Council passes tax incentive for housing developments on Metro stations

Council passes tax incentive for housing developments on Metro stations

Proposal to require prevailing wage narrowly defeated

| Published:

Montgomery County Council Member Hans Riemer speaks at a press conference on July 6 about new legislation that would create an incentive for developers to build high-rise housing on top of metro stations. The County Council passed the bill on Oct. 6.

File photo

Housing developers will get an incentive from Montgomery County to develop high-rise buildings on Metro station properties — a break on property taxes for 15 years.

The County Council approved the bill on Tuesday 7-2. Council Vice President Tom Hucker and Council Member Will Jawando voted against the legislation.

Hucker said there are other ways to incentivize housing on those properties and the county needs to know more about what its budget will look like next year.

Jawando said the bill wouldn’t be a good trade — the county would forgo too much property tax revenue for not enough benefit.

Jawando noted a proposed project at the Grosvenor station that council staff members estimated would have a tax abatement worth roughly $1.2 million to $1.4 million each year, for a total abatement of $18 million to $20.3 million.

The bill requires that development on Metro station properties be at least 50% rental housing. For eligible properties, 100% of the property tax would be exempted — a payment in lieu of taxes would be made for a period of 15 years.

Advocates of the bill say there isn’t enough housing in the county to keep up with the population growth and demand.

About 8,000 people have been added to the county’s population annually since 2010, but only around 2,700 new housing units have been added each year, according to a press release from the county on Tuesday.

The county estimated that at least 8,600 units of housing could be developed at Metro station properties, which currently have no high-rise developments. Up to 1,300 of those units could be affordable housing.

During the council meeting, five amendments to the bill were proposed. Three passed successfully.

Jawando recommended the first amendment. It required that 25% of the moderately priced dwelling units (MPDUs) be reserved for people with income at 50% or less of the area median. It passed unanimously.

The second amendment, proposed by Council Member Gabe Albornoz, required that 25% of the workers on each project be county residents. It also passed unanimously.

Council Member Andrew Friedson recommended the third amendment, which created a Dec. 31, 2032, sunset date for the bill. It was approved unanimously.

Jawando proposed two other amendments that failed with split votes.

The first was to let the county’s Department of Housing and Community Affairs (DHCA) review development projects on Metro sites and determine how much of a tax abatement each project would get. A minimum of 80% of an abatement would have been required and the review would have had to be done within 90 days.

“All of these Metro sites are not the same,” Jawando said. “They all are going to be expensive to build on. But they’re not exactly the same. Their layout isn’t exactly the same. … I think we should give the DHCA the authority to look at this quickly in each case and say, ‘Is anywhere between 80% and 100% of the tax abatement needed?’”

But other council members argued that adding a review process would delay projects and discourage developers.

“I think the critical factor here is to create certainty and clarity,” said Council Member Hans Riemer, who spearheaded the bill with Friedson. “I think the market responds to certainty and clarity. We want to maintain that. I am very concerned about something that results in protracted negotiations. I think there are better ways to deal with bigger questions and risk.”

Hucker disagreed with Riemer and said putting in a review process and determining the tax abatement for each project was the right approach because of the financial constraints that the county is under.

“We all know our county dollars are scarce. … We want developers to work in partnership with our county agencies,” he said.

Albornoz said the process wouldn’t be expeditious.

“Expeditious is not normally something that the county utilizes when dealing with matters like this,” he said. “I say that having worked in the executive branch and knowing the wheels of government sometimes don’t move as quickly as we need them to in some cases with projects that can be very complex.”

Council Member Evan Glass said he was also worried about the timeliness and raised concerns about a county executive being able to object to an application and delay it.

Bob Drummer, a senior legislative attorney for the council, said the executive would be required to propose at least 80% tax abatement for 10 years under the amendment.

Council President Sidney Katz said not every project needs a tax abatement.

“I do believe that there is a great possibility that not everyone would need 100% in order to get a project completed,” he said.

The council voted 6-3 against the amendment. Council Members Nancy Navarro, Craig Rice, Albornoz, Friedson, Riemer, and Glass were opposed. Katz, Hucker and Jawando voted in favor.

Jawando’s third proposed amendment was to require a prevailing wage for construction of each development project, which includes an hourly wage, benefits and overtime. He noted that the county already requires a prevailing wage on county building projects.

“I think, as the detractors of this amendment have said, that if we can’t pay people a fair and prevailing wage to build the most expensive type of housing that there is, then we need to question whether we should be incentivizing that with a 15-year, 100% tax abatement,” he said.

Riemer said the county doesn’t require affordable housing developers to pay prevailing wages on projects on county-owned land.

“This requirement would exceed the value of the incentive and we’re right back where we started,” he said. “We haven’t gained any jobs. We haven’t gained any economic development.

“We don’t have the kind of growth that we’re seeking. If this was a county project, we’d do it. But I think in this instance, it’s a little bit more than the project — it overwhelms the value of the incentive. For that reason, I don’t think it’s wise.”

Katz said that if WMATA (Washington Metropolitan Area Transit Authority), which owns the land , were to build on the properties, the agency would have to pay a prevailing wage.

“If they sold this piece of property, then I would not have the same thoughts on it because it would no longer be WMATA property,” he said. “They’re not selling it, they’re leasing it. … Because of that, I believe it is not fair for them to sidestep doing what they would have had to do on their own property if they built on it by leasing it to a private agency.”

Rice said the bill already struck a “fine balance.”

“I think that trying to make some changes to it actually tips the balance and makes it a little bit uncomfortable for me to support,” he said.

Glass said he considers WMATA’s property to be public and prime real estate.

“Similar to the conversation that we had an amendment or two ago about MPDUs and income thresholds, I apply that same standard to this in that as we grow, literally and figuratively, we need to support all of our residents,” he said. “We need to support our residents who are working on these projects on what I consider to be public land.”

The council voted 5-4 against the prevailing wage amendment. Albornoz, Friedson, Navarro, Riemer and Rice voted against it. Katz, Hucker, Jawando and Glass voted in favor.

Briana Adhikusuma can be reached at briana.adhikusuma@bethesdamagazine.com.

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