Smarter growth will expand Prince George's tax base

Capitol Heights Metro station is undeveloped. Image from WMATA.

Prince George's County Executive Rushern L. Baker III wants to raise real property tax rates by 16% to increase funding to public schools. The real way to boost Prince George's economy is to develop around its gateway Metro stations near the DC line.

Prince George's is home to the lowest median home values and highest property tax rates in the region, largely because of the low home values in its older, deteriorating communities that border the District of Columbia. Seven of the county's 15 Metrorail stations are in these gateway neighborhoods, but they all are devoid of any substantial transit-oriented development (TOD).

Improving existing home values will strengthen the tax base

Like many other suburbs, Prince George's County has historically been a bedroom community. The county's largest source of tax revenue comes from real property taxes, and 61% of taxable real estate is residential property.

It stands to reason, then, that even small increases in existing home values in the county would go a long way to raise revenues even without any major large-scale development.

Currently, median home values in the five Prince George's county subdivision areas bordering the District of Columbia fall 10-31% below the countywide median value of $269,800. If existing home values in these areas simply rose to that level, the county's taxable real estate base would increase by approximately $2.47 billion. That would add approximately $23.7 million annually in revenue to the county.

Of course, if the county got serious about developing the seven Metro stations located in these struggling communities (Capitol Heights, Addison Road, Cheverly, Southern Avenue, Naylor Road, Suitland, and West Hyattsville), real property revenues would soar much higher than the median.

Undeveloped transit station areas undermine economic growth

Shockingly, Prince George's current General Plan doesn't recommend any substantial growth around six of the seven Metro stations near the DC border over the next 20 years. (The Suitland station, next to the U.S. Census Bureau, is the exception.) Indeed, the county's planners believe there are currently "too many" Metro stations in the county and that developing all of them would "undermine economic growth."

More specifically, planners say that the six gateway Metro stations bordering DC, plus the four stand-alone MARC stations, plus all the planned stand-alone Purple Line stations should only account for 15% of the county's future growth in the next 20 years. That equates to fewer than 600 new housing units per transit station.

By contrast, the General Plan recommends putting 30-40% of the county's projected growth and development over the next 20 years—or up to 25,000 new housing units—far away from transit and mostly outside of the Beltway. This recommendation appears despite county-funded research that concludes that failing to focus on TOD puts the county "at a continued disadvantage relative to its neighbors."

Prince George's has continually squandered opportunities to focus its attention on revitalizing its neighborhoods inside the Beltway. Continuing to encourage scattered development away from transit has crippled the county financially, environmentally, and aesthetically.

Gateway communities can't wait 20 more years to redevelop

Old Central Ave at Southern Ave SE. Image by author.

The close-in Prince George's neighborhoods and Metro station areas near the DC line are likely the first thing the region's current and prospective residents think about when determining whether they would like to live and work in the county.

Until Prince George's County improves its gateway neighborhoods, it will be difficult for it to attract the region's best and brightest. The county can't wait another 20 years for that transformation to happen.

County executive Baker is rightly concerned with diversifying the county's revenue base, creating more jobs, and expanding the county's commercial tax base. To that end, he has advocated strongly for developing the end-of-line Metro stations at the Beltway's edge.

For example, he's called for the FBI to relocate its headquarters to Greenbelt Metro, for the state housing agency to relocate to New Carrollton Metro, and for a new regional medical center to come to Largo Town Center.

Likewise, the General Plan's strategy to direct 50% of future growth to the seven largest Metro stations (including the three mentioned above) plus National Harbor, and to create three "downtowns" at Largo, New Carrollton, and Prince George's Plaza, is sensible.

Still, the county's economic development strategy should also reach beyond downtown, and deeper inside the Beltway, to the neighborhood Metro stations near the District's edge. Most of the new development that the General Plan currently contemplates for outer-Beltway suburbia should instead be directed to these gateway areas.

Prince George's County cannot simply tax itself out of its last-place position in the region. Instead, its leaders need to become better stewards of the public's trust and the public's resources. The county's transit-rich gateway neighborhoods are economic engines ready and waiting to be fired up, but county leaders have to ignite the switch.

