The Towson Row bailout is a good deal for whom?

There is an editorial posted today by the Baltimore Sun captioned “Towson Row has been handled badly but still may be a good deal.” A good deal for whom? Certainly for the developers.  Probably not for the City of Baltimore or for the ordinary taxpayers of Baltimore County.

The Sun’s editorial board focused on the practical problem of filling the empty crater located where Towson Row is supposed to be. There is a longer view that I believe that the editorial board missed. I wholeheartedly agree, however, with the point made in the editorial that there are important questions remaining to be answered, and that the Baltimore County Council cannot responsibly vote on the proposed $43 million bailout as scheduled on Monday.

Hopefully, the County Council will heed that advice. Given more time, perhaps the other important questions can be explored, and the longer view taken. I have three suggested areas of inquiry. The first is whether the scale of the proposed development is harmful to the City of Baltimore.

What happened to the concept of “regionalism”?

During his testimony at Tuesday’s work session on the proposed bailout, Will Anderson, the director of the County’s Department of Economic and Workforce Development stated that Towson Row was intended to position the County to be able to compete with Anne Arundel and Howard County and the City of Baltimore. It was a point underscored by Anirban Basu, an economist and president of Sage Policy Group, which was paid $9,600 by the County to analyze the economic impact of Towson Row.

Mr. Basu downplayed the size of the County’s contribution. He described the $43 million amount as relatively small, especially considering the County’s need to “compete” for economic development. Here is Mr. Basu’s statement as reported by WYPR:

“Because there is a Harbor East. There’s a Harbor Point. There’s a Port Covington. There’s a Locust Point. And all of these areas are competing with Towson for the most prestigious employers, the highest paying employers in the region.”

Should Baltimore County be using taxpayers’ money to compete with the City of Baltimore for the headquarters of major employers at this point in time? Is it a legitimate goal of Baltimore County government to use government subsidies to turn Towson into a traffic-choked replica of Silver Spring at the expense of the City of Baltimore, when the city is in a life-or-death struggle to restore its employment and tax base?

County Executive Kevin Kamenetz describes himself as a friend of the city, and as embracing “regionalism.” To date, regionalism is a concept to which he has given mostly lip service.

Attempting to create a large edge city replete with high-rise office buildings a couple of miles outside of the city is not regionalism. Washington, D.C., with a massive federal agency presence downtown, can survive a Silver Spring on its outskirts. The City of Baltimore may not.

It is an issue that was largely glossed over when Towson Row was proposed in 2013, and again in 2015 when the County Council rushed through the zoning concessions necessary to allow the developers to shoehorn 1.2 million square feet of improvements on about five acres of land.  Better late than never, and the issue should be considered by the County Council before it votes to approve the bailout.

Why isn’t the absence of development impact fees in Baltimore County recognized as part of the taxpayer subsidy of Towson Row?

In a post on Tuesday, I talked about how the absence of development impact fees or development excise taxes has been a boon for developers in Baltimore County, but has harmed residents. The last time that Baltimore County gave serious consideration to the imposition of impact fees was in 2005.

Ironically, it was a study by Mr. Basu and the Sage Policy Group commissioned by the Maryland Homebuilders Association (a trade group) that helped persuade Baltimore County officials that impact fees were not justified in Baltimore County. Mr. Basu concluded in 2005 that existing taxes and fees paid by the owners of new construction more than offset the costs of expanding the capacity of public facilities to accommodate the new construction.

Suffice it to say that other economists have studied jurisdictions with similar tax and fee structures and concluded that, without impact fees or development excise taxes imposed on builders and developers, the owners of existing homes and businesses subsidize the expansion of infrastructure capacity necessary to support new construction. In any case, Baltimore County remains the only metropolitan county in Maryland (and the only county in Maryland with a population of over 100,000 except Wicomico County) that does not impose either impact fees or development excise taxes on builders and developers – and it shows.

When you drive around the streets and road of the County, and visit schools and other public buildings, two words come to mind: Deferred maintenance. Infrastructure is not being repaired or replaced when it should be in Baltimore County. That will catch up with the County sooner rather than later.

I threw some numbers around in my post on Tuesday, and I will provide some more today. The combined populations of Anne Arundel County and Howard County are just a little more than the population of Baltimore County. In the past three fiscal years, those two counties collected a combined total of about $96.5 million in impact fees.

That’s $96.5 million that the two counties did not have to spend on expanding the capacity of streets and roads and other public infrastructure to support new residential and commercial development, and could use to take care of existing infrastructure. Think of what Baltimore County could have done to fix its streets, roads, schools, and other infrastructure with $96.5 million over the past three years.

The developers and builders of Towson Row will not have to pay transportation impact fees. So who is going to pay for the widening and other improvement of streets and roads in Towson necessary to cope with the traffic generated by Towson Row? That’s right, the same taxpayers paying for the $43 million bailout.

Maybe Baltimore County could chip in a little bit more money and ask Mr. Basu to calculate what the developers would pay in impact fees for Towson Row if it was in Anne Arundel or Howard County. I believe that the savings to the developers attributable to the fact that they will not have to pay impact fees in Baltimore County should be recognized as part of the County’s financial contribution to the development.

Do the developers need the bailout to make Towson Row economically feasible, as they claim?

Brian Gibbons, the president and CEO of Greenberg Gibbons, testified on Tuesday that the developers needed the proposed County funding to make the project work. Mr. Gibbons has a sound reputation as a developer, and his credibility is not in question. But that’s not the point. Individual members of the County Council may operate on trust, but as a body the County Council is under a duty to verify.

In an email that I sent to the County Council on Monday, I suggested to the County Council that they should require the County Attorney to confirm on the record that the County Council has the legal authority to approve the bailout. A city or county cannot simply decide to spend public money for a private purpose outside of a specified framework enacted into law by statute or ordinance.

The only such framework relevant to the proposed bailout of which I am aware is found in Title 10 of Article 10 of the Baltimore County Code, which establishes the Economic Development Revolving Financing Fund. Before a loan or grant may be made from that fund, a detailed application must be submitted to the Department of Economic and Workforce Development that requires the applicant “to supply information necessary to evaluate the requested financial assistance” including the “financial ability of the applicant” and the “need” for the assistance.

The application for financial assistance in this amount for a project of this size would be voluminous. Was an application submitted, and has it been made available for review by the County Auditor and County Council? Was an evaluation of the application performed by the Director of Economic and Workforce Development according to the criteria specified in § 10-10-105(d) of the County Code?

If the procedures set forth in § 10-10-105 of the County Code were not followed, what is the legal authority for the proposed financial assistance to the developers of Towson Row? Failure to follow the legal formalities necessary to obtain the assistance would spell doom for the tax credit advances and hotel tax advances if a taxpayer’s suit is filed.  Considering the widespread and vehement opposition to the bailout, it would be foolish to assume that a taxpayer’s suit would not be filed.

                                                                          * * *
The editorial in the Sun accurately described the mishandling of this matter by the Kamenetz administration. If anything, the Sun’s observation that Mr. Kamenetz “has worn out his welcome with many voters” is a gross understatement. In my opinion, the chickens from his generally imperious attitude toward residents have come home to roost.

I take issue, however, with the suggestion in the editorial that “politics…related to Mr. Kamenetz’s gubernatorial aspirations” is playing a role in the opposition to the bailout. From what I have seen and heard from the opponents, it appears to me that the opposition is based on the belief by the opponents that the proposed bailout is simply one more instance in which the Kamenetz administration has favored the interests of developers over the interests of the ordinary citizens of Baltimore County.

December 14, 2017

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