Tax dispute stalls veteran housing

The Baltimore Sun

The plans are as ambitious as the $100 million price tag would suggest: a sprawling retirement village for military veterans on the site of a former Department of Veterans Affairs hospital in eastern Baltimore County.

With 1,300 residential units, Bayside at Fort Howard would be one of the largest continuing-care facilities for veterans in the country. But months before the original move-in date for the first residents, the project is in danger of falling apart.

Crews recently stopped renovating the old brick hospital and long-shuttered military quarters on the North Point peninsula campus. And the developer has begun returning deposits to veterans who signed up to live at the development, which would also have a history museum, a large marina and retail shops.

The snag: a dispute over whether the project is subject to Baltimore County zoning laws.

The county says the developer, Federal Development LLC, must obtain local building permits that could delay the project by two to three years, and pay county property taxes to offset the impact on roads and services.

The developer contends that the land is exempt from county regulations and property taxes because it is owned by the federal government.

The dispute reflects a debate over the tax obligations of private developers to local communities when they build on federal land. The debate is likely to surface more often in Maryland and across the country as the Pentagon consolidates military bases and turns over land to companies for development.

John Infantino, chief executive officer of Washington-based Federal Development, said county regulations threaten to reduce the size of his project by more than half, to 500 homes. The levying of property taxes would raise rents by 30 percent to 50 percent, he said.

"It's a much different project at the end of the day," said Infantino, adding that he might not be able to "offer the kind of affordable and numerous housing product types in a continuing-care retirement setting with the focus on veterans that was originally envisioned."

When the company signed a 75-year lease with the VA in February 2004 to develop Fort Howard, officials said the facility would serve as a national model. Never before had a private company leased a department-owned tract of this size, officials said.

The idea is to provide discounted housing and nursing care for hundreds of the 500,000 veterans who reside in Maryland, most of whom are of retirement age.

The only care facility in the state devoted to veterans is the 504-bed Charlotte Hall in St. Mary's County, run by the Maryland Department of Veterans Affairs.

The Fort Howard development would be built on a picturesque strip of land that juts into the Chesapeake Bay. Once a plantation, the site is the spot where the British disembarked to fight the Battle of Baltimore in the War of 1812. It was an Army post until 1940, when the land was turned over to the VA.

For decades, the VA operated a hospital there. It closed in 2002.

The VA and Federal Development agreed in 2004 that the company would renovate more than two dozen buildings, including large houses that once served as officers quarters, and build 36 other structures. A mix of housing would be offered for independent living, assisted living and nursing care.

Veterans would have priority, followed by their spouses, former spouses, and then others age 55 and older. The veterans would also receive rent discounts.

Apartments for active-living seniors were being advertised last year, with rents starting at $1,045 a month.

"I don't think there is anything like this out there," said R. David Edwards, a VA spokesman in Baltimore

The first residents were to move in by early 2009. But last fall, after the company began rehabilitating the houses, Baltimore County officials notified the developer that the project would have to go through the county's development process.

Donald T. Rascoe, deputy director for county permits and development management, said most federal facilities are exempt from county zoning laws. But he said the county treats federal sites used for homes like private developments, requiring them to undergo a review by county agencies to determine the impact on roads, schools and the environment.

"There's all kinds of issues they would be subject to if they go through our development process, and that may hinder them doing what they want," Rascoe said.

Infantino, the developer, said that even though the Fort Howard land is being leased by a private company, the land is still exempt from zoning laws because it would be turned over to the VA after the lease expires.

"We not only have to give the land back, we have to give all the buildings back to the government," Infantino said. "We just stand there for a short period of time."

The VA apparently has sided with the county. In a letter to the developer in December, a VA official wrote that the department would not grant a federal exemption from local regulations in this case.

VA officials did not respond to numerous requests for an interview, and a spokeswoman referred questions about the permit process to Baltimore County.

Infantino said he and the county will meet later this month and that he hopes to work out a compromise that would allow the project to move forward.

About 100 veterans have paid application fees ranging from about $500 to $1,000, he said. Some have begun to ask for their money back, and the company has reimbursed them, he said.

Walter Pasciak, a World War II veteran who lives in Lutherville, said he signed up to live in Fort Howard because he would be able to spend the rest of his life in one place, surrounded by other veterans.

"They were going to have an entire community there, from cradle to the grave," said Pasciak, 83. "They were going to have all kinds of facilities there, the medical facilities. They had transportation to town. The whole thing was very attractive."

But he said that if the project ends up being delayed for years he will ask to have his application fee returned. "I think I'll have to look around," he said. "I'd rather not."

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