Subject
title
Annexation Petition ANX2023-00147 - Conduct a work session on the Planning Commission-approved preliminary annexation plan and receive a presentation on the fiscal impacts of annexation of the Shady Grove Metro Station and CSX Transportation Properties into the City.
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Department
CPDS - Management & Support
Recommendation
Review the Planning Commission-approved preliminary annexation plan; conduct a work session; and provide direction on proposed annexation options.
Change in Law or Policy
The proposal is a city-initiated annexation that will enlarge the corporate boundary by approximately 107.9 acres of land. If approved, the annexation area would be incorporated within the city’s corporate limits and be subject to the Charter, laws, ordinances, and regulations of the City of Rockville. Staff is recommending Mixed-Use Transit District (MXTD) zoning for the property upon annexation.
Discussion
This section provides a general overview of the Shady Grove annexation process with a brief background on the comprehensive plan, local laws that govern annexation, the annexation plan (See Attachment 1 - Preliminary Annexation Plan), and a summary of discussions with WMATA, the property owner. The Fiscal Impact Analysis report, as prepared by city-contracted consultants, will also be presented (See Attachment 2 - Rockville Fiscal Impact Analysis).
This section also presents three options for the Mayor and Council to consider while moving forward with the proposed annexation, with the associated advantages and disadvantages of each option.
Background
Rockville 2040 Comprehensive Plan
Rockville’s 2040 Comprehensive Plan was adopted in Aug 2021. The Municipal Growth Element (MGE) is an individual element of the comprehensive plan. Per State law, the MGE should identify future growth areas outside the existing corporate limits and define the limits of municipal growth, also called the maximum expansion limits (MEL).
The MGE included an annexation strategy to identify areas to proactively annex in the near term and explore if the potential annexation is likely to be beneficial to the city. At its February 7, 2021, meeting, the Mayor and Council directed staff to prepare the information needed to initiate annexation of the WMATA property at the Shady Grove Metro Station.
Maryland State Law
Annexation is defined as the legal process by which land is added to the corporate city limits. Under State Law, Rockville may annex contiguous and adjoining unincorporated properties that are within the City’s Maximum Expansion Limits (MEL), as adopted through the Municipal Growth Element of the Comprehensive Plan.
Maryland law does not allow cities to annex property without some of the property owners consenting to do so. Although not applicable to the city’s annexation petition, the process is outlined in Title 4, Subtitle 4 of the Local Government Article of the Annotated Code of Maryland (LG Article). An annexation can be initiated by a petition signed by at least 25% of the registered voters who are residents in the area to be annexed and the owners of at least 25% of the assessed valuation of the real property in the area to be annexed. Alternatively, a municipality’s legislative body may initiate an annexation. To do so, State law requires that the municipality’s legislative body obtain consent from: (1) at least 25% of the registered voters who are residents in the area to be annexed; and (2) the owners of at least 25% of the assessed valuation of the real property in the area to be annexed. A public hearing is required as part of the annexation process.
With the city’s proposed petition, annexation may occur without the owner’s consent based upon an important exception to the above-mentioned requirements related to tax-exempt properties. The Maryland Court of Appeals (now the Maryland Supreme Court) has ruled that a municipal corporation’s legislative body may introduce a resolution to annex tax-exempt land without obtaining the consent of the owners of such land. Public records show that the WMATA property as proposed for annexation has a tax-exempt status. There are no registered resident voters within the property. Therefore, per the Maryland Court of Appeals ruling, the Mayor and Council are not required to secure the consent of owners of the WMATA properties and initiate the annexation of such properties.
In addition to the WMATA property, the proposed annexation includes a portion of land owned by CSX Transportation, Inc. between the east and west sides of the WMATA property that serves as the railroad right-of-way. Under Section 6-103 of the Maryland Tax Property Article, the operating property of a railroad is subject to property tax.
