Last week, the DC Council voted to pay $36 million for 600 new parking spots at Union Market, as part of a larger public financing deal. At-large councilmembers Elissa Silverman and David Grosso wanted to use the funds for affordable housing and new NoMa Metro entrance instead of parking, but their efforts were unsuccessful.
Kenyan McDuffie (Ward 5, which includes Union Market) and Charles Allen (Ward 6, which includes the NoMa Metro) both voted against Silverman's amendment. We posted Allen's letter to his constituents explaining his decision on November 9. Now, here is Silverman's staff's explanation of the issue:
At the DC Council legislative meeting on November 7, 2017, Councilmember Silverman moved an amendment to legislation that would authorize the creation of the Union Market Tax Increment Financing (TIF) area. The amendment is pretty simple: it moves $36 million in the TIF that would pay for parking to instead fund more affordable housing and transit at the site. The other $46 million in the TIF legislation, which is earmarked for infrastructure improvements, would not be affected by the amendment.
What would this amendment do?
First, the amendment would put $18 million into more affordable housing for the site. Unfortunately, most of the development at the site is only meeting the basic requirements for the District’s Inclusionary Zoning (IZ) law. Therefore, the amendment would use the funds to essentially buy more affordable housing at the site. Assuming each unit costs about $200,000 (a high estimate), the $18 million could add almost 100 more affordable units that would help working families afford to stay and live in the District.
Second, the amendment would put $18 million into a new exit for the NoMa-Gallaudet U Metro station. By creating a new exit on the east side of the train tracks, the tunnel would cut in half the amount of time it takes to walk from the Metro stop to Union Market. This may seem small, but it drastically improves access to the site. It would help more people get to Union Market, improve access to Gallaudet University, and continue to make the District a national leader in transit. This tunnel would also make the office space more attractive to companies that care about things like transit accessibility, not parking.
Are TIFs actually tax dollars?
TIFs are a form of public tax subsidy, just like a tax abatement. It pays developers up front in the form of bonds to improve the area, and the higher taxes (sales and property, usually) over time help pay the costs of the bonds. Because the bonds are paid for by tax dollars, the bonds should be considered public funding. If we didn’t have to pay the bonds back, we could use the money for other uses, like schools or roads. The question here is whether or not the development would happen without the TIF. In this case, our Chief Financial Officer (CFO) testified that the TIF was not necessary for the development.
Is this amendment even legal? Isn’t the tunnel outside of the TIF area?
Yes, the amendment is legal. To even move the amendment for consideration, we had to receive clearance from our Office of General Counsel, who checks for so-called “legal sufficiency.”
Additionally, the underlying TIF legislation that this amendment would apply to is supported with tax funds from the Downtown TIF. The entire Union Market project is clearly far outside of the Downtown TIF area, so there is not a problem using TIF funds to improve something outside of the named TIF area.
Is $18 million enough for the Metro tunnel?
Yes. Metro has studied the feasibility of the tunnel and estimates the cost to be between $16 million and $24 million, depending on where the tunnel would exit. If it turned out to be more expensive, the District could always supplement with additional funding in the future.
Is it more expensive to build the Metro tunnel with a TIF?
No. The form of the funding does not affect the cost of the project. Our TIF bonds may have a slightly lower rating from the credit agencies than our other forms of borrowing, but the difference in cost for such a small project ($18 million) is likely to be insignificant. Both our TIF and regular bonds have strong investment-grade ratings. What will have a greater effect on the cost of the tunnel is time. The longer the Council waits to fund the tunnel, the potentially more expensive it gets, as labor and materials get more expensive.
Is a tunnel actually feasible there?
Yes. Metro studied the feasibility about a year ago and concluded it can be done. The developer for the tunnel site even left space for the tunnel in their building plans. We just have to fund it.
How would the affordable housing work? Can you fund affordable housing with the TIF?
Yes. Any housing, affordable or not, would increase the taxes in the TIF area and help support the TIF bonds. The TIF would set aside $18 million, which would be available to the developers to build additional affordable units. It would function exactly the same way the existing TIF does, by either providing the money upfront or reimbursing developers after they build the affordable units. The units would need to comply with the District’s IZ laws.
What if the developer doesn’t want to do either the tunnel or the affordable housing?
That is within their rights as developers. We are not requiring any action under this legislation, but we are saying that the $36 million can only be used for affordable housing and the Metro tunnel, not parking. The CFO said in his analysis that the development will happen even without the TIF. If the developer chooses to not build the tunnel or affordable housing, there is no reason to be concerned about completion of the larger development.
Would this amendment, and changing the agreement, hurt the Union Market development?
Our Chief Financial Officer said that the development will happen even without the TIF. Even if this was not the case, there is no evidence that the development would be hurt if there is less parking. In fact, more multimodal transit options would arguably help the development more than the parking would.
Why do you think there’s too much parking in the Union Market area?
It’s not just us. It’s our District Department of Transportation, Department of Energy and Environment, and Office of Planning too. All three raised concerns about the amount of parking and concluded that there will, and should, be plenty of parking at the Union Market site, with or without the amendment. In fact, there will be thousands of parking spaces, far more than are there now. The question is whether or not the District should use public dollars to pay for additional parking. This amendment would make the policy decision to use the development’s tax dollars to pay for affordable housing and transit access, both of which are needed at the site much than more parking.
Have other TIFs included parking?
It’s difficult to tell how TIF funds have been used in the past. Parking has been an allowable use of TIF money, but not every project has needed the money for parking. However, even if other projects used TIF funds to build additional parking, there is no reason why the District should make the policy decision to use tax dollars to build more parking at Union Market. This is especially true because the District will not own the parking it is paying for, since the developer will retain ownership and any revenue it generates.