After mistakenly granting developer tax cut, College Park weighs retroactive rule change

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More than a year ago, College Park City Council unanimously approved a special tax cut for a student housing development. But there was one problem: the project was never eligible the tax cut program, a fact which city staff discovered several months later. Now, College Park City Council must decide to either amend the law governing the tax cut program so the project is eligible, or do nothing and force the developer to move ahead on the project without the expected tax cut. 

The project in question is the Tempo student housing development, located at 8430 Baltimore Avenue, former site of a Burger King and a long-abandoned neighboring drive-through restaurant. The project is backed by Rhode Island-based Gilbane Development Co. 

The Tempo development is a big one: 1,080 square feet of ground floor retail, 296 units and 800 beds in a multi-story student housing layout. Notable in the plans are a proposal to build a boardwark-and-asphalt trail connection from the apartment to link with the Paint Branch Trail along the eastern shores of Paint Branch, as well as the inclusion of 300 parking spaces in a first-and-second floor garage.

According to state property records, Gilbane Development holding companies named 8430 Baltimore Avenue LLC purchased 8430 and 8510 Baltimore Avenue for $29.7 million from a in a sale recorded Feb. 14, 2019.

In a November 2020 letter to College Park officials, representatives of Gilbane said the tax cut was needed. If they had known beforehand of their ineligibility, Gilbane officials would have either changed their designs for the project, or delayed construction. The letter also asserted the project site, which backs onto clay cliffs near Berwyn Road overlooking Paint Branch, presents unique challenges that have increased construction costs by $4.3 million.

“The need for the tax credit is greater now than it was before we filed the application,” said Thomas Haller, attorney representing Gilbane, during discussion of the issue at College Park’s Jan. 19, 2021 City Council meeting.

During discussion of the matter at a January 2021 City Council meeting, freshman District Four City Councilor Maria Mackie indicated opposition to granting the tax credit retroactively. 

“We are all very sad about the erroneous thing that happened,” said Mackie. “We are basically asking the citizens to incur the cost of revitalization tax when it’s not in our code. Correct? I just want to say I have a problem with that.”

No other City Council members commented on the matter in detail during the January discussion, at least not during open session. 

The fine print

The tax cut program in question is College Park’s Revitalization Tax Credit Program. Under the program, eligible developers can get their city property taxes reduced over a period of five years. Eligible projects, if approved, get their city property taxes cut by 75 percent in the first year, 60 percent in the second year, 45 percent in the third year, 30 percent in the fourth year, and 15 percent in the fifth year. The goal of the Revitalization Tax Credit Program is to encourage development within the city on the assumption that initial tax cuts will be offset in the long term by increased tax revenue later on from new developments.

In order to qualify for the Revitalization Tax Credit Program, projects must be located in one of four designated revitalization districts, which include the city’s central Baltimore Avenue corridor, Berwyn commercial and industrial areas, Branchville’s industrial areas, and areas near the intersection of Greenbelt Road and University Boulevard. But the program does not allow “multi-family housing intended to house undergraduate students,” a rule imposed on the program in 2015 by the City Council.

Despite that rule, the developers applied for the tax credit program in late 2019. In January 2020, after the application had been reviewed by city staff, College Park City Council unanimously approved the tax credit. But by June, city staff had discussed the error and informed the developers their project was ineligible for the tax credit.

Gilbane officials have suggested the city could create a limited exemption for the development in the law that created the revitalization tax credit. They also suggested the creation of a waiver program that would make the project eligible. 

Correction: This article has been edited to remove a sentence saying developers would have to raise rents if they did not receive this tax cut. Another developer who is currently asking College Park for an exemption from the school facilities surcharge for a different development project, has said they would raise rents if they were not exempted from that surcharge. Route 1 Reporter’s notes from meetings where both of those projects were discussed erroneously misattributed those remarks to Gilbane. Route 1 Reporter regrets the error.