On a 7-2 vote, the Montgomery County Council approved a bill that would completely exempt real estate developments on WMATA property from property taxes for 15 years. Councilmembers Tom Hucker and Will Jawando voted against. The Council should sustain County Executive Marc Elrich’s veto of this corporate welfare masked as a social justice housing project.
This bill is such a bad idea that one hardly knows where to begin.
Proponents of transit endlessly sell the considerable funding required for it as the motor for development and smart growth that not only attracts jobs but increases land values and property tax revenues. We are told “if you build it, they will come.” Now, these same people tell us that they won’t come unless we “incentivize” (read: pay) them.
Even stranger, we are to pay these incentives to build high-priced apartments in desirable locations with very little extra affordable housing thrown in above normal requirements. I understand establishing enterprise zones with lower taxes in struggling neighborhoods, but Grosvenor-Strathmore and other Red Line stops don’t fit the bill.
Councilmember Andrew Friedson (D-1) has been quite aggressive in trying to sell Councilmember Hans Riemer’s bill:
None of the WMATA sites are being developed and developers with Joint Development Agreements are walking away all over the region, due to unique infrastructure requirements on these sites, high costs of high-rise construction, etc.
These sites currently collect ZERO property tax, generate ZERO housing, and provide virtually no public benefits aside from surface parking. I view that as an abject public failure, but respect anyone who prefers this status quo.
Multiple fiscal analyses have demonstrated both that high-rise projects don’t work without the incentive and that the Grosvenor project in particular would generate more revenue to the County in impact and income taxes than the property tax abatement (which the county wouldn’t otherwise receive without a project).
Councilmember Friedson argues we need to step up our corporate welfare game to compete when we shouldn’t even play this game. His argument also ignores that demand for homes in Frederick or Fairfax is based on other factors that far outweigh tax incentives linked to individual projects.
The uniqueness of the site argument fails to impress as somehow many buildings have been constructed around the whole region, indeed the whole country, around transit and difficult sites without the magic of tax incentives. (Manhattan exists!) I’m sure WMATA, developers and their supporters on the Council are happy to produce analyses showing otherwise, just as they always have in support of public spending on their agenda.
The incentives are a roundabout subsidy to WMATA. When we establish tax incentives the land becomes more valuable, so WMATA raises the price and recoups much of it. So it’s not even clear what share of this supposedly badly needed incentive the developers will see.
This tax giveaway also won’t increase the housing stock. When it’s built, Councilmembers Riemer and Friedson will point to it and say, “look what we did!” Except there will be another nearby project that didn’t happen because you’ve already pre-satisfied any demand with this one. Montgomery has plenty of land zoned for housing and buildings.
Councilmember Friedson also neglects to mention that the building will not have a zero cost to the county. Providing county services will cost money but Montgomery will receive a lot less than normal to cover those costs.
Andrew Friedson has been touted with much hope, including here, as the Council’s bright new economic light. If he wants to live up to this promise, he needs to shift his focus fast from this old-style ineffective developer welfare to more original ideas to attract commercial business to Montgomery.
The bill reflects Councilmember Hans Riemer’s long-term approach over several terms to housing, which has long dominated the Council. Unfortunately, it has had far more success in pleasing monied interests than it has accomplished in producing affordable housing. No doubt it also pleases David Blair’s developer-heavy crowd.
Councilmember Nancy Navarro has presented herself as second to none as a champion for social justice. She has stood up unflinchingly for often abused undocumented immigrants to the frequent dismay of their opponents around the State. Here, she argued that the Council needed to “be bold” and support this bill.
Except there is nothing remotely new, let alone bold, about giving a tax subsidy to developers. Speeding the production of high-priced apartments strikes me as the opposite of social justice.
I cannot help but wonder why this proudly progressive Council is focused on this legislation at this time when so many county residents are facing far more immediate and desperate problems. Even managing the day to day is still far from ordinary.
Charter Amendment A on Property Taxes
The crowning insult of this legislation is its juxtaposition with County Charter Amendment A. The short version is that the Council majority is now proposing to collect more in property taxes from ordinary residents even as it engages in this tax giveaway that has no valid economic or public purpose.
Charter Amendment A garners support from many because the current property tax system is not ideal for a variety of reasons (not the subject of this post). It effectively asks voters to loosen the very tight tax corset (it can only rise with the rate of inflation) so that the county can collect more if property values rise, as would likely happen now if the measure passes. It’s a tough ask at a time when many have seen incomes drop. One can argue that it is necessary when so many are in need.
But it is insupportable for the majority of the Montgomery County Council to offer a tax holiday to developers while increasing the take from ordinary citizens. It’s not progressive. It’s not liberal. It’s just bad economic policy wrapped in gaudy rhetoric that doesn’t stand up to scrutiny. It goes against this county’s good government traditions.
County Executive Elrich was right to veto this bad bill. The Council should vote to uphold his veto tomorrow.
In the wake of his veto message, County Executive Marc Elrich has once again blasted a bill passed by the county council granting developers at Metro stations 15-year property tax breaks. The council is set to override Elrich’s veto on Tuesday. Elrich’s mass email, which reiterates his reasons for vetoing the bill, is reprinted below.
*****
Dear Friends:
Last week I issued my first veto of legislation, Bill 29-20 Taxation – Payment in Lieu of Taxes – WMATA Property. I sent a memorandum with the veto explaining in detail the reasons for the veto; you can read the entire memo here, but I wanted to explain some of the reasons in my letter.
Like the Council, I am focused on expanding transit and transit-oriented development, broadening our tax base and preserving and increasing the supply of affordable housing. Unfortunately, Bill 29-20 does not achieve any important goals, is too costly and does not produce sufficient public benefit to justify the cost.
This legislation would require 100 percent exemption of the real property tax for 15 years. This exemption is known as a Payment in Lieu of Taxes, or PILOT [see NOTE 1]. A few requirements are included in the bill. However, it would not increase the number of affordable housing units than otherwise would have been provided. While it was amended to make some of the units more affordable, we could have negotiated that with the developer at a fraction of the cost to the County.
[NOTE 1: The requirement applies to development that is higher than eight stories on property owned by WMATA at a Metro station. The development must include at least 50 percent residential rental housing, and one-quarter of the moderately priced dwelling units (MPDUs) must be affordable for residents at 50 percent of area median income (AMI). The PILOT would begin no later than the second year after the property tax is levied. The law would sunset in 2032, but any existing PILOT would continue until the end of its 15-year period. To be eligible for a PILOT, a developer would be required to use contractors and subcontractors who have no more than two final penalties of $5,000 or more in the three prior years for violations of applicable wage and hour laws. At least 25 percent of the workers constructing the project must be County residents. Special taxing district taxes are exempt from the PILOT.]
