Montgomery County-based developers and commerce officials voiced support for a bill that would alter how development impact taxes are collected during a County Council public hearing Tuesday in Rockville.
The proposed legislation would require the collection of development impact taxes at the “final inspection” of a completed structure, according to the council agenda packet. Currently, an applicant for a building permit does not pay impact taxes until six or 12 months after the building permit is issued, depending on the type of building, or the structure’s final inspection by the Department of Permitting Services, whichever is earlier. The bill would change county law so that applicants do not have to pay the tax until their building projects are completed.
“This bill falls under the category of common-sense legislation. It’s helpful to development and comes at no cost to the county. It’s certainly a win-win,” said Pat Harris, an attorney with Bethesda-based Lerch, Early & Brewer who represents multiple county-based development firms. “Postponing the payment until the end of the process … increases the ability to secure the necessary financing so that these projects can move forward.”
The proposed legislation is sponsored by councilmember Evan Glass (D-At-large) and co-sponsored by councilmembers Gabe Albornoz (D-At-large), Andrew Friedson (D-Dist. 1), Sidney Katz (D-Dist. 3), Natali Fani-González (D-Dist. 6) and Dawn Luedtke (D-Dist. 7).
The hearing on the proposed legislation follows the council’s Nov. 12 approval of new development impact tax policies after passing the county Planning Board’s proposed Growth and Infrastructure Policies (GIP). The policies are designed to help govern county development for the years 2025-2028.
No one spoke in opposition to the bill on Tuesday. However, County Executive Marc Elrich (D) vetoed another bill passed by the council on Nov. 12 in conjunction with the GIP that would have changed some of the development impact tax districts, reducing the amount of potential income the county could receive from these taxes.
“I cannot support a bill that reduces our ability to fund critical infrastructure projects without a viable alternative in place. As county executive, I have only made a handful of vetoes, and these decisions are not taken lightly. But I could not in good conscience sign this bill into law,” Elrich wrote in a Nov. 27 newsletter.
The assessment of development impact taxes is directly impacted by the size and geographical designations in the GIP. Developers are required to pay the taxes on approved projects to help fund school and transportation infrastructure. The designations and rates differ based on the location of a proposed development, as illustrated in maps attached to the council’s resolution.
Development impact taxes directed to school infrastructure spending are calculated for new housing developments based on estimated school construction costs as well as the expectation that the housing will generate new students. The taxes are used to help offset the costs associated with increasing school capacity.
Peter Ciferri, an attorney representing the Maryland Building Industry Association, said during the hearing that passing the legislation would be the first step in “re-examining Montgomery County’s burdensome development impact tax structure.”
“The impact of development does not actually occur until the building is occupied, so there is no real nexus for tying payment of the tax to a sort of arbitrary timeline, rather than a point in time that is more reliably certain to relate to when the impact will occur,” Ciferri said. “In some cases, the payment of a substantial impact tax fee will create material delays or stop the project entirely by pulling too early from the budget.”
Brian Levine, vice president of government affairs for the Montgomery County Chamber of Commerce, said the bill, if approved, would have a positive impact on the county’s economy.
“It’s not just the economic impact for developers and on the county. There’s a positive impact on the county’s housing stock, which is just as important in our mutual priority to address the housing challenges that Montgomery County faces,” Levine said.
Elrich said his main concern with the previously approved development tax policies is that the county will have to continue to cut financial support for projects. He referenced cuts and delays made to projects including those for Bradley Boulevard improvements, the Forest Glen passageway, Paint Branch High School in Burtonsville and Mill Creek Towne Elementary in Rockville.
“If development doesn’t pay its fair share, one of two things happens: the cost gets shifted to residents through higher taxes, or the infrastructure simply doesn’t get built. Neither of these outcomes is acceptable,” Elrich wrote. “While I’ve long said that impact taxes are not a perfect tool, reducing them further without a replacement is shortsighted. Instead, we need to develop a comprehensive alternative that ensures we have the resources to build the infrastructure our growing community needs.”
A vote on Glass’ proposed legislation has not yet been scheduled. The council’s Government and Operations Committee is scheduled to hold a work session Jan. 23 on the bill.
