Arvi: Regressive anti-business legislation by Wicomico County Council

Basic economics teaches us that if you want to decrease prices you must increase supply. Wicomico County has not built a sufficient number of housing units since the Great Recession of 2008-09. The need is great and the supply lacking.

To incentivize more development, particularly in the high-density neighborhoods, revitalizing downtown Salisbury the Horizon tax credit legislation was passed in 2021. This model legislation was adopted statewide by the Maryland legislature.

Shockingly, the Wicomico County Council is fast-tracking legislation to repeal the Horizon tax credit program. It is regressive, myopic, and anti-business and signals that Wicomico does not want or need any new investment.

The existing housing stock is old, please see the attached non-partisan Greater Salisbury Committee (GSC) white paper on housing. Wicomico County poverty rate1 of 17.1 % is double that of Maryland’s 9.5 %.

Homeownership rate in Wicomico is 58.6 % vs 67.9 % statewide2. We are a poor county, dependent on the state, and wealthier counties across the Bay to bridge our funding needs due to our property tax cap.
Adding insult to injury is this proposed legislation to repeal the tax incentives that will promote new development.

The developers of the Ross in downtown paid market price for three buildings with an annual property tax of $20,000 to the county. With redevelopment into class “ A” 354-bed student housing, the assessed property value increased from $2.16 million to over $31 million and annual property tax to $600K. Even with the tax credit incentives over the next 20 years, the City, County, and State stand to gain an additional $6.4 million (see attached). This is what is called a win-win.

This development in a tertiary market like Salisbury is undoubtedly a remarkable achievement given the less attractive returns and high risk associated with development.

The developers have invested tens of millions to make this happen providing numerous jobs to local contractors and suppliers.

The residents in downtown Salisbury have tripled because of this project with downtown businesses benefiting from the residents’ spending on food, drinks, and entertainment.

The Horizon tax credit made it relatively feasible to obtain financing to complete this project despite COVID-19 delays, inflationary supply chain price increases, etc.

There is a simple reason why no new development is happening here. Question to ponder: Why haven’t any of the parking lots in downtown Salisbury not been developed?

The risk-return tradeoff is too high for any developer to undertake large-scale investment in Wicomico County. This legislation will be the nail in the coffin for any future investment in the county.

By repealing the Horizon tax credit, the elected officials will vote is wrong, ill-informed, and frankly suicidal to any future development happening here. Elected officials are responsible for ensuring new business investment including increasing the housing stock. Without any new property taxes from new developments, the county cannot afford to build new/expand public schools, pay for policemen, firefighters, teachers, and continue providing the level of public services that our citizens deserve.

Money is fluid and flows where is it welcomed with incentives. No wonder Sussex and Kent counties have annual housing starts that are 10x or more of Wicomico.

We need more affordable, entry-level housing units. It will not happen with policies like the one County council is considering.

The question to our elected officials – do not vote on this legislation repealing the tax credits. Do what is right for the citizens of this county who elected you, and encourage investment in our county. Do NOT phase out the Horizon tax credit.

Housing developers are real businesses. They spur economic activity, spending, and new jobs. We need workforce housing for future businesses to want to come here. Do what is right and not be persuaded by partisan politics.

Leonard Arvi

Chairperson, Department of Finance

Franklin P. Perdue School of Business Salisbury University

Disclosure: The author has a minor equity investment in the Ross project.