It is an expensive, and unnecessary, approach, particularly at this moment when the County is struggling to fund critical services (the need for which is increasing and will likely continue to increase for a while), where the outlook for revenues over the next couple of years is not good and where full economic recovery from this pandemic may take as much as 10 years. It is certainly not prudent to reduce revenues coming into the County coffers at this time.
During the Council’s deliberations on the bill, supporters could only cite one potential development as being eligible for this 15-year, 100 percent tax break – the proposed Strathmore Square at the Grosvenor/Strathmore Station. Under the provisions of this legislation, Strathmore Square’s owners would receive a tax break of approximately $100 million. As a member of the County Council, I supported the zoning changes that made this proposed development possible, but I simply do not believe it is a responsible use of County resources to supplement a market-rate housing complex at this level of expense.
The developer of that project saw an increase in the allowed units that went from a little over 500 to more than 2,200—density that was based on being atop a Metro station. Now, the developer is arguing that it is too expensive to develop on the Metro, yet WMATA records show that the price the developer paid was based on an appraisal that was done AFTER the property was rezoned. The developer accepted the appraisal and agreed to proceed. If the developer thought the price was unreasonable and would make development unprofitable, it could have rejected the appraisal and the deal. Instead, it came to the County three years later and asked that all its taxes be forgiven because the deal does not work for it.
Should similar developments occur at the other potential WMATA sites across the County, lost revenue would likely exceed $400 million. To be clear, I want more housing constructed in our County, and I see the significant benefit of housing that makes transit usage extremely convenient. However, I do not believe providing developers with as much as $400 million in incentives is necessary to get 8,000 new housing units that are projected to come here anyway. Put another way, this bill would provide a developer with a $50,000 per unit gift regardless of cost of rent, without producing additional affordable housing units beyond the amount required for all developments. This is not a good use of public funds.
Nor do we need this law—the authority already exists for the County to negotiate individual agreements.
It makes sense to continue to allow them on a project-by-project basis—not all projects need the same PILOT term or value. Flexibility should be maintained to enable negotiation of the best possible agreement that is in the public interest.
Additionally, it does not make sense to focus the market rate housing (along with the public subsidy) at Metro stations, which pushes affordable housing elsewhere. As the recent Housing Preservation study points out, affordable housing units near transit are at greatest risk of being lost and are being lost. Seventy-five percent of projected need for housing over the next decade is for affordable housing—why would the focus of a housing bill be on subsidizing market rate housing? Furthermore, given the projected number of market units needed over the next 20 years, there is sufficient zoning near Metro Stations to accommodate the needed units. While they might not be built on top of Metro property, they may be built nearby within easy walking distance of the Metro.
In White Flint, there are properties adjacent to, and across the street from, the Metro entrance where housing could be built that would actually be closer to the Metro entrance than some buildings on WMATA property. In other words, the housing does not have to be built directly on WMATA property; it can be nearby. And this bill creates a difficult precedent. It is likely that other properties near Metro will ask for the same PILOT. Those properties offer similar value in providing transit proximate development. It is simply not good policy to have a general approach to subsidize market rate housing.
Ironically, this bill may be counterproductive by raising the value of WMATA’s land. Under Federal law, WMATA must seek the highest and best price for its land. Land that is exempted from all property taxes for 15 years is more valuable because the calculation of its value includes the costs to acquire and develop, including taxes, weighed against market rents. If two properties are side by side, one exempt from taxes and the other not, and they were producing the same value of unit, the land value of the exempt property would be greater because its cost of development would be less than the cost to develop the tax-paying property. This would, in turn, likely raise the parcel’s appraised value. Supporters of the bill have said they are trying to reduce the cost to developers, but if the value of the land increases, the bill has had the opposite effect.
Furthermore, there is no evidence that this is needed. In fact, if you look around the region, many of our neighboring jurisdictions have their highest taxes on property nearest Metro sites and the tax rates are substantially greater than in Montgomery County. If property taxes were the key to development, we would have won the development battle a long time ago because we are lower than most surrounding jurisdictions. (See chart below)
And I would note that if one of the goals of this bill is to provide tax incentives to attract new businesses, those incentives should go to the occupant of the building, not to the developer of the building. This legislation gives public funds to help build buildings, not to incentivize businesses to become tenants in those buildings.
And workers deserve a prevailing wage. A majority of the Council voted against requiring the prevailing wage at these projects. The provision would have required that all contractors and subcontractors pay prevailing wages and be licensed, bonded, insured and abide by wage and hour laws. Legislation that dedicates public funds to market-rate housing should, at least, also support the workers who build the housing. If WMATA was building a structure on the same property, current law would require it to abide by the prevailing wage. I believe the developments contemplated by this bill should as well. The lack of such a provision to treat workers equitably and to share in the subsidy is another major deficiency in this legislation.
Finally, to risk of stating the obvious, using our limited funds for market-rate (non-affordable) housing development means fewer funds for other services including affordable housing, recreation and education, which has a racial equity/social justice impact. This bill allows housing to be built for those who can afford it, not for lower-income populations who are disproportionately Black and Latino.
I hope this gives you a better understanding why I could not support this bill.
County Executive Marc Elrich has a soft and raspy voice. Close your eyes and imagine that voice saying:
I just think that developers should pay their fair share.
Last week was a terrible one for Elrich. His chief administrative officer and emergency management director were blown to smithereens by the county council over the pace of the executive branch’s distribution of federal assistance funds. The story dominated the local press for days. Elrich responded to the council with this saucy comeback: “I used to be a legislator, and it’s the best job in the world because you can just say, ‘I want to spend this money,’ and tell someone to go spend it. And you don’t actually figure out how to do it.” There is more than a bit of truth to this, but the observation won’t improve Elrich’s relations with an irate council.
I just think that developers should pay their fair share.
Supporters of the vetoed bill argue that it was necessary to enable development of high rises at the pending Grosvenor-Strathmore Metro station project. They feared that failure to act would doom or shrink the project. That urgency prevented them from examining other, more time-consuming, paths to a deal including an appropriation from the economic development fund (in which Elrich would get to play) or providing financing through the county’s economic development corporation or the Housing Opportunities Commission. But unlike those mechanisms, legislation is a highly public thing. By giving Elrich an opportunity to veto the bill, his critics on the council gave him an opportunity to go on offense.
But wait a minute, you say. The bill passed on a 7-2 vote, one more than necessary to override a veto. When the council overrides Elrich, doesn’t that make him a loser?
Those who think that do not understand how Elrich got elected executive. During his twelve years on the county council, Elrich was the sole no vote on a host of master plans, all increasing density. Yes, he “lost” those votes again and again. But he also picked up support in those communities from skeptics of the plans who came to see Elrich as their only champion. Those folks became a critical and expanding part of Elrich’s base. Few if any politicians in the county have ever won more from “losing” than Marc Elrich.
