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Council to Review Development Tax Credit Program

At tonight’s Council worksession, the City Council will discuss reviewing City’s current tax credit program. Staff and the City Attorney are recommending modifications to the Ordinance to ensure the Program meets its goals of incentivizing high-quality redevelopment projects.

Since its adoption in November 2012, the City’s Revitalization Tax Credit Program has received four applications.

The idea of a tax credit program was initially conceived in 2009, as the City aimed to create financial incentives that would encourage redevelopment and revitalization of its key commercial districts. Due to the increased costs associated with infill development (e.g. land assemblage, lease buyouts) that are not typically present in more suburban development, the City looked to offset these costs through real property tax credits and increase the attractiveness of development opportunities in College Park. However, at that time the City did not have the authority to establish revitalization districts or grant property tax credits.

The City requested a change in the Annotated Code of Maryland to allow the creation of such a program, which was approved in June 2011. In October 2012, a City Ordinance was introduced to provide the framework for the College Park Revitalization Tax Credit Program.

The guidelines for the Program include six revitalization districts:

  • US 1 Corridor Development District Overlay Zone
  • College Park-Riverdale Transit District Overlay Zone
  • Hollywood Commercial Development District Overlay Zone
  • Berwyn Commercial and Industrial Districts
  • Branchville Industrial District, and
  • Greenbelt/University Commercial Corridor

In order to qualify for a tax credit, projects are required to receive approval of their detailed site plan or building permit by City Council while meeting a number of eligibility criteria as set by Section 175-9 of the Ordinance. Projects that meet all requirements may receive a five-year tax credit on real property taxes based on the increased assessment attributed to the improvements. The tax credit is in an amount equal to 75% of the increased assessment in the first year, 60% in the second year, 45% in the third year, 30% in the fourth year, and 15% in the fifth year. While projects that are under construction, completed, or have an approved detailed site plan or building permit are prohibited, a waiver provision was included to grant these projects consideration in certain circumstances. Tax credits granted under the waiver provision are subject to possible reductions in the amount and/or duration by City Council.

Since the Program’s launch, staff has received applications from four development projects: College Park Place, The Enclave, Monument Village, and The Varsity. Following is a summary of each project’s application status:

College Park Place Submitted in July 2014, the applicant is seeking a tax credit for phase 1 (hotel and retail) and phase 2 (multifamily housing). Since the application filing date, both phases of the project received Detailed Site Plan approval. The tax credit application is scheduled for review at the January 20, 2015 City Council worksession. Upon its completion, College Park Place is expected to have an increased assessment of more than $50,000,000 that will contribute nearly $170,000 annually in real property taxes to the City.

The Enclave Submitted in September 2013, the applicant sought a tax credit for phase 1 (completed student housing and retail) and phase 2 (approved, but not yet built student housing). Staff determined that phase 1 was ineligible, while phase 2 was eligible; however, it was discovered that the owner was delinquent on their City and County property taxes and the application was placed on hold. Upon its completion, The Enclave’s second phase is expected to have an increased assessment of $10,000,000 that will contribute $33,500 annually in real property taxes to the City.

Monument Village Submitted in November 2013, the applicant sought a tax credit for the mixed-use, multifamily housing complex that was approved in 2008, but had yet to begin construction. The project was eligible for a tax credit through the waiver provision with the maximum amount of $387,392.06 over a five-year period. City Council elected to reduce the credit in half to $193,696.03 over a three-year period. Upon its completion in 2016, Monument Village is expected to have an increased assessment of more than $51 ,000,000 that will contribute more than $170,000 annually in real property taxes to the City.

The Varsity Submitted in April 2013, the applicant sought a tax credit for the mixed-use, student housing complex that was completed in 2011. The project was eligible for a tax credit through the waiver provision with the maximum amount of$717,488.60 over a five-year period. City Council elected to reduce the credit to $500,000 over a five-year period. With an increased assessment of more than $95,000,000, The Varsity contributes nearly $320,000 annually in real property taxes to the City.

Staff and attorney are advising to make the following changes:

  • Section 175-9 – Eligibility Requirements (A) o The proposed change would exclude student housing from the list of eligible improvements in order to further incentivize other development types.
  • Section 175-10 -Eligibility Criteria (E) o The proposed change would require projects to exceed the LEED certification required by Prince George’s County. For example, the US 1 Corridor Sector Plan requires all development within the walkable nodes to obtain a minimum LEED-Silver certification in its appropriate rating system. The change would require the project to obtain LEED-Gold or higher certification in order to meet the criterion.
  • Section 175-11 -Credit amount and term: The proposed change gives the council the flexibility to reduce or eliminate the credit amount and/or duration as well as to alter the sequence of the tax credit based on city budget constraints.
  • Section 175-13- Waiver (A(2)): The proposed change would eliminate this waiver provision to make any completed project ineligible for a tax credit.
  • Other Consideration was given to requiring an applicant to also apply for a tax credit through Prince George’s County; however, staff felt that was an unnecessary requirement since the two programs are not jointly operated.

Please let me know if you have any questions.

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