Friday, January 15, 2010

County Considers $4 Million Subsidy to Bring Costco to Wheaton

The Leggett administration is secretly considering a $4 million subsidy to lure Costco to Westfield Wheaton. When – or if – it plans to make the subsidy available for public review and comment is unclear.

Details on the plan are murky at best. The administration briefed the County Council about it in closed session on Tuesday. Westfield has indicated its intent to the county to attract Costco to its mall site adjacent to the Wheaton Central Business District, but it has a problem: the cost of preparing the site for Costco’s occupancy is high enough that the return on investment falls short of other development opportunities Westfield has elsewhere. But Westfield has told the county that a four million dollar subsidy would boost the return on investment to the point where the project would be worthwhile. The Executive Branch is now considering disbursing the subsidy to Westfield in Fiscal Year 2012. While the administration is keeping the proposal officially secret, its representatives are reaching out to selected individuals in an effort to build support for the project. It is unclear whether the proposal will ever be available for public input prior to any signed commitment with Westfield.

The subsidy would raise a number of issues if its details were ever to become public. Here are just a few of them.

1. What does this mean for the county’s vision of Wheaton?

The county has convened numerous groups of stakeholders and devoted significant staff time to redeveloping the Central Business District (CBD) for nearly twenty years. The Planning Department is currently developing a sector plan amendment for the CBD. The preliminary staff report contains this statement describing “Wheaton Tomorrow.”

Wheaton is envisioned as a compact, mixed-use residential and retail community with an ethnic flavor and significant retail, entertainment and services. The greatest activity occurs in a dense, transit-oriented environment in the immediate environs of the [Metro] station (within a ¼ mile and to a lesser extent, within ½ mile) so that walking eventually becomes the predominant access mode for Metrorail. Increasing the commercial and residential density around the station and improving pedestrian connectivity and facilities are central to achieving this goal. The Core (bounded by Georgia Avenue, University Boulevard and Veirs Mill Road) is envisioned as a compact, high-density area with a variety of building heights, meeting and performance space, art galleries and artist studios, restaurants, retail and entertainment venues. The civic focus of the community will be a major public space on Parking Lot #13.
A Costco complex is totally antithetical to this vision of Wheaton. Costco customers drive in, sometimes from areas many miles away, to buy in bulk and leave. They do not travel by Metro or bus. They require a giant parking lot. They do not walk from the Costco site to engage in nearby pedestrian activities. The Costco on Route 1 in Beltsville is a perfect example of the company’s business model: a giant big-box on an auto-dominated strip. While one part of the county government is planning to make Wheaton a mixed-use, transit-oriented community, another part of the government is offering a subsidy for car-oriented sprawl. Does this make sense?

2. What does this mean for the existing businesses?

Wheaton’s CBD is home to a large number of small businesses, many of them owned by immigrants and/or minorities. Wheaton is known for its restaurants, but it also contains bakeries, grocery stores and specialty retail stores – all product lines in which Costco is active. Many of these small businesses are struggling to survive and some have closed. The administration’s Costco plan would divert a portion of their property taxes to subsidize a competitor that would undercut them and drive many of them out of business. Why should these existing small businesses be expected to pay for their own destruction?

3. What does this say about the county’s economic development strategy?

Costco offers starting wages of $10.00-10.50 per hour, and the administration estimates that its average wage in Wheaton would be $18.00. No employee earning those rates could afford to live in Montgomery County free of poverty, yet the county is considering attracting those jobs with a $4 million subsidy. In contrast, the county only offered $150,000 to attract the Hilton International headquarters, which offered over 300 executive-level, high-paying jobs. Of course, those jobs went to Virginia instead.

Montgomery County is known for its excellent public schools and well-educated workforce. Its population expects good jobs. Has proud MoCo now been reduced to offering million-dollar subsidies for the sort of low-wage retail jobs that nearby jurisdictions like Prince George’s County acquire for free? And if MoCo empties its meager vault for Costco, can it afford to compete for Northrop Grumman? What does it say about us if we pay dearly for cashier jobs but abandon prestigious headquarters jobs to Virginia? And what will the other malls in the county begin demanding if Westfield gets a special deal?

4. What will the unions think?

Five of the county’s six public employee unions are negotiating new contracts with the school system and the Executive Branch. They will clearly not be as generous as the old contracts and may in fact contain no cost-of-living adjustments this year at all. Furthermore, the County Executive announced that he is laying off 44 people through mid-year cuts, most of whom are unionized bus drivers. Yet this same administration plans to use $4 million to create low-wage private-sector jobs which will very likely be non-union. (Only 13,500 of Costco’s 142,000 employees are union members.) Why should the unions make concessions when they will be used to finance low-wage non-union employment?

These are the questions the Executive Branch must answer prior to giving any subsidy to Costco and Westfield. Now that the secret is out, let the answers begin.