ELKTON — The Mayor and Commissioners of the Town of Elkton met Wednesday to continue to discuss a proposed special taxing district relating to infrastructure for the Southfields Planned Use Development project.
According to Elkton Mayor Rob Alt, the purpose of the work session Wednesday was to continue to allow members to educate themselves about the proposed special taxing district. He said during the meeting that no action on the proposal would occur until November at the earliest, and possibly later.
The proposal, which includes two related resolutions, R8-2020 and R9-2020, would establish a special taxing district encompassing certain parcels of land connected to the Southfields project and would authorize the issuance of bonds for the purpose of funding public improvements for the district.
In previous meetings of the mayor and commissioners it has been discussed that the proposed district would not increase taxes for other residents of the Town of Elkton. Any taxes relating to the district would be the responsibility only of those in the proposed district.
At a prior meeting, Southfields PUD developer Ray Jackson of Stonewall Capital said that he was seeking the creation of the special taxing district to provide private financing for an infrastructure project which would include the creation of public roads, including the main boulevard for the Southfields project. The project would also include related infrastructure projects such as a proposed water tower and sewer pump stations for the development. In addition, the financing would include some traffic related improvements to Maryland 212 and U.S. Route 40.
During Wednesday’s meeting, commissioners asked a variety of questions regarding the proposed development. One of the most significant of which was asked by Elkton Town Administrator Lewis George who noted that the entire proposal is based upon the premise that the project will be built. George wanted to know what the risk was, especially to the town if the project doesn’t get built. He noted that while there was a reference to market studies relating to the building of homes, he wasn’t seeing that many homes being built.
Emily Metzler, senior vice-president with MuniCap, LLC, the entity that is anticipated to be appointed administrator of the bond trust funds, said that whether or not the development is completed is not a risk factor for the town.
Metzler said that MuniCap is aware of the risk and as the project proceeds through the bonding process, Municap works to try to mitigate any risk. She said during the process several studies will be conducted and Municap will work to ensure that permits and financing is in place. She said an appraisal will be done on the property and an engineer will ensure that necessary approvals are in place and that the cost estimates are sound. She said a market study will be performed, but that MuniCap likes to have legislation in place before they proceed with relevant market studies.
Metzler also noted that whether the property is developed or not, the special tax will apply to the undeveloped property as well so taxes can be collected from both developed and undeveloped properties. This helps to incentivize the developer to go ahead and develop the property.
She also noted that the private bond holders who would ultimately be purchasing the bonds are familiar with the risks and the additional risk brings with it a slightly higher interest rate to compensate bondholders for the risk they would be taking in the project.
As a final note she said said that if the developer does not sufficiently develop the property there are fail-safe procedures in place including the ability of the bondholders/investors to take title to the land through a process similar to a tax sale. If that were to happen the investors could find a new developer to complete the project.
Attorney Kimberly Min with Whiteford, Taylro & Preston LLP in Baltimore, who has been working with the town on the project, said that the developer not completing the project is an unlikely result, but bondholders understand the risk when purchasing the bonds.
Municap President Keenan Rice said that bondholders are really looking at the property as security, that is why an appraisal of the property will be important to help determine the value and the risk involved. He also noted that it is extremely rare that a developer would not complete a project.
Also during the meeting, the potential tax rates were discussed for each property. Alt read the figures during the meeting as follows: $492 dollars per unit for residential structure, $832 per room for the hotel, mixed-retail property would be $812 per 1,000 square foot, office space would be $1,304 per 1,000 square feet. The indoor sports complex would be $969 per acre and the outdoor complex would be $305 per acre. For the proposed marina, the tax would be $1,772 per slip. These figures are per year figures over a 30-year period.
Metzler said a 2 percent tax increase per year had also been calculated into the total figure.
In response to a question regarding whether those figures were concrete, Metzler noted the figures are calculated the idea is that the total figure required to be financed could go down, but it would not go up without approval of the mayor and commissioners.