Last September, the Takoma Park City Council held a work session on the idea for establishing differing, higher property tax rates for commercially zoned real estate. The idea was prompted by the City Council’s prior decision to abolish, once and for all, the city’s tax on business’s inventory, which was cumbersome, unfair and unenforceable. Abolishing the inventory tax, a boon to certain retailers, is estimated to cost the City’s treasury about $320,000 in annual revenue. The City naturally wants to recover these loses by some other means. Thus, the intriguing idea of a slight increase on commercial property tax rates arose as a way to make up the difference, which also would have the side benefit of not affecting residential tax rates.
As councilmembers and city staff batted the pros and cons back and forth, which is what a “work session” is intended to accomplish, a question arose about the necessity of asking the commercial property owners — those who’d be affected — if they would support a differential tax rate and, if so, how much of a difference might they tolerate.
Well, someone said (I am paraphrasing), we need to ask them. Someone else asked, who are they and how do we do this?
Sitting in the audience, when I heard this, I chuckled to myself: Who indeed are they! Staff appropriately responded they would work on it. It occurred to me that no one who runs this town really knows who owns what when it comes to non-residential property. Yes, we have anecdotal information. From my experience, I know this information is often difficult to find out because most income-producing properties are owned by LLCs rather than individuals.
I also know there’s no one who can legitimately speak for all the landlords, whether commercial or multi-family property owners in the City. No one. Sure, we may know the owners of many of the small businesses in town, but almost none of them own the real estate they occupy.
Much of Takoma Park’s identity; that is, it’s “sense of place” derives from its business districts, especially to visitors.
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The City has hired the long awaited new Economic Development Manager. She will be introduced to us soon. The City has created a new economic development operating division within its Department of Housing & Community Development. The Council previously approved this action as part of the current city budget.
Undoubtedly, the addition of a new position will enable certain internal duties to be shifted. Of great importance, the staff’s professional capacity will be notably expanded.
So What Does All This Mean?
First it means that for the first time in its history, the City can give full-time focus to stimulating business growth, the construction of affordable housing, the activation of Sector Plans and Concept Plans along New Hampshire Avenue and in Long Branch, and facilitating the redevelopment of various obsolete commercial properties.
Equally important, it means that Takoma Park’s business community can now have a place “at the table” on any issues affecting business and property owners and the direction of our economy.
Much of Takoma Park’s identity; that is, it’s “sense of place” derives from its business districts, especially to visitors. The “Old Town” area attracts shoppers and diners from a wide area. It projects an enviable, appealing shopper-friendly ambiance. The New Hampshire corridor does not. Yet, it is bustling and vibrant, providing a huge piece of Takoma Park’s tax base and it offers an even bigger (perhaps gigantic) as-yet unrealized economic potential.
A 2017 State of Maryland study of the economic potential of the N.H. corridor found that full development of the developable parcels could increase assessed values (as of 2017) from $2.13 million per acre to $18.57 million per acre. This would be an order of magnitude increase in assessable values of more than 8 times. This would increase City revenues by more than $2 million annually. Keep in mind, each new dollar allows a reduction in the tax rate. The study also shows that added jobs could number into multiple thousands depending on the kind of businesses.
Ironically, despite these facts, business community members — those people behind these businesses are virtually invisible to us. They are largely unknown to the City Council and the people who run our city. And this is nobody’s fault.
This would be an order of magnitude increase in assessable values of more than 8 times. This would increase City revenues by more than $2 million annually.
So if we are going to do economic development well in Takoma Park, we need the business community to organize itself. They need to make themselves knowable and and make their voices heard. Based on conversations with business owners we are calling it the Greater Takoma Business Alliance.
The business community comprises owners of the multi-family properties in the city, owners of the shopping centers and office buildings, and all the small business owners. All have one thing in common owners make their living, literally, in and from Takoma Park. Each of them has invested in our city.
Business people, whether a landlord of an 8-unit apartment building or an owner of a nail salon, are affected by city laws and regulations, but also benefit from the pubic services Takoma Park provides.
Thus, if we are going to undertake economic development, doesn’t it make sense to involve the business community in this process? They stand to lose or gain as much as anyone. And, they have knowledge, experience and ideas to offer. They can and need to be partners with the City.
What Characterizes Economic Development?
As a genre, Economic Development has many permutations that vary considerably among communities across America and even just in Maryland. These permutations can be boiled down to four: 1) increasing the assessable property tax base, 2) increasing sales revenues of businesses, 3) attracting / preserving businesses and 4) job growth, which is not an area of concern. Under these rubrics, there are scores of methodologies and programs that localities employ to enhance their well being.
What’s Our Economic Development Agenda?
This is a tough question. The Mayor and City Council more or less set the policy agenda based on the strategic plan and the Council’s annual update of priorities. In October 2017 the city received a voluminous consultant study, the “Housing and Economic Development Strategic Plan” that is replete with recommendations on what to do. The city is using it as a kind of foundational guide to its thinking.
But the issues that get addressed (what gets done first) are affected by those stakeholders who speak up and bring their concerns to bear.
To start with, we’re all aware that our property taxes keep going up year after year. The tax rates gets set by both the County and City. For those of us on fixed or modest incomes, this is a big problem. Being able to live in the City — whether you own or rent — is becoming more and more challenging. That’s not news, is it? This side of shrinking the city and county governments, the only practical solution for rising taxes lies in increasing Takoma Park’s assessable tax base. And for this we need commercial property developers to improve their properties in a big way and build more affordable and market-rate housing.
