Months before Frederick County Executive Jan Gardner announced plans for two developers to help fund construction for two elementary schools, detailed negotiations with Gardner, the developers and other county officials led to changes in County Council legislation, emails indicate.
Emails obtained by The Frederick News-Post through the Maryland Public Information Act show that Gardner told the developers that mitigation fees — which developers can pay to build near an overcrowded school — wouldn’t be raised for at least one year. Gardner had proposed to raise the fee the previous year to address rising school construction costs.
Gardner informed the developers of this by email before the Frederick County Council amended legislation to keep the mitigation fees unchanged. Increases to impact fees, which developers across the county pay, were phased in over a two-year period, the council voted, instead of all at once, as Gardner had also proposed. Gardner told the developers of the changes to the impact fees in emails before the change was made.
Gardner said on Friday that it was not surprising the bills were amended.
“When I proposed those bills, I knew it would cause concern from the development industry,” Gardner said. “The development community came in and asked for those fees not to be increased at all. I think that is entirely normal that you will hear from people asking you not to do this or not to do that.”
Gardner announced the deal with the developers in March.
Deal struck for
To pay for two elementary schools — Butterfly Ridge Elementary School in western Frederick City, and Sugarloaf Elementary School, in Urbana — the county will issue $27 million in bonds, for the two elementary schools and part of the cost of building a new Frederick High School.
The bonds represent a significant portion of the state’s share of school construction funding for the elementary school projects. The county-issued bonds would be paid back as payments from the state are received. The developers, Natelli Communities and Elm Street Development, will spend approximately $1 million each to carry the interest on the bonds.
At the March announcement, Gardner, County Council President Bud Otis and representatives from the developers said they had discussed and negotiated how to work in everyone’s best interest and fund the elementary schools.
What did not come up at the March announcement is that as a part of the negotiations, the two developers are now eligible for credits on mitigation fees, roughly $2 million, which is the total amount of interest they’re paying on the bonds. The developers then wouldn’t need to pay the county mitigation fees to build a certain number of units. The credits are determined by the current rate of the mitigation fees, not future increases.
On Friday, Jason Wiley, the vice president of Elm Street, described the agreement with the county as “a done deal,” though it had not been signed as of Friday.
Asked about the information Gardner shared during negotiations, Wiley said: “The council works in a collaborative way with the county executive, that’s for sure, certain members more than others. She seemed to be pretty accurate to make the process unfold the way she suggested.”
In an interview, Otis said he and Council Vice President M.C. Keegan-Ayer met regularly with Tom Natelli, the president and chief executive officer of Natelli Communities, and Mark Lancaster, a builder and a leader within the Frederick County Building Industry Association.
County officials proposed the change to the mitigation and impact fees, Otis said. Councilman Tony Chmelik attended one meeting, but no other council members did. Lancaster was not involved in the final deal.
Natelli brought Wiley to the table, Otis said.
“We wanted to hear what they had to say and let them be a part of the discussion,” Otis said.
Many of the emails between county leaders and the developers were congenial.
Prior to the public announcement of the deal, Gardner wrote to both Wiley and Natelli asking if they were “OK with” Wiley being appointed to Gardner’s work group to study school construction costs and Natelli being named to a group that would study the viability of leasing public school buildings, led by Chmelik and Councilman Kirby Delauter.
Delauter and Chmelik had requested Natelli for the leasing task force, Gardner wrote, and the Frederick County Building Industry Association had recommended Wiley for her school construction roundtable.
On Feb. 12, Wiley wrote to Otis that “great schools are of paramount importance” and “critical to the success of the real estate and building communities.”
The building industry, he wrote, considered the mitigation fees a useful approach to building schools, but asked that the spike in costs to construct Frederick High not be used as the example to set new fee levels.
“The fee increases that have been proposed extrapolating those costs are hard to swallow,” Wiley wrote.
Mitigation fee expiration nears
Emails sent in late February show a deep divide between Gardner and the partner developers on one major issue — whether the mitigation fee provision in the county’s Adequate Public Facilities Ordinance should remain in place.
Before the former Board of County Commissioners passed the mitigation fee option, developers who wanted to build near overcrowded schools were required to build or expand schools, or wait to build new homes until the nearby school wasn’t overpopulated.
Wiley, in an interview, said the development community has broadly criticized the county’s Adequate Public Facilities Ordinance, and developers don’t want the mitigation fee option to die. Before the mitigation fee option, undue economic stress was placed on developers, particularly those working on smaller projects, he said.
In an email to Gardner, Wiley wrote that when the developers entered negotiations, they wanted the mitigation fee option extended for two years. That provision of law is scheduled to expire in July.
“What I heard … was that a sunset extension was not the desire of the executive and would leave the council with a need to obtain five votes to have an extension become law without the executive’s signature,” Wiley wrote in an email, alluding to the council’s veto-proof majority.
Wiley wrote that another acceptable option was allowing the mitigation fee option to expire this year, then be revived in July 2017.
In an email to Otis and his assistant, Wiley forwarded a draft version of a bill that would accomplish this desired “time out.” The email was not sent to Gardner.
In the emails, Gardner wrote to Wiley that she did not agree with the time-out strategy and would only agree to appoint a work group to discuss the issue.
“I do not support this bill and did not agree to it in our meeting,” Gardner wrote. “To the best of my knowledge, there was no agreement to pursue this concept. I am not even sure this is legally permissible.”
It was clear that discussion of extending the mitigation fee option bothered Gardner.
“The intent [of negotiations] was simply to work together to keep the school on time to solve a community problem — school overcrowding,” Gardner wrote in a Feb. 29 email. “This discussion did not include any conversation about fees or the sunset of the mitigation fee option. Let me know whether you want to continue to be part of the solution on this issue.”
Debate on the issue continues
Otis said Friday that any changes to the mitigation fee are “still open for discussion,” including the “time out” option.
He said the mitigation fee option is useful to have, but he hoped it wouldn’t be overused.
Wiley said Friday that the “time-out” option was one idea to give everyone a year to discuss a middle ground.
Gardner said she does not support the continuation of the fee.
“That is going to sunset as far as I can tell. I clearly did not support that,” Gardner said Friday.