Frederick County Executive Jan Gardner’s support of a $2.8 million TIF for the proposed downtown hotel and conference center was called into question at last week’s County Council meeting.
Tax-increment financing, or TIF, bonds allow developments to borrow money based on anticipated future increases in tax revenue, part of which will be used to pay back the bond debt.
The downtown hotel and conference center project currently anticipates TIFs from both the city and the county to help pay for public investments at the project site, including the conference center, infrastructure improvements, land acquisition and parking.
Councilman Kirby Delauter (R) questioned Gardner’s support for the TIF, given that she previously testified publicly against other TIF proposals during his last term as a member of the former Board of County Commissioners, from 2010 to 2014.
So what changed for Gardner?
For one, she tightened the county’s policy on TIF approvals in 2015. The new changes would allow TIFs in more limited circumstances, and would not have allowed the funding mechanism for projects approved by the former board.
Past positions on TIFs
Delauter himself took heat at the most recent council meeting after backing away from the downtown hotel and conference center TIF, after he supported a similar proposal in 2014.
He said new facets to the downtown deal — including competition with another proposed conference center outside of the downtown core — have made him rethink his position.
Delauter also said he is “at a loss” to explain Gardner’s support for the proposed downtown hotel and conference center, given her past opposition to TIF agreements.
“Jan Gardner was losing her mind,” he said. “She thought that the world was coming to an end, the TIF was the worst thing out there, you can’t do that, the taxpayers are going to get totally screwed on this. Now, all the sudden, TIFs are a good thing.”
Gardner said she does disagree with the TIFs approved by former commissioners in Oakdale and for the Jefferson Tech Park development — because they are underpinned by mostly residential areas.
“It’s like every other financial tool,” Gardner said of TIFs. “It can be done well, or it can be done poorly.”
Residential properties don’t generate a community-wide economic benefit and also require expenditures on such services as police, fire, snowplowing and schools.
For the Jefferson Tech Park development, financial estimates provided by Gardner show that the county would direct about $70 million in tax revenues to the development through 2043, while only receiving about $17.5 million in tax receipts.
Delauter argued that the Tech Park and Oakdale TIFs funded important road projects, including interchanges on U.S. 340 and I-70.
Gardner said other financial arrangements should have been used.
Two TIFs she’s supported in the past were for a former Toys R Us distribution center (now used by a different company) that was issued in 1996 for $1.89 million and a MedImmune TIF issued in 1998 for $1.09 million. The MedImmune TIF was for 10 years and has been paid off. The Toys R Us TIF is expected to be paid off in September 2018.
“I support utilizing TIFs to create jobs and will always protect taxpayers by ensuring an immediate property tax benefit to the county,” Gardner said last week. “I do not support the use of TIF’s for residential development. We do not need to incentivize residential development and the county needs the property tax revenue to pay for services demanded by residential growth.”
The county has maintained a policy on when to allow TIFs since at least 2005.
In 2013, the Board of County Commissioners changed the policy to allow TIFs for “planned unit developments,” which are residential subdivisions that include commercial areas. TIFs in Oakdale and Jefferson Tech Park qualified under that change.
With Gardner’s re-write of the policy, TIFs are again limited to commercial, industrial or mixed-use developments.
Gardner also changed the policy to limit borrowing on anticipated future tax revenue. The 2014 policy allowed TIF borrowing when a project was expected to generate additional property taxes of at least 150 percent of the anticipated debt. Gardner raised that bar to 200 percent.
The city of Frederick has no formal policy on tax-increment financing, but has agreed to follow the county’s new policy, Gardner said.
“It’s one of our goals to develop, but the city hasn’t done a lot of TIFs,” said Katie Barkdoll, city budget director.
The one time the city used a TIF, to fund the bridge connecting Gas House Pike and Trading Lane, it followed the county’s policy.
Barkdoll in an interview Thursday said that TIF was successful, and called the county’s policy “strong.”
TIFs for downtown
There are still questions about tax-increment financing for the downtown project. For instance, officials could not say for certain last week that the conference center will absolutely become a taxable property. Under the most recent plans, the center would be owned by MEDCO, a state entity. Once the center is leased to the hotel developer, a for-profit company, it will likely become assessable, officials said.
The exact size of the bonds for the downtown hotel project — and final determinations about the assessability of the conference center — will be calculated by MuniCap Inc., a public finance consulting firm based in Columbia, said Richard Griffin, the city’s economic development director.
Project plans call for a 200-room hotel with 24,000 square feet of conference center space at the site of the old Frederick News-Post building. The property at 200 and 212 E. Patrick St. is owned by a business entity formed by members of the Randall family. The Randall family also owns the parent company of The Frederick News-Post.
Staff writer Nancy Lavin contributed to this report.