Elrich’s opposition to many new development policies have prompted his critics to brand him as a NIMBY. But there is more to his political success than pure NIMBYism. When you listen to him discuss development closely, he is making an equity argument as much as a land use argument. Here is what he said about development in 2002:
Our beleaguered middle-class is told that the County can no longer afford to provide the quality of life that made this place so attractive at the same time it throws millions in subsidies into the pockets of millionaires. We make great claims about ending welfare, but we’re really only changing the beneficiaries. What we’ve done is to recast developers as the new poster children of the Nineties. This blind devotion to growth is great – if you’re a developer or a tumor – but it doesn’t work so well for the rest of us who are better served by priorities that strengthen our communities and our schools.
In other words, throwing public money at developers reduces the money available for schools, public safety, health and human services, libraries, parks and more. Here is a more refined version of this argument from his 2018 campaign kickoff.
Elrich’s quarrels with developers resonated more when the economy was better, such as in 2006, when he was first elected to the council. As executive, such arguments come up less often, first because his office does not often deal directly with land use and second because the economy is in such wretched shape. MoCo has much bigger problems at the moment than “predatory” developers. But in a dark blue county in which Democratic primaries are the real elections for office, Elrich’s equity argument still has purchase when occasion calls for it.
Supporters of the bill that Elrich vetoed have good arguments on their behalf. It’s true that Metro sites have extra development costs. It’s true that, for the most part, high-rises are not being built on these sites. It’s true that transit-oriented development is superior to sprawl or no growth. So it’s not a crazy position that public investment should be used to make these projects happen.
But the bill’s supporters have two problems. First, they are making complicated arguments and Elrich is making a simple one. In politics, simple arguments usually beat complicated ones. Second, the supporters are making economic arguments while Elrich is making a value judgment. Most MoCo Democratic primary voters are not accountants or economists, but they do have progressive values. Broadly speaking, they agree with the notion that everyone with means – not just developers – should pay towards the cost of funding government.
On top of all that, consider the times we are in. The county’s unemployment rate is the highest it has been in anyone’s memory. Small businesses are shutting down left and right. Tenants are missing rent and will be, eventually, at risk of eviction. So what are we doing? Giving developers 15 year tax breaks. That’s how Team Elrich is going to frame this.
I just think that developers should pay their fair share.
Unless something strange happens, the council will override the executive’s veto. The bill’s supporters will get the policy win. But the political win? Overall, that belongs to Marc Elrich.
On Friday, County Executive Marc Elrich issued the first veto of his administration against a bill by the county council offering 15-year property tax breaks for high-rise developments at Metro stations.
Vetoes are uncommon events in MoCo politics. Elrich’s predecessor, Ike Leggett, vetoed three measures: a county property disposition bill in 2012 (which was overridden), a minimum wage bill in 2017 (which was subsequently replaced by a similar bill that he signed) and a 2018 line item in the capital budget covering stormwater contracting (which resulted in passage of a compromise). Vetoes are typically prevented by one of two things: deal-making between the executive and the council or passage of a measure by more than the six votes required to override. But there was no deal in this case: Elrich opposes the property tax bill and wrote his rationale in a lengthy veto message.
This post examines the policy debate around the bill, about which I wrote a three-part series. (Here are links to Part One, Part Two and Part Three.) Tomorrow, we will discuss the politics.
These events gave rise to Bill 29-20, which offers developers at Metro stations 15-year property tax breaks if they build high rises. The bill’s supporters claim that without the tax breaks, the sites will either remain undeveloped or will contain low- or mid-rise projects that waste the stations’ potential for generating transit-oriented development. Elrich disagrees, offering several key reasons that I will evaluate.
Elrich: The bill “harms the budget.”
Elrich wrote:
At a time when the County is struggling to fund critical services, where the outlook for the next couple of years is uncertain at best, and where full economic recovery from this pandemic may take as much as ten years, it is certainly not prudent to reduce revenues coming into the County coffers.
The bill’s supporters argue that the tax break would only apply to projects that would otherwise not happen without the bill, thus not creating a real marginal cost to the county. They also say that without the bill, the Metro stations would remain undeveloped and therefore pay nothing to the county. However, according to Fivesquares, a low density project would be viable at Grosvenor-Strathmore without a subsidy and would therefore generate actual property taxes for the county. So even without the bill, it’s possible to get taxpaying low- or mid-rise development at Metro stations. The real question is not so much about the budget but whether the public benefit of high-rise housing infrastructure at Metro stations is worth an investment of public dollars. Elrich says no, the bill’s supporters say yes.
Elrich: The public benefit isn’t worth it.
Right now, developments at Metro stations are required to ensure that 12.5-15% of constructed units are moderately priced dwelling units affordable to moderate income people. Council Member Will Jawando amended the bill to require that 25% of a qualifying project’s units be moderately priced to get the tax break. Elrich says there should be a higher percentage of moderately priced units and he argues that they should be mandated rather than included in a tax incentive. (If he believes that, he should send over legislation to accomplish it.) Bill supporters argue that a higher percentage of affordable units would kill a project’s economics. The record of the bill does not conclusively prove either side right.
Elrich: Public funds should be used for affordable housing, not market rate housing.
Elrich argues that MoCo’s real housing shortage is in affordable units, not so much in market rate units, and that because the bill allows projects with 75% market rate units to get tax breaks, it contributes little to solving the county’s housing problems. He is right that MWCOG’s report recommends that “at least 75% of new housing should be affordable to low- and middle- income households.” But with all due respect to MWCOG, the difference between the county’s requirement that 12.5-15% of new units be moderately priced and the report’s recommendation that 75% of them be affordable is VAST. The county’s housing target is 10,000 units above forecasts. No one – not Elrich, not the council, not the planning board – has a credible financing plan for plowing (at least) hundreds of millions of dollars of public money into building 7,500 or more affordable units. Holding this bill or any other plan to that standard is unrealistic.
Elrich: The bill sets a difficult precedent.
Here, Elrich makes the same slippery slope argument that I made. If developers at Metro stations get these tax breaks, developers of properties next to Metro stations will want them too. The bill’s supporters argue that Metro sites have extra costs that require subsidies to offset. Those extra costs are probably responsible for the dearth of new high-rise projects at Metro stations all around the region. But the bill does change how the county does incentives. In the past, incentives have been granted on a case-by-case basis (including the Marriott headquarters development project). The bill establishes its subsidy in law, giving it to developers by right. The bill’s supporters don’t say this publicly, but they argue privately that legislation is necessary because Elrich can’t be trusted to constructively negotiate with developers. Even if that were true, Elrich won’t be executive forever, and case-by-case negotiations have advantages that a one-size-fits-all approach can’t replicate.
Elrich: Construction workers deserve prevailing wages.
Council Member Will Jawando offered an amendment to require that Metro station development projects should pay construction workers the same prevailing wage they receive on county construction projects to get tax breaks. The amendment failed on a 4-5 vote, with Jawando and Council Members Evan Glass, Tom Hucker and Sidney Katz voting in favor. Elrich cites the bill’s failure to require prevailing wage as a reason to veto it.
