The Takoma Junction Project: a Layman’s Guide

The proposed Takoma Junction development project continues to generate a lot of heat, but not enough light. While I no longer serve on the City Council, I continue to watch, talk to people involved and listen to their concerns and questions. 

Given my unique background in real estate development, banking and planning, I want to lay out here certain facts for, I hope, the benefit of everyone regardless of their particular views on the project. 

Let me be clear that I strongly support Neighborhood Development Company’s proposed plans as presented as recently as this month. This won’t surprise those who’ve heard my views over the past eight years. This implies, of course, that I am biased. To counter my biases, I am just going to stick to plain facts as much as possible in this particular blog post.

Confusion and Conflict

There’s a lot of confusion, uncertainty and misinformation regarding the plans for this project. It’s not surprising because different people assert different things about the plan itself and its future impact. Perhaps you get information from neighbors and others whom you know and respect. You hear statements from the developer (NDC), City staff and various consultants, and it may be hard to know what to think. 

City Council members have been deluged with residents’ varying opinions. Unfortunately, some are based on faulty or incomplete information, personal agendas, or wishful thinking.

Nevertheless, over the past six years — since publication of the Takoma Junction Task Force report in 2012 — the City Council has not stopped listening and steadily wading through all the comments and, along the way, finding many constructive ideas that have shaped the project plans.

The Process

While the proposed project design has always been a work in progress (and there still remains work to be done), there’s really never been uncertainty about the process. Let me explain.

With the issuance of the RFP in early 2014, the City Council publicly laid out a process that it intended to follow in order to give the best chance that the Task Force’s goals could be realized. The Council has proceeded one step at a time. For example, no one knew whether any developer would respond to the RFP. (Years before a prior solicitation had gotten no responses.) The City was pleasantly surprised to receive seven responses. So, the process continued to move forward with the Council deliberating publicly on its next steps. 

The Development Agreement

Let’s begin with the fact that the city owns most of the project’s site. NDC has made a side deal to acquire the adjacent 5,470 sq. ft. Auto Clinic site. whose owner decided to sell in part because he wanted to retire. The city-owned lot covers 53,493 square feet, but a chunk of that is an unbuildable treed slope. Taking required setbacks into account, I guess NDC has about 45,000 sq. ft. to work with. 

The City signed a Development Agreement (DA) with NDC in July 2016. This 2-party agreement is in fact a legally binding contract that stipulates terms and imposes conditions on the two parties that are intended to protect the peculiar interests of each. And, like any development agreement, it anticipates various eventualities that could reasonably occur in the future and how the parties will deal with them. The DA remains the operative document along with the contemporaneous ground lease between the City and NDC.

The City Council has been careful to maintain compliance with the DA’s terms.

The City chose to lease its land to NDC for a period of 99 years, instead of selling it. The City will collect rent from NDC over the duration and property taxes on the assessed value of the improvements, which NDC will own. NDC will be responsible for all costs of operations and maintenance as though it were the owner, including any environmental compliance costs. 

Motivations

NDC’s main motivation as a real estate development company is to make a profit. “Profit” in this case means that NDC expects to design, build, finance, maintain and manage the facility, and sublease the space to tenants at rents sufficient that NDC will earn enough revenue from leases to pay its development costs, financing and maintenance expenses, and be able to sustain a reliable cash flow that will accrue to NDC, its owners and investors. NDC is also naturally motivated to build a quality project to enhance its reputation. 

NDC will inject some equity (capital) into the project and will borrow the rest (likely in the millions) from a commercial lender. In order to get a loan, NDC will have to prove to the lender on paper that the cash flow will be more than sufficient to repay the loan, and that the property when completed and fully occupied, will have a value markedly more than the loan amount. (This is stuff I used to do as a banker.) 

There in nothing new here. It is well to realize that every building in Takoma Park was built through this process . . . unless the owner used his own money or built the house for his own personal use. B.F. Gilbert, the founder of Takoma Park, was a developer. So, casting pejoratives about NDC’s profit motives, as some have done, is not helpful.

The City has multiple motivations for entering into this DA. These include, among other things, putting the property back on the tax roll, attracting new businesses to the city, turning the Junction into a more viable shopping district, thereby strengthening all the existing businesses in the Junction, and demonstrating that the City is supportive of good real estate development.

Risks, Costs and Requirements

NDC is assuming all the financial risks in this project. In other words, in the event the project were to “fail” from a business investment point of view (assuming the City were to meet all of its obligations under the terms of the DA), then NDC and the bank that finances the project could suffer possible financial losses. So far the City has spent about $89,000 hard cash on the project, mostly for legal services and consultant fees. This may go up in the future, but not by much. There are rumors that the city has spent “millions” on this project. These are untrue. The City has of course incurred the cost of staff time.

The DA also states that NDC should consider the Takoma Park-Silver Spring Food Co-op as the effective primary tenant in the project in light of the Co-op’s desire to increase its floor space and to expand onto a portion of the city-owned lot. Although a private enterprise, the City nevertheless believed the Co-op was significantly important to its members and other shoppers that the Co-op’s expansion would strengthen the overall project. The Co-op is a tenant on private land adjacent to the city’s lot. The City cannot dictate to it, as with any other business in the city. 

