Reply to Schools near metro will get more housing without overcrowding relief

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Reply to "Schools near metro will get more housing without overcrowding relief"

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]I just don’t get why anyone would blindly support new developments without the infrastructure (like schools) to support it.  Makes zero sense to me.[/quote]

Montgomery County has NEVER built the schools before building the housing. Never.[/quote]

Nobody is saying that Montgomery County needs to build the schools before the housing.  However, it is reasonable to expect developers to set aside money or to designate a plot of land that can be used for future schools.

That is not happening.  [/quote]

Yes it is.

"Development Impact Taxes are, set by the Montgomery County Council, assessed on new residential and commercial buildings and additions to commercial buildings in the county to fund, in part, the improvements necessary to increase the transportation or[b] public-school systems capacity[/b], thereby allowing development to proceed."
https://www.montgomerycountymd.gov/DPS/fees/Taxes.html
[/quote]

What developers are paying is a fraction of what costs to support the students that new development generates. The county loses money on every housing unit it adds once you account for school costs. That’s a fact. [/quote]

So two things:
1.  The PP I was responding to said that developers are not required to set aside money to address schools.  They are.  That was false.  You are now making a different point.
2.  I genuinely and sincerely am interested in seeing anything that supports your "fact" that adding housing loses money for the county.  And as you say not just theoretically or some, but "every unit" so indesputably true that "it is fact."[/quote]

To your second point, look at the current impact fees and the average per seat cost of school construction. The impact fees are less than the average per seat cost of school construction. The county just lowered the impact fees again last year because school construction costs spiked and they didn’t want to burden developers with the cost increase. That impact fee cut last year was on top of the impact fee cut that they did three years ago. [/quote]

There is a big difference between saying the impact fees don't meet per pupil cost and saying that the county loses money on housing units.  Two erroneous assumptions off the top of my head:  1) not every unit results in a student; 2) It does not take into account ongoing tax revenue[/quote]

I didn’t say pupil costs. I said average per seat construction costs. [b]If impact fees are below cost recovery levels (which they are), then the county loses money every time it adds a housing unit[/b].  It is simple math. If fees are below cost recovery, the difference must be financed through debt issuance or taken from somewhere else. If it’s financed, then debt service costs eat away at the rest of the budget. (There’s also the choice of not building schools at all but that’s a bad outcome)

Ongoing tax revenue is going to support other services for new residents. For very expensive housing, ongoing tax revenue exceeds what services residents consume fairly quickly. For less expensive housing, it may take a long time. Either way, if impact fees are below recovery costs, something else gets hit or we don’t build schools.

And remember none of these fee cuts caused developers to lower prices or push the housing market into surplus. The fee cuts just made the developers’ profits bigger. It’s good for the county to spend money to achieve a public policy goal (lower housing prices in this case) but it’s not good for the county to spend scarce funds subsidizing developers to build high-end housing. [/quote]

I appreciate your explanation.  But I still disagree with the bolded.  It is true that the discrete costs for building a new school are not explicitly met by new development, at this particular time.  That remains a very different thing that the county as a whole losing money as a result of the development.  For example, counties and municipalities frequently subsidize development on all scales (Amazon HQ, smaller cities attracting and retaining other company HQs, entertainment venues.)  It is an immediate loss for a long term net gain.[/quote]

You can’t compare commercial real estate and residential. Commercial consumes little in the way of services but pays a lot in tax revenue and has a high multiplier. The opposite is true of residential, and it’s worse when we subsidize developers to build market rate housing (income restricted is a different story). [/quote]

My point was that there are multiple circumstance in which counties/municipalities will SPEND money for long term gain(above examples, building a new park, offering more city services, etc).  You are talking about an example where a place is paying no money at all while still recouping a percentage of potential future cost.

To not have 100% immediate cost recovery (that is only hypothetical) does not in any way make something a net loss overall.[/quote]

Your approach makes almost all housing units a short-term loss and causes the county to accrue debt service costs, which are deadweight costs. The benefit of your approach accrues almost entirely to the developer with costs imposed on everyone else. [/quote]

I'm not at all sure what you think "my approach" is?  I don't have one.

But I will say that my understanding is that there is in fact ZERO short term loss as a direct result of this development?  There would only be any potential temporary loss (in the sense that the cost is not recovered in advance by this particular assessment) IF a school is built immediately after the development.  [/quote]

That’s an incorrect understanding, because the county has to borrow to pay for school construction and pay interest. All residential development that requires school additions to be financed results in some unrecoverable deadweight costs to the county (accruing to the benefit of bond buyers and developers). Over time, some residential development may be net positive, but that really depends on residents’ incomes and to a lesser extent turnover rates. Even for those projects, [b]the county still accrued the short-term deadweight costs.[/b] [/quote]

Let's get real specific here.  Can you cite to any particular development project in MoCo in the past decade that led directly to "short term deadweight costs"?  All of the development in downtown Bethesda, for example.  What was this "short term deadweight cost"?[/quote]

All recent residential development that paid less than recovery costs for adding school capacity. [/quote]

I think you are missing my point.  Where is the money loss?
To my knowledge no new schools were built.  As a result, the county actually banked more money in school assessments to build future schools.  No expenditure was made, so no debt was incurred.[/quote]

The money loss is the debt service (principal plus interest, and specifically the interest). The county isn’t “banking money.” If you save $5 but the thing you’re paying for is $7, you’re $2 in the red. Read up on public finance if you need more detail. [/quote]

Where is the expenditure that incurs the debt?  For example, several new multi-family apartments were built in Rockville (I understand this is not MoCo jurisdiction). An impact fee was assessed.  No new school was built.  Where is the loss?[/quote]

That’s right. So when county has to build in Clarksburg and developers don’t pay in enough, Wootton, Magruder, Eastern, and Damascus all suffer. [/quote]

What is right?  Where is the loss?  Where is the burden on those other schools?[/quote]

You may be too dense to engage in this conversation. [/quote]

That very well may be true...but I doubt it.  I'm trying to understand.  Can you answer the question, please?[/quote]

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