Tax plan may help pay for Arlington housing

Correction: An earlier version of this story inaccurately characterized a staff report by Arlington County Manager Barbara Donnellan. The report will recommend creating a tax increment district policy. The story has been corrected.

November 16, 2013

Hoping to capture a portion of the anticipated growth along Columbia Pike, the Arlington County Board said Saturday that it wants to use tax tools to help nonprofit developers pay for affordable housing along the rapidly developing road.

Board members described the proposal to set up a tax increment financing fund for the area as “creative” and “innovative” because it would capture 25 percent of any new real estate taxes and dedicate that money to a fund that would pay for infrastructure and fees, thus allowing nonprofit developers, who build most of Arlington’s affordable housing, to qualify for tax credits.

“Those tax credits are our lifeblood for creating low-income housing,” said board member Jay Fisette (D). “This shows exactly the right creativity we need.”

Housing and transportation are bound together along Columbia Pike, where the effort to build a 4.5-mile streetcar line has run up against opposition from residents who are afraid of losing some of the most affordable apartment complexes in the region. Businesses and developers want the streetcar; meanwhile, the demand for affordable housing is such that 3,600 people in September applied for 122 new apartments targeted to families who earn $60,000 a year or less. Studies say that since wages are not keeping up with rent increases, that squeeze won’t ease any time soon.

Tax increment financing is used around the country to collect revenues as new development is built and to dedicate that money to improvements in the area where the taxes are collected. Arlington currently has a TIF fund in Crystal City, some of which is being used to build a streetcar line along the Jefferson Davis Highway.

County Manager Barbara Donnellan also indicated in the staff report that in the coming months she will propose that the board create a county-wide tax increment district policy that could be used for projects not limited to particular neighborhoods. She may have difficulty getting the support of board member Libby Garvey (D).

Garvey was the sole dissenting vote on the board’s decision to advertise a Dec. 14 public hearing on the Columbia Pike TIF.

“TIFs in general make me uncomfortable,” she said, because the money is dedicated to a single purpose without a wider budget discussion. “I’m just saying this is a huge [change] in how we fund things.”

The Columbia Pike TIF could bring in about $1.2 million in fiscal year 2016, which would mean $403,000 for affordable housing, the staff estimated. By 2024, the new taxes would raise an estimated cumulative total of $16.47 million.

The money would be used to pay for infrastructure and fees such as county permits and water or sewer-line costs. Developers usually pay those costs. But the Virginia Housing and Development Authority, through which federal and state funds flow, has ruled that as of 2014, tax credits will not be provided for affordable-housing units that cost more than $372,750 for new construction or $292,875 for rehabilitated ones. Given the high cost of land in Northern Virginia, that limit has severely cramped the nonprofit developers who rely on tax credits to build affordable housing.

“We created a very, very ambitious plan for creating affordable housing . . . [which] will require new robust tools to implement,” said Inta Malis, a Columbia Pike activist and member of the county’s Planning Board. “I think these tools have a great deal of promise.”

The Arlington County Board promised 15 months ago that the 6,200 existing affordable housing units along Columbia Pike would not be lost as the area undergoes redevelopment, which is expected to bring thousands of new residents and 9,500 new apartments to the neighborhood in the next 30 years. Some of the current affordable units will be demolished and replaced, but it was unclear whether that could happen without the county’s financial help.

The board, in an eight-hour-long meeting Saturday, also adopted by a 5 to 0 vote other planning and zoning tools that will implement the Columbia Pike Neighborhood Plan adopted in July 2012.

Patricia Sullivan seeks out news about Alexandria and Arlington County for the Washington Post.
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