When is a conservative estimate of $500,000 in net new annual tax revenues to the City from the proposed mixed-use Reserve at Tinner Hill project a “bad deal”? Apparently, when compared to a hypothetical, never been achieved, 100 percent commercial, Class A+ trophy office building that maybe, possibly, hopefully someday, could be built on the environmentally contaminated property on South Washington and Maple.
This, I respectfully suggest, is not just harmless wishful thinking. It is seriously bad math and, in my opinion, dangerous to the financial future of the City. Think there is a better deal out there than the Reserve at Tinner Hill? I don’t. Let me explain why, in real math.
As proposed, The Reserve at Tinner Hill will consist of 40,000 square feet of grocery, retail, restaurant and office space, along with 224 residential units on a 2.2 acre site. All over structured underground parking. The apartments have been sized and designed to appeal predominantly to younger professionals and singles. The projected assessment will be in excess of $70 million. Total “net” tax revenue to the City (after accounting for school costs of new students) is projected to be between $500,000 and $1.2 million. In addition, the City will be receiving over $7 million in up-front “community benefits” in the form of cash contributions to the school capital fund, affordable dwelling units, an attractive public park, undergrounding of utilities and various other items.
Put a $70 million assessment in perspective: George Mason Square, in the heart of the City, with approximately 91,000 square feet of commercial space and deck parking on a 2.7 acre site. Assessed at $16.6 million. That’s over $50 million less. Kaiser Foundation on North Washington Street? Assessed at $18.6 million on a 3.4 acre site. Broaddale Shopping Center on Broad Street? Assessed at $7.3 million on a 2.4 acre site. Any way you look at it, the proposed Reserve at Tinner Hill project will achieve an assessment that is 3 to 10 times the current, “real” 100 percent commercial assessments in the City.
What about the school impact? Covered. Those costs have already been subtracted in the conservative $500,000 “net” new tax revenues to the City. In the five mixed use projects that have been built in the last 12 years – Broadway, Byron, Spectrum, Pearson Square and Read Building – only one, Pearson Square, has had more students than originally projected. All the rest have fewer. And there is a specific reason for the Pearson Square anomaly. The City mandated Pearson Square be designed and built as a condominium. Notwithstanding changing market dynamics and industry experts that suggested it would be better designed as rental apartments with smaller units. As a result, when the condominium market receded and it was forced to convert to rental, the larger units were, by design, more affordable and appealing to families with children. Nonetheless, Pearson Square still achieves a net tax revenue which is three times the prior 100 percent commercial use of the property.
Another real math example? The Byron. The 21,000 square feet of commercial space alone is assessed at $7.4 million. That’s $100,000 more than the entire Broaddale Village shopping center. The Byron’s 90 residential units are assessed at nearly $47 million. And, as of 2012, have 12 students in City public schools. I can throw darts and hit 5 random single family homes in the City that have over 12 students in the public schools. And pay property taxes on a cumulative assessment of under $4 million, let alone $47 million.
Everyone agrees that it would be great if the actual annual net tax revenues ended up at the $1.2 million higher side of the projected range. But to call the conservative end of the range – $500,000 per year – a “bad deal” for the City? Here are a few bad deals to ponder:
First, the site remains a used car lot for the next decade and the City ends up with $80,000 a year in annual gross tax revenues instead of $500,000 to $1.2 million in “net” tax revenues and none of the $7 million in community benefits.
Second, Lincoln Properties gives up and the property is redeveloped as 100 percent commercial retail strip with surface parking. That’s a “by right” development that requires no City Council approvals. And be worth about $10-20 million less in tax revenues to the City over the next 20 years.
I could go on. But this isn’t all about dollars. I don’t live in the City, but I love it nonetheless. The Reserve is not just a financially good deal. It is also very attractive architecture and the type of development that will bring more younger professionals into the City to support existing retail businesses and restaurants. That’s good for everybody, and, overall, a great deal.
Ed Novak is President of Nova-Habitat, a development company based in Chevy Chase, Maryland. He has no professional or financial interest in The Reserve at Tinner Hill. He is a limited owner of Mad Fox Brewing Company.