When I was employed by the carpenters union, I lobbied the council to pass what is now the county’s prevailing wage law. In doing so, I provided them with a mountainof evidence that prevailing wage laws do not inflateconstruction costs because higher wages tend to be offset by higher productivity. As Nooshin Mahalia of the Economic Policy Institute wrote just before the bill was passed:
An overwhelming preponderance of the literature shows that prevailing wage regulations have no effect one way or the other on the cost to government of contracted public works projects. And as studies of the question become more and more sophisticated, this finding becomes stronger, and is reinforced with evidence that prevailing wage laws also help to reduce occupational injuries and fatalities, increase the pool of skilled construction workers, and actually enhance state tax revenues.
Council Member Marc Elrich was a co-sponsor of the prevailing wage bill. No current council member was in office when it passed in 2008.
The county has a prevailing wage law for its construction projects. WMATA uses the federal prevailing wage law (the Davis-Bacon Act) for its construction projects. And yet a developer with a county subsidy building at a WMATA Metro station is not required to pay prevailing wage. That just does not make a lot of sense.
Those who voted against prevailing wage coverage argue (against the evidence linked above) that it would inflate project costs and offset the value of the 15-year property tax break. If they truly believe that prevailing wages increase costs, then to be intellectually honest, they should repeal the county’s prevailing wage law to save money for the capital budget. Unless they do that, the arguments against prevailing wage ring hollow. On this one, Elrich is right.
The best point that Elrich’s critics make against him is that if he opposes this bill, then what is his plan to build more affordable housing? The county’s current total of $62 million in operating and capital money for preserving and building affordable units is woefully inadequate when compared to the needs. Elrich has been discussing this issue while in elected office for 14 years. What is the Elrich Plan to Build Affordable Housing?
Tomorrow, we will get into the politics of the veto.
County Executive Marc Elrich has vetoed Bill 29-20, which would grant high-rise developers on Metro station projects payments in lieu of taxes in return for 15-year exemptions from property taxes. I wrote a three-part series on this legislation quoting the bill’s supporters in Part One, evaluating their arguments in Part Two and raising concerns in Part Three. The bill passed the council with amendments on a 7-2 vote, with Council Members Tom Hucker and Will Jawando voting no. Under the charter, the council may override a veto with 6 votes.
The executive’s veto message is printed below.
*****
October 16, 2020
TO: Sidney Katz, Council President
FROM: Marc Elrich, County Executive
RE: Veto explanation of Bill 29-20, Taxation – Payment in Lieu of Taxes – WMATA Property – Established, Enacted with amendments
I share the Council’s desire to find ways to spur smart growth and to broaden our tax base. However, I strongly oppose the approach used by the Council in this legislation. It is too costly and does not achieve my goal of increased affordable housing. Therefore, I am vetoing Bill 29-20, Taxation – Payment in Lieu of Taxes – WMATA Property.
Below is a description of the bill and my explanation of the veto.
Description of Bill 29-20
Bill 29-20 requires 100% exemption of the real property tax for 15 years. This exemption is known as a Payment in Lieu of Taxes (PILOT). The requirement applies to development that is higher than 8 stories on property owned by WMATA at a Metro station. The development must include at least 50% residential rental housing, and one-quarter of the moderately priced dwelling units (MPDUs) must be affordable for residents at 50% of area median income (AMI). The PILOT would begin no later than the second year after the property tax is levied. The law would sunset in 2032, but any existing PILOT would continue until the end of its 15-year period. To be eligible for a PILOT, a developer would be required to use contractors and subcontractors who have no more than two final penalties of $5,000 or more in the three prior years for violations of applicable wage and hour laws. At least 25% of the workers constructing the project must be County residents. Special taxing district taxes are exempt from the PILOT.
This Bill harms the budget without providing a meaningful public benefit.
At a time when the County is struggling to fund critical services, where the outlook for the next couple of years is uncertain at best, and where full economic recovery from this pandemic may take as much as ten years, it is certainly not prudent to reduce revenues coming into the County coffers.
During the Council’s deliberations on the Bill, supporters could only cite one potential development as being eligible for this 15-year, 100% tax break – the proposed Strathmore Square at the Grosvenor/Strathmore Station. Under the provisions of this legislation, Strathmore Square’s owners would receive a tax break of more than $100 million. As a member of the County Council, I supported the zoning changes that made this proposed development possible, but I simply do not believe it is a responsible use of County resources to supplement a market-rate housing complex at this level of expense.
Should similar developments occur at the other potential WMATA sites across the County, lost revenue would likely exceed $400 million. To be clear, I want more housing constructed in our County, and I see the significant benefit of housing that makes transit usage extremely convenient. However, I do not believe providing developers with $400 million in incentives is worth the 8,000 new housing units. Put another way, this Bill would provide a developer with a $50,000 per unit subsidy regardless of cost of rent. We simply cannot afford this cost.
Public benefit
Generally, PILOTs are used to incentivize production of more affordable housing that we would not otherwise get. Under current law, new residential development must include between 12.5% and 15% MPDUs (the minimum percentage requirement depends on the location of the project). Enactment of an entirely new program with such a substantial subsidy must do more than require one quarter minimum required number of MPDUs be affordable to those earning 50% AMI. In fact, we need more of these deeply affordable units, and I would support turning that provision into a requirement, rather than simply using it as part of an incentive package. Again, the public benefit proposed by this Bill does not warrant the expenditure.
Authority already exists to provide PILOTs
As you know, the County already has the authority to offer PILOTs. It makes sense to continue to allow them on a project-by-project basis – not all projects need the same PILOT term or value. Flexibility should be maintained to enable negotiation of the best possible agreement in the public interest.
Additionally, if we want to provide tax incentives that support commercial development to bring new businesses here, those incentives should go to the occupant of the building, not to the developer of the building. This legislation gives public funds to help build buildings not to incentivize businesses that would be tenants in those buildings.
Use of limited public funds should be targeted for affordable housing production and meeting affordable housing goals, which is not the focus of this Bill
By the estimates developed by WMATA and some Councilmembers, about 8,600 units can be built on the properties covered by this Bill. Approximately 1,300 of those units would be the required MPDUs; approximately 7,300 would be market rate units. The recent regional housing study and the related housing goals were clear that our housing need was not simply about the total number of housing units. The report and the related goals specify income-based targets: three-quarters of the future projected 40,000 units need to be below 70-80% of area median income. Therefore, only one-quarter or 10,000 of the projected 40,000 units, are needed to be at market rate. If this legislation succeeded in producing the number of units estimated by WMATA, then about 7,000 (those on WMATA property) of the 10,000 market rate units needed would not produce property tax revenue for 15 years. The legislation would shift property taxes almost entirely onto below market rate units.