Prince George's must get serious about revitalizing its old streetcar suburbs. These vital neighborhoods can't be left to languish for another generation.



(This article is cross-posted on Greater Greater Washington.)

Prince George's Should Reform Its Government, Not Raise Its Taxes

Image from OpenSource.com on Flickr

Since it already has the highest tax burden and the lowest wealth in the Washington region, it would be a bad idea for Prince George’s County to raise its property tax rates by 16%—even if it’s to increase funding to the school system. If Prince George’s really wants to secure more revenue over the long term, it should first focus on eliminating the corrupting influences in county government and restoring the public’s faith and trust.

Specifically, the county should establish an independent inspector general’s office, do away with the county council’s role in individual development review, create a public financing system for local elections, and include at-large seats on the county council.

Public trust is broken in Prince George’s

Image from BK on Flickr

Shortly after taking office in 2010, county executive Rushern Baker forthrightly acknowledged the need for county officials to restore public trust. The need was particularly acute in the wake of the odious corruption scandal that sent his predecessor, Jack Johnson, to federal prison for seven years.

Baker commissioned a blue-ribbon advisory board led by former Baltimore City mayor and renowned lawyer and higher education administrator Kurt Schmoke to issue recommendations for how the county could “provide transparent, open, and accountable services for its citizens.”

Schmoke’s advisory board issued a detailed report in June 2011, recommending a host of reforms, the most significant of which included establishing an independent inspector general’s office to investigate, publicly expose, and prevent fraud, waste, and abuse, as well as inefficiency and mismanagement by elected officials, county employees, and contractors. However, the county council blocked Baker’s efforts to establish the inspector general’s office.

Baker promised to redouble his efforts to enact ethics and transparency reforms in his second term, which began last December. Yet, shortly after he was re-inaugurated, one of his deputy administrators rhetorically unfurled a “Mission Accomplished” banner and declared that the county had magically “transitioned…to a place where it’s a trusted brand, where people expect good things to happen.”

Ironically, in what can only be described as an epic message fail, the administrator who made that lofty pronouncement, Victor Hoskins, promptly left his post after only six months in office to go head up Arlington County’s economic development office. Ouch!

The truth is that the ugly shadow of the Jack Johnson years still looms large over Prince George’s County, even now. People are still intensely mistrustful of the county government, and for good reason.

For example, many feel that Baker intentionally sandbagged the electorate when he reversed his stated opposition to gaming and instead supported construction of a billion dollar casino at National Harbor. Many feel the same way about Baker’s current effort to use a 2012 state law to circumvent the county’s charter cap on property taxes, known as TRIM.

The county council fares no better in the public’s eyes. Council chair Mel Franklin, for example, has evinced a bad habit of using legislative trickery to sneak through controversial, developer-friendly zoning bills at the last minute, evading public debate and opposition.

And last year, the council joined with Baker in a failed effort to push through a ballot measure to extend term limits in the county—a move funded heavily by developer interests, who sought to maintain their competitive political advantage by keeping their lasissez-faire friends in office longer.

County Council. Image from Prince George's County.

Likewise, the council refuses to halt its controversial practice of meddling with the county Planning Board’s (M–NCPPC) decisions on individual development proposals. Developers routinely cite this practice as a main reason they are apprehensive about doing business in the county. (Maryland’s highest court is currently reviewing a lower appellate court decision declaring the county council’s actions in this regard illegal.)

The county must institute bold reforms to restore public faith

Back in 2010, in the wake of the Jack Johnson debacle, everyone from the Washington Post to anonymous county employees was offering suggestions to Rushern Baker for ways Prince George’s could eliminate corruption, increase transparency and accountability, and structurally reform government. Here are my top four recommendations:

Image from OEA-OES on Flickr

1. Establish an Independent Inspector General’s Office. This was a primary recommendation of the Schmoke panel that was quashed by the council in 2012. This council should stand up and allow the IG’s office to come to fruition. The council’s non-independent Office of Audits and Investigations, which was originally established in 1970, and the recently created Office of Ethics and Accountability, established as a compromise in 2012, should both be folded into and replaced by an independent IG’s office. The IG should serve a four-year term that overlaps with the council and county executive’s terms, such that the IG’s term expires at the midpoint of each council term and continues to the midpoint of the succeeding council’s term.
2. Eliminate Council Review of Individual Development Applications. The courts may well take care of this item themselves, but if they don’t, the council should immediately extricate itself from the administrative review process relating to individual development applications. Any administrative appeals from the Planning Board’s decisions should be heard by the Board of Appeals, and any further review should take place in the courts. The council should confine itself to setting the general ground rules, as reflected in the Zoning and Subdivision ordinances, and then leave the administration of those rules to M–NCPPC.