Since the CSX property is subject to a property tax and does not have a tax-exempt status, owner consent is required to introduce the annexation resolution. City staff reached out to the appropriate CSX staff and obtained a consent letter that states that CSX will not object to the City of Rockville’s proposed annexation. The letter, (See Attachment 3 -Letter from CSX consenting to Rockville's Annexation), meets the State law requirement that the municipality’s legislative body obtain consent from the owners of at least 25% of the assessed valuation of the real property in the area to be annexed. Since the CSX property under consideration is a railroad right-of-way, there are no residents in the area to be annexed, whose consent may be required for an annexation per the State Law.
Both the WMATA and the CSX properties are within the City’s adopted MEL and meet the contiguity and adjacency requirements.
Under Section 4-403 of the State Local Government Article, the first step of any annexation process is for the Mayor and Council to introduce an annexation with a resolution that describes the property to be annexed. The Mayor and Council introduced the annexation at their meeting on October 23, 2023, thus initiating the process. Following this action, staff developed a preliminary annexation plan and recently received approval from the Planning Commission after the required public hearing.
Annexation Plan
The Land Use Article also requires that the municipality prepare and adopt an annexation plan for the area to be annexed. In accordance with the provisions of City Code § 25.02.04, the Planning Commission is required to study the area proposed for annexation and prepare an annexation plan. The purpose of the annexation plan is for the municipality that is proposing to annex an area to affirm that the annexation is consistent with the municipal growth element of the municipality’s comprehensive plan. The city code also requires that the Planning Commission hold a public hearing on a draft of the annexation plan. The Planning Commission reviewed the preliminary annexation plan at its meeting on February 26, 2025, and conducted a public hearing on the preliminary annexation plan on April 23, 2025.
The Planning Commission received the following testimonies.
1) One related to pedestrian safety at the WMATA property. The testimony noted that during icy and snowy events in winter, the parking lot is not adequately treated.
– The staff’s recommended response to the testimony is that WMATA, as the property owner, will continue to be responsible for maintaining roads within its property and providing snow removal and other related services. The city can advocate more with WMATA to ensure that snow removal services, which are crucial for safety and accessibility, are provided in a timely manner so that they do not pose significant safety hazards to the public.
2) The Planning Commission received testimony from Mr. Steven VanGrack, a city resident, in support of the annexation. Both testimonies are included (see Attachment 4 - Testimony received by the Planning Commission).
3) At the public hearing, the Planning Commission received oral testimony from Mr. John Becker, a city resident supporting the annexation.
At its meeting on April 23, 2025, the Planning Commission approved the preliminary annexation plan (See Attachment 1 - Preliminary Annexation Plan), with the following findings:
• The proposed annexation is consistent with the City’s Municipal Growth Element.
• The proposed Mixed-Use Transit District (MXTD) designation for the proposed annexation area is appropriate, and
• The City has the capacity to provide services.
Prior to the approval of the plan, several of the Commission members expressed concerns about the financial impact of funding the six police officers to service this area.
The Local Government Article, Section 4-415 of the Annotated Code of Maryland requires the city to adopt the annexation plan in advance of completing the actual annexation. Mayor and Council are scheduled to adopt the annexation plan, as is, or with changes based on the discussion at the work session at their meeting on June 9, 2025.
Outreach with WMATA (property owner)
Staff had communicated the City’s interest in annexing the Shady Grove WMATA property with Steven Segerlin, Director of Real Estate and Station Area Planning at WMATA several times in the past specifically at a staff meeting on April 5, 2023. Staff also notified Mr. Segerlin of the date when the Mayor and Council will be introducing the annexation. Mr. Segerlin noted that WMATA was aware of the City’s intent regarding the annexation. Per its government relations policy, WMATA would not provide testimony on the annexation either way. Steven Segerlin is no longer with WMATA, and staff has since been communicating on the topic with Liz Price, Vice President of the Office of Real Estate and Development and WMATA.
In 2022, WMATA published a 10-year Strategic Plan for Joint Development that prioritizes stations based on their: (i) Market Readiness, (ii) Infrastructure Costs, and (iii) Development Potential. In that document, Shady Grove Metro Station is currently placed in Group 4 in WMATA’s strategic plan for joint development.