Because the Co-op and NDC are private businesses, the DA stipulated that the two parties would need to negotiate an agreement to cooperate, called a Letter of Intent (LOI). It set a deadline for this to be done, with the expectation that a formal lease would follow. An LOI gives both parties mutual confidence that they can move forward together in the planning and development process. The DA also constrains NDC from doing certain things that might injure the Co-op, like leasing space to a store that competes with the Co-op.

The Co-op and NDC were unable to agree on an LOI by the deadline (Jan 2017), but have continued discussions to try to work things out.

Takoma Junction Task Force

One of the more eloquent speakers at a recent city council meeting said it was essential we all understand the deeper purpose of this endeavor because to him the case was not clear.

The answer goes back to the work and report, published in February 2012, of the Takoma Junction Task Force. The City Council formed the task force in 2010, and appointed 22 people to it, with the mission of determining what should be done with the city lot. Eleven members were from Ward 3 (closest to the Junction). None was from Ward 5. The task force took great pains to reach out to a large number of interested parties including public officials. Its report enumerated 58 recommendations plus some imbedded “additional” recommendations. The authors noted some of the recommendations were mutually exclusive. Of course, a consequence of diverging recommendations is that residents have over the years cited different aspects of the report to support their wishes for the project site.

The City Council did not formally adopt or endorse the report. (It customarily does not do so for task force reports.) The Council commended the task force and has relied heavily upon it to formulate its strategy regarding the lot. NDC’s proposed site plan does in fact meet the major goals identified by the Task Force.

Current Issues

Current issues among opponents, undecideds and supporters include, in this order:

  • — the impact of the added traffic from the project on the existing roads, 
  • — the Co-op’s survival as a successful business through the construction phase and beyond, 
  • — the workability of the so-called lay-by for truck deliveries, 
  • — the overall size (scale) of the project, 
  • — the adequacy of off-street parking, 
  • — assurance of safe & convenient pedestrian paths across Carroll Ave, and
  • — adequacy of publicly available outdoor space (green features) 

In addition, there’s concern for defending the historic integrity of the Junction as part of a federally designated historic district. There is also a vague aspect that I can only describe, for lack of a cogent label, as the appropriateness of future retail tenants’ character in terms of what suits the taste of the quintessential Takoma Park resident.

Each of these matters could merit its own page here. I note a few points. 

Traffic

Everyone agrees that from a traffic and pedestrian standpoint, the Junction is a failure. We are fortunate to have two new traffic engineering studies addressing this. Although hired separately by the City and NDC, the consultants agree about the failure, but also say it’s fixable. The studies concur (or at least don’t disagree) that NDC’s project will contribute a very minor amount of new traffic to the intersection even during rush hours. The Traffic Group has presented a possible reconfiguring of the Sycamore/Carroll/Ethan Allen intersections that (they say) could cure traffic congestion, create far safer pedestrian movements and rationalize mobility and access concerns — even with the new project. This idea will require a more study separate from the NDC plan.

The engineers agree that the proposed lay-by will work for deliveries and trash pick up. Co-op spokespersons, however, remain skeptical. Traffic engineers are indeed engineers. Based on my training and experience in the field, they apply tried and true standardized methodologies to ascertain findings and produce forecasts. The work of these two consultants can be relied upon.

Scale

As for the size and scale of the project (“too big,” some say), NDC has removed any vestige of an earlier proposed third floor. In NDC’s sketches, it tends to look big next to the Co-op’s building. Let’s agree that envisioning a 3-dimensional volume is hard to do for most of us. So I suggest, try walking along nearby parts of Carroll, Sycamore and Manor Circle and see for yourself the relative height of many of the houses. Take a gander at the 2-story structures that house Middle East Cuisine, Mark’s Kitchen and Trattoria da Lina, as well as the buildings on the opposite side of Carroll, all roughly the same height as NDC’s design. They sit right up against the sidewalk. What makes those sidewalks so inviting to walk?

Parking

With 72 spaces underground, not counting the Co-op’s parking along Sycamore, parking will be adequate for Co-op customers, as well as for the new and existing businesses. Co-op shoppers laden with groceries may be concerned with accessing the underground parking. Is one elevator enough? The current city lot has 56 spaces, most of which are not used. Most of the current Junction businesses, other than the Co-op, don’t generate a large demand for parking, meaning their customers come and go fairly quickly.

Open Space

The adequacy of proposed public space is impossible to judge. There are no measurable standards like there is with parking and traffic; and everyone seems to have their own opinion on adequacy. I observe two things: first, small urban open spaces only function well when lots of people are present. Second, the B Y Morrison Park beacons it’s sheltered open space 60 feet away, yet remains neglected and deserted. Isn’t that odd?

The Site Plan Process: What’s Next

The City Council will vote later this month on a resolution approving the NDC project. Approval would enable NDC to submit a Site Plan Application to the Montgomery County Planning Board. This review process is highly regulated by County law. The Planning Board has the authority to command changes in the site plan. County agencies will look carefully at every aspect of the project. The process is time consuming and there will be plenty of opportunities for additional community input and further changes to the project’s design.

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