The remaining 3,000 market rate units are likely to be spread out at the 23 “activity centers” along with the more than 25,000 affordable housing units. It does not make sense to focus the market rate housing at Metro stations and push the other affordable housing elsewhere. As the recent Housing Preservation study points out, affordable housing units near transit are at greatest risk of being lost and are being lost.
Given the projected number of market units needed, there is no lack of zoning in the Metro Station areas in order to accommodate the needed units; while they may not be built on top of Metro property, they may be built nearby within easy walking distance of the Metro.
High rise housing is expensive to build and expensive to rent
Furthermore, a focus on high rise buildings ignores the fact that by its very nature, high rise development is the most expensive that can be built. Advocates want to maximize use of land but if density is used to build high rises, it will be unaffordable to most of the people identified as needing housing. Seventy-five percent of projected need is affordable housing – why would the focus be on subsidizing market rate housing? Zoning in central business districts for high rises far exceeds the zoning for types of housing that are generally affordable and more family friendly – including garden style and mid-rise apartments.
The Bill could increase the cost of WMATA land.
Under Federal law, WMATA must seek the highest and best price for their land. Land that is exempted from all property taxes for 15 years is more valuable because the calculation of its value includes the costs to acquire and develop, including taxes, weighed against market rents. If two properties are side by side, one exempt from taxes and the other not, and they were producing the same value of unit, the land value of the exempt property would be greater because its cost of development would be less than the cost to develop the tax-paying property. This would, in turn, likely raise the parcel’s appraised value. The Bill could potentially be counterproductive by raising the value of WMATA’s land.
The Bill sets a difficult precedent
It is not clear why there is a public need to specifically incentivize development on WMATA owned property. It is likely that other properties near Metro will ask for the same PILOT. Those properties offer similar value in providing transit proximate development – a residential walkshed is a radius of ½ mile from Metro; a walkshed is the area around a station that is reachable on foot for the average person – how far someone is willing to walk to their home or business from transit. Additionally, a commercial walkshed is ¼ mile from heavy transit, which would raise the question of whether commercial development should be favored closer to Metro. There does not seem to be a logic to the approach of this Bill.
The impetus for this Bill seems to be based on one project at one Metro site as evidenced by testimony and the Council packets. One project should not drive countywide policy.
The specific project was discussed during Council deliberations – at the Grosvenor Metro Station by FiveSquares Development which had been working with WMATA for about five years either directly or through their affiliate, Streetscape Partners.
The Bill is particularly focused on one project at the Grosvenor Metro. In December 2017, as a member of the County Council, I voted in favor of the Grosvenor-Strathmore Metro Area Minor Master Plan which allows for this development to proceed. WMATA documents that we reviewed show that the original assumption for their property was that about 500 units could be built. This Minor Master Plan up-zoned portions of the Plan Area to allow for greater density, particularly on the Metro site both to take advantage of the Metro location and to provide density to make the project feasible. This up zoning resulted in allowing more than 2,200 units to be built there, essentially quadrupling the density.
The documents show that FiveSquares was substituted for Streetscape as the developer and that the appraisal of the land would only be done after the completion of the rezoning process. So, the price was set based on the appraisal which, like all appraisals, took into account all of the costs and the market for units that would be needed to support those costs. One has to assume that FiveSquares fully understood what they were doing because had they thought the appraisal was wrong, they could have walked away from the project. FiveSquares agreed to the appraisal and signed a deal. The appraisal assumes that the property can be developed at the determined price and FiveSquares obviously concurred with that assessment. Having been personally involved as an Executive negotiating over the value of land, I know that it is common for buyers and sellers to differ in appraisals and then to reach agreements that attempt to accommodate the assumptions of both parties. One has to assume that FiveSquares knew what they were doing when they accepted the assumptions and the appraisals that went with it.
If FiveSquares had a problem with the price and appraisal, they had an opportunity to reject the appraisal and the deal. At no point during the Council’s consideration of the Minor Master Plan was there any indication that additional public subsidies would be required to get a high-rise project “shovel ready,” let alone a 15-year abatement of all property taxes.
I would also note that others have commented that FiveSquares will pay for amenities; those amenities attract residents and make the project feasible. They would also have been included in the appraisal and are key in marketing the property.
Fiscal impact of a PILOT and the FiveSquares project
According to the Bill’s Fiscal Impact Statement that compared Strathmore Square with existing nearby buildings, the development’s approximate annual property tax bill upon completion would be between $5.8 million to $7.1 million a year. Over 15 years, the approximate loss of property tax revenue would be between $87 million and $106.5 million for just this single project.
No evidence that this Bill is necessary to stimulate market-rate (non-affordable) housing and this approach is not done region-wide
There is no evidence that this subsidy is required. In fact, if you look around the region, many of our neighboring jurisdictions have their highest taxes on property nearest Metro sites and the tax rates are substantially greater than in Montgomery County. If property taxes were the key to development, we would have won the development battle a long time ago because we are lower than most surrounding jurisdictions.
Furthermore, market housing is being built rapidly in Bethesda and is likely to spread to other densely zoned areas as Bethesda builds out. Rents in Bethesda are extraordinarily high, and it does not make sense to subsidize the construction of apartments that rent at prices far out of reach for most County residents. The Bill, coupled with a separate proposal from the Planning Board to reduce impact fees in most areas, will only deepen the obstacles to growing the tax base. While it is true that residents of these buildings will pay income taxes, the loss of property taxes is significant, and residents could live in other market rate housing where we collect both income taxes and property taxes. For the commercial sector, the only ongoing tax we receive to help provide infrastructure is the property tax.
This Bill was designed without a market analysis to establish whether this type of general legislation is needed. As noted above, the authority already exists to provide these PILOTS on an individual project basis, and a Countywide approach is not warranted.
Workers deserve prevailing wage
A majority of the Council voted against requiring the prevailing wage at these projects. The provision would have required that all contractors and subcontractors pay prevailing wages and be licensed, bonded, insured, and abide by wage and hour laws. Legislation that dedicates public funds to market-rate housing should, at least, also support the workers who build the housing. This provision was supported by the Baltimore-Washington Laborers’ District Council, an affiliate of LiUNA; United Association (UA), United Brotherhood of Carpenters, International Brotherhood of Electrical Workers (IBEW), CASA, Jews United for Justice, Progressive Maryland, Montgomery County Education Association (MCEA), SEIU 32BJ, SEIU Local 500, SEIU Local 1199, UFCW MCGEO Local 1994, and UNITE HERE Local 25. If WMATA was building a structure on the same property, current law would require them to abide by the prevailing wage. I believe the developments contemplated by this Bill should as well. The lack of such a provision to treat workers equitably and to share in the subsidy is another major deficiency in this legislation.