City staff corresponded with Ms. Price and her team (December 17, 2024, and March 5, 2025) with questions related to the property. City staff asked if there were any updates to the Strategic Plan and/or changes to the grouping. Ms. Price responded by noting that the Office of Real Estate & Development is in the process of drafting a Strategic Plan status update. As part of this process, some Metro stations may move up or down a category based on a number of factors that include market readiness, policy guidelines, and available resources. Currently, Metro does not plan to adjust Shady Grove’s category. However, like with other stations in the City of Rockville (Twinbrook and Rockville), strong support of the local jurisdiction is instrumental in addressing feasibility challenges and advancing joint development planning and future development solicitations.
Staff asked if WMATA was currently in the process of conducting studies to determine the potential for development at Shady Grove. In response, Ms. Price told us that Metro conducted a Joint Development Feasibility Study for Shady Grove Metro Station in 2021. The purpose of the study was to evaluate market readiness, development potential, transit needs, environmental conditions, and site layouts. The study ultimately concluded that the site is not currently feasible to develop given the high cost of replacement transit facilities and other infrastructure. There are no imminent further studies planned at this station.
Staff also asked if WMATA had received any interest for potential development either on the west or the east side of the Shady Grove Metro Station. WMATA staff responded by noting that in Summer 2024, a private entity expressed interest in possibly developing the east side of the Metro station for a cricket stadium combined with a mixed-use development. The stadium would require the demolition of an existing Metro garage and the building of a new garage which were cost-prohibitive. Metro is also required to competitively bid for most land dispositions, with very few exceptions, which were not met by the cricket stadium proposal.
Staff will continue to coordinate with WMATA staff as this proposed annexation process moves forward.
As discussed above, annexing a large area for potential high-density development in the future could be beneficial to the city. Also, the number of calls for police services to the Shady Grove Metro properties has a significant cost impact on the city. Staff decided to perform a fiscal impact analysis to evaluate these potential revenues and costs. The City contracted with a consulting firm, NewGen Strategies and Solutions, to develop a model that estimates the expenses and revenues to a municipality associated with this proposed annexation (See Attachment 2 - Rockville Fiscal Impact Analysis).
The analysis did perform an assessment on whether the revenues generated by the annexation are sufficient to cover the direct cost of additional police services required for the area. As a result of no near-term taxable development, the revenues generated under current development assumptions would not be sufficient to fully offset these expenses, estimated at an average of nearly $1.3 million per year over the 25-year analysis period.
Options for Consideration
The Mayor and Council have three options available regarding this annexation petition:
1. Annex the entire annexation area, both the east and the west side, as originally proposed.
2. Annex only the west side of the proposed annexation area.
3. Delay annexation for some time in the future.
These options have potential advantages and disadvantages.
Option 1 - Annex the entire annexation area, both the east and west sides.
This option as originally proposed and described in detail in the annexation plan (See Attachment 1 - Preliminary Annexation Plan) includes the entire WMATA property with the Shady Grove Metro Station and CSX land.
Potential advantages of Option 1 annexation include:
1. It provides an opportunity for the city to develop any future mixed-use development consistent with the City’s Comprehensive Plan vision and principles, including additional affordable housing.
2. It provides an opportunity to improve pedestrian access and safety at the station. Currently, the County and City both own streets in and around the WMATA properties. The fragmented ownership often creates conflicts and makes it difficult for the City to enforce its regulations, since the road code, adequacy, and development standards differ from the County and the City.
3. Any tax revenue that will be generated by future new development will add to the city’s tax base.
4. Adjacent properties to the Shady Grove Metro Station located in the County, are currently developed with low-density single-use development and could benefit from future redevelopment. Once the WMATA annexation is complete, the adjacent property owners can be encouraged to annex and incrementally redevelop within the City, resulting in a new mixed-use development and an improved road and pedestrian circulation, and improving the City’s tax base.
5. There are non-measurable advantages to consider as well. Annexation of the WMATA Shady Grove Metro station property will significantly improve Rockville’s branding for economic development and enhance Rockville’s prestige as being the only municipality with three metro stations (Twinbrook, Rockville, and Shady Grove) within the City limits on WMATA’s red line.
