City of Rockville Discusses Annexation of Shady Grove Metro Station, Shady Grove Hospital, Properties Along East Gude Drive

The mayor and council of the City of Rockville will discuss the potential annexation of three different areas into the city- Shady Grove Metro Station, Shady Grove Hospital, and properties along E Gude Dr – during the city council meeting on Monday, February 7th.

A possible timeline from introduction of a resolution for annexation to its effective date, is estimated to be about nine to twelve months, depending on the size of the property. Larger properties have additional requirements with respect to public notice, which can extend the time frame by 1-2 months.

Staff requests that the Mayor and Council discuss the potential initiation of proactive annexation of these three areas and provide direction. The Mayor and Council may also wish to consider other areas within the MEL for proactive annexation.

Additional information, per the City of Rockville, below:

Area 1 – WMATA property (Shady Grove Metro Station)
The WMATA property is adjacent to the current city limits and within the City’s adopted MEL (Attachment B). As the WMATA property is tax-exempt, Rockville has the authority to initiate annexation of the WMATA land without consent from the property owner.

Both WMATA and Montgomery County desire high-density development take place on the WMATA site as soon as possible. The county planning staff noted that WMATA anticipates conducting a feasibility study for future development at the Shady Grove Metrorail station. Once an agreement has taken place on the development, and the status of WMATA property changes from tax-exempt to taxable, (which could potentially result if WMATA enters into a leasing option with developers or sells the land for development). When this happens, the window of opportunity for annexing the property without the consent of the property owner will close for the City. Staff therefore recommends the WMATA annexation as one of the Mayor and Council’s top priorities to initiate annexation.

Area 2 – Shady Grove Adventist Hospital
Adventist Health Care’s Shady Grove Adventist Hospital is located at 9901 Medical center Drive (Attachment C). Per State Department of Assessments and Taxation (SDAT) records, the hospital property is tax exempt. Therefore, similar to the WMATA property, Rockville has the authority to initiate annexation of the Shady Grove Adventist Hospital parcel as a tax-exempt entity without consent from the property owner. At present, City staff is not aware of future plans to allow for-profit development on the site. Therefore, at least for the near-term future, the entire parcel is likely to remain tax-exempt.

As seen in Attachment C, Shady Grove Hospital is not currently adjacent to Rockville’s city limits, which the State law requires for annexation to move forward. Two private taxable properties are located between the city limits and the hospital property. The properties are 9804 and 9714 Medical Center Drive, both of which are owned by Alexandria Real Estate Equities, LLC, whose consent would be required for annexation. If representatives of this LLC were not interested, the City would need to obtain consent of the owners of other adjacent property of significantly higher valued property to annex the Alexandria Real Estate Equities properties. State law allows cities to annex without property owner consent provided that there was support of the owners of at least 25% of the assessed valuation of the taxable real property in the area to be annexed.

As an alternative but not desirable approach, the city could gain adjacency to the hospital site, through annexation of necessary portions of the rights-of-way of Shady Grove Road and Medical Center Drive. Both roads are currently controlled by Montgomery County. As a prior example, the City of Gaithersburg annexed the Great Indoors site, which is now CarMax, by annexing parts of Shady Grove Road and I-370 to achieve their adjacency. The City would not need the County’s permission to annex these rights-of ways.

The Shady Gove Adventist Hospital is within the Life Sciences Center and a part of the Montgomery County’s Great Seneca Corridor Master Plan as adopted in 2010. In December 2019, the Montgomery County Council instructed Montgomery Planning to initiate a Minor Master Plan Amendment to the 2010 Great Seneca Science Corridor Master Plan. This Minor Master Plan Amendment will examine the staging requirements of the 2010 Plan and offer potential amendments to the 2010 Plan. County planning staff does not anticipate changes to the Shady Grove Adventist Hospital Site.

Advantages for Rockville of annexation the hospital property include:

1) Rockville having a hospital within its city limits, thereby adding to the attractiveness and prestige of Rockville overall; and 2) potential tax benefits if any portion of the site develops for such for-profit uses as private medical offices or laboratory space that are sometimes associated with hospitals, and therefore becomes taxable.

Concerns regarding annexation include that expansion of general City services into this area. In addition, Rockville it expected to not receive any tax revenues from this annexation.

Staff requests direction from the Mayor and Council on whether to initiate proactive annexation activities regarding this property. Such activities include: 1) reaching out to Adventist Health Care to discuss with their leadership the benefits of being in Rockville and to gauge interest in becoming part of the City of Rockville, and 2) initiating annexation of the rights-of-way and tax-exempt properties.

Area 3 – Properties along East Gude Drive in the RockEast District
The Mayor and Council recently designated the corridor of East Gude Drive as the RockEast District, with the goal of branding the area for creative industries and activities. One of the themes of RockEast is craft beverages. As such, staff was asked to identify and discuss the two properties outside of the city limits, but within the MEL’s Proactive Annexation Area, that house craft beverage companies: Twin Valley Distilleries (1029 E. Gude Drive) and True Respite (400 E. Gude Drive). Their locations can be seen on Attachment D. Both properties are taxable, meaning that the City would need consent of the property owners to annex, unless the properties were part of a larger area of consenting owners.

Both businesses are tenants in their respective buildings. Twin Valley Distilleries leases 3,008 square feet of space in a 79,642-square-foot-building (1029 E. Gude Drive) that is owned by Berkeley Partners located in California. It is immediately adjacent to the city limits, meaning that the City could reach out to the property owners to promote the potential for annexation and consider offering incentives to be a part of the City. If the property owners were interested, annexation would be a straightforward process.

True Respite leases approximately 17,000 square feet in a 56,920-square-foot building that carries the address of 7301 Calhoun Place. It is part of a larger parcel whose address is 400 E. Gude Drive, on which there are three buildings. The owner is listed as Gaithersburg-based EB Rockville, LLC. As shown in Attachment D, 400 E. Gude Drive is not currently adjacent to Rockville’s city limits. Annexing that property would therefore require several properties to be annexed to establish adjacency unless the Mayor and Council would wish the City to pursue annexation of more than a half-mile of E. Gude Drive right-of-way (from either direction) to gain adjacency. While other Maryland municipalities have engaged in this type of “strip” or “lasso” annexation in the past, the Maryland Attorney General’s Office has raised concerns about such annexations.

The existing Montgomery County zoning for the highlighted properties is Industrial Moderate Floating (IMF) 2.5 H -50. The zoning permits a Floor Area Ratio of 2.5, which is the measurement of a building’s floor area in relation to the size of the lot/parcel upon which the building is located. The “H-50” refers to the maximum building height of 50 feet. The IM is a moderately industrial zone that is intended to provide land for industrial activities where major transportation links are not typically necessary, and where noise, dust, vibration, glare, odors, and other adverse environmental impacts are usually minimal.

The advantages of annexing these properties include:

1) the tax revenues that would accrue from current operations and from any future redevelopment; 2) addition of properties to Rockville that have been in the City’s MEL for many years and are already associated with the Rockville community; and 3) the compatibility with and support for the RockEast District that the current business owners would bring.

Challenges or concerns for these sites include:

1) achieving consent of the property owners; 2) that the craft beverage business owners are tenants and may not choose to stay when their leases expire; and 3) in the case of 400 E. Gude Drive, that other properties would need to be annexed to achieve vacancy with the City of Rockville.

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March 1st (Friday) 6pm-7:30pm

March 2nd (Saturday) 6pm-7:30pm

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