MacRo LTD Blog

The High Cost of Frederick City’s Sewer and Water Impact Fees

Will exorbitant start-up fees squeeze out the local flavor of Frederick?

High-Cost-of-Sewer-Water-Impact-Fees-in-Frederick-Maryland-MacRo-Report-e1335295634553-1Last week, the city of Frederick’s Board of Aldermen met to discuss the ongoing dilemma of water and sewer impact fees.

This issue has prevented small businesses from opening downtown in the past, but it gained notoriety when local chef Bryan Voltaggio and his business partner Hilda Staples put their North Market Kitchen project (to be located in the former Carmack Jay’s building) on hold last fall. Hilda and her angel investors decided they couldn’t stomach paying out in excess of $200,000 in hook-up (impact)  fees to the city before the restaurant even opened its doors.

Some accuse the Volt team of creating a tempest in a teapot, but that does not steep well here. If a nationally-renowned chef with a fleet of financial backers can’t make an income model work to re-furbish a longtime vacant piece of downtown Frederick Commercial Real Estate into a restaurant, how will aspiring restaurateurs with significantly fewer resources make it?

Rumor has it that Wild Wings recently signed a deal for the very high traffic count prime commercial real estate in Market Square over by Wegmans, paying the City of Frederick $200,000 in impact fees without so much as a whimper. Only a chain operation can afford those kinds of upfront costs.

National chain restaurants certainly hold an important place in any community, wouldn’t it be nice to see downtown Frederick retain the unique culture and charm that a strong influence of locally-owned businesses can provide and nurture.

The establishment of “Impact Fees” by local governments has become quite popular over the last twenty to thirty years.  In essence these are fees charged to new users to cover for the additional “impact” that new development will place on public services and systems.

Other than water and sewer impact fees, school impact fees are charged in Frederick County to cover the impact that children coming from new homes will have on the school system.  There are also park impact fees, safety impact fees and even library impact fees just to name a few.

In the case of a new restaurant, how is it to compete?  Imagine your reaction if the next time you enjoyed a meal at a new downtown restaurant and your bill had a line item on it that stated “Water & Sewer Impact Fee Pass-Through Charge … $5.00”?!?!   Not good public relations.

Is it fair that a new business should pay 100% of the cost of this new growth, or do certain types of growth benefit the community at large so that such costs should be spread among the existing users in some proportionate manner?

It’s not an exaggeration to say that the celebrity status of Volt has had a ripple effect on all of the excellent shops and eateries downtown. And it’s important to point out that without The Tasting Room, Firestones, The Orchard, Acacia, Isabella’s, Brewers Alley (and so many other local downtown restaurants), Volt probably would never have come to Frederick in the first place.   Isn’t it fair to also say that as each new restaurant comes to downtown, all of these establishments benefit as Frederick’s reputation as a dining hub grows?

Great food is an important part of Frederick’s culture and a cornerstone of its future growth and success. Richard Griffin has pointed out, correctly, that we all benefit when unique and well-run businesses open up downtown. Downtown Frederick not only hops on the weekends, but also on weeknights — bursting with energy and a great mix of people from young to old enjoying the food, the shops, and the general ambiance. Just try to get a table downtown on Thursday-Saturday night without a reservation or a long wait.

North Market Kitchen would have gone a long way toward gentrifying an area of North Market Street that has tremendous potential but doesn’t get as much tourist traffic as the southern blocks of that street. As the real estate recovery begins pick up speed, what is clear is that the zoom-zoom days of 2004 to 2006 will not return for a very long time – if ever. In addition to reviewing our city government spending and pension plans more decisively, it is also time to take a hard look at the upfront development charges that are actually impeding the local real estate recovery.

Many of the city’s land-use regulations and real estate development fees were established in those zoom-zoom days, when thresholds were set to such heights that many residential and commercial real estate developers began to wonder whether these measures were more to curb growth pressures than to encourage the redevelopment of downtown properties for establishment of new businesses.

In looking at the costs to provide these public services, are they being operated int he most cost effective manner?  Could it be that the city government has been reluctant to seriously get its fiscal house in order, as Aldermen Young and Aloi have been calling for?

While there has been a good bit of pecking around the edges, to date, the city has yet to be decisive in addressing many areas of government spending, which would result in significant costs savings.

This post has focused on the impact on the local restaurant businesses … for a moment think about the impediment these fees will have on the ability of a 200 plus room downtown hotel to get off the ground.

The good news is that the city plans to hold a public hearing on water and sewer impact fees in coming months. To date, that hearing has not been set. Stay tuned, and please contact your local aldermen in the meantime to encourage them to find a better solution to this issue!

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Rocky Mackintosh, President, MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He is an appointed member of the Frederick County Charter Board. He also writes

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