Using limited funds for market-rate (non-affordable) housing development means fewer funds for other services including affordable housing, recreation, and education, which has a racial equity/social justice impact
A Racial Equity and Social Justice (RESJ) impact analysis was not applied to this Bill, which was introduced before the RESJ requirement took effect. Because the Bill will have a significant budgetary impact, it deprives the County of tax dollars that could be used for other programs, including affordable housing that would benefit communities of color most. This Bill allows housing to be built for those who can afford it, not for lower income populations who are disproportionately Black and Latino.
Following the meeting, which Elrich did not attend, he told Montgomery Community Media he was surprised at the council’s reaction. “There is no way the money goes out the door the next day.” Elrich explained that applications for funds must be gone through to make sure they meet the requirements. “This is the whole thing about allocating money,” he said, adding, “We are not holding money back.”
Um, whaaaaat???
Anyone who was surprised by the council’s response to the administration’s COVID grant challenges is not paying attention to them. This is only the latest episode in a loooooong line of council complaints about the executive branch. If I were to type them all out, my keyboard would break. There is nothing new here. And there is absolutely nothing surprising.
If one word can be used to describe the council’s sentiment towards Elrich, it is frustration. They are frustrated at the communication problems which have plagued the relationship for the entire term. They are frustrated at what they believe to be disorganization and a lack of an agenda (other than reacting to COVID) on the part of the administration. They are frustrated at Elrich’s management of the budget, including but not limited to his union contracts, a raid on retiree health care money last year, a hidden tax increase built into his budget this year, his failure to make any progress on restructuring government to save money and now his runaway COVID pay liability. But most of all they’re frustrated because they don’t think they have a willing or competent partner in the executive branch. For all their substantial powers over budget, legislation and land use, the council members have no authority to actually run the government themselves. And at this point, all of them think the government could be run better.
Many people look at the executive-council relationship through the prism of Elrich vs Council Member Hans Riemer. It’s true that Riemer (my former employer) is Elrich’s harshest and most frequent critic. But Riemer is something of an anomaly. His fifteen-year personal enmity with Elrich is not shared by any other sitting Council Member. Instead, look at Council Member Nancy Navarro, a cautious politician who is not given to public hysterics. She was at a loss for words at the tumultuous meeting about the grants on Tuesday. Look at Council Member Tom Hucker, who shares much of Elrich’s political base and is usually with him on progressive issues. None of that stopped Hucker from calling out Elrich. “Do you know where the county executive is?” Hucker asked Chief Administrative Officer Rich Madaleno on Tuesday. Look at Council Member Will Jawando, another progressive who called the administration’s slowness on getting out federal assistance to renters and vulnerable residents “totally unacceptable.”
The body and facial language says it all.
But most of all, look at Council Member Gabe Albornoz. Nicknamed Mr. Rogers by his colleagues, Albornoz – like his mentor, Ike Leggett – is one of the most courteous and civil politicians I have ever met. Unlike his flashier freshman colleagues who have been quick to establish their political identities, Albornoz has set the same kind of slow, steady and workmanlike path to higher office that Leggett employed decades ago. But Albornoz has become increasingly vocal over his unhappiness with the administration in recent months. When Elrich joked that the council was “fact proof” on a hot mic, Albornoz said:
I did not find the County Executive’s comments on this video funny or amusing. In fact, I found them deeply troubling and the reaction of his senior officials disappointing. It’s also disappointing that the County Executive does not have a better understanding or command of this situation.
And with regards to the administration’s grant problems, Albornoz said:
I’m not confident at all that a month from now, when we have another update, that things will be significantly improved from where we are right now. And we’re setting everybody up for failure right now. And it’s not fair. It’s not fair to the county employees who are working diligently and around the clock to address these issues. We need stronger strategic leadership to be able to provide them with the support that they need to be able to get their jobs done. And I’m not seeing that and I’m not hearing that right now.
When Mr. Rogers grabs a shotgun, you know that all is not well in the neighborhood!
There have been seven MoCo executives since the office was established in 1970. None of Elrich’s predecessors have been so isolated and so regularly attacked by the council as Elrich has – and let’s remember that one of them (Jim Gleason) was a Republican. Politics is a team sport. No politician – not the president, not a governor, not a mayor, not a county executive – can totally go it alone and succeed from either a policy perspective or a political perspective. As amiable and astute as Rich Madaleno is, he can’t fix the relationship with the council all by himself. No one else can fix it. Only Elrich can.
And if he doesn’t, the “surprises” are going to keep coming.
Here are two things that almost everyone inside and outside of county government will agree on.
The needs of residents and businesses for financial assistance to deal with the COVID crisis are immense.
The $183 million in CARES Act grant money the county has been allocated by the federal government is helpful but is far from adequate to cover all the above needs.
With those two things said, representatives of the executive branch told the county council yesterday that they have not spent all the federal money appropriated by the council yet. And facing an end-of-year deadline to get the money out the door, there is now doubt as to whether the county will spend all of the federal money or forfeit some of it.
The council’s response to this was nothing short of nuclear.
The fissile material was prepared by council staff, whose memo to the council listed major appropriations of federal assistance and its actual expenditure by the executive branch. Six federal money appropriations mentioned in the memo and passed by the council months ago include:
Resolution 19-439: Emergency Assistance Relief Payment (EARP) Program Adopted by council: 4/30/20 Funds appropriated by council: $5,000,000 Funds spent by executive branch: $0
Resolution 19-499: 3R Program (Reopen, Relaunch, Reimagine) – Economic Development Adopted by council: 6/16/20 Funds appropriated by council: $500,000 Funds spent: $142,500 (Note: the county’s economic development corporation is responsible for spending this money.)
Resolution 19-506: Food Assistance/Security Adopted by council: 6/23/20 Funds appropriated by council: $10,300,000 Funds spent by executive branch: $5,052,209
Resolution 19-523: Reopen Montgomery Initiative Adopted by council: 7/7/20 Funds appropriated by council: $14,000,000 Funds spent by executive branch: $1,431,538
Resolution 19-535: Business Assistance for Medical and Dental Clinics Adopted by council: 7/21/20 Funds appropriated by council: $3,000,000 Funds spent by executive branch: $0
Resolution 19-557: Rental Assistance and Eviction/Homelessness Prevention Adopted by council: 7/28/20 Funds appropriated by council: $20,000,000 Funds spent by executive branch: $607,508
The above six appropriations total $52.8 million, of which the largest chunk ($20 million) is assistance to renters. Of that amount, the executive branch has spent $7,233,755. If the executive branch does not spend the remaining $45.6 million of federal money by December 31, it risks forfeiting the money.
That’s not all. Eight additional appropriations of federal money passed more recently by the council total $12.1 million, of which the executive branch has so far spent just $30,492. The two largest portions of this money are assistance to school age child care providers ($7.7 million) and assistance to distressed, affordable common ownership communities ($2 million). If this money is not spent by December 31, it might also be forfeited.
