A Story Is Substance

The Laurel City Council did not approve any TIF money for Laurel Commons last week. They only approved the TIF map boundaries. The Gazette left their readers confused, incorrectly writing that the council had approved $14 million for public financing. The Leader got the story correct. Council members must still decide how much, if any, money will be invested in the project.

What do you think?
Would you vote to invest city tax dollar$?
Please add your comments below.

I don’t envy the council’s decision. It's a hot political topic. I’ve already received a surprising number of private emails and comments from neighbors strongly opposed to the TIF. I’ve only had a couple in emails in support. The opposition’s comments have included:

• “We should not pay for more retail. We don’t need it.”

• “Give a TIF to Main Street. They need it more.”
• “They [developers] didn’t say they wanted a TIF last year. Why now?”
• “Invest city taxes for a Burlington Coat Factory? No way!”
• “No more bailouts, bulldoze the mall and build a park.”

I’ve been wondering why so many Laurelites are opposed to the TIF. Why are there such strong emotions?

It might be a reaction to the bad economy and the billions in bailouts for banks and automobile companies. But this can’t be the reason because the anti-TIF drumbeat started long before the economy tanked.

Then, thinking back over the Laurel Mall story, I began to see that some of this opposition might be the result of how the rebuilding story was told. We tell ourselves all kinds of stories. Sometimes the story matches reality and sometimes it doesn’t.

When I start a round of golf with a shiny new driver, I tell myself a story that I’m going to shoot like Tiger Woods. Usually by the third tee I realize I’ve got the same clumsy game as before. It’s a shiny new driver but it’s the same old, fat, bald guy swinging the damn thing. I think that might be what’s causing the strong opposition to the Laurel Commons TIF. We bought the dream but then reality kicked in at the exact same time the TIF was mentioned. Of course we are feeling disappointed.

You have got to hand it to the Laurel Commons developers. They really pumped up the original story. Expectations were sky high after those early focus groups. We swooned over the dream of a reborn mall with historically accurate mill art, classy fabric swatches, and even an ice skating ring.

These story tellers were slick. Maybe too slick as everyone realized we were only getting common stores and the promise of a couple of restaurants and a new multiplex theatre. After buying the early story about a shining cathedral to retail consumerism, we woke up to realize that we are simply rebuilding a shopping center. It's really not Tiger Woods. It’s just the same old, fat, Wilson, but now he has a new toupee and wants the city to pay him $14 million for playing.

You need to sit in the dark to appreciate the light.
You need to fear the nightmare of hell to accept the dream of heaven.

Why do so many people oppose the TIF for Laurel Commons? Let me offer the following explanation for your consideration.

We sold the dream without first selling the nightmare of a failed mall. I think that we, all of us, city leaders, mall developers and even this bloviating blogger failed to fully explain the true cost of a failed mall.

• The Laurel mall was dead 8 years ago, and this was during the boom.
• What would have happened if the developers passed on the Laurel Commons project?
• How long would the mall have survived in today’s economy? It would have gone from death spiral to flat line. Tax revenues would have dropped to near zero.
• The downside of a dead mall is almost insurmountable for a town our size. We can’t absorb the loss.
• How many of you remember the dead Rockville mall? It decomposed for over two decades, not only generating zero tax revenue, but its blight was dragging down surrounding property values.

• The city wins when the Laurel Commons succeeds. We get 40% of the success. If we don't stop the bleeding, we will get 100% of almost zero.
• The tax revenue prediction with a derelict Laurel Mall in 2015 makes the city’s revenue split in the same year with a TIF look fantastic in comparison.

I support the TIF. We must save the mall property from its death spiral. The TIF combines a little bit of city money with a lot of other people’s money to keep the mall from certain death. We won’t get a Columbia Mall but we will get a refreshed mall that will be viable for decades. I would have paid a 40% TIF just to get a new movie theatre.

I encourage the Laurel City Council to approve a TIF for the Laurel Commons project.

There is nothing more important than a story to help us learn new things—or to appreciate common things in uncommon ways.

Getting the story right is one of the most difficult skills to master in business, politics, or life. I've learned to appreciate the mastery attained by the early Christian writers. They told their story and it included both heaven and hell. They got their story right and it has served to both define and renew us for over 2000 years.

Merry Christmas,

rick

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.

Please add your comments and questions here.

Laurel Commons

The Laurel Commons redevelopers provided me with a few interesting drawings that show how the property will look when completed. See the Leader's recent story.

The TIF issue is still not resolved. The County does not appear to support a TIF. Either the County Executive or our local County Council Member, Mr. Tom Dernoga, must sponsor the legislation and neither has done so at this time.

The lack of County support for a TIF will make the City Council's support politically difficult. I don't hear a lot of support for a city-sponsored TIF from my Oldtown neighbors.

Please click on any graphic below for a larger image.

My thanks to Ms. Calista Black, Marketing Manager, Laurel Commons, General Growth Properties, Inc.

Hopefully the architects will soon provide their own web page with better graphics. These drawings are really worth seeing in high resolution.

Laurel Commons Drawings

If you did not attend the recent town hall meeting, Keith over at the Laurel2020 Blog has the story on the artist renderings for Laurel Commons. http://laurel2020.blogspot.com/2008/06/commons-town-hall-info.html

Laurel Commons Briefing

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.

The NEW Mall at Laurel

It's not often you get to see the hidden hand of the market. But tonight the market manhandled the old Laurel Mall and proposed transforming it into something totally unique.

A standing room only crowd gathered at Laurel City Hall to hear and see renderings of the new mall. An impressive team from Somera Capital Mgt (developer and owner), AEW Capital (owners), General Growth (leasing and development), and Callison (architect) described the project and provided the back story for the redevelopment.

The developers explained what the community said in focus groups about the old mall and it was not pretty. Dead, dirty, disgusting were the nice words. One person was quoted as saying that the existing mall was a big disappointment for new folks and an embarrassment for the community. After establishing the low water mark, the team turned towards the transformation concept.

The architect presented a slide show explaining how they turned to Laurel's unique history for new design elements. Georgian architectural elements lifted from the train station. Brick facades and stone are reminiscent of Laurel's early mills. Lots of brick, wrought iron and features from turn of the century color palettes. The pageantry of Thoroughbred horse racing lend an air of fun and color to a children's playground.

Mayor Craig Moe introduced the team and explained how the city is committed to redevelopment. Karl Brendle, Laurel Director of Development and the Mayor created a form of land use planning called a revitalization overlay zoning that was one of the first of its kind in the state. The City Council approved the award winning approach by quickly turning it into law. This is the kind of amazing and innovative policy wonk stuff that Laurel does so quickly and well. Mega kudos to the Mayor, Council, Bob Manzi the city attorney, Karl Brendle and the whole city team. Kudos also to the capital providers and developers for having faith in Laurel.

Here is the Leader's awesome same day coverage of this story.

More to come from me but here are the architect's renderings. Please use the comments section for your comments and questions.

UPDATE - I forgot to mention the new 16 screen state of the art movie theatres!

Laurel Mall Plans

Karl Brendle passed along the following public invitation to learn about the rebirth of the Laurel Mall.

Somera Capital Management & AEW Capital Management General Growth Properties
The City of Laurel & The Honorable Mayor Craig A. Moe Cordially invite you to join them for a public meeting to announce the plans for the new Laurel Mall

Tuesday, January 30, 2007 at 6:30 p.m.
City of Laurel / City Hall
8103 Sandy Spring Blvd.
Laurel, MD 20707