.

Commercial Development at Dulles Airport May Impede Herndon’s Metro Station Area Plan

The Metropolitan Washington Airport Authority’s plan to commercially develop Dulles Airport property may lure businesses away from Herndon.

On January 16, 2013, the Metropolitan Washington Airport Authority’s (“MWAA”) Board of Directors passed a resolution proposing to amend its lease with the US Department of Transportation to allow commercial development on Dulles Airport property. (See resolution attached to article.)  At the present time, MWAA is only allowed to use the 3,000 acres surrounding the airport for aviation-related purposes.  Because this land is federally owned, it is exempt from the payment of federal and state income taxes and county real estate and business taxes, although apparently MWAA does make some type of payments in lieu of taxes on developed property.  The Town of Herndon would have a difficult time attracting new businesses here when a business owner could simply travel a couple of miles up the road to undeveloped, essentially tax-free property. 

A little history is in order.

MWAA is an independent airport authority, created by the Commonwealth of Virginia and the District of Columbia with the consent of the United States Congress to oversee the management, operations, and capital development of the Washington D.C. area’s two major airports: Ronald Reagan Washington National Airport and Washington Dulles International Airport.  On June 7, 1987, Dulles Airport was transferred to MWAA under a 50‑year lease authorized by the U.S. Congress in the Metropolitan Washington Airports Act of 1986 (“Airport Act”).  The Airport Act originally stated that “[d]uring the period of the lease, the real property constituting the Metropolitan Washington Airports shall be used only for airport purposes.”  49 USC §49104(a)(2)(A) (Excerpt of Airport Act attached).

Under the FAA Modernization and Reform Act of 2012, the definition of “Aviation Purposes” was amended to include use “for a business or activity not inconsistent with the needs of aviation that has been approved by the Secretary [of Transportation].”  This language is mirrored in the proposed lease amendment.  It’s not clear to me if the lease amendment would itself permit the commercial development proposed by MWAA or if the lease amendment would merely permit MWAA to submit commercial development plans in the future for approval.

Let’s examine what would happen if the lease amendment is approved by the US Secretary of Transportation and the proposed commercial development plans are permitted.

MWAA is presently looking at two options.  One option would be to allow private development on the north side of the future Route 606 Metrorail station in Loudoun County. Another potential development area is what MWAA calls the “western lands” — about 430 acres along Route 606 on the western edge of the airport property.  MWAA President and CEO Jack Potter has said he envisions mixed-use communities including residential and office buildings with ground-floor retail space, as are planned around most of the other Silver Line stations. (See attached Fairfax Times article.)  A convention center is also being considered.  Please note the lease amendment allowing for commercial development isn’t limited to these two areas but applies to all 3,000 acres leased by MWAA.   

MWAA’s proposed mixed-use development is precisely the type of development the Town of Herndon envisioned when it passed its Metro Station Area Plan on February 28, 2012 allowing for development of 38 acres of land adjacent to the new Herndon Metro stop.  Of course, there are existing buildings on that 38 acres.  Any new business locating in Herndon would have to factor in the cost of demolishment along with new construction.  A business owner would find it much easier to locate a few miles up the road to pristine, essentially tax-free property.  We are at a severe competitive disadvantage. 

What to do?  The lease amendment is presently sitting unsigned on the desk of Ray LaHood, the US Secretary of Transportation.  However, LaHood is leaving office soon.  Who knows whether he will sign the lease amendment before he leaves office or leave the matter to his successor.  In any event, I propose that either Herndon residents, or the Town of Herndon in an official capacity, contact the Secretary to ask that the amendment not be signed until all concerned parties weigh in.  The Reston Citizens Association has already done this. (See attached letter.) 

