GWCAR Quarterly: Fall 2002 - Third Quarter Market Wrap Up

CBQ >> Fall 2002 Issue

Public Policy News

Broker-Friendly Candidates Win at Polls, Dramatically Alter Political Landscape in Montgomery

A seismic shift occurred in Montgomery County politics this year as 4 new councilmembers were elected to the Montgomery County Council, No-Growther Councilmember Blair Ewing suffered a crushing defeat, and County Executive Douglas Duncan won an overwhelming mandate on transportation and practical growth solutions.

Of the nine elected members to the Council, all but two were endorsed by GCAAR/GWCAR. Newcomers Nancy Floreen (At-Large), George Leaventhal (At-Large), and Mike Knapp (District 2) received strong support from commercial brokers in the form of campaign contributions, email updates and GWCAR networking. The results speak for themselves, as a pro-business agenda is a top priority for an overwhelming majority of the Council. More importantly, the Council went from a 5-3-1 anti-ICC Council to a 6-3 Pro-ICC Council.

"The entrée of No Growth, No Roads over a coulis of congestion with a side of Rent Control would be tough for any REIT, relocating firm or new resident to swallow," explained GWCAR President Phillip Thomas. "But that was what was on the Council's table." GCAAR, the Montgomery County Chamber of Commerce, the Tech Council, and AOBA-Metro went back to the kitchen looking for new leadership. "We definitely needed some new chefs because they were conjuring up a recipe for disaster."

No-Growthers like Blair Ewing, Mark Elrich, and Phil Andrews looked like strong incumbents and candidates that were assured victory. However, most polling also suggested that practical transportation solutions (like the ICC) and sensible land use measures were held in an even more favorable light by the County residents. In short, many candidates that were very popular were also very out of touch with their constituencies. GWCAR and GCAAR felt they needed to get their message out and inform Montgomery County residents that many of their attractive, articulate, and amiable Councilmembers did not vote in accord with the priorities of their constituents. GWCAR, GCAAR and its coalition partners knew that the future of Montgomery politics would not be about identity but about the issues: transportation, education, and affordable housing.

At the same time, unbeknownst to the community, County Executive Duncan was brewing what The Washington Post called, "The biggest transportation improvement program offered by any local government in the Washington area." This program and Councilmember Blair Ewing's predetermined slate of No-Growth/No-Roads candidates gave the entire business community and various community groups a unique motivation to mobilize their base.

Clearly, the election results are a mandate for continued responsible growth management and Duncan's Go! Montgomery initiative.

District of Columbia Election

In the District of Columbia, all of WDCAR/GWCAR's endorsed candidates were reelected. Despite major campaign setbacks, Mayor Williams trounced both Rev. Willie Wilson (D) in the Primary Election and Councilmember Carol Schwartz (R) in the General Election. Incumbents Linda Cropp (D-Chairman), David Catania (R-At Large), Phil Mendelson (D-At Large), Jim Graham (D-Ward 1), Kathy Patterson (D-Ward 2), Vincent Orange (D-Ward 5), and Sharon Ambrose (D-Ward 6) were all reelected to serve in Council Period 15.

GWCAR and WDCAR worked hard to re-elect Mayor Williams by spending $15,000 in direct mail and raising thousands in campaign contributions. Spaulding and Slye, Colliers was incredibly active in its efforts to support the Mayor - raising almost $10,000 in last minute hard money.

Virginia Election

A disappointing result carried the day in the Virginia General Election. Northern Virginia and Hampton Roads voters decisively voted against raising the sales tax by one half of a penny to pay for transportation solutions.

REALTORS^® Lead Coalition, Produce T.V. Ads

Traffic is the driving issue in Montgomery County politics and GWCAR and GCAAR (the Greater Capital Area Association of REALTORS^®) are leading voices in the transportation policy debate. For the first time in Montgomery County history, a coalition of business and community groups, led by GWCAR and GCAAR, launched an aggressive campaign to improve the County's quality of life by using issue ads funded by so-called "soft money." GWCAR/GCAAR, the Montgomery County Chamber of Commerce, the Apartment and Office Building Association of Metropolitan Washington, and several other groups formed Citizens for Quality Living to focus public debate on transportation, affordable housing, and superior education opportunities.

The hallmark of the issue advocacy campaign was a series of 30-second television ads that aired this fall on CNBC, CNN, MSNBC, and the History Channel. The regionally recognized ads touted County Executive Duncan's $1 billion Go! Montgomery plan and called upon Montgomery County residents to encourage elected leaders to build the long delayed Inter-County Connector (ICC). A front page Washington Post story explained how traffic issues dominated County politics and its first three paragraph's highlighted one of CQL's more poignant issue ads.

"GWCAR's leadership on transportation and education advocacy is a credit to brokers' commitment to improving Montgomery County's quality of life," commented Council President Steve Silverman.

District of REALTOR^®- Friendly Congressman, Al Wynn, Expands into Montgomery

While much of the press and most of the political pundits focused on "Connie, Chris, Mark, and Ira," GWCAR paid special attention to "Consumer Choice in Real Estate" Co-sponsor Congressman Al Wynn (D-4th Congressional District). Congressman Wynn's representation of Montgomery County will be greatly expanded thanks to a recent federal redistricting plan. The plan, drafted by a Democratically-controlled commission and passed by the General Assembly, was intended to carve out two additional Democratic seats to help the Democrats take back the U.S. House of Representatives.