What’s the problem? First, the county just can’t spray checks around; it has to design the assistance programs, publicize them to potential recipients, process the applications and distribute the funds. Those things take staff and time. Second and more seriously, the county has had problems complying with FEMA paperwork requirements to get reimbursed. The process is nightmarish and time-consuming with FEMA changing the rules at least once (so far). County homeland security director Earl Stoddard told the council that the county had obtained just $20,000(!) in reimbursement from FEMA so far and that took more than two weeks and dozens of staff hours to process. Stoddard and Chief Administrative Officer Rich Madaleno made no defense of the feds and were clearly frustrated.
None of this mollified the council, who proceeded to nuke the executive branch from orbit. Here are just four quotes from MANY angry statements by council members.
Council Member Andrew Friedson This is a really frustrating conversation and clearly there are a lot more questions than answers. Some of that is understandable when in the midst of a crisis and there are a lot more questions. We don’t know what the future will hold, we don’t know what this virus will do, we don’t know what the impact on our community will be, we can’t control what the federal government… and how they will respond. But the idea that our residents and our businesses are struggling more than they ever have and are more vulnerable than they’ve ever been, when the needs are as challenging as they currently are, with an economic crisis and a public health emergency, that our issue right now is not whether or not we will run out of money too quickly, but whether or not the clock will run out before these programs will have been able to help the businesses, help the residents, help the vulnerable members of our community who desperately need it. And I can’t tell you how frustrating that is for me. I believe it’s frustrating similarly for colleagues and I can’t imagine how frustrating that is for the 1.1 million residents who are desperately trying to get through the most challenging time in our lifetimes.
Council Member Nancy Navarro For that list of special appropriations that we started, some of them, all the way back in April, the amount of money that has not been spent translates into residents not receiving that assistance. Residents who we interact with on a daily basis that I know I have said, “Oh no, we have this program, we have that program,” we all did, all these different places and interviews and social media, pushing all this out and I keep getting feedback that, “Well no, we have not really been able to access this and we have not received that,” thinking OK, we’ll keep working on it. So number one, I’m just super disappointed that so many of these amounts, these special appropriations, these funds that are specifically to address the needs of some of the most vulnerable people in the county, and when I see how little has been spent, I just don’t even know what to say…
There is no excuse for the fact that so much of this money has not been out there.
Council Member Gabe Albornoz I’m not confident at all that a month from now, when we have another update, that things will be significantly improved from where we are right now. And we’re setting everybody up for failure right now. And it’s not fair. It’s not fair to the county employees who are working diligently and around the clock to address these issues. We need stronger strategic leadership to be able to provide them with the support that they need to be able to get their jobs done. And I’m not seeing that and I’m not hearing that right now.
Council Member Will Jawando The thing that is totally unacceptable to me is that we can’t get money out of the door that we’ve appropriated for rent and for food and for emergency assistance. So we just have to do better on that.
Council Members also called out County Executive Marc Elrich directly.
Navarro I apologize to you, Dr. Stoddard, because this is not directed at you, because you’re not the executive. And I will say, the executive should be here talking to us about what is happening because this is really, really critical.
Council Member Tom Hucker [To Madaleno] Do you know where the county executive is? I would just expect the county executive to be coming in and making this presentation. This is not one, this is like five or six of the most important issues facing the county. It’s hard enough to tell our constituents, “We don’t have money to keep your business open, we don’t have money to keep you in your apartment,” but it’s heartbreaking to tell them, “We have the money, we appropriated it, and it’s in a bank account, we just haven’t given it to you yet. And we may not be able to.” And I would just think, if there would be one thing he’d be on top of, it’s this. I don’t want to be unfair to him, I’m happy to tell him that himself, but I’m a little shocked that he’s not here to make this presentation and that it also wasn’t made months ago.
Council Member Craig Rice This lies firmly in the county executive’s lap. And look, I have been incredibly complimentary to the county executive in terms of how I think we’ve responded to the pandemic, and so now, I can also equally be critical of the fact that we failed. We dropped the ball. And it does rest in his court. That’s just the reality…
We cannot work as a county if we have a disconnect between the county executive and the county council on something that is so important as keeping people in their homes, putting food on their tables and making sure that they can continue to be employed. I mean, these are basics. And if it’s not happening, then there’s a serious problem ahead…
[To Stoddard] I just want to say I appreciate you falling on your sword, but sir, it’s not your sword to fall on.
Friedson With all due respect, I heard earlier about the county executive and his frustration. We don’t need frustration from the county executive, we need leadership. And thus far on these issues, we have not seen it, and we need to.
On top of all that, Stoddard made this grim observation.
The FEMA reimbursement process is going to be incredibly difficult, not just for us, but also for FEMA. And as I think I have alluded to before, my experience with FEMA is generally that if they can find a reason not to reimburse you for something, they’re going to find it. And they’re going to utilize that as a rationale to not reimburse.
What is this new spending stream? On April 10, County Executive Marc Elrich announced that he had reached an agreement with the three county employee unions (MCGEO, the fire fighters and the police) to provide their members with COVID-19 differential pay. The extra pay applied to two categories of employees.
Front Facing Onsite: work that cannot be performed by telework, involves physical interaction with the public and cannot be performed with appropriate social distancing. These employees would get an extra $10 per hour.
Back Office Onsite: work that cannot be performed by telework and does not involve regular physical interaction with the public. These employees would get an extra $3 per hour.
The extra pay was retroactive to the March 29 pay period and was supposed to be in effect for six pay periods “or until the Maryland State of Emergency is lifted.” At the time, county council staff estimated that the extra pay would cost the county $3.2 million per pay period. As of this writing, I am told that the COVID pay continues. (Note: this pay arrangement does not apply to MCPS or other agencies legally separate from county government.)
My sources tell me that the county’s COVID pay program is one of the most generous in the United States. It is far more generous than the state’s COVID pay, which was an extra $3.13 per hour for some classifications of public safety, juvenile center and healthcare employees plus $2.00 more for those working in quarantine areas. (The $3.13 per hour ended on September 8 while the quarantine pay continues.) The generosity of the county’s program can further be seen by its cost: $3.2 million per pay period versus the state’s $3.3 million. MoCo has roughly 10,000 employees while the state has more than 80,000.
Elrich painted this extra pay as a financial win for the county. His press release stated, “The County Executive noted that under provisions of existing county bargaining agreements (which were negotiated years ago), the unions could have insisted on much larger benefits, but they understood the importance of the ongoing fiscal health of the county.” So according to Elrich, by giving the unions something less than what their agreements gave them, he was saving the county money.
In retrospect, that was a dubious claim. The unions are indeed entitled to double pay during emergencies under their agreements. However, a careful examination of the county’s collective bargaining agreements with MCGEO, the fire fighters and the police shows that their emergency pay provisions relate to weather emergencies. The emergency pay provision in the police agreement is actually labeled “Snow Emergency-General Emergency Pay.” All three agreements contain this language:
“General emergency” for the purpose of this agreement is defined as any period determined by the County Executive, Chief Administrative Officer, or designee to be a period of emergency, such as inclement weather conditions. Under such conditions, County offices are closed and services are discontinued; only emergency services shall be provided.
