Reston Spring

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Monday, January 23, 2012

County Says Future Tysons Infrastructure Costs to Rise 24% Over Previous Estimates; Notes from January 19, 2012, PCTC Meeting

Presented below is a lightly edited version of an e-mail prepared by an observer at the most recent Planning Commission Tysons Committee (PCTC), January 19, 2012.  Key news:
  • Total infrastructure costs for the next 20 years have risen 23.6%, largely on increased estimates of "Tysons-wide" transportation improvements (35%).
  • With total 40-year costs now put at $3.0 billion (vice $2.5 billion), the author suggests costs could actually reach $4 billion when interest costs are included.
  • Committee members suggest that, given the absence of growth in the last two years, the whole plan may "shift to the right" or later years.
  • The issue of who pays for all this remains up in the air.  County staff didn't help the matter by grouping federal, state, and local public payers together.  (The issue has focused on how much Fairfax County taxpayers will have to pay.  The PCTC has a proposal that they should pay two-thirds; the McLean Citizens Association--supported by Reston Citizens Association--has advocated that taxpayers pay for no more than one-quarter.  The MCA-RCA proposal is based on who benefits financially from the infrastructure effort.)
  • Besides the local taxpayer vs. landowner split, there is a split between landowners who have property close to the Metro stations and those who do not as to who should pay for the improvements.  
It is important for Restonians to understand--and maybe become involved in--what is going on at Tysons because it is quite likely that whatever is agreed to there will be the basis of tax planning for the Reston.  

The ongoing debate also highlights what RCA Reston 2020 has long advocated:  Implementation considerations should be addressed during the process of putting together a plan to make it realistic, not afterward when legal rights have been established for developers.

We suffered a setback of sorts at Thursday's PCTC, but first I'll open with some sobering news.  The 2012 cost estimates for all Tysons transportation improvements from 2010 to 2050 went up 20%.  I hope these tables come out formatted and readable.

          Estimates of Total Infrastructure Costs for Tysons Corner, 2010-2050 ($MM)

                    *  Previous Estimate*     *    New Estimate  *     *   Change   *
 2010-2030             $1,698                           $2,099                       23.6%
 2030-2050                $831                              $939                       13.0%
 Total                       $2,529                           $3,038                       20.1%

Estimates of Total Infrastructure Costs for Tysons Corner, by Type, 2010-2030 ($MM)
                              *Previous*                     *Updated*             *Change*
Grid of streets        $443                               $519                      17.2%
Tysons-wide           $810                            $1,095                      35.2%
Transit                    $374                               $408                         9.1%
Neighborhood           $70                                 $77                       10.0%
Total                      $1,697                           $2,099                       23.7%
A few caveats to bear in mind:
1.  These are 2012 planning estimates using up-to-date VDOT and county costing methodologies.
2.  When the engineering starts, the costs may go up or down on a project basis, but generally the costs go up.
3.  Fairfax County DOT will be revising these estimates one more time within the coming weeks.  This revision will take into account the projected year of construction of each project and they will add in a 3% inflation rate.
4.  These estimates do not include the cost of implementing a streetcar system in the 2030-2050 time frame which is estimated at $870,000,000.  Staff does not yet know whether they will recommend a street car system, so the cost was not included in this estimate.

I think these costs could easily come to $4 billion, even without the streetcar system, once the inflation factor and, more importantly, the cost of financing bonds is added.  For example, a 40-year $500M bond at 3.5% interest would cost $400M in total interest payments.  By the way, no one at these meetings has speculated how much would be bonded or what the terms might be.  This is my example using what I think would be a low interest rate.

The Tysons Comp Plan is based on an assumption of fairly high growth over a period of 2010 to 2050.  Obviously the first two years produced next to nothing and the amount of redevelopment the in next two years will be modest.  So essentially, the 40-year plan will be shifted to the right until significant redevelopment in Tysons starts.  I've heard staff speculate that could be in the 2015-2018 time frame, but they were quick to note that no one knows.  Staff did comment Thursday night that the pace of transportation improvements in Tysons over the next 40 years would be paced to keep up with redevelopment.  If a recession occurs and redevelopment slows significantly, transportation spending would go down accordingly.

Tom Biesiadny, head of DOT, said they would model the planned growth in Tysons over the next 40 years to estimate when a sustained revenue stream from redevelopment would start and and how much it would vary over that time.  Commissioner Alcorn commented that it would be interesting if they also modeled a 40-year period with a couple of recessions thrown in.  Biesiadny agreed to do it. 