I personally don’t know enough about all the issues here to say today what the final answer is on this.  I do know that we at least need some time to consider how MWAA’s proposal would impact our Town’s Metro Station Area Plan.  Secretary LaHood in the past had always considered the opinions of all stakeholders before coming to any decisions.  I hope either he, or his successor, does so now.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Dave Webster March 01, 2013 at 01:23 PM
Joe, First of all the Virginia code would have to be amended by the General Assembly. Va. Code Sec. 5.1-172. Exemption from Taxation states that MWAA "shall not be required to pay any taxes or assessments upon the airports or any property acquired or used by the Authority under the provisions of this act or upon the income therefrom." With regard to Business Professional and Occupational License taxes, as well as zoning regulation, I don't think those would apply to MWAA absent the approval of the Federal government which actually owns the property and is just leasing it to MWAA. I have been told several times now that MWAA would have to pay some type of payment in lieu of Fairfax and Loudoun County property taxes on leasehold improvements but no one has shown me any code sections or any other proof that MWAA is subject to county taxes.
joe brewer March 01, 2013 at 02:06 PM
Thanks Dave, I'll read the code. If I can find anything about the amending of it I will e-mail Wolf, Kaine and Warner. Fat chance i know but got to keep trying. Wouldn't it be sweet if Virginia could buy the land from the feds then the BOS could start telling Jack Potter to take it or leave it like he did with the Silver Line negoations!
Dave Webster March 01, 2013 at 02:17 PM
Joe, Thanks. On the state level, any action has to come from Governor McDonnell and our representatives in the General Assembly. On the Federal level, there is one additional thing that can be done which is to suggest Messrs. Wolf, Kaine and Warner that regulations be promulgated to implement the new provisions of FAA Modernization and Reform Act of 2012. As noted above, the definition of “Airport Purposes” was amended to include use “for a business or activity not inconsistent with the needs of aviation that has been approved by the Secretary [of Transportation].” No Federal act should give the Secretary of Transportation such wide lattitude without some type of guidelines as to what is or is not "inconsistent with the needs of aviation." That language is ripe for abuse if the Secretary is essentially free to interpret it any way he or she wants.
Bob Bruhns March 01, 2013 at 03:03 PM
Certainly our government and its managing agencies such as MWAA should not be in the commercial real estate business. The land should be returned fairly to private ownership. I think that any Airport property that is contemplated for use as commercial land, should be ceded to its original owners, their successors and heirs, if such can be found, as private land in Loudoun or Fairfax County as appropriate according to its exact location, at a per-acre price equivalent to the average $500 per acre that was paid when it was taken around 1960, allowing for the increase in the value of unimproved land, with appropriate allowance for improvements such as homes, barns, etc, that its owners might have had on the land when it was taken, all of this at present rates equivalent to its zoning and use when it as taken around 1960. If such original owners, successors and heirs can not be found, or do not wish to repurchase the land, then the property can be auctioned at rates appropriate to their commercial value today, as private land in Loudoun or Fairfax County as appropriate according to its exact location. The ceded land would then be governed and taxed according to the laws of Loudoun and Fairfax Counties, with any additional regulations appropriate to its proximity to an airport and its runways, etc.
Dave Webster March 01, 2013 at 04:25 PM
Clearly something must be done. In a time of sequestration cuts decimating businesses across Northern Virginia we can't have a tax-exempt quasi-federal entity stealing from Fairfax and Loudoun County what little commercial business remains.
joe brewer March 01, 2013 at 04:28 PM
Dave, Bob I hope you do not mind if I paraphrase part of your comments and send them to the Gov, Senator Kaine and Warner.
Dave Webster March 01, 2013 at 04:36 PM
I don't mind.
Bob Bruhns March 02, 2013 at 11:41 AM
Fine with me. I hope they do the right thing. But I don't think they will... I think you had better put some serious political pressure on these guys, or they'll flim-flam you in a hot second.. Kaine is the one who gave MWAA the Dulles Toll Road, and helped get this disaster started in the first place, and Warner was brought in to support the Rail project back when it almost got scuttled. Governor McDonnell made some noises, but in the end he said NOTHING about the excessive prices that are very visible in this rail project, particularly the 2.4X price estimate for the Rt 28 station, and the 2X price estimate for the five Phase 2 parking garages. In my opinion, all three of these guys will be perfectly happy with MWAA ripping this region off, as long as it benefits them and their parties. And I think MWAA knows this, and has a trick 'solution' planned. And although that 'solution' will fool enough people long enough to get approved, ultimately it won't make Northern Virginia very happy at all.
joe brewer March 02, 2013 at 12:05 PM
Thanks. That's a lot of property sitting vacant and not providing tax revenue. I did send letters and received the usual canned response but will endeaver to perservere. Where is Minchew and his eminent domain buddies or is that just for the so-called little people that he breaks out eminent domain? Bob you seem to be good with numbers so please correct me if I make a mistake here. Say there is 550 acres at the airport at a value of 100k per acre equals 1,235 dollars a year per acre, times 550 acres that's 6792,50 dollars per year per acre, over 50 years that's 33,962,500 dollars laying fallow because it's federal property leased by the MWAA.