Potential disadvantages of Option 1 annexation include:
1. Added cost to the City to provide services to the property, including an additional 6.0 FTE police officers to provide public safety services, once annexed.
2. Development will not take place in the near term. No revenue will be generated since the WMATA properties are in the tax-exempt category. As noted earlier, the property is placed under Group 4, the lowest priority, under WMATA’s strategic plan for joint development.
3. An existing stream bisects the property and presents environmental challenges on the east side.
4. There are two parking garages on the east side, and the relocation of the required parking spaces or the demolition of garages potentially makes redevelopment prohibitive at this point.
5. Potential development restrictions related to the water mains on the east side exist. The concerns are discussed in the preliminary annexation plan (See Attachment 1 - Preliminary Annexation Plan p, 10-12).
Option 2 - Annex only the west side of the property
With Option 2, only the west side of the proposed annexation area which includes the WMATA property and the CSX land, as shown in the map below would be annexed.
Figure 1- Option 2 for annexation consideration
If the Mayor and Council choose to move forward with Option 2, the annexation of the partial area on the west side, the advantages would be:
1. The west side primarily comprises a surface lot and approximately 17 acres with comparatively lesser constraints to development. The remainder of the 63 acres of land on the west side, which is a part of the proposed annexation area, comprises of the WMATA Shady Grove Rail Yard located near the train station and is used to perform servicing and inspection functions for the metro cars that will continue in the future.
2. New transportation facilities that are proposed on the west side include a new BRT station that will be funded by the County (no cost to the city).
3. Because the east side metro property will become adjacent and contiguous to Rockville with the annexation as presented with Option 2, the city can move forward with the annexation at the right time in partnership with WMATA and/or when a developer is identified.
4. The annexation will still bring in the main Shady Grove Station for the city to improve its branding image by having three metro stations within its boundaries.
5. After Rockville’s annexation with Option 2, the City of Gaithersburg will not be adjacent or contiguous and will not be capable of annexing the Shady Grove WMATA property in the future.
6. The WMATA Shady Grove Metro properties are currently not included in the City of Gaithersburg’s maximum expansion limits in the Municipal Growth Element, as adopted in April 2009.
The disadvantages of Option 2 include:
1. With this option, the police chief notes that there will be an additional need for 4 officers for the initial annexation in lieu of the original 6 officers as was noted for Option 1. Although this is less costly than Option1, there is still the added cost of 4 police officers. The police chief will, post annexation, evaluate and assess the need for additional officers over the following 3 years.
2. Development is not expected to take place in the near term. No revenue will be generated upon annexation since the WMATA properties are in the tax-exempt category. As noted earlier, the property has been placed in Group 4, the lowest priority, under WMATA’s strategic plan for joint development.
Option 3 - Delaying Annexation
State Law does not mandate that an annexation be completed within a certain timeframe. The city could potentially hold off on moving forward with the annexation process after the work session on May 12. Since the initial steps of the Mayor and Council introducing the annexation, the Planning Commission holding a public hearing and approving the annexation plan are already concluded, the Mayor and Council can reconvene at a later time to schedule the review and adoption of the annexation plan and continue with the required next steps to complete the annexation (as outlined in the proposed schedule) at a later date.
If the Mayor and Council chose to delay annexation, the potential advantages would be:
1. Option 3 provides an opportunity for the city to work with a developer and discuss incentives. The zoning ordinance rewrite (ZOR) process is currently underway. For MXTD zones, the proposed heights for the Mayor and Council considerations are 235’ by right with a 100’ bonus for the provision of additional affordable housing. The heights as proposed are more than what is permissible in the County. The ZOR also proposes to eliminate parking minimums within ½ mile of metro stations and ¼ mile of BRT stations, consistent with Montgomery County. Delaying the annexation provides time for the increased development potential to be enacted by the city.
