The New Cultural Center was an agenda item on the September 14th Howard County Council Monthly meeting. Below are my notes and thoughts on the discussion. There is lots to unpack here. And if you can get through all my bullets as I get into the weeds on TIF, LIHTC, and GO bonds; then you will be awarded with my hot take on school capacity!
First, if you missed it over the summer, check out the detailed piece on the NCC I published on July 9. And before we get to my notes from this latest council session, here is a summary on where things currently stand.
The FY21 Capital Budget passed by the County Council in May put the $63 million in County funding needed for the project in an contingency account that requires further council approval to be released. The council is in process of their due diligence work prior to voting on whether or not to provide this funding.
This $63 million is only half of the total $137 million project cost. The other half ($64 million) is already secured through low income housing tax credits (LIHTC) that will deliver the first of several planned affordable housing developments to Downtown Columbia. The LIHTC portion of the financing would be jeopardized unless funding is approved and the construction begins by Spring 2021. So, if the project doesn't get approved shortly, the whole NCC project is at risk. And if this project fails, it also calls into question the viability of the future projects since the State may be less likely to award tax credits to Downtown Columbia again.
It also must be noted that for better or worse, the housing and cultural center are inextricably linked. Without funding for the NCC, the housing component cannot proceed, and likewise, the cultural center cannot proceed without the housing component.
As I understand it, the previous County Council included a phasing schedule for affordable housing in the Downtown Columbia plan. Per this schedule, the NCC housing needs to happen first before the Howard Hughes Corporation can continue with other future development projects that they have planned.
Councilmembers Opel Jones and Christiana Rigby support releasing the funds for the NCC, while Liz Walsh seems to be opposed. Councilmembers Deb Jung and David Yungmann are on the fence. So, at least one of them needs to join Jones and Rigby in approving the project in order for the funding to be released and the project to move forward.
Over the summer, Jung and Yungmann participated in a series of three workshops hosted by the Columbia Downtown Housing Corporation to address issues and answer questions that they had.
NEW CULTURAL CENTER
This brings us to the 9/14 Council meeting. My notes:
Even after the summer workshops, Councilmembers Jung and Yungmann still are not satisfied and both, particularly Jung, have many unanswered questions that they asked during the meeting. Jung and Yungmann both indicated that they are both generally okay with the housing portion of the project, but have question and concerns regarding the Arts Center and Toby's Dinner Theater component.
Jung seems primarily interested in mitigating the county's risk. The structure of the deal has the county becoming the owner of the NCC and landlord to Toby's Dinner Theater and sister organization - Columbia Center for Theatrical Arts (CCTA), which would be merged together as a single entity and principle tenant of the NCC, and make lease payments to the county. To finance construction, the country would use a combination of general obligation bonds (paid back using rental revenue the county receives from Toby's/CCTA) and Tax-Incremental Financing (paid back using the incremental property tax revenue created from building out Downtown Columbia). In other words, as constructed, the project is supposed to pay for itself, and is not taking funding away from other potential projects elsewhere in the county, though the county is ultimately bearing the risk if project revenue is not sufficient for the county's debt service.
Jung wants to ensure that the dinner theater / CCTA will be capable of making those lease payments over the duration of the lease, for if Toby's / CCTA were to fail, the County would be the owner's of a tenant-less dinner theater and still be on the hook to pay back the bonds issued for its construction.
This certainly seems like a valid concern and one that I hope can be worked out between the Council and Toby's/CCTA, which after all, has been successfully serving our community for 40+ years. But, based on the relentless questioning that Jung directed at Howard County's Government Director of Policy & Programs Carl DeLorenzo (who I thought did an admirably job in answering), I'm skeptical whether the Councilwoman will ever receive answers she finds sufficient to vote to release the funds. In researching the history of TIF financing in Howard County, I came across an old blog post outlining the "show me a rock" argument that has been used in the past by the Council to oppose Downtown Columbia redevelopment on the grounds of "not enough information". I wonder if Councilwoman Jung will ever be shown the rock that she is looking for?
