City Council Considers New Commercial Tax Class

City officials hope a proposed 75 percent tax break for certain commercial developments related to the coming federal Base Realignment and Closure that will affect Aberdeen Proving Ground spurs large office development here.

The City Council Monday approved an amendment to the budget creating the framework for a new property tax bracket.

Commercial developments that are certified environmentally sustainable could be eligible to pay 17 cents per $100 of assessed value. That's 25 percent of the adopted 68-cent per $100 of assessed value for FY 2012.

The city would then raise the special tax rate up to full value over the course of six years.

The measure passed 4-1 with Councilwoman Ruth Elliott casting the lone dissenting vote.  The ordinance, however, must still be approved separately despite the fact that the Council has approved a new tax rate for the fiscal year that begins July 1.

 “We have a very finite time period where we can attract BRAC-related development outside the gate,” said City Manager Doug Miller, who proposed the amendment. “The base is capturing the development on post but Aberdeen gets all of the impact. The traffic is incredible.”

St. John Properties is developing the Government and Technology Enterprise complex, an office and technology business-park housed inside Aberdeen Proving Ground for lease to both government and private sector tenants.

Boeing opened an office there in February. Others are also looking to relocate there, in part, because it puts contractors in close proximity to their clients.

Matthew Holbrook, director of federal programs for St. John Properties, Inc., commended the city for taking initiative. But he said his company wouldn't likely develop new properties in town because there seems to be more office space scheduled to come online than the demand dictates.

"There are several competitors outside the base," Holbrook said.

Holbrook also said that there is a misconception about his company’s project enjoying unfair financial advantages.

"We certainly don't get services from the city. We pay a higher rate for services on post—water, sewer, police protection, permitting and road improvements,” Holbrook said.

Holbrook said St. John Properties pays an impact fee to the state of Maryland for road improvements. The company also makes a payment in lieu of taxes to Harford County.

“We pay many times over what we would pay outside the post,” Holbrook said. “We have the preferred location, but we pay for it.”

Businessman Patrick McGrady, of Holly Circle Townhouses, said the city should be looking for ways to preserve the businesses that are already in town rather than creating a new tax subclass.

"This offers preferential tax rates and treatment to people who decide to come here," McGrady said. "Offering any type of break to a specific group is monopolistic in nature."

Retired Judge John S. Landbeck Jr. said additional details about the way the program works should be made available soon.

"We need a whole lot more information," Landbeck Jr. said.

In order to receive the special tax rate, a property would have to be a minimum of 50,000 square-feet and maintain LEED environmental certification.

Miller said the administration can't obligate future City Councils to the new tax rate but the goal is to have businesses in the new tax class pay a six-year progression.

• Year 1-25 percent
• Year 2-25 percent
• Year 3-25 percent
• Year 4-50 percent
• Year 5 -75 percent
• Year 6-100 percent

Councilwoman Ruth Elliott has said she has concerns about creating special tax breaks for BRAC-related businesses.

 “I don’t want to set up another zone to give away taxpayers’ money,” Elliott said. “People say its good because businesses will come. But that’s not what drives the train. The market drives the train.”

Councilwoman Ruth Ann Young said creating a new tax class for large office projects could help the city lure developers to town who might otherwise open offices on APG because the city sees no tax revenue from development on base.

“We’re trying to level the playing field,” Young said.