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Transit Oriented Development at W.Hyattsville Metro Station

To:                        Paul Morris, Jim Hencke, PB

From:                  Janet Smith-Heimer, Ron Golem, BAE

Re:                        Economic Development Implementation Report for West Hyattsville TOD

Summary of Findings

Successful implementation of the West Hyattsville Transit-Oriented Development Plan (TOD Plan) and realization of its desired economic development benefits will require the use of public financing tools such as tax-increment finance bonds as well as the creation of multiple public/private partnerships.  This memorandum describes the BAE’s analysis of financial feasibility for the development described in the TOD Plan and the resulting need for public sector investment.  It addresses potential implementation issues and actions by Prince George’s County to foster the attraction of private development interest.

The Maryland Department of Transportation has funded a comprehensive planning initiative for the West Hyattsville Metro station and surrounding neighborhood.  Conducted in conjunction with Prince George’s County, the City of Hyattsville, WMATA, and other stakeholders, a land use plan was developed for an area encompassing ½ mile radius around the Metro station.  The plan calls for 3,134 housing units, nearly 825,000 square feet of office and retail space, and community facilities, parks, and open space.  The plan also includes significant flood plain improvements needed to make targeted areas developable.

Following formulation of the TOD Plan, it was tested by BAE for financial feasibility.  Fiscal impact analysis to determine the extent of the net fiscal “benefit” or “impact” was conducted by County staff using the County’s fiscal impact model, based on information provided by BAE.  Two alternative market-rate development plans were tested:  one that assumes 100 percent homeownership of all residential units;  and one that assumes an mix of 90 percent homeownership units and 10 percent rental units[1].  The financial feasibility analysis detailed 25-year cash flow model that BAE developed based on local market conditions and development costs.  The analysis determined that a feasible development program will have the following characteristics and projected outcomes for the two alternatives:

                                                                           100% Homeownership                    90% Homeownership / 10% Rental

Value of Proposed Development                                                               $738 million                                                           $726 million

Developer Internal Rate of Return                                                            15.0%                                                                     15.0%

Residual Value for Land Purchase                                                            $64 million                                         $64 million

TIF Bond Financing[2]                                                                                   $26 million                                         $37 million

Annual Debt Service on TIF Bonds                                                         $2.1 million                                                            $2.9 million

Net New Annual Fiscal Revenues After TIF                                           est.  $1.6 million                                                    est.  $600,000

Bond Debt Service, Cost of Public Services

The proposed TIF bonds will be repaid entirely from new tax revenues generated by new development called for in the TOD Plan.  It will not result in an increase in taxes for existing residents and businesses, nor will it require use of the County’s General Fun.  The annual gross fiscal benefit (after deducting the cost of new public services, but not including debt service for TIF bonds) is estimate at just over $3.7 million per year for the 100 percent ownership model, and just over $3.5 million for the 90 percent homeownership model.

The TOD Plan will result in the significant economic development opportunities, including opportunities for entrepreneurship and small business development, and attraction of new office, retail, and residential development.  A broader range of housing products will be developed than is currently available, including townhouses and higher-end condominiums.  The County’s fiscal impact analysis also identified that the TOD plan will also generate approximately $38 million in non-recurring revenue for impact and permit fees and transfer taxes, and the equivalent of approximately 3,200 permanent new jobs and between 1,400 and 1,700 new construction jobs.

Realization of the potential of the TOD plan will require the County to address a series of issues, including land assembly, parking standards and management, creative use of public finance tools, and fostering of innovative public/private partnerships.  The demonstration of financial feasibility by itself is insufficient to attract the desired developer interest.  This is because other issues, including and other factors necessitate the creation of a capable and strong lead entity to address these issues.  BAE identified and evaluated a range of options for the lead entity, including a public agency, JPA, non-profit development corporation, and private master developer.  Other public/private partnership opportunities are also discusses.

Attached to this memorandum is a summary cash flow projection table for the two alternatives for the development program envisioned in the TOD plan.  The following pages of this memorandum provide more detailed discussion of the above points.