PILOT To The Poorhouse

Dear Readers,
You got all worked up over the city giving away a street. How do you feel about the city giving away tax revenue?
That’s what’s happening – the council voted to give Edinburgh House a 50% break on it’s city taxes, amounting to a $6,218 loss next year, and an estimated $62,180 over ten years.
A proposed tax break for another property would divert a whopping $47,713 from next year’s revenues, and an estimated $477,130 over a decade

The properties are affordable housing projects, run by the nonprofit Montgomery Housing Partnership (MHP). The MHP is asking for Payment In Lieu of Taxes (PILOT) deals. The revenues these projects don’t pay to the city will go into renovating the properties.
The council came close to turning down the first PILOT. A majority of the council had concerns, and some were downright outraged, by the proposal – as reported here last month. But a reduced PILOT (50% instead of 100%) passed 2 to 5 at the end of the Nov. 8th council meeting.
How will they feel about the much larger 100% PILOT proposed for 7667 Maple Avenue, a 125-unit rental facility MHP plans to purchase in December? Even a 50% PILOT would amount to a $24,000 loss in city funds. What city employee’s job will have to become part-time to make up for that?
Nay, Nay!
When the Edinburgh House final vote came around Nov. 8, Councilmember Colleen Clay voted against it because she thought the housing project was wasting money and making a foolish investment. The amount of money per unit was more than the units were worth, she said. it reminded her of the sort of financial arrangement that brought on the mortgage crisis.
It was ironic that she voted against it, since she prefers, in theory, the MHP’s method of affordable housing to the city’s rent control system. MHP tenants must be able to prove they are low-income. The city only keeps the rents controlled and has no income requirements.
The other “nay” voter Councilmember Dan Robinson didn’t like the investor-driven project style of MHP. He objected that “They want an exemption, then a tax credit.”
“They take a $2 million property, puff it up to $7-8 million to generate a government-financed return to investors, and call that affordable.” he said, “All our rental housing here is already affordable because of rent control.”
Filling one building with low-income tenants, he said, “goes directly against the philosophy of rent stabilization,” which prefers a mix.
The Missing Nay
There should have been 3 “nay” votes, but councilmember Fred Schultz, who sits at the far end of the dais, says he misheard the proceedings due to the considerable noise in the room at the time The large crowd that turned out for the discussion of Route 410 was loudly departing, heedless of the council trying to vote.
Schultz said it was “time to tighten our belts everywhere,” including at the Edinburgh House. The expected state, county, and city tax budget shortfalls next year make him reluctant to give away any potential income.
Councilmember Terry Seamens, who voted for the PILOT, said his concerns about it were addressed by additional information. He was concerned about possible inequities between MHP’s affordable housing the city’s rent control. But once it was determined that the rental rates were roughly the same, and that city landlords could also get relief from the city – by appealing for rent increases to cover maintenance costs.
Opposed to a ten-year giveaway of all tax revenues from Edinburgh House, Councilmember Josh Wright was more amenable to giving half. He voted for the 50% PILOT.
Councilmember Reuben Snipper came to a similar conclusion. He said going to 50% “balanced out” the equation for him. He said it was in the city’s interest to keep the project going. Edinburgh House is an important part of Maple Avenue, he said.
Mayor Bruce Williams was not enthusiastic about passing the PILOT, but he recognized that the project had made a drastic mistake that needed to be corrected. MHP should have done a more thorough renovation when it first purchased the building about 15 years ago, so now they have to start over.
Now the council has to weight supporting another worthy (perhaps) affordable housing project against giving up a significant amount of much needed revenue.
– Gilbert

About the Author

Gilbert is the pseudonym of a hard-bitten, hard-drinking, long-time Takoma Park resident who maintains the granolapark blog. Gilbert and William L. Brown — Granola Park's mild-mannered chief of staff, researcher, and drink pourer — have never been seen in the same place at the same time.