County officials: Without TIF, Howard County could 'wait forever' to redevelop downtown Columbia

As the Howard Hughes Corp. develops downtown Columbia, Howard County officials defended the need for $128 million in tax increment financing to fulfill a vision to create a vibrant urban core, a framework laid out by the 2010 Columbia redevelopment master plan.

The tax increment financing, known as a TIF, joins nearly $2.21 billion in private investment proposed for the full build-out of downtown Columbia, which Howard County Executive Allan Kittleman envisions will be "the driving economic engine and force of the county."

As proposed, the county would have three rounds of bonds sales over the next three to four years, the first of which is now before the Howard County Council and includes $90 million for the Crescent area this year. The public financing covers a 2,545-space public parking garage, intersection improvements and roadway changes along Hickory Ridge, Merriweather Drive and Symphony Drive.

"Howard Hughes can certainly invest their money in something else and get a better market rate of return," said Stan Milesky, the county's finance department director. "For us to see the comprehensive and organized completion of the downtown Columbia plan, both in terms of its breadth and timing, we realize that we might wait forever for Howard Hughes to develop this property and it still may not be to our liking."

Without the TIF, the developer would not have sufficient incentives to maintain its development plan and could possibly stall development, according to projections by MuniCap, the consulting firm hired by the county.

Greg Fitchitt, vice president of development at Howard Hughes, said the TIF was "essential to realizing the mixed-use, vibrant 'real city' envisioned by Jim Rouse."

"Without the public infrastructure to support it, the momentum of development in Downtown Columbia would be significantly slowed," said Fitchitt.

The TIF — the largest in the county's history — is a public financing method that allows the county to borrow against the future increased value of property in order to fund public improvements that encourage and support downtown's redevelopment.

Combined with private investment, these improvements increase the assessed value of private properties, leading to increases in property tax revenue. The increment refers to the increase in future property tax payments compared to what the properties generate currently. This increase is dedicated to paying off the county's debt and cover other costs.

In the first phase of the Crescent project alone, Howard Hughes, a Dallas-based company, plans to invest $618 million to create roughly 1,600 rental units, 963,000 square feet of office space and 211,000 square feet of retail. The overall development effort calls for 3.4 million square feet of office space and 250 hotel rooms.

Only $128 million of the developer's initial $171 million request qualified for public financing, according to county officials.

The county estimates the development effort will produce $408 million in net revenue over 30 years after all costs are covered. Overall, the program could yield $1.7 billion in total revenue, according to estimates.

But the county and Howard Hughes have not reached a profit-sharing deal, which determines how much both parties can profit from above what they agree would be a reasonable amount for the developer.

The deal pays for roadways, intersection improvements and stormwater management and water and sewer improvements within the county's road beds, said Milesky.

The TIF does not finance a new elementary school, library, fire station, arts center and transit center. The growth in revenue because of the development effort could free up county funds for these projects, which Milesky said have been on the county's budget books for years.

"The need for those projects will be accelerated because of the development effort, but the county was already facing the expense of those projects even without the development effort," said Milesky. "[Howard Hughes] could not be expected to do all the things we have here and earn less than market rate return on their investment. That's what it comes down to."

Howard Hughes would pay a special tax in the event of a shortfall in the anticipated tax revenue.

The company earlier sought a $60 million TIF to fund a 3,303-space garage in 2013, according to Deidre McCabe, the county's communications director.

TIF negotiations — which were based on a development plan for the Crescent that was not fully defined fell apart under former County Executive Ken Ulman's administration because it was unclear who would own the garage, said Milesky.

The developer and the Ulman administration settled out of court after the county sued the company for $106,000, citing allegations that Howard Hughes did not pay fees to establish a TIF district, according to court records.

County officials said the new TIF — a marked shift from previous negotiations and part of a larger proposal to incorporate affordable housing — is the way forward to make downtown Columbia the next big city in the area.

"The time has now come for Howard Hughes to develop this property and in order to do in a way that we believe is consistent with the downtown Columbia plan, we realize that we have to engage with them," said Milesky. "Not more than need be. But sufficiently so that we can see the downtown Columbia plan move forward."

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