2. The areas could still most likely be annexed in the future when development is more likely to happen.
3. Since much of the required work has already been completed, the city could expedite the annexation in the future.
4. Near-term costs to serve the property are delayed.
5. The WMATA Shady Grove Metro properties are not currently included in the City of Gaithersburg’s maximum expansion limits in the Municipal Growth Element, as adopted in April 2009. Therefore, Gaithersburg would be unable to annex the Metro properties until their comprehensive plan is amended which typically takes 6 months. In addition, Gaithersburg is required to notify Rockville if they are amending their plan. Due to this notification requirement, the city should have ample time to annex the station in advance of Gaithersburg, since Rockville has already initiated the process of annexation.
The potential disadvantages of this option, delaying the annexation, include:
1. It may limit our ability to work with WMATA to attract development to the site as part of Rockville.
2. WMATA may choose to work with the County and a developer as a part of its joint development process. If not annexed prior to the developer obtaining ownership interest, the property would no longer be tax-exempt, and the City would not be able to annex the property without owner consent.
3. Rockville may lose out on the opportunity of annexing into the city if Gaithersburg decides to annex it in the future prior to our annexation.
4. The CSX representatives may withdraw their willingness to annex into the city, and Rockville would not meet the adjacency requirements, which could prevent the city from annexing the east portion of the WMATA property.
5. Montgomery County may still be more attractive for a developer since it offers tax abatement for new qualified high-rise development for a project constructed on property leased from WMATA. The provision exempts 100 percent of the real property tax that would otherwise be due and allows a new development on a metro station to retain that property tax exemption for 15 years (The law does not apply to metro stations within the city limits).
Since the City costs and related fiscal impacts with the addition of 6 additional police officers are substantial, staff is concerned with moving forward with Option 1 at this time. With Option 2, costs associated with 4 police officers are still significant. The Mayor and Council could choose Option 3 - delaying the annexation until a time when a developer is identified who is willing to work with WMATA and the City to invest in a project to redevelop the property.
WMATA process for Joint Development provides city staff time to coordinate with WMATA. Per the process, if a project is feasible, WMATA staff will seek authorization from the WMATA Board of Directors to hold a Compact Public Hearing and issue a Joint Development Solicitation. Once a developer is selected, a Joint Development Agreement is negotiated that outlines the terms and conditions of the future sale or lease of the project. The Joint Development Agreement must be approved by the WMATA Board and Federal Transit Administration (FTA). Per FTA and WMATA Board policies, Metro is required to have competitive solicitations for most joint development opportunities. WMATA staff did note that unsolicited proposals are considered in some circumstances. In summary, city staff would need to actively engage with WMATA staff, participate in WMATA public meetings, and follow up with published Strategic Plans and other documents to remain informed of any new planning initiatives at this location that might potentially result in a future sale or a lease. During the WMATA process, as noted earlier, if the tax-exempt status of the WMATA property changes, the city will be unable to annex the property without owner consent.
Mayor and Council History
The Mayor and Council introduced the annexation on October 23, 2023, by introducing the annexation resolution in accordance with the Maryland Local Government Article § 4-404 (See Attachment 5 - Resolution to introduce the annexation). The Mayor and Council also approved a resolution that provides specifics of time and place for the Mayor and Council public hearing as mandated by the State Law and the City Code (See Attachment 6 - Resolution to enlarge city boundaries). Both resolutions will need to be revised with the current schedule and included for approval at the June 9 meeting.
Public Notification and Engagement
For the Planning Commission public hearing, the Zoning Ordinance requires that the public hearing be advertised in a newspaper of general publication at least fifteen days before the Public Hearing, and that written notice be mailed in accordance with the provisions of Section 25.05.03.
The Planning Commission Public Hearing notice was originally published in the Washington Post newspaper on March 6, 2025, for the March 23rd public hearing, and then subsequently published on April 3, 2025, for the April 23 public hearing. Consistent with Article 5, Section 25.05.03 provisions staff provided notification by mail and email to surrounding jurisdictions and other governmental agencies, including the Montgomery County Council, Montgomery County Planning Board, Montgomery County Public Schools, the City of Gaithersburg, and Maryland Department of Planning. Representatives of property owners (WMATA and CSX, Inc.) were also notified. Additionally, staff notified the adjacent property owners of the annexation. This notification included information on the preliminary annexation plan, the time and dates of the public hearing, and the methods by which written testimony may be submitted.
