Officials Try to Help Builders in Downturn

Tax Hikes Delayed; Permits Extended

Local governments in the Washington region are trying to blunt the recession's effect on developers by delaying tax increases, extending the life of building permits and limiting fees they collect from new projects.

Homeowners and commercial property owners haven't been as fortunate: Although they, too, are feeling the recession's squeeze, in many areas, they are paying more in property taxes this year than last.

The conflict between giving a reprieve to the development industry and increasing taxes on property owners is one of the challenges local governments face as the recession continues. Officials are trying to ensure that local businesses survive and can help spark the economy. At the same time, they can't take too much political risk by hitting homeowners or commercial property owners too hard.

In Maryland, despite a growing budget gap for state and local governments, many localities are giving developers more time to complete projects rather than forcing them to pay thousands of dollars in fees to reapply for permits or other approvals that have expired.

The state legislature passed a bill this spring to encourage local governments to extend the life of development approvals, saying tight credit markets are causing some projects to fall behind schedule. Many officials say their communities will be better off if government can give builders more time to finish their work and not leave half-built projects or empty lots.

In Montgomery, the County Council is weighing a plan to delay for at least two years a proposed 3.5 percent annual increase in impact taxes developers pay to help cover the cost of schools, roads and other infrastructure. How significant that will be is unclear; the county had predicted it would collect about $37 million in impact taxes last year but took in only about $10 million as the real estate market slowed.

In Prince George's, the County Council has lengthened the life of development approvals and held off on enacting a customary July 1 increase in the impact taxes developers pay to offset the cost of roads and schools.

In Fairfax County, following the lead of the state legislature, officials have reduced the amount of money a developer must put up in surety bonds to guarantee a project's completion. Prince William County is also looking at ways to help stimulate development.

And in the District, the D.C. Council gave regulators the latitude to lengthen from two to five years the time developers have to begin work on projects in Southwest Washington, giving them breathing room to get financing and take other needed steps before breaking ground. Last month, the council approved a plan to use $272 million in public funds to help energize construction of a Marriott hotel near the convention center.

A rare exception is Arlington County, where officials say developers aren't hurting too badly.

"We still have indications of a strong market. A few hundred dollars here or there is not going to make a difference in a project," said Chris Zimmerman (D), a County Board member who closely tracks development.

This year's aid to the development industry across the region might not be enough, though, a spokesman said.