Sunday, December 07, 2008

A Laurel Commons TIF Tiff?

Our Laurel City Council will soon be deciding if the city should invest in the Laurel Commons Mall project in the form of a TIF. It's a complicated issue and citizens have strong opinions. The TIF is creating quite a tiff. I'm sure council members are not taking their decision lightly.

A lot of us are talking about the TIF. Some folks are opposed to any form of public financing. There is a lot of public financing going around these days. From bailouts to buyouts and people are getting fed up. "Bulldoze the mall and build a park." "Why should my taxes be used to bailout a developer?" "We don't need anymore retail in Laurel."

Other people want to understand all the details, "Will the city be left holding the bag, if the mall redevelopment fails?" How can we be sure that the developer accomplishes what they promise, they still haven't even started to tear down the parking deck like they said 2 years ago?" "Why aren't we getting any high end stores like Columbia Mall?"

The Mayor sees the Laurel Commons project as necessary for the long-term economic success of our city. He believes that we need to redevelop the mall and use it as the engine that drives redevelopment along Laurel's Route 1 commercial core.

This is both a complex and often emotional issue. It's hard to explain and even harder for the experts, let alone laypeople to understand. This is not an envious position for any city council member. But don't fear, I think that our TIF tiff took a positive turn over the last few weeks. And it's because of the dedication of a couple of real Laurel heroes.

We often think that public heroes are like the brave firefighter who rushes into the burning house. But there is another kind of hero who rushes headlong into thorny, public policy debates. I'll get to our heroes later, but first let me recap our story.

A TIF is a form of public financing. A developer asks the local government to provide some of the funding for public infrastructure improvements associated with a project, for example, parking facilities, roads, or street lights.

The government borrows money (sells a bond) that is used to finance the infrastructure improvements. But there is a twist. Instead of the government directly paying off the bond over thirty years, like my mortgage, the government uses the development's property taxes to pay off the debt. The TIF concept is based on the assumption that the improved property's value will increase over time because of the new development. With TIF, the bond is paid off by using a part of the future "tax increment."

The Laurel Commons developers asked the county and the city to finance over $30 million of public infrastructure improvements. The Prince Georges County government bailed out of the deal early. That left the city to decide if and how much to invest.

Now our two heroes enter the story.

Jim McCeney went to the TIF public hearing a couple of weeks ago. Jim spent many years as a financial officer of a large corporation. He had a lot of questions about the TIF. He was trying to understand the deal in all of its details. He really wanted to know if the TIF was viable and if the developer failed at some point in the life of the deal, would the city need to pay more than we bargained for? Was this TIF the right deal for this city at this time?

At the public hearing, Jim pressed his TIF questions. City staff and consultants provided answers to the best of their ability at this point in the process. But Jim was not fully comfortable that he understood the details.

A lesser policy hero would've stopped at this point. It would have been easy for Jim to just drop it and move on. He is just a citizen. He has other things to spend time on. But Jim didn't drop it. He called around. He asked more questions. He asked for a meeting with the administration and their consultants. He spent a lot of his time. And at the end of the day, Jim got answers to his questions.

This is when Kristie Mills, another dedicated policy hero enters our story. Kristie is the city's administrator. She is the big boss, after our elected officials. Kristie is the day-to-day manager of the city.

I don't know if Jim inspired her to do it, but Kristie ran into all the confusion and fog of the complex TIF issue and she made magic. She wrote a briefing, in plain English, that we can all understand. You can read her briefing on the City's website. Here is a little bit of it.

• A TIF can only be used for public improvements.
• It cannot be used for any private purpose.
• The property owner is responsible for the remainder of the financing package.
• The numbers will be defined in the ordinance as "not to exceed".
• There is no financial risk to the City with the TIF Special Obligation Bonds.
• Payment of the TIF Special Obligation Bonds is derived from the real property tax revenues.
• The Administration believes this is the best package they can offer while still protecting the City now and in the future!

I recommend that you take a few minutes and read Kristie's whole briefing. It's very easy to follow.

The city council still has difficult TIF decisions to make. Council chambers are often frightening places. However, I think we all owe a debt of thanks to our public policy heroes Jim McCeney and Kristie Mills. They went above and beyond the call of duty and we will all make more informed decisions because they did.


Mike Sarich said...

• A TIF can only be used for public improvements.
• It cannot be used for any private purpose.

The TIF will be used to pay for the public improvements that are required under the law for a project of this scope. These are burdens traditionally borne by the developer under the premise that those who benefit from the development should bear a portion of their impact on the community. Because these public improvements are a private responsibility, it’s a bit of a stretch to say there isn’t a private purpose served by this give-away of your tax dollars. Your tax dollars will go to things like parking decks, paving, and lights. To claim that a mall owner’s private interests aren’t served by this, strains credulity.

Why would the mall owners invest the significant funds for the TIF project without a pay-off for themselves? Quite simply, whatever the number of millions that they get is money that would have traditionally gone to the city coffers.

I respect both of Rick’s hero’s here and I honestly don’t know how I’d vote on this issue, heck I worked at the Mall many Christmas’s ago and want to see it come back stronger than ever. However, the thing that sticks with me is that the mall owners never made one mention of public funding at their public meetings and now, in this economy, want us to forgo tax revenue that could be used for more police, more programs, or a reduction in our burdensome tax rate.

Mike McLaughlin said...

My problem with the TIF centers on three things:

1) Where is the TIF for Main St.? By putting so many eggs in the retail basket of the Mall, are we ignoring the historic retail soul of Laurel? Wouldn’t Main St. benefit from a TIF-like instrument that could, at a minimum, help out with the parking woes of a street where once hitching posts sufficed, and prevent the loss of more businesses. I know it is not retail, but the Laurel Leader was, nonetheless, an “anchor” of Main St., and its loss is perhaps Main St.’s greatest recent tragedy, one that should have been prevented.

I realize that for historic towns like ours, there is a delicate balance between progress and preservation. But the amount of that TIF for the Mall seems to throw the scales out of whack. I think more vision, as well as energy and money, needs to be added to the Main St. side of Laurel’s retail environment scale.

2) The concept of a shopping “Mall” is a 20th century retail model that appears only to survive these days as large regional centers (Columbia Mall, Arundel Mills, Potomac Mills). Do we really envision our Mall as such a regional attraction? Would a Mall in Laurel ever be able to draw people away from large, established Malls like Arundel Mills or Columbia, or from anticipated centers like what’s expected at the future behemoth to our south, Konterra?

3) I’ve been to a number of community meetings with the developers of the Mall and have never left feeling better about their plans than when I arrived. They come across as long on sales and short on substance. At times they seemed ill-prepared. And while their shifting plans could be explained as “evolving” plans, it could also be seen as poor planning or leadership; or worse, it hints at stalling for the day when the real estate market improves and they can sell the place to get out from under it.

Anonymous said...

A million bucks for a pool, 20 million for the mall, and not a cent for old town!

The police station moves, the Leader moves, it's like the city doesn't care about us.

Anonymous said...

Amen Mike! Where's the money for old town and Oliver's or Fred Frederick?