   

   Image from Patrick Gensel on Flickr

3. Establish a Public Financing System for Local Elections. Thanks to a recent amendment to state campaign finance law, counties may now establish a voluntary public financing system for local elections. Prince George’s should definitely do this, as Montgomery County has recently done. U.S. Supreme Court precedent prevents the imposition of a mandatory public campaign finance system, so it’s not a panacea. Nevertheless, such a system can help to reduce the influence of special interest money—particularly from developer interests—that has so tainted Prince George’s politics.
4. Restructure the Council to Include At-Large Seats. Currently, the Prince George’s county council has 9 members, each of whom represents a single district of the county. Through informal features such as “council courtesy,” where council members often blindly defer to the wishes of the council member whose district is most impacted by a particular decision, council members each tend to be rulers of their own individual fiefs. There is no member of the legislature who is electorally accountable for being concerned with countywide interests. That can make it hard for the council to make hard policy choices that may be good for the whole county in the long term, but may appear to disadvantage a particular district’s parochial interests (such as preventing unconstrained sprawl development away from transit). To address this issue, Prince George’s should follow Montgomery County’s example and restructure its council so that it has 4 at-large seats and 5 district seats.

* * *

These suggested structural reforms will take hard work and political sacrifice to implement successfully—but over time, they will help to restore the public’s faith and trust in the Prince George’s County government. That, in turn, will foster more robust commercial investment and development in the county—thereby enabling it to bring in more revenue without raising taxes.

In the third and final segment in this #PGTaxes series of posts, I will discuss another, more concrete, strategy that the county can implement to raise more revenues over the long term without raising taxes.

Prince George's Doesn't Need Higher Taxes to Fund Its Schools

Prince George’s county executive Rushern Baker’s recent proposal to raise the county’s base real property tax rate by 16% has created quite a buzz among residents and the county council…kind of like the buzz that accompanies a plague of locusts.

Many citizens and even a state senator have expressed outrage over what they believe is Baker’s brazen and unlawful attempt to circumvent a voter-imposed property tax cap known as TRIM, which was added to the county’s charter in 1978 and which remains exceedingly popular among the electorate. Under TRIM, any property tax increase must be submitted to the voters for approval.

Prince George’s County already bears the heaviest property tax burden of any suburban jurisdiction in the Washington metropolitan region, and it has the least to show for it. Yet, Baker argues that county residents should pay even more taxes next year, so that the county can fully fund the school district’s proposed FY 2016 budget, which requests an additional $133 million in county funding over the current year’s budget. That equates to a 21.1% increase in county funding to support a proposed 7.6% increase in the school district’s budget.

Baker is betting that his “let’s educate our children” argument will eventually persuade a wary public and council to support his move. But raising taxes to increase school funding isn’t the right move for Prince George’s County at this juncture.

High Tax Rate + Low Tax Base = A Bad Combination

In the chart linked below, I calculated “effective real property tax rates” for 10 county-equivalent jurisdictions in the Washington, DC metropolitan region, as well as for my hometown of Virginia Beach, VA. I also calculated values for each jurisdiction’s assessable tax base per capita and per household. (The methodology for these calculations is described in the endnotes on page 2 of the chart.)

Assessable Tax Bases and Rates in Metro DC. Click to download chart.

Prince George’s current effective tax rate is $1.377 per $100 of assessed value. That includes a $0.96 base rate, plus $0.112 in mandatory state assessments, plus $0.305 in mandatory assessments for two bi-county agencies operating in Montgomery and Prince George’s counties: the Maryland-National Capital Park and Planning Commission (M–NCPPC) and the Washington Suburban Transit Commission (WSTC).