In order to achieve this end, the Democrats had to improve Democratic voter performance in Congresswoman Morella's 8th Congressional District. Her District included the entirety of Montgomery with the exception of some highly Democratic performing precincts in the Silver Spring area. With two of Montgomery County's most viable State House Democrats set to challenge Congresswoman Morella, the Commission retooled the incumbent's district to include those Silver Spring precincts and a large swath of the State's best performing Democratic precincts - where over 95% of the voters chose Governor Glendening over Republican challenger Saurbrey in the 1998 Gubernatorial election.

These "Super Prime" Democratic precincts were a cherished part of Congressman Wynn's 4th Congressional District - - centered in Prince George's County. In order to accommodate the redistricted 8th District, Congressman Wynn's 4th District had to extend into Morella's old 8th and into areas like Olney, Burtonsville, and Clarksburg. Congressman Wynn has long been a friend to REALTORS^®, dating back to his first run for the House when REALTORS^® were the first business group to endorse the underdog candidate. "Congressman Wynn understands our business and he really looks out for us on the Hill," commented NAR lobbyist and former MAR top gun Jamie Gregory.

With this seismic shift in representation occurring, GWCAR dispatched our government affairs staff and key members to welcome Congressman Wynn to his new District. A tour was arranged of several new communities in Clarksburg to show off the emerging commercial space in the area. "When we saw Congressman Wynn's district expand into Montgomery, we saw a real opportunity to show him the expanding commercial market in areas like Clarksburg," stated Brendan Cassidy, GWCAR's Treasurer.

"If you want to connect with the community, you'd better start with the REALTORS^®. In so many ways, they make communities happen," praised Wynn. GWCAR looks forward to working with Congressman Wynn and developing meaningful coalitions with commercial REALTORS^® in Prince George's County, who are also represented by Wynn.

"If you look past the partisan intent of the design of the new district, you can see some meaningful opportunity for regional cooperation and representation. The new districts provide an opportunity for real regionalism - something GWCAR has displayed with its new office site selection," commented Wynn.

House Passes Terrorism Insurance

The house approved the Terrorism Risk Insurance Act of 2002 (H.R. 3210/S. 2600), which, for the next three years, would make the federal government the insurer of last resort on property casualty claims that result from terrorist attacks. The bill would insure 90 percent of the cost of a terrorist attack for losses of $10 billion to $15 billion. President Bush has made terrorism insurance a top priority and has promised to sign the bill.

The current shortage of adequate and affordable terrorism insurance has severely reduced and restricted commercial real estate transactions, making it increasingly difficult to operate or acquire properties, build new projects and find appropriate financing. Over $15.5 billion worth of real estate projects in almost 20 states has been stalled or cancelled due to the ongoing lack of terrorism insurance, according to a recent survey.

DC Council Drops First-time Homebuyer Exemption from Recordation and Transfer Tax Increase

Despite an intense series of "Calls-to-Action," compelling testimony from GWCAR leadership, and full time lobbying from the GWCAR staff, GWCAR could not fend off an increase in the District's Deed Recordation and Transfer tax rate from 1.1% to 1.5%, effective January 1, 2003. WDCAR and GWCAR's lobbying did initially produce two targeted exemptions for first-time buyer transactions and transactions involving affordable units. However, the exemption for first-time homebuyers was later dropped.

Although there is no longer any exemption for first-time buyers, Deed Recordation and Transfer Tax rates on the sales of homestead real property of $250,000 or less will remain constant at 1.1% (non-first time buyer sales above $250,000 will be taxed at the new 1.5% rate).

The Council also established a "sunset clause" that will reduce the rates to 1.3% on the Deed Recordation and Transfer Taxes in the unlikely event that the CFO's 4th quarter revenue estimates exceeds the estimates made in the previous quarter by at least $100 million. Rates would return to 1.1% if revenues exceeded estimates by at least $100 million for two straight fiscal years. WDCAR is working on amendments that would establish a "date certain sunset clause" that would lower the rates to either 1.1% or 1.3% in two or three years.

"These rate increases have been on the table since January of 2002," explained WDCAR President Carol Mitten. "We worked with the administration throughout the year and stifled an attempt to raise the rates during the initial budget debate in March." WDCAR's advocacy essentially staved off an increase for a full year.

Nonetheless, plummeting capital gains revenue returns forced the Mayor and Council to make up a $325 million budget deficit in short order. There was nascent talk of the looming deficits during the campaign season, but WDCAR's RPAC Committee still sought assurances from councilmembers NOT to increase the Deed Recordation and Transfer rates.

"When we asked incumbents about Deed Recordation and Transfer rate increases, all of them said it would be the last place they would look for revenue," said RPAC Trustee and WDCAR President Carol Mitten. "The reality is: the rate hikes were the first place they looked for revenue." The WDCAR RPAC Committee sent a letter to endorsed candidates asking them to explain their altered position to our membership.

The Council and Mayor also raised telephone, gas, electric, inheritance, cigarettes, and alcohol. The Deed Recordation and Transfer Tax rate increase is currently projected to raise the most revenue of all the tax hikes.

Like WDCAR's Public Policy Committee members, Councilmember Jack Evans holds that the District's fiscal instability is based on its inability to control spending. "We can't tax our way out of the problem," explained an exasperated Evans at a recent legislative meeting. Perhaps, Councilmember Adrian Fenty summarized the D.C government's prevailing posture towards irresponsible spending when he summarized the Council's rasion d'etre, "We are elected to spend the people's money."