Agenda Item 10
October 5, 2010
Action
MEMORANDUM
TO:
County Council
FROM:
SUBJECT:
Robert
H.
Drummer, Senior Legislative Attorney
~g
enact the Bill with
Action:
Expedited Bill 47-10, Administration - Legislative Branch - County
Council Economic Impact Statements
Management and Fiscal Policy Committee recommendation (3-0):
amendments
Expedited Bill
47-10,
Administration - Legislative Branch County Council - Economic
Impact Statements, sponsored by Councilmember Knapp, Council President Floreen, Council
Vice President Ervin, and Councilmembers Navarro and Berliner was introduced on July 27,
2010. A public hearing was held on September 21 and a Management and Fiscal Policy
Committee worksession was held on September 27.
Background
A complete economic impact statement is an important tool for the Council to review in
making public policy decisions necessary to enact legislation. The Code does not currently
require an economic impact statement. Bill 47-10 would require the Director of the Office of
Management and Budget (OMB) to submit an economic impact statement to the Council for
each bill under consideration before Council action. The Bill would also establish a time line for
submission and the required content for the statement. A Bill would not be subject to challenge
solely because OMB failed to timely submit an economic impact statement to the Council.
Public Hearing
OMB Director Joseph Beach testified in support of the Bill on behalf of the Executive.
See ©7-8.
Mr.
Beach suggested that the Bill's description of the required contents of an
economic impact statement be clarified and that OMB be given additional time to prepare
statements on complex legislation or during busy times.
Mr.
Beach promised to provide
proposed amendments at the worksession.
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Issues
1. What is the fiscal impact of the Bill?
The OMB fiscal impact statement points out that the Bill would require economic impact
analysis not currently being done. See ©5-6. OMB estimates that this new requirement would
add 6-8 hours of preparation and review time for each bill. OMB also states that the required
economic analysis would require the development of a model by a consultant at an estimated
cost of $20,000 to $40,000. OMB estimates that the additional staff time to prepare statements
can be accomplished without additional staff resources.
2. Should the timeline for submission of the statement be extended?
As promised at the public hearing, OMB Director Joe Beach provided additional written
comments and a suggested amendment in a September 23 memorandum. See ©9-11. Mr. Beach
suggested the following language be added after line 20:
ill
If Executive Branch staff need additional time to prepare the analysis they will
notify the Council President indicllting when the fiscal impact statement
vvill
be
submitted.
Mr. Beach points out that the required analysis will vary for different bills and that the
analysis may require information provided by non-government sources over which the Executive
Branch has no control. The suggested amendment would permit Executive staff to grant
themselves an extension of time to submit the statement. The timeline in the Bill is not a hard
deadline.
It
is a guideline using the word "should" rather than "must." There is no penalty for
missing the 21-day guideline. The 21-day guideline may be unreasonable for some bills
sponsored by a Councilmember. The Committee decided to amend the Bill to require the
Finance Director to notifY the Council President when a delay is necessary on a Bill sponsored
by a Councilmember, the reasons why, and the new delivery date. The Committee also added a
sentence authorizing the Council President to establish a new delivery date if the Council
President finds that the Finance revised delivery date is unreasonable. See lines 21-26 of the Bill
at ©2. Committee recommendation (3-0): amend the Bill as shown on lines 21-26.
3. Should the Director of Finance be substituted for the Director of OMB?
Mr. Beach pointed out that the Department of Finance is responsible for economic
projections and recommended substituting the Director of the Department of Finance for the
OMB Director. Committee recommendation (3-0): change the Bill references to Director of
Finance.
4. Should the County Code require an economic impact statement for legislation?
OMB has recently added an economic impact statement to its fiscal impact statements for
legislation. Although it is not required by law or Council rules, the Montgomery County Plain
2
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Language Drafting Manual requires a Legislative Request Report that includes a section for
economic impact. The Drafting Manual is a 25-year old document that was created for use by
Council staff. The Drafting Manual is referred to in the Council Rules, but it does not have the
force of law.
An
alternative to legislation would be a Council Rule of Procedure requiring an
economic impact statement for legislation. However, the Montgomery County Council Rules of
Procedure do not bind the Executive Branch and can be suspended for a specific matter upon a
vote of 6 Councilmembers. This Bill would require the Executive Branch to submit an economic
impact statement for each bill and establish the required content and timing.
The County Council, as the final fiscal authority, must insure that tax money is spent
wisely. The Council, as the elected legislature for the County, has an additional responsibility to
enact laws to promote the health and welfare of the County's residents. Promoting economic
development in the County is a critical part of this duty. The Council must consider the
economic impact of legislation in order to perform this duty. Although the preparation and
review of an economic impact statement would require additional resources, the additional
resources identified by OMB appear to be small compared to the potential benefit.
Committee
recommendation (3-0):
approve the Bill with amendments.
5.
Technical amendment.
If the Council enacts Expedited Bill 42-10, the section created by this Bill would have to
be changed to §2-81B.
This packet contains:
Expedited Bill 47-10
Legislative Request Report
Fiscal Impact Statement
Testimony of Joseph Beach
OMB September 23 memorandum
Circle
#
1
4
5
7
9
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Expedited Bill No.
.:!.47!...-..!-10:::!...-_ _ _ __
Concerning: Administration - Legislative
Branch - County Council - Economic
Impact Statements
Revised: September
30,2010
Draft No.1
Introduced:
July
27,2010
Expires:
January
27, 2012
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date: _--:-_ _ _ _ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Councilmember Knapp, Council President Floreen, Council Vice President Ervin, and
Councilmembers Navarro and Berliner
AN EXPEDITED ACT
to:
(l)
require the Executive to submit a