Additional notifications were sent through the city’s Rockville Reports newsletter, Development Watch e-newsletter, and city-maintained email distribution lists to provide information on the preliminary annexation plan, public hearing dates, methods to provide testimony, and to keep the public updated on the process. An email message was also sent to the King Farm Citizens Assembly representative.
Per Montgomery County Planning staff’s request, City staff presented the annexation proposal to members of the Westside and Derwood communities (that are outside the city limits and adjacent to the east side of the proposed annexation area) on April 2, 2025. Additionally, although not a City outreach effort, the MOCOSHOW newsletter published an article on April 1, 2025, on the proposed annexation that can be viewed here <https://mocoshow.com/2025/04/01/rockville-moves-forward-with-proposal-to-annex-107-9-acres-near-shady-grove-metro/>.
Boards and Commissions Review
The Planning Commission received a presentation on the annexation and the preliminary annexation plan at their meeting on February 26, 2025, and set the public hearing date of March 26, 2026. That meeting set for March 26th was canceled due to a lack of quorum, and the public hearing was subsequently rescheduled for April 23, 2025. Staff also presented the annexation to the Transportation and Mobility Commission at its regularly scheduled meeting on April 22, 2025.
Fiscal Impact
If annexation is approved, the Shady Grove Metro property will remain tax-exempt until development begins, and the timing of this development is currently unknown. It is estimated that to adequately serve the public safety needs at this property an additional 4.0 FTE - 6.0 FTE police officers will be required. The annual cost per officer in Year 1 is approximately $127,000, with an additional one-time cost of just over $42,000 per officer. Six new officers will result in total first-year cost of roughly $1,015,000 (Option 1) and four new officers will result in a total first-year cost of roughly $676,700 (Option 2).
If the Mayor and Council elect to move forward with the annexation, the costs associated with the additional police officers will be fully taxpayer-supported until the property develops and becomes revenue-generating. The FY 2026 Adopted Budget has reserved an operating capacity of $650,000 to help facilitate Year 1 annexation costs.
The City contracted with NewGen Strategies and Solutions to analyze the fiscal impacts of the annexation to the City. The analysis concludes that the sooner the development reaches substantial completion, the greater its potential to contribute positively to the City's finances. Outcomes can vary significantly based on how costs are defined and attributed. If police costs are treated as a shared Citywide responsibility, the annexation is projected to generate a positive fiscal impact once development is underway, with stronger results as the development approaches full buildout.
However, if police costs are treated as a direct cost from the annexation area, the analysis suggests that the revenues generated under current development assumptions would not be sufficient to fully offset those cumulative expenses over the 25-year analysis period.
Next Steps
The current schedule for the annexation process is shown below. The key next steps for the Mayor and Council would be to review the Planning Commission-approved preliminary annexation plan, conduct a work session on the fiscal impacts of city services related to the annexation, and provide direction to staff.
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Mayor and Council Actions (ANX2023-00147) |
Proposed Dates |
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Work session with a presentation on the Fiscal Impact Analysis. |
May 12, 2025 |
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Adoption of the Annexation Plan. Establishes public hearing date. Revises the resolutions as introduced on October 23, 2023: 1) Annexation resolution (enlarge city boundaries) 2) Resolution to set a public hearing date Adopts the resolution to set the public hearing date. |
June 9, 2025 |
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County Review of Zoning Consistency. |
June - July 2025 |
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Annexation public hearing. Potential adoption of the annexation resolution. Potential introduction of the Ordinance(s) to amend the zoning map to include annexed property. Adoption of Ordinance(s) to amend the zoning map to include annexed property (if they waive the layover period) |
July 21, 2025 |
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Annexation is effective 45 days after enactment of the annexation resolution. |
September 2025 |