The county suspended some (but not all) services early during the COVID crisis but many of them are being provided now. The county even said as far back as March 13, “While schools and public facilities will be closed, Montgomery County offices remain open for business and operations are continuing.” This status does not qualify as a general emergency under the contract language.
MCGEO’s agreement contains this additional language:
Implementation of General Emergencies shall be in accordance with Administrative Procedure 4-21, dated July 12, 1991. In addition to the above, before making a determination whether to declare a General Emergency, the CAO or designee will consider recent weather reports regarding the amount of precipitation already accumulated, as well as the forecast for further accumulations during the succeeding 8-hour period. Other considerations that the CAO or designee will take into account include whether the major roadways of the County are passable and safe for travel and whether the County public schools have been closed for the day and what actions other public sector jurisdictions in the Washington Metropolitan Region take. The decision whether to declare a General Emergency shall be based on the cumulative of all these factors and no one factor shall be conclusive or determinative. The County Executive or CAO should attempt to give employees the earliest notice of whether a general emergency or liberal leave period will be declared.
Again, this clearly relates to a weather emergency.
Either Elrich knew all this and granted concessions anyway or he didn’t bother to read the union contracts and was out-negotiated by MCGEO’s shrewd president, Gino Renne. If the latter, he is not the first executive to be cleaned out at the bargaining table by Gino! The unions were quite upset to see the council cancel $28 million of compensation increases last spring, but they have already earned more than that in COVID pay.
It’s important to note that the county council had no role in this. Normally, the council would approve economic elements of a new collective bargaining agreement inside county government. But in this instance, a renegotiation occurred of an existing agreement. Elrich did not ask for council approval and the council did not bless it.
The issue here isn’t whether employees should get COVID pay. Of course they should. If you were a police officer, a fire fighter, a correctional officer, a Ride On bus driver or another employee interacting with the public for hours on end, you would want it too! The issue is whether the county has a way to pay for it, especially given its troubled financial condition. And that’s where the matter gets complicated.
One place where the county can turn for COVID expenses is federal grant funds, especially those disbursed under the CARES Act. To date, the county has received $223 million in federal grant funds during the COVID crisis. The status of those funds is a bit murky, but my quick and dirty math from examining the county council’s spending resolutions is that close to all of that money has already been appropriated. Last summer, the county was hoping a deal in Congress would produce more federal funds but it didn’t happen. Now there is talk of covering at least part of the COVID pay through a FEMA reimbursement but who knows if that will occur. Looming over all of this is the question of how long the payments will continue.
If federal funds are not available, the county’s options for financing its COVID pay program are difficult ones. It could make offsetting spending cuts although most county spending is tied to labor in one way or another. (How crazy would it be to pay employees more and then furlough them?) It could dip into reserves, which might impact its AAA bond rating. It could raid retiree health care funds yet again (something that was hinted at in July), which has already earned it a rebuke from Wall Street. Or it could raise taxes.
In a retort to County Executive Marc Elrich’s decision to not follow the state’s phase 3 reopening of businesses, Governor Larry Hogan’s office has released a letter written by Elrich asking the governor to relax restrictions on live entertainment. Specifically, Elrich asked Hogan to allow live entertainment, which was at that time prohibited, in front of audiences of 50 or less people. Hogan’s phase 3 reopening, which is scheduled to take effect tomorrow, allows live performances with audiences of 50% capacity or 100 people indoors and 50% capacity or 250 people outdoors, whichever is less.
Elrich’s defense of the live entertainment industry will be appreciated by musicians, comedians, actors and other performers. But those in other industries that are affected by the county’s refusal to follow the state into Phase 3, such as retail and religious establishments, will inevitably ask: what about us?
Originally, Kleine was set to remain in his position. Bethesda Beat reported this on July 7:
County Executive Marc Elrich, in a statement to Bethesda Beat on Monday, wrote that Kleine is a “committed public servant” and that the CAO’s agreement with the Ethics Commission “resolves the matter.”
“Andrew has acknowledged that his actions were an error in judgment and has accepted responsibility for his actions,” he wrote. “I appreciate that Andrew has cooperated with the Ethics Commission’s investigation from the very beginning to resolve this situation.”
But the matter was far from resolved. On July 28, the county council discussed the ethics report and erupted with fury. Multiple council members vowed to obtain more information about the issue, guaranteeing that it would not die as long as Kleine remained. That forced Elrich’s hand and resulted in today’s announcement, the first resignation of a MoCo Chief Administrative Officer due to ethics issues that anyone can remember.
Elrich’s press release appears below. If there is a severance package, the release does not mention it.
*****
County Executive Marc Elrich Nominates Budget Director Rich Madaleno to Serve as New Chief Administrative Officer Following Andrew Kleine’s Resignation For Immediate Release: Wednesday, Aug. 12, 2020
County Executive Marc Elrich today announced that he will nominate Richard Madaleno as the Chief Administrative Officer (CAO) for Montgomery County. Madaleno’s nomination follows the resignation of Andrew Kleine, who has served a CAO for the first 20 months of the Elrich Administration. Madaleno will begin serving as acting CAO on Aug. 16.
County Executive Elrich expressed appreciation for Kleine’s many contributions to the County Government. “During his time as CAO, Andrew Kleine led the County Government’s effort to reorganize services ranging from public safety to technology services,” said Elrich. “He championed a Turn the Curve initiative to empower County employees to rethink and improve the delivery of services to our million-plus residents. Over the past five months, he has played a critical role in our community’s response to the coronavirus pandemic. I thank him for his many contributions and wish him well in future endeavors.”
Madaleno, who is serving as the Director of the Office of Management and Budget, is a lifelong Montgomery County resident. He has spent his career serving the people of the County in leadership roles at the County and the State levels and had a long career as an elected representative for Montgomery County in the Maryland General Assembly. He served from 2003-2007 in the Maryland House of Delegates and from 2007 to 2019 as a State Senator representing District 18. While in the Senate, Madaleno was the Vice Chair of the Senate Budget and Taxation Committee where he was known for his ability to find solutions to some of the most challenging budget problems facing the state. He was a leader in education reform serving on the Kirwan Commission. Madaleno also worked in the County’s Office of Intergovernmental Relations from 1995 to 2002.
“Rich is trusted by community groups and policymakers throughout the County and State for his leadership skills and budgeting acumen, which will serve the County well as we face the most significant challenges of our generation,” said Elrich. “I am confident that his experience and expertise will help my administration deliver on my promise to build a healthy, well-functioning, innovative, equitable and inclusive community for all of our residents.”
The County Executive’s CAO nomination must be approved by the Montgomery County Council. Councilmembers are scheduled to return from their summer recess in Sept.