This side of shrinking the city and county governments, the only practical solution for rising taxes lies in increasing Takoma Park’s assessable tax base.
Some Key Issues:
Here are six. I could easily give you lots more, but will spare you. Dear readers can think of others, doubtlessly.
(1) The Rent Stabilization ordinance (“rent control”) is timeworn and it does not work the way it used to. Conscientious landlords are operating in the red. They cannot increase their rents adequately to cover the upgrades they need to undertake. This is not a a sustainable situation for them or the future of affordable housing.
(2) Why has there been no new housing, especially affordable units, built in the City for the past 40 years? How can the City best leverage its limited resources to get movement?
(3) Instituting a proposed tax-rate differential on commercial properties is something the City Council is currently wrestling with. Councilmembers recognize the need to gain input from the business community.
(4) The county boundary line along parts of New Hampshire Ave and University Blvd. is lamentable. From an economic development perspective each county seems paralyzed into inaction. Why? Because how does a jurisdiction promote half a business neighborhood? Well, one answer lies with the Old Takoma Business Association that promotes and markets across a state boundary. Let’s do something similar at the Crossroads and along the lower part of NH Ave. County leadership is called for!
(5) Now that Montgomery County has a new chief executive in Marc Elrich, maybe now we can advanced the idea of designating the Crossroads as a TIF (a tax increment financing district) for at least the Montgomery side of the Crossroads and ideally for all four corners. As assessed values in the district rise TIFs earmark some or all of the incremental increase in property taxes for either or private development purposes in the district.
(6) The very best way to attract the specific businesses we want is to harness our business leaders to join with the city in talking with the corporate officers, making the case, and inviting them to our city. That’s far better than our passively waiting on shopping center leasing agents to make these decisions for us.
These six issues have one thing in common. By addressing them together they conjoin our business and city leaders in pro-actively growing and developing Takoma Park the way we want it. In truth, you will not find more ardent Takoma Park boosters than the business men and women who make their living here.
How Does This Get Done?
A bit of historical context here: Much of Takoma Park’s reputation and civic pride has been built — since the 1960s — on its ability to stop destructive development and protect its physical character. If Takoma Park has a reputation as a difficult place to build or own income-generating real estate, well, we’ve earned it honestly. Now, however, that has to change.
But it won’t be easy. It will take time.
As cited above, on the east side of town where there is considerable room for growth, the City and the business community can and need to work together to get redevelopment underway.
With minimal expense to the city, sensitive development can get us a new Recreation Center; a lot of quality housing, and far superior shopping and dining experiences. We do not need more auto parts, cell phone, mattress and check cashing stores, pawnbrokers, nail salons, and tax and insurance services. In the NH corridor alone, we have enough (9) franchised quick service restaurants (QSRs), and 8 gas stations. In the Crossroads area alone I counted 9 cell phone stores and 14 tax preparers, and these are just the ones with prominent signs.
Serious investors with ample capital might want to replace the Econolodge and Quality Inn — our notoriously hottest crime spots in the City — with high-rise housing, retail, community space or perhaps a proper hotel. South of the Ethan Allen Avenue intersection, we see acres of land, asphalt parking lots, and obsolete structures that represent tempting targets for hugely lucrative mixed-use projects.
Obviously, the creation of an economic component within the city is the critical first step. Hooray for that! But the second critical component is enrolling our business community in the process. Again, here’s why it is so important:
In other words, government can only do so much.
In that regard, Takoma Park can try to provide incentives and form public-private partnerships as inducements. The City has already amassed a $700,000 fund to support affordable housing. Sections of NH Ave, University Blvd., Holton Land and Sligo Mill Rd areas are designated by the State as Enterprise Zones, which provide employment and property tax credits, certain Montgomery County fee waivers and certain utility exemptions.
Greater Takoma Business Alliance
The GTBA is not intended to be a membership organization in the sense of paying dues or who gets to vote. Rather, it’s an interest group, or call it an affinity group, of concerned business people who do business in and around Takoma Park. It should be inclusive, not exclusive.
Residents can also participate because in this context they are consumers with tastes and preferences. Residents also can learn a lot about what it means to be in business for yourself and have your livelihood grounded on the success of your investment and enterprise. If you have never been in those shoes, you really can’t know what it’s like.
The GTBA will not supplant the Old Takoma Business Association or the Crossroads Development Authority; rather just the opposite. They will strengthen each other. The GTBA can represent business not part of these two organizations, and also it will be issue oriented. The two existing organizations focus on promoting, marketing, sponsoring events and helping individual proprietors in their respective geographic areas.
The GTBA will take on whatever shape best suits the participants’ interests. Regardless, it will enable members of the business community to become more fully informed about whats going in the city that may affect them. It will be an effective means for lobbying the City Council.
My belief is that the business community and the City’s new economic development staff will naturally want to work together to address problems, like those I previously described, and to exploit opportunities. Since business owners don’t all think alike, the GTBA will be a place for opinions to be heard.
I have been meeting with various business leaders over the past six months. All are interested. The Greater Silver Spring Chamber of Commerce is also interested in helping out. Soon I will be initiating a first meeting of these folks, which hopefully will be the first of many.
Dear Reader, if you are interested and want to be contacted, please get in touch with me at SchultzAssociates@rcn.com. You can also find me on LinkedIn.
Frederick Schultz 1/12/19