Bob Bruhns March 03, 2013 at 03:06 PM
People should BEWARE. Businesses and developers are going to be playing every game to push for gold-rush level development on the airport land under MWAA. Money doesn't talk - it swears. Loudoun County bought a 101.3-acre parcel in Ashburn for $13.5 million in 2004, and sold 75.4 acres of it in 2012 for $20 million. $20 million for 75.4 acres is $265,252 an acre for unimproved land. So unimproved land around there might sell for about $265,000 per acre. If such land is developed and close to an active Metrorail station, its value will be much higher, and of course tax assessment will be higher. I saw a tax estimate for this property of $200,000 a year just as vacant land - for 75.4 acres, that's about $2,652 tax per acre every year, for unimproved land - and I saw a tax estimate for this property of $16 million a year (for 75.4 acres, that's $212,202 tax per acre every year) once it is in operation. I think that much of the higher tax figure would be state and federal tax, so I am not certain how much of that figure the Counties will receive, and I also read that this particular land was gerrymandered out of the rail tax district at the last minute. Still, this example shows how much money Loudoun and Fairfax Counties stand to lose if such properties are instead leased on federal land by MWAA, in unfair competitive conditions.
Dave Webster March 03, 2013 at 06:00 PM
Joe, This week I am sending letters to Governor McDonnell, Senators Kaine and Warner and Congressmen Wolf and Connolly. If MWAA wants to be a commercial developer, it should be subject to the same regulations and laws that other commercial developers are, i.e. no unfair advantages! It's too bad the Loudoun County and Fairfax County Board of Supervisors are asleep at the switch on this issue. I can only presume that the various members of these boards don't have any business experience and don't realize how having tax-exempt status and being exempt from zoning regulations would confer an advantage on any entity wanting to commercially develop land.
joe brewer March 03, 2013 at 10:07 PM
Unless you know that they have no business experience I would leave that part out Dave. Helping with the facts and the reminder of said is the way to go. I think the people are the ones who are asleep or do not have any business experience otherwise that be raising their voice and sending e-mails. I did get a reply from senator but it was his canned talking points mostly about the sequester. Good Luck!
Bob Bruhns March 04, 2013 at 07:03 PM
Wow!!! OK, I found this on the RCA Reston 20/20 website. The Dulles Corridor Committee document appears there, and below it there is an addendum from this document that shows detailed plans from MWAA PEOPLE NEED TO LOOK AT THIS. http://reston2020.blogspot.com/2011/02/dulles-corridor-air-rights-analysis-and.html ...
Bob Bruhns March 05, 2013 at 03:01 AM
Politicians just want to get their hands on this money for their parties. They may push MWAA out of the way, but the money will still be stolen from the Counties if it benefits the parties. Loudoun County will suffer the worst - but its so-called 'leaders' will do just fine, for some mysterious reason. The news media will of course talk about jobs. Any questions about double prices will of course be met with the usual 'whistle and look the other way' response that we always see. Watch for gold-rush overdevelopment, followed by lackluster business, followed by our so-called 'leaders' saying "Ohhhh, ain't it awful! Who could have FORESEEN this?" - and the news media will just be reporting the Metro breakdowns.
joe brewer March 05, 2013 at 07:10 PM
That's not entertainment reading there Bob. Carte Blanche is what it could be, scary. Dave if you get any replys please lets us know here or on the LTM or Leesburg today?
joe brewer April 03, 2013 at 10:43 PM
Mr. Webster I did get a call from Amanda at Tim Kaines office today. She said they were looking into the airport competition involving private enterprise.
Dave Webster April 04, 2013 at 03:45 PM
Joe, Great job! I only have received form responses. Certainly no calls. Thanks for the update.
joe brewer April 04, 2013 at 04:45 PM
202-224-0048 is Amandas number. Metro Garage Proposals Head for Hearing on the Leesburg today has this at the bottom of the piece- Federal legislation has granted MWAA the ability to build non-aviation uses on its property, by teaming with a developer to lease the property for taxable development. That puts a different spin on the issue. Would it be that the taxes are paid to the localities or the Federal government?
Dave Webster April 04, 2013 at 05:02 PM
The statement in the article is misleading. The businesses themselves would pay the normal income and business license taxes but MWAA itself is still tax exempt under state and Federal law. Everything I said in my Connection article remains true: "MWAA is tax-exempt under both Virginia and federal law and thus can unfairly compete with private landowners. MWAA does not pay state or federal income taxes, county business license taxes, or county real estate taxes. Any businesses that locate on the Dulles Airport property won’t be part of a special Phase II tax district and won’t pay a dime toward defraying the cost of building the Metro Silver Line. As if that isn’t enough, MWAA is not subject to county zoning laws and has no incentive to offer “proffers” which are voluntary agreements by a landowner to go above and beyond what zoning laws require, e.g. planting additional trees in a development." http://www.connectionnewspapers.com/news/2013/mar/26/letterairport-authority-gets-business/
