Home Archived Articles Use of TIF for Downtown Garage Questioned: Lawsuit Ensues

Use of TIF for Downtown Garage Questioned: Lawsuit Ensues

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A coalition of four development partners has filed a lawsuit in Howard County Circuit Court challenging the county’s use of a Tax Increment Financing (TIF) arrangement to build a parking garage in downtown Columbia.

Corporate Office Properties Trust (COPT), Merritt Properties, St. John Properties and Greenebaum Enterprises allege that the TIF has given Howard Hughes Corp. (HHC), Columbia’s master developer, an unfair economic advantage other developers don’t have.

Each plaintiff is a commercial real estate developer that owns commercial real estate properties in Howard County.

According to documents filed with the Circuit Court, the coalition alleges the county overstepped its authority in what it characterizes as “an improper giveaway of county tax dollars to HHC to the detriment of the local developers and, ultimately, the county taxpayers.”

At the heart of the issue is the appearance of a conflict of interest: The use of TIF funds alleviates HHC from the financial burden of constructing, operating and maintaining a parking facility to support its own office development.

The complaint asserts that the situation places other downtown developers at an economic disadvantage because they must pay to develop, operate and maintain their own parking facilities.
According to the coalition partners, the cost advantage enables HHC to lease its office and retail spaces at rates significantly below established market rents for similar projects in the county.
“While the coalition is supportive of the TIF as it pertains to the redevelopment of downtown Columbia, the coalition seeks to prohibit Howard Hughes Corporation’s use of a public garage funded by Howard County TIF money to satisfy the private parking needs of HHC office tenants,” said Alessandra Moscucci, the Nevins & Associates account executive who respond to public information inquiries about the complaint.

 

Revisiting Concerns

In 2010, the Howard County Council approved the Downtown Columbia Plan to redevelop and revitalize Downtown Columbia and chose HHC as its partner to implement the plan.
The first phase of the Crescent project, to be built on land owned by HHC, is expected to deliver approximately 215,000 square feet of mixed office, retail and restaurant space, in addition to the nine-story garage, which provides 2,545 parking spaces.

Funding for the garage was included in a $90 million legislative package approved by the council in November 2016 that was intended to leverage a redevelopment investment of $2.2 billion from HHC in the Merriweather District.

Incremental property taxes from the new development will be set aside for major public projects supporting downtown Columbia, including a public elementary school, a fire station, arts center, transit center, central library, roads and transportation and infrastructure improvements.

District Three Councilwoman Jen Terrasa was the only member of the council who opposed the TIF legislation, having proposed a separate legislation package that was ultimately defeated.
“The [Memorandum of Understanding with HHC] doesn’t address some of the bigger concerns we’ve heard about the TIF, giving one developer an unfair advantage or leaving the county vulnerable on a number of fronts,” Terassa said when casting her vote in opposition. “I don’t have an objection to things that can’t go into legislation going into an MOU.”

 

Public vs. Private Use

The lawsuit names Howard County and Howard County Executive Allan Kittleman as defendants in the case. Kittleman introduced the legislation in June 2016 (through then-Council Chair Calvin Ball) in response to a March 2016 application by HHC to create a TIF to fund a portion of Crescent District development.

Kittleman declined to provide a statement regarding the lawsuit, citing an administration policy of not commenting on pending litigation.

HHC officials also declined to comment on the lawsuit against Howard County.

The complaint argues that the garage, owned by Howard County and intended for public use, is located within a private commercial office park, and the county will use taxpayer money, not TIF proceeds, to cover operating and maintenance costs for the next 50 years.

Citing HHC’s ability to charge rent below the market rate, “current tenants of the local developers and similarly-situated developers will be incentivized to relocate from established commercial office and retail projects in Howard County at a faster rate than would be expected in a normal competitive market,” the coalition charged in its filing documents. “As a result, while real estate taxes in the Crescent District may rise, any such tax gains will be offset by the losses experienced by the local developers and similarly situated-situated developers from the accelerated vacancies in their projects in … other submarkets.”