ensure that quality is maintained and even improved throughout the years. Even though Somera paid for it, the mall's role in Laurel should be the responsibility of all us.
to quote the great Larry The Cable Guy, "What is this, Russia or sumptin?"
Somera bought the Mall said squat about "public-private" partnership and now wants not 36 million but actually 94 million if Rick's math is right.
It's not like they're going to sit on 450 million investment and let it rot. They'll maximize thier investment like any good business would. These guys are bluffing and we shouldn't be fooled by them.
There's no way I'd give away the tax dollar store just to have a few more places to eat.
how does the city benefit from giving these guys 18 million?
why not 80 or 100 million?
Getting right to the heart of the matter: the reason that Keith's FIOS connection doesn't get a TIF and Oliver's doesn't get a TIF, is because neither of these two improvements can have the same domino-effect on the city's fortune (positive or negative) that the mall property can have. Fact is, the Mall is the single biggest factor in how non-Laurelites view Laurel. In other words, improve the mall--->improve the perception of Laurel-->Laurel benefits from increased investment and revitalization. Conversely, let the mall continue to die (or, put up an inferior upgrade)-->reinforce the negative perception of Laurel-->watch investment $$$ go to other burbs. Really, those are the Choices that we face. The question is not: Should the mall use a TIF. Since, the city is not giving Somera a single dime from its coffers. The question really boils down to: Do you see this property as THE catalyst for the city, the type of property deserving of a TIF. The type of property that increase the values (and tax base) of surrounding properties.
Given that 90,000 people drive past it each day, I do.
right, no flashy mall and the empire crumbles, the sky falls, and my girlfriend stops doing my laundry...
I think I'd rather hang onto my 98 million in county/city taxes and fix the lake, hire some cops, and actually time the lights on 198...
"...the reason that Keith's FIOS connection doesn't get a TIF and Oliver's doesn't get a TIF, is because neither of these two improvements can have the same domino-effect on the city's fortune (positive or negative) that the mall property can have."
I understand your point, but it's irrelevant to my comment. Of course those examples can't have the "same" effect on the city's long-term fortunes, but who's to say that they wouldn't have a proportionally similar benefit? They wouldn't be $36 million (before interest) deals, so you wouldn't expect the benefits to be as great.
And that's my problem with the whole TIF concept (forgetting for a moment the specific case of the Mall): it's a subsidy that isn't ever going to be available for smaller businesses - and, in large-scale cases like this one, it's often gained through a form of extortion. Let development projects live or die on their own merits, without the city and county trying to guide where we spend our money.
Stephen Kriegel, of the Mall's management company answers my question in this week's Laurel Leader by saying that the TIF has been part of the plan since "day one", but that "it may have gone over some people's heads..." As someone who went to some of the early presentations of the Mall proposal and obviously had my head too low, I need to ask if someone, anyone recalls a TIF being mentioned early on? For those of us who apparently weren't paying close enough attention, does anyone have any documentation of the TIF being presented from "day one" (in one of the early City Hall presentations of the Mall plans)?
And while I’m asking, did The Centre at Laurel (Rt.1 and Contee Rd.) request or receive a TIF for the road “improvements” attached to that development? I went to a number of those meetings too, and I can’t recall any talk of a TIF. But then again, it could have all just gone over my head.
Mike
I’m no expert. But guess I’m looking at this a little differently than some commenters.
I accept that developers are driven by profits. But they are no more evil than a washing machine is evil. You turn them on and they do what they are programmed to do, maximize profits and minimize investments.
So I just try to look at the deal w/o being taken in by the color chips and fabric selections. Are they pulling a fast one about the TIF? I really don’t care. It doesn’t change where we are now. I also really don’t care about the store list either. I don’t shop that much and when I do, it is mostly online. I’ll mainly use the services and movies.
The Laurel mall failed 15 years ago. It just took till last year to die. It was nobody’s fault. It was built too small and too late in the 70’s mall frenzy era. Columbia, Arundel, Annapolis, Bowie all conspired to kill it. Not maliciously, they just had more room to expand.
But paving over or planting grass at the Laurel Mall over is not going to help our fair city. The mall needs to refresh itself to have any hope of surviving. The city needs the refreshed tax revenue because residential units alone are a really bad way for a city to grow. A city needs to have a balanced tax base that includes a healthy mix of residential and commercial.
Laurel City is directly competing with Konterra for commercial development. We are also directly competing with the county for development. The county makes considerably less tax revenue for any project that a municipality wins. When it comes to development inside an incorporated city, the county is not necessarily on our side.
Konterra has big, open spaces. It’s expensive, but a developer can build what they want over there. The county gets to keep all the taxes. To get developers to overbuild in Laurel, we gotta make it worth their while.
Laurel has three distinct advantages. We can turn really fast circles to validate and process a developer’s plans as compared to the time the county takes. We do things in months that literally takes the county years. We also have the revitalization overlay that lets us trade zoning relief for amenities. We also can share in the future tax proceeds as in a TIF.
It’s a real simple deal for me. We need the mall to spearhead the route 1 redevelopment. We need route 1 revitalization to be underway before the economy turns back around and Konterra takes off.
It ain’t just about the mall. It is about the whole corridor from the train station down to Contee Road. It all needs to be turned around to ensure we have the proper amount of commercial tax base to support 30,000 people and 12,000-15,000 residences in Laurel in 2020.
Transit will become a tremendously important piece of the mix during the next decade. Laurel needs to become the transit center of the Baltimore-Washington corridor. But we need to encourage the private investment here that will attract the public transit investment 5-10 years downstream.
I’m convinced that if the route 1 revitalization fails during this economic cycle, Laurel will continue to decay and eventually look like those parts of Route 1 inside the Beltway today.
You and I will move. Laurel won’t have the quality of life we have now. I like it here. I like you and your family. I want to grow old here.
Do we need to give these developers 60 cents on the dollar of future tax revenue? Hell no. We can negotiate. But we can’t take a narrow view. We need to ante up.
We also need to encourage our elected leaders to focus on the whole corridor and see the mall for what it is, a part of a bigger plan. We also need to put the county on notice that Laurel is in the game and we are hear to play it to our advantage.
Thanks again for the excellent discussion. -rick
Rick said: "Laurel has three distinct advantages. We can turn really fast circles to validate and process a developer’s plans as compared to the time the county takes. We do things in months that literally takes the county years."
Rick, I have heard the City (and developers) brag about how quick one can run through the City process - and by my own personal observation, over citizens who raise concerns.
The City can keep its "quick" process and what results from it. I find certain aspects of County permitting lacking, but I can look at a number of projects that got the City's "quick service" and I just shake my head. I guess its a matter of perspective and what one looks for in a development policy.
Tom D
The Poll is closed So I'm storing the results here:
Do you support a TIF for the Laurel Commons Redevelopment?
Yes 27 (60%)
No 17 (37%)
I don't understand the question 1 (2%)
45 Votes
I grew up in Laurel. I left in 1993 for Florida after 30 years. There are a lot of people that come through where I live and work that lived in or around Laurel. When I ask about Laurel I always get the same response. "Ghetto" "Drugs" "The Hood" "Crime" "Not someplace you want to be". I guess you really can't go back home.
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