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The Tentacle


April 5, 2011

Frederick's $2.65-per-minute Dilemma

Earl 'Rocky' Mackintosh

Will the dream of developing the Hargett Farm, off Butterfly Lane in western Frederick City, into a regional park ever become a reality?

 

It seems that there is no easy answer of what to do with the last city administration's acquisition of this property. It was via a condemnation suit that finally settled in 2009 with the city taking title. Pleasents Development, the owner, had already received approval for a 645-unit housing subdivision.

 

The city paid $18 million, which was funded with some of the proceeds from a $121 million tax-exempt bond issue.

 

The plan was for the city to develop a regional park on the 148 acre site, which would include ball fields, picnic areas and possibly an aquatic center (natatorium). In addition, room could also be made for substations for police and public works personnel, as well as a realignment of the intersection of Butterfly Lane and Md. Route 180.

 

Depending on the degree of investment, some estimates put a price tag of nearly $40 million to fully develop the property. This did not include the annual maintenance cost that the city’s Parks and Recreation Department would oversee.

 

That was then … this is now.

 

In 2009 an all new mayor and Board of Aldermen took office.

 

The impact of the recession began to really hit the coffers of all levels of government, and the City of Frederick was no exception.

 

Over the course of the last year, Mayor Randy McClement, and his budget conscientious Board of Aldermen, have combed through every aspect of what it costs to run the government.

 

There is great concern over the property's annual carry cost of $1.39 million in principle and interest … $116,000 per month or $2.65 per minute!

 

City officials have acknowledged that they have a "burdensome" dilemma on their hands. Trying to make budgetary ends meet with the Hargett property’s monthly costs is a challenge; and the idea of funding infrastructure to even develop a fraction of the dream plan is currently out of the question.

 

And the survey says…

 

One thing for sure, there is not a “Family Feud” among the elected officials in the city about the matter.

 

At a mayor and board workshop March 23, 2011, Joe Adkins, the deputy director of Planning presented the results of a second online survey that his office conducted to get a sense of what city residents believed was a good use for the property. Understandably the majority were opposed to any future commercial or residential uses, and preferred park and/or open space.

 

Among other questions, the respondents were asked what concerned them about the property. While traffic, quality of life, construction and environment all ranked high, a total of 87% said that they were either "concerned" or "moderately concerned" about the cost to the taxpayers of the project.

 

What the response would have been if the question directly asked how much in additional taxes would the respondent be willing to pay each year for the development and maintenance of the regional park?

 

… and the answer is!

 

I was impressed with the fiscal focus that the mayor, board and staff put on this matter. They carried on a very healthy discussion of options of what to do with this "nonperforming asset" as Alderman Karen Young called the farm.

 

Alderman Michael O'Connor outlined three scenarios as a means to analyze the future of the property. He asked:

 

What is the property worth right now if we sold it?

 

What would it cost the city if the property was held for future use while continuing to carry the debt?

 

Is there a hybrid use to develop the property through a public/private partnership?

 

As to the first question, Mr. Adkins offered his opinion that the Hargett property is likely worth less than the city paid for it in 2009.

 

After a quick analysis, my guess is that in today's market the highest and best use from a financial return point of view is probably still the residential approved plan that Pleasents obtained. My best guess is that it is probably worth 12% to 15% less today.

 

To the second question, Alderman Carol Krimm expressed concern that $1.39 million annual cost could be better used for more urgent projects.

 

Alderman Kelly Russell logically stated that the county government should participate in the funding of the regional park idea, but all agreed that there is little hope for that.

 

Where do we go from here?

 

The third question opened the door to what seemed to be endless possibilities.

 

While there have been any number of nonprofit and government uses that have approached the city for a piece of the property, it is not likely that dividing some of the property in this way would cover the costs to develop a park.

 

Alderman Young noted that she has been approached by at least one private group with a public/private partnership idea.

 

Many agreed that the idea of Frederick having its own natatorium would greatly benefit the local economy with weekend events … but it would be hard to find public funds for such a concept in today's environment.

 

In the end the consensus seemed to be that a "workgroup" should be formed to "brainstorm ideas" and bring them back to a future workshop. Mayor McClement seemed to like the workgroup idea and acknowledged he received good direction.

 

May I offer a suggestion, Mr. Mayor?

 

I was pleased to see the direction that the discussion went at this meeting. It seems that the next step of putting this third option into a workgroup is a step in the right direction.

 

I'd like to suggest, however, that the group come away with a list of park (and possible other nonprofit) priorities in size, scope and uses.

 

From there, look to the proven idea of offering the property through the RFP (Request for Proposal) process.

 

Over the last couple of years, the city has left a few real estate opportunities to chance by not using this process, leaving interested parties within the community a bit confused.

 

An RFP that is extensively publicized to the private sector will provide the city with a multitude of options for a public/private partnership.

 

Be sure to give the participants at least four to six months to give deep consideration to the park priorities the workgroup lays out. Allow the private sector to use their planning and development expertise to come up with an array of uses that will assist in finding a solution to meeting the needs of the community at numbers that will make the dream a reality.

 

Rocky Mackintosh is president, MacRo, Ltd., a land and commercial real estate firm based in Frederick, MD. He also writes for the MacRo Report Blog. Rocky can be reached at rocky@macroltd.com.

 



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