The additional mandatory environmental fees that Prince George’s charges for stormwater and solid waste management and watershed restoration are not included in the effective rate, because those fees are not assessed based on property value. This is essentially another end-run around the TRIM property tax cap because, in most other jurisdictions, these types of environmental costs are typically paid for out of the general property taxes collected.

County executive Baker’s proposal would raise Prince George’s current base rate by $0.15, from $0.96 to $1.11. That’s a 16% increase, which would result in an effective tax rate of $1.527—by far the highest property tax rate in the region. By contrast, Montgomery County’s current effective rate is $1.120, which includes the mandatory state, M–NCPPC, and WSTC assessments. Arlington County’s current effective rate is only $0.996—the lowest in the region.

Although it is the wealthiest majority-black jurisdiction in the United States, Prince George’s has the lowest assessable tax base in the Washington region, whether measured on a per capita or per household basis. That’s because the county has the lowest property values in the region—values that have sunk even lower in recent years, in the wake of the Great Recession and the ensuing foreclosure crisis. Prince George’s also has the lowest median household income of any suburban jurisdiction in the Washington region.

As detailed in the chart linked below, Prince George’s County has the worst wealth-to-tax rate balance of any suburban jurisdiction in the region. (The District of Columbia technically has a heavier overall wealth-to-tax burden; however, it shifts the bulk of that burden onto commercial property owners, not homeowners. That makes it somewhat of an anomaly in the region.)

Wealth-to-Tax Balance Rankings. Click to download chart.

Rushern Baker’s proposed 16% increase in real property taxes would still leave Prince George’s County as the least wealthy jurisdiction in the region. Such an increase could also cause some residents to flee the county for neighboring jurisdictions, or dissuade others from moving into the county.

While there may well be occasions when the county may need to raise taxes for the greater good, even if it risks alienating some people, now is not one of those times.

More Money ≠ Better Schools

The county executive’s basic premise for proposing a tax increase—that the school system budget needs to be significantly increased to ensure educational success—is dubious at best. According to data compiled by the Maryland State Department of Education, Prince George’s already pays its teachers higher than the statewide and national averages, and has higher per-pupil expenditures than the statewide and national averages, ranking within the top third of Maryland’s 24 jurisdictions in these areas.

The county’s overall education spending relative to its wealth is also well above the statewide averages. (Again, Prince George’s is not a “poor” county; it’s just not as wealthy as others in the Washington region.) So it can hardly be said that Prince George’s County is giving its public school students short shrift at its current funding levels.

Moreover, there are public school systems out there that are funded at much lower levels than Prince George’s, which nevertheless manage to perform exceptionally well. I am a product of one of those systems: the Virginia Beach City Public Schools. I use Virginia Beach as a comparator here because it has similar physical and wealth characteristics to Prince George’s County.

Both jurisdictions are geographically large bedroom communities, with similar population densities. They are both outside of and larger than their respective metropolitan region’s central city, and they are both principally suburban in character. Virginia Beach has a lower median household income and a slightly lower median home value.

As detailed in the chart linked below, Virginia Beach has a significantly lower per-pupil expenditure rate than Prince George’s and also pays its teachers significantly less. Yet, it has higher student achievement levels, a higher on-time graduation rate, and a lower dropout rate:

Comparison of Prince George's and Virginia Beach School Districts. Click to download chart.

Additionally, even though the Virginia Beach school system receives a much greater share of its overall budget from the local government, the city’s effective real property tax rates are still significantly lower than Prince George’s: $0.93 in Virginia Beach vs. $1.377 in Prince George’s.

Virginia Beach's city manager is proposing a $0.06 real estate tax increase in for FY2016—to maintain, not increase, the school system's current funding levels and other city service levels. But Unlike Prince George's, that proposed increase would still leave Virginia Beach with the lowest taxes in the Hampton Roads region.

Virginia Beach’s example demonstrates how and why Rushern Baker’s argument that Prince George’s County needs to dramatically increase its property tax rate to increase school funding rings quite hollow. At the very least, the county executive hasn’t articulated a compelling case for such an increase.

In a later post, I will discuss what Prince George’s County really needs to do to ensure greater revenues going forward. (Spoiler alert: it’s not raising taxes.)