Impact Fee Holding Up North Market Kitchen

Bryan Voltaggio’s plans for The North Market Kitchen are on hold. According to the Washington Post the snag is $200,000 in impact fees:

With North Market Kitchen, chef Bryan Voltaggio’s planned restaurant and market in Frederick, co-owner Hilda Staples didn’t want to repeat the nightmare of Volt’s final push to secure a certificate of occupancy. Back in 2008, with Volt nearing its debut, the city of Frederick socked the restaurant with a $90,000 bill for water and sewage fees.

City officials, Staples says, wouldn’t hand over the certificate without the cash. “It almost closed the doors at Volt” before it even opened, she notes.

Staples hoped to avoid such a situation with North Market, Voltaggio’s ambitious $2 million operation in a former Carmack-Jay’s grocery store in downtown Frederick, so she started researching the water and sewage fees before the owners even signed the lease at 331 N. Market St. It was a smart move: The estimate for the impact fee came in at a whooping $205,543. The estimate is based on the number of fixtures — urinals, toilets, drains, sinks, washing machines, dishwashers — that will be installed in the space, and, as you might suspect, North Market has many such fixtures in its preliminary architectural plan.

“I’d rather cut my losses now than get into a project where I’m paying $200,000 to the city for nothing,” says Staples. “That money that we gave to the city when opened Volt just hurt us so badly, that I was like, ‘It’s never happening to me again.’ It was painful.”

The Post also posted a letter form the City of Frederick in response to the article. In part is reads:

It has been pointed out by the Volt team and others that the City Water and Sewer Impact Fee’s are a significant up front cost and may very well be an obstacle for smaller and independent businesses like restaurants and laboratories – high water users compared to office and retail. The Volt team has asked for those fees (currently estimated at approximately $205,000) to be reduced or waived. Water and Sewer Impact fees are calculated based on number of fixtures (like sinks, toilets, drains), and by intent are not able to be modified, waived, or reduced by city staff or elected officials. This is to avoid the slippery slope issues related to different users paying different amounts and the related pressure to reduce or waive fees. Such regulations provide confidence in the system and allow the city to borrow the capital through the sale of bonds for multi-million water and sewer projects at very low interest rates.

And ends with:

The City of Frederick is a terrific place to do business as evidenced by the overwhelming success of Volt Restaurant and more than 3,500 other businesses which employ approximately 49,000 people. The City stands ready to make changes to its current system and to provide assistance to the Volt-Carmack Jays project and others. Such assistance requires collaboration by the business community.

I hope the city and the Volt team can work this out. A tenant in that old Carmac Jay’s building would be fantastic.

On a side note, I’ve quoted excerpts from the WaPo article to give you a flavor of what the debate is, please read the whole thing to get the full story.

Also, thanks to the many people who mentioned this article in this week’s Open Thread.

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7 thoughts on “Impact Fee Holding Up North Market Kitchen

  1. This is laughable. The city cannot get out of its own way. The Carmack Jay property was sold by the Dougherty administration to Douglas Development in DC (despite local bidders meeting or exceeding the ending purchase price). The same Dougherty administration imposed these water and sewer “Impact fees” on new commercial development downtown.

    There will be very little new restaurant or other water dependent development in Frederick city. Restaurant, laboratory, medical and other business models do not support large upfront capital requirements for simple access to water and sewer. Raising city revenues by upfront extorsion is not a sustainable recurring revenue model.

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  2. A couple of interesting excerpts from the Gazette article:

    Kershner [city engineer] said the $205,000 in fees is a “best guess” based on minimal information provided by Voltaggio’s team. Without more details, the city cannot determine how much water the business will use.

    — and —

    A meeting with parties involved, including the city, the prospective tenant and property owner, has not happened yet, though the city has requested such a meeting, according to Josh Russin, executive assistant to McClement.

    “We’ve asked a number of times for additional information and have been met with the most part with silence,” Russin said.

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  3. All good info, but under these costs why would anyone pick Frederick city to develop a new restaurant? It’s significantly cheaper everywhere else.

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  4. Why Frederick? Small town charm located within’ an hour of Baltimore and DC Metro areas. An exceptional weekend destination for those areas as well as commuters coming and going from there. Dinner and shopping all in one and it’s not in a strip mall, or mall…it’s in Downtown Frederick.

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  5. Note that this is only a hookup fee. Preexisting restaurant spaces are grandfathered in (wonder what influence that has on lease rates for existing restaurant spaces?). Perversely, if Voltaggio plunks down the $200K and the place goes belly up, the next tenant can open a restaurant without paying the fee.

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  6. More on this from the FNP. Basically the Mayor and the Board are going to create special legislation that “… would require businesses to foot a portion of the fee before receiving a building permit, and then pay the rest over a period of time.” This is a stop gap that should be implemented in the next couple weeks and would allow the Mayor and Board more time to do a “more detailed ordinance rewrite.”

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