Tuesday, January 19, 2010

Costco Subsidy Heads to Secret Straw Poll (Updated)

The Executive Branch is conducting a secret straw poll of the County Council on its $4 million subsidy for Westfield’s Costco project that will be due by noon today. This is another sign that the subsidy is on a fast track regardless of public input.

Reasonable people can disagree in good faith on whether the county should be subsidizing a Bigbox retailer at Westfield’s ultra-profitable Wheaton mall. But we continue to be disappointed by the lack of openness in the process. Our sources tell us that the administration asked the County Council for immediate concurrence in its closed session on January 12, but the council wanted to study the issue further. Then the administration had supporters call and email the council in support of the project just hours after the closed session while continuing to withhold details from the general public. MPW forced the administration’s hand by breaking the story wide open last Friday, prompting a public defense from Director of Economic Development Steve Silverman.

In his remarks, Silverman promised public scrutiny of the proposal. But just last night, Silverman made a closed presentation before small businesses who are members of Local First Wheaton. No public notice was given and while Costco and Westfield appeared, the press was not invited.

Now the Executive Branch is asking each County Council Member to indicate a preference for or against the subsidy in private communications due by noon today. It is unclear whether this straw poll has any meaning other than merely providing a sense of where the council is at the moment. But what is clear is that if the administration had its way, only its handpicked supporters would be providing input to the council at this point.

Our demands for open government are not unlimited. We acknowledge that secrecy is in rare circumstances a necessary evil. For example, Montgomery County and the State of Maryland are in competition with Virginia to attract the headquarters of Northrop Grumman. If the internal deliberations of the county and state became public, that would give Virginia an unwarranted edge. Maryland’s Open Meetings Act recognizes this by stating that public bodies may close meetings to discuss “proposals for a business or industrial organization to locate, expand, or remain in the State.” But in the case of Costco, Montgomery County is not in competition with any other jurisdiction. The proposal will rise or fall on its own and so there was never any reason to make it secret.

The administration’s control of information gives it an unfair advantage in promoting its project. One example is Silverman’s claim that the project will be a “money-maker” through receipt of property taxes, income taxes and impact fees. Impact fees are, of course, needed to pay for infrastructure improvements necessitated by the project’s construction. The county’s impact fee levels are way too low to pay all of those costs. And in terms of income taxes, the county’s analysis – which it has never released publicly – assumes that every single Costco store employee will be a county resident. That is difficult to imagine considering that the average employee salary is projected to be $38,000 per year. So some workers will have to be imported while others may have to live in poverty. In any case, the county will not capture anywhere near all the income taxes generated by the store.

Another example of insufficient information has to do with the corporations’ finances. MPW has already revealed that Westfield’s Wheaton mall is the company’s second-most profitable mall out of the 55 properties it owns in the U.S. A casual glance at Costco’s 2009 annual report shows that its 527 stores average $133 million in sales each. That means that a typical Costco store could afford the equivalent of the county’s $4 million subsidy with just 11 days of sales.

Finally, the county does not want to talk about the experience of the Best Buy store that opened on Georgia Avenue just south of Westfield Mall in 2006. Best Buy did not ask for a public subsidy and opened despite the fact that a Circuit City branch was then located right up the street on mall property. Best Buy does a brisk business and shows no sign of failure. If you like Bigboxes and do not worry about what they do to local small businesses, Best Buy’s success proves you can have one for absolutely free – even in Wheaton.

Defenders of this process say that the county has been doing business this way for a long time. We do not recognize the merit of that argument. It is a sad, sad state of affairs that a mere blog has provoked public debate in a way that has so far not been encouraged by our elected and allegedly democratic government. Regardless of the outcome of this particular proposal, this blog will continue to pursue freedom of information and open discussion – even going so far as to publish remarks from officials who disagree with our views - whether our government wants it or not.

Update: A Gazette reporter showed up at the Local First briefing last night. The reporter was allowed to stay only if she agreed that everything that was said was to be kept off the record. This is yet another victory for transparency in Montgomery County government.