With no debate and little ceremony, the Montgomery County Council unanimously voted Tuesday to override County Executive Marc Elrich’s veto of a previous council decision to update the county’s development impact tax districts.
That means that some developments will no longer be subject to development impact taxes, based on their location of the type of project, or may pay a lower rate than in the past. The legislation will apply to any building permit filed with the county on or after Jan. 1.
Elrich vetoed a bill passed by the council Nov. 12 in conjunction with the county’s growth and infrastructure policies (GIP) that changed some of the county’s development impact tax districts. The change potentially will reduce the amount of income the county could receive from collection of the taxes.
“I cannot support a bill that reduces our ability to fund critical infrastructure projects without a viable alternative in place,” Elrich wrote in a Nov. 27 newsletter to constituents. “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.”
Prior to the council’s vote Tuesday, council President Kate Stewart (D-Dist. 4) said the council did not compromise funding for public school infrastructure in its decision to update tax districts. However, the council chose to reduce transportation impact taxes that would be applied in some areas to encourage certain types of development.
“One of the things that we were all very clear on is that we held the line on school funding. We did not look at or change the school impact tax,” Stewart said. “We did … look at the transportation impact tax to encourage the type of development that we all have been talking about here on the dais, from encouraging the building of townhouses to three-bedroom apartments, and also extending life science projects and to encourage office-to-residential conversions.”
The assessment of development impact taxes is directly impacted by the size and geographical designations outlined in the GIP, which are designed to help govern county development for the years 2025-2028.
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.
When asked during a press briefing about the council’s decision following the override, Elrich said he does not understand councilmembers’ rationale for the tax changes.
“I don’t comprehend the logic of it … you’re not gaining any economic advantage by continuing to lower tax rates,” Elrich said. “If that has been the secret sauce to economic development, we would not be trailing Virginia the way we are.”
On Tuesday, Elrich criticized the impact tax concept.
“There’s just no excuse to continue with impact taxes. Impact taxes, they yield money, but they don’t yield them in a way that you can bond against it. So it’s never been useful for us on transportation projects,” Elrich said.
Elrich has continually spoken of his support for special taxing districts, similar to those that exist in parts of Northern Virginia, that allow taxes in those districts to fund transportation projects.
“Continuing to not want to look at how you do things differently, or not act on how you do things differently is frustrating,” Elrich said Tuesday. “The council said that they’re going to take up looking at special taxing districts. The county is already working on this project. Hopefully we can work together in evaluating what can be done.”
Tuesday’s decision marks the fifth time the council has overridden an Elrich veto. The last time was in March 2023, after Elrich rejected the council’s confirmation of Planning Board appointee James Hedrick due to concerns over his social media posts, which had included critiques of Elrich’s policies. The council unanimously voted to override Elrich’s rejection. Hedrick is currently serving on the Planning Board.
Under the council’s Rules of Procedure, a supermajority of at least seven councilmembers must vote in favor of overriding a county executive’s veto.
