Elrich vetoes tax incentive bill for high-rise developments on Metro stations

Elrich vetoes bill that provides tax incentive for housing developments on Metro stations

Council votes line up for possible override

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Montgomery County Executive Marc Elrich vetoed a bill that would provide a tax break for housing developers for constructing high-rise buildings on top of Metro stations.

File photo

County Executive Marc Elrich on Friday vetoed a County Council bill that would provide tax incentives to housing developers for constructing high-rise buildings on top of Metro stations. Elrich called the measure “too costly” for Montgomery County.

However, because the council approved the bill 7-2, it would have enough votes to override Elrich’s veto. A minimum of six votes is needed for an override.

The bill, which the council approved on Oct. 6, would provide a break on property taxes to eligible developments for 15 years. It created a debate between Elrich and the council on the outlook for developing housing on top of stations.

The county has estimated that at least 8,500 units of affordable 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.

The county is currently collecting no property taxes on Metro property that Washington Metro Area Transit Authority (WMATA) owns.

Council Vice President Tom Hucker and Council Member Will Jawando voted against the bill.

Hucker said at the time of the vote that 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.

In a letter to Council President Sidney Katz on Friday, Elrich argued the same points as Hucker and Jawando, as well as other concerns.

He wrote that if similar developments were built at other Metro sites, lost revenue would likely exceed $400 million. Providing developers with $400 million in incentives isn’t worth 8,000 new units, he wrote.

“Put another way, this bill would provide a developer with a $50,000 per unit subsidy regardless of cost of rent,” he wrote. “We simply cannot afford this cost.”

The legislation is expected to be back in the council’s hands on Oct. 27 to consider an override.

“I don’t want my hands on this,” Elrich said in an interview Friday night. “There are a lot of county residents who live in apartments and pay taxes. The sight of expensive housing going up on a Metro [station] and knowing those [developers] aren’t paying taxes, I think, doesn’t sit well with people.”

Council Member Hans Riemer, a co-lead sponsor on the bill, said in an interview Friday night that Elrich’s letter is a “vapid diatribe.”

He said Elrich’s claim of the lost tax revenue to the county is “garbage nonsense.”

“It can’t harm the budget unless you believe that these Metro stations are going to develop without this incentive,” Riemer said. “Every assertion there is made on the false premise that if we do nothing, these high-rise developments are going to come. We’ve been waiting decades. They haven’t come. That entire premise is just totally false.”

“These Metro stations are showcases of parking lots and empty space,” Riemer continued. “It’s been a really long time that Metro has tried to get them developed and we’ve had different companies come in and walk away time and time again because they just can’t make the numbers work.”

“We’re collecting zero dollars from these properties now,” Riemer said, “and we’ll likely continue collecting zero dollars far into the future unless there’s a development that happens there. Again, we’re only talking about property owned by WMATA on the stations,” not property near Metro stations.

In return, Elrich criticized Riemer’s argument and said there’s no need to offer the tax incentive to produce the housing the county needs. County officials have projected housing growth over 10 years that doesn’t involve measures such as providing a payment in lieu of taxes (PILOT), he said.

“Building on top of Metro guarantees that it’s the most expensive housing that will be built in the county because it’s a desirable place to be,” Elrich said. “There’s no way landlords won’t take advantage of location.”

Elrich said there is already available property around Metro stations. Landowners around WMATA would be at a disadvantage with the appeal for developers to build on WMATA property, he said.

If a quarter of the housing that comes to Montgomery County doesn’t pay property taxes and the rest of the housing is affordable housing, which ultimately pays low taxes, the county can’t count on that revenue, Elrich said.

“I don’t understand why someone walks away from revenue when you know you really have to have them,” he said. “It’s going to be impacting. … No taxes means no revenue. I don’t know how you walk around that.”

Council Member Andrew Friedson, a co-lead sponsor on the bill, wrote in a text message Friday night that he was disappointed, but not surprised, that Elrich “continues to work against housing solutions to allow more people to afford to live in our county, especially on Metro sites where there is already transportation infrastructure and even as regional leaders all around us recognize the importance of addressing our housing crisis for our economy, our environment, and our future.”

The Coalition for Smarter Growth voiced its continued support for the bill in a press release released Friday in response to Elrich’s veto.

“High-rise construction provides the most benefits — more homes and jobs means more Metro riders, more transit revenue, and more permanently affordable housing,” Jane Lyons, the coalition’s advocacy manager for Maryland, said in the release.

In Elrich’s letter, he wrote that the public benefit does not warrant the expenditure. The authority already exists to provide PILOTs, which should be offered on a project-by-project basis.

“Not all projects need the same PILOT term or value,” he wrote. “Flexibility should be maintained to enable negotiation of the best possible agreement in the public interest.”

Elrich wrote that the bill could increase the cost of WMATA land, it could potentially set a precedent for incentivized development on other properties near Metro stations, and workers on the project should earn prevailing wages.

When the council took a final vote on the bill, Jawando proposed an amendment to require developers to provide workers a prevailing wage. The amendment failed 5-4. Council Members Gabe Albornoz, Nancy Navarro, Craig Rice, Friedson and Riemer voted against it.

Council Members Evan Glass, Katz, Hucker and Jawando voted in favor.

Another argument Elrich made in his letter was that using limited funds for market-rate housing development means “fewer funds for other services,” such as affordable housing, recreation and education.

The bill also did not have a racial equity and social justice impact analysis because it was introduced before the requirement for the analysis took effect, Elrich wrote in his letter.

“Because the bill will have a significant budgetary impact, it deprives the county of tax dollars that could be used for other programs, including affordable housing that would benefit communities of color most,” he wrote. “This bill allows housing to be built for those who can afford it, not for lower income populations who are disproportionately Black and Latino.”

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

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