Questioner: Show me a rock. Supplicant: What kind? Questioner: I don’t know; you’re the expert! A rock! Supplicant [arrives with rock]: Here you go. Questioner: No, not that rock! A different one! Supplicant: Could you give me more of a descrip… Questioner: YOU’RE THE EXPERT. SHOW ME A ROCK. [Continues forever]
One of the strategies that DeLorenzo explained could be used to mitigate risk is using TIF as a backstop to the GO bonds. In other words, while the construction would be financed through both TIF and GO bonds, if rental income is not sufficient to cover the debt service on the GO bond, then the county could allocate more of it's anticipated future downtown property tax revenue to payback the GO bonds.
The development of Columbia's downtown core is projected to be an economic engine for our county's future with estimates that the total additional property tax revenue that the large-scale, mixed-used, urban downtown will generate for the county will exceed $1 billion over the next 30 years. This is additional tax revenue - so it represents how much more tax revenue the county will get from realizing the Downtown Columbia Master Plan. Key point here: you have to first build downtown Columbia for the county to get the new property tax revenue that comes with having built a new Downtown Columbia.
Tax Incremental Financing (TIF) is a powerful, albeit controversial tool for financing urban redevelopment. It utilizes the new property tax revenue projected to be generated in the future from an urban redevelopment project to finance it's construction today. In other words, the new tax revenue that is generated by the TIF would not have taken place "but for" the investment that the TIF enabled.
In Columbia, we already have made the decision to utilize TIF financing for the public portion of the downtown Columbia redevelopment, as $48 million of TIF bonds have already been issued and used to finance roads and other infrastructure improvements in the Merriweather District. These bonds are backed by the new property tax revenue that is projected to be generated by the new development. This makes the county a partner with Howard Hughes Corporation in ensuring that the increased property tax revenues come to fruition. In all, TIF is planned to bring the public infrastructure improvements needed to support the private-sector development of Downtown Columbia. This public infrastructure is planned to include a new elementary school, fire station, library, traffic improvements, transit center, parking, and the arts center. Of course, if more TIF financing than anticipated is needed to service the arts center GO bonds, it could mean less is available for these other infrastructure projects in Downtown Columbia. But at the very least, it will help ensure that the county is not dipping into other revenue sources to service the GO bonds.
One of the most intense and interesting portions of the Council session came during questioning of school capacity in Downtown Columbia, as Councilwomen Jung noted that by 2026, there is projected to be a shortfall of 650 seats in the downtown area (500 alone at the elementary level), as she rattled off a long list of new housing coming soon to the area. I highly recommend that you check out the 4 minutes of discussion beginning at the 2:59:00 mark for yourself (and sorry, I couldn't figure out how to get the clip to start playing exactly at 2:59:00, so you'll need to go to scroll to that timestamp yourself).
As readers of this blog are certainly aware, I'm just as excited for the redevelopment of downtown Columbia as one can imagine, but I also share the concern of Councilmember Jung expressed that we need a better plan for ensuring our school capacity keeps up with projected student yield. As it is, we currently do not have enough seats available in our downtown schools for our existing students, let alone all the new students projected for the future in and around downtown. Yet, instead of opposing new housing, I much rather see school capacity added as we welcome into our community all our new neighbors. Unfortunately, building this new school capacity is not currently planned to happen anytime soon. In fact, a new elementary school is not projected to be built in downtown Columbia until 2030 at the earliest. But now, 2030 might even be overly optimistic. E#44 was included in the Long Range Master Plan in the approved FY21 HCPSS Capital Budget, but that school (along with several other school capacity projects elsewhere in the County), completely dropped off the list in the recently released FY22 HCPSS Capital Budget Request.
So my question is this: If the plan is to use TIF to add a new elementary school downtown, then what are we waiting for? Isn't the point of TIF to first add the public infrastructure necessary to enable and support new development? So, why isn't the county issuing TIF bonds now to fund school construction as soon as possible so its ready as all the new downtown housing comes online?