joe brewer May 19, 2013 at 12:01 PM
Sean Connaughton from the Govenors office sent me a reply that it is a federal issue and that there is nothing that the state can do about the taxes on the property.
Dave Webster May 19, 2013 at 01:07 PM
He is wrong on two fronts. Whether he knows he is wrong is a different story. First, Virginia granted MWAA exemption from STATE income taxes. We can take that exemption away now that MWAA has decided to become a commercial venture rather than merely running an airport. Two, Virginia could attach conditions to the MWAA lease amendment if we wanted to. Virginia governors must sign, and have signed, every amendment to MWAA's lease with the Federal government.
joe brewer May 19, 2013 at 02:37 PM
Letter content Governor McDonnell asked that I respond on his behalf. Washington Dulles international Airport was designed and property for it was complied in the late 50's by the federal government. Therefore, it falls under the purview of the federal government.As such, stipulations regarding eminent domain, airport grant-in-aid assurances, land leases, and similar legal instruments dating back to the original compilation of property are governed by federal law and subordinate rules and regulations. Consequently, although your premise may have merit, we are at this point not able to affect and change that would alter an outcome pertaining to your opinion on possible property use at this facility Sean CC Burdette
Dave Webster May 19, 2013 at 03:15 PM
Thanks. I will send my own letter to Sean Connaughton informing him of his erroneous analysis and see what he says.
Dave Webster May 19, 2013 at 03:44 PM
Let's see what he says. Mr. Connaughton, An acquaintance of mine forwarded a response from you to the effect that Virginia can do nothing about the Metropolitan Washington Airport Authority's intended use of Dulles Airport for commercial use. As you know, the Federal government authorized the use of Dulles Airport for commercial use in February of 2012. This Federal act, however, merely allowed for MWAA's lease to be amended. The original MWAA lease and all lease amendments must be, and have been, signed by Virginia governors. Please take a look at the original MWAA lease and subsequent three lease amendments, all signed by Virginia governors. The source for Virginia's rights with regard to the MWAA lease comes from Va. Code § 5.1-154. Acquisition of airports; approval. This code section states that the "Metropolitan Washington Airports Authority created by this act is hereby authorized . . . to acquire from the United States of America, by lease or otherwise, the two airports known as Ronald Reagan Washington National Airport and Washington Dulles International Airport . . . , but only with the approval of the Governor of Virginia." Therefore, Virginia has a right to object to the proposed commercial use as a constituent member of MWAA. In other words, we don't have to go along with the lease amendment or could attach conditions to it.
Dave Webster May 19, 2013 at 03:45 PM
Also please note that Virginia independently granted a state income tax exemption to MWAA pursuant to Va. Code § 5.1-172. Virginia can take away this exemption from state income tax now that MWAA has decided to become a for-profit commercial entity rather than a mere steward of Dulles Airport. I look forward to your response.
joe brewer May 19, 2013 at 04:24 PM
Good Deal, maybe a carbon copy to Randall Burdette---director@doav.virginia.gov
Dave Webster May 30, 2013 at 04:55 PM
Joe, I haven't received any response yet.
Bob Bruhns June 09, 2013 at 09:35 PM
If Leesburg Today was correct in that April 4, 2013 report 'Metro Garage Proposals Head for Hearing' saying that federal legislation has granted MWAA the ability to build non-aviation uses on its property, by teaming with a developer to lease the property for taxable development, then I'd like to know how and to whom the taxation would be assigned. Would the land be treated as though it is taxable by the state and county that surrounds it? And how would MWAA benefit from that? I think I smell another lie - much like the story about how the lack of any solid Tifia loan agreement isn't important, even though we have already contracted for part of Phase 2 - because no big Phase 2 construction will happen very soon. We are just being strung along, I think, until it is too late. Metro Garage Proposals Head For Hearing Leesburg Today, April 4, 2013 http://www.leesburgtoday.com/news/metro-garage-proposals-head-for-hearing/article_44d08a80-9d31-11e2-9fba-001a4bcf887a.html
Dave Webster June 11, 2013 at 12:52 PM
I had commented on this article previously Bob. To wit: This statement in the article is misleading: "Federal legislation has granted MWAA the ability to build non-aviation uses on its property, by teaming with a developer to lease the property for taxable development." The businesses themselves would pay the normal income and business license taxes but MWAA itself is still tax exempt under state and Federal law. MWAA is tax-exempt under both Virginia and federal law and thus can unfairly compete with private landowners. MWAA does not pay state or federal income taxes, county business license taxes, or county real estate taxes. Any businesses that locate on the Dulles Airport property won’t be part of a special Phase II tax district and won’t pay a dime toward defraying the cost of building the Metro Silver Line. As if that isn’t enough, MWAA is not subject to county zoning laws and has no incentive to offer “proffers” which are voluntary agreements by a landowner to go above and beyond what zoning laws require, e.g. planting additional trees in a development.
Bob Bruhns June 11, 2013 at 03:11 PM
What a mess.

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