2020 | Government

Council overrides Elrich’s veto on development impact-tax bill

County executive didn’t support tax revenue decrease

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Montgomery County Executive Marc Elrich’s second veto in office — more than six weeks after his first — also was unanimously overridden by the County Council.

Elrich had declined to sign a bill that would decrease impact-tax revenue from developments. The bill is connected to the county’s newly approved 2020-2024 growth and infrastructure policy — formerly known as the subdivision staging policy.

His second veto, issued on Nov. 30, was rejected by the council in a vote on Tuesday. A minimum of six votes was needed to override the veto. All nine council members voted against it, just as all unanimously approved the policy on Nov. 16.

As part of the policy, school and transportation impact taxes are levied against developers to help pay for infrastructure needed as a result of increases of residents in particular areas. The newly approved bill provides impact-tax discounts to developers as part of a goal to produce more housing.

The legislation calls for the county to calculate school impact taxes at 100% of the cost of a student seat using student generation rates in school impact areas. The taxes were previously calculated based on 120% of the cost of a student seat.

A discount will be provided on transportation impact areas to incentivize development in desired growth and investment areas. Projects in Qualified Opportunity Zones — certified by the U.S. Treasury Department — will be exempt from development and school impact taxes.

In addition, a 60% impact-tax credit would be provided for construction of three-bedroom units in the “infill” school impact area.

In a letter accompanying his veto addressed to then-Council President Sidney Katz, Elrich wrote that he couldn’t sign the bill in its current form. The projected revenue loss is estimated to be $12.5 million to $20 million a year, he wrote.

“While I have long been concerned with how impact taxes work and I believe that there are alternatives that should be implemented, I cannot support simply reducing the necessary revenues without an appropriate replacement,” Elrich wrote in the letter.

Council Member Will Jawando voted for the bill and for the veto override , but raised concerns over the reduced impact tax revenues during the council’s consideration of the bill in November.

On Tuesday, Jawando said he would support the override, but wanted the council to revisit the impact-tax revenue gap soon.

“I made very clear when we took these initial rounds of votes that I think we missed the mark on this policy, but we did vote and we made our decision and we can review it at any time. … I don’t necessarily agree with the premise behind how we lowered these and haven’t filled in revenue, but, hey, we did it and we’re going to have to see how that goes and have to make other decisions that hopefully improve the situation,” he said.”

Council Member Hans Riemer defended the council’s decision on the bill.

“There’s a history of policies that have been holding us back,” he said. “As we hope to have a good share of our economy accelerating coming out of this situation — this COVID crisis that we’re in — it’s not going to accelerate if we don’t make big changes. Certainly one of those is in the area of impact taxes. It’s unfortunate the executive chose to veto this bill despite its 9-to-nothing vote.”

Council Vice President Gabe Albornoz said he hopes the council and Elrich can have more one-on-one conversations on disagreements. He said he spoke with Elrich about the veto and appreciated the discussion.

“While I understand this is symbolic in some ways, to veto, acknowledging that this already had unanimous support of the council — let’s have more productive conversations about this and so many other issues moving forward, so that we can really move this county forward,” he said.

Briana Adhikusuma can be reached at briana.adhikusuma@bethesdamagazine.com.