Now, for our favorite topic, the allocation of responsibility for funding all these transportation improvements.  Over the last 4 or 5 PCTC meetings, the commissioners divided the responsibility into three categories:

1. County taxpayer
2. Private sector
3. Federal and state contributions

For reasons I'm unsure, staff produced an analysis that divided the responsibility into two categories: public sector and private sector.  A huge step backwards in my opinion and I said so.  Commissioner Alcorn replied in a few weeks they would go back and divide the public  sector into two:  county tax payer and fed/state contributions.

Staff produced a handout that I hesitate to distribute because it is busy and confusing, but I'll try to explain it.  Over the prior two months, the PCTC divided responsibility into 3 categories, but many transportation projects were actually put into multiple categories.  For example, the widening of Gallows was assigned 75% public and 25% fed/state and the widening of Rt.7 inside Tysons was assigned 75% private and 25% fed/state.  During these discussions, the  commissioners would rate each project as 'mostly public' or 'mostly private' with the remaining costs going to the feds/state.  Only one project was assigned 100% to feds/state.  The commissioners did not know exactly how much 'mostly' should be, but for purposes of discussion they guessed the 'mostly' meant around 75%.  They asked staff to look at who principally benefits from these improvements to determine what percentage 'mostly' might be.  So, that bring us to staff's handout that analyzes three scenarios where 'mostly' meant 51%, 75% or 90%.  Staff's conclusion after doing all the math was, and I'm quoting here, 'the final figures didn't  change significantly over the three scenarios'.  I looked at the numbers only in passing and concluded the analysis added little value to the process.  I was happy with 'mostly' equaling 75% as first proposed because I thought the final costs assigned to county taxpayers were not unreasonable when everything is taken into consideration.  Also, whether mostly means 51% or 90%, it applies equally to taxpayers and the Tysons developers.

So where does this leave us?  We still do not know how much county taxpayers will be expected to fund.  The PCTC needs to break out taxpayers' costs again out of the public sector category and how they will go about deciding this has not been discussed.

The last agenda item was a report by the Tysons Partnership (TP) on how Tysons should be funded.  The TP representatives actually talked about many topics, but didn't actually present a plan for paying for the transportation infrastructure.  Overall, their discussion points were even more sobering than the 20% increase in costs.

1.  In order to make Tysons work and to fund the much-needed transportation improvements, there needs to be a Tysons-wide tax district where the landowners tax themselves to raise revenue.  It would operate much like the existing Silver Line tax district where landowners have been paying 22 cent per $100 of land value to raise $400M to help fund the Metro.  As they reach the $400M goal, the tax will gradually be reduced.  The TP would like to keep the tax at 22 cent tax and dedicate the excess to Tysons transportation.  The problem, and it's very big problem, is that many landowners are steadfastly refusing to pay for these transportation improvements.  Why, they reason, should they pay this tax when many of them do not plan to redevelopment for a very long time (10-15 years or more) and when their land lies outside of the TOD areas and does not qualify for the much higher densities being given to landowners near the Metro stations. Also, Lerner and Macerich, who are inside the TOD area, have already obtained county approval for their significant redevelopments and see no benefit in paying this tax.

The reality is the landowners outside the 1/2-mile TOD areas WILL benefit from the transportation improvements, but they don't want to pay as they feel the TOD area landowners lopsidedly benefit.  These problems associated with establishing a Tysons tax district are well-known within the Tysons landowner community, but this was the first time the TP has discussed them in public testimony at a PCTC meeting.

2.  Even if the landowners inside the four TOD areas decide to form their own tax district, any tax revenue raised, by state law, must be spent inside the tax district boundaries.  Unfortunately, the needed transportation improvements cover all of Tysons and many of them even lie outside the border of Tysons.

3.  The TP would like to create a separate tax district where landowners outside of the TOD areas would pay a very modest tax, say 5 cents, as this would create a constant revenue stream for 40 years, something everyone agrees is essential.  However there may be state constitutional issues with this idea and it would most likely require supporting legislation from Richmond.  In the meantime, the words 'law suit' are being thrown around by people opposed to seeing separate tax districts established.  My take is this is a serious issue that will require a political solution.

4.  The TP is upset with the 20% increase in transportation cost estimates.  They thought the previous estimates were already very high.  The TP wants the county to set a firm, fixed price for their share of the transportation improvements.  Of course they want that, who wouldn't?  They were able to get a fixed price of $400M for the Metro and now the Silver Line costs overruns are being passed on to the Toll Road users.  That was a great deal for the Tysons landowners, but it won't happen again.

5.  They reported that the cost of development in Tysons has risen 41% in the last three years, however they provided no data to substantiate this claim.  Frankly, I find it hard to believe.  I would like to see a breakdown of all these costs to better understand which components have increased so dramatically.

6.  The TP also plans to do their own growth modeling.

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