Montgomery County officials scrambled to prevent the Silver Spring redevelopment effort from collapsing yesterday after the partnership building the commercial center placed its financing package on hold out of concern over the cost of impending legislation.
The latest threat to the decades-long effort to restore downtown Silver Spring comes two months after the project's celebrated groundbreaking. But no construction work has been done since those festivities, and the partnership managing the first phase of the project failed to close on a $12.7 million loan yesterday after missing several target dates.
At the heart of the delay is the perceived threat posed by legislation that the Montgomery County Council is to introduce next week. As envisioned, the "living wage" bill would require companies that receive county contracts or taxpayer-funded economic development incentives to pay employees $10.41 an hour, more than twice the minimum wage. The $321 million Silver Spring renovation project includes $132 million in subsidies from Montgomery and the state.
"The living wage bill has caused an uproar, and the immediate problem is Silver Spring," said County Executive Douglas M. Duncan (D). "Basically, the project is on hold until we get some kind of resolution from the council."
Council member Philip Andrews (D-Rockville), who is drafting the bill, said this week he plans to exempt a portion of the Silver Spring redevelopment district from the legislation after officials from a prospective tenant warned they were having second thoughts about locating there because of the bill. Officials from Strosnider's Hardware said the living wage bill could cost them $250,000 a year in employee raises.
But the partnership led by the Foulger-Pratt Cos. yesterday sought more formal assurances from council members, fearing the bill as originally envisioned would severely hamper their ability to rent retail space called during the project's first phase. The stores, restaurants and movie theater planned for the first phase commonly have a high percentage of workers who make less than $10.41 an hour.
A number of large jurisdictions have passed living wage legislation since welfare reform three years ago to help a growing segment of the population known as the working poor. Montgomery's version would be among the broadest in the country because it extends beyond county contractors to apply to economic development projects.
Earlier this week, according to several county sources, San Francisco-based Wells Fargo Bank, the project's primary lender, raised concerns about the bill's potential effect. Since then, developers have been personally contacting council members in hopes of resolving an impasse that threatens the project's private financing.
After two days of lobbying by Duncan aides, eight of nine council members agreed yesterday to send letters to company President Bryant Foulger pledging not to support a version of living wage legislation that would affect enterprise zones. That would exclude the Silver Spring and Wheaton redevelopment projects from the legislation. Only Andrews declined to sign any version of the letter, several of which pledged to oppose any version that affects economic development projects.
Andrews said the letters supported broader exemptions than he was willing to accept. "I believe that an urban renewal area is a special case, but I am not planning on going further than that myself," Andrews said. Council President Isiah Leggett (D-At Large) warned, however, that the bill probably would go down in defeat if there is no give on the issue. "If it is proposed [to include] Silver Spring, it is dead on arrival," he said.
James Todd, president of Peterson Cos., which is part of the development consortium, said yesterday that the letters represented progress in addressing their concerns but said the proof would be in the final bill.
"We have been told that this legislation will provide language that will prevent it from hurting Silver Spring," Todd said. "We're getting letters that say that. If the ultimate legislation is consistent with those letters, then everything will continue forward."
Council member Michael L. Subin (D-At Large) said the bill probably should have been introduced at a later date.
"In terms of Silver Spring, clearly this was unfortunate timing," Subin said. "One thing we have learned is that financial institutions understand the issue of market uncertainty. What they can't accept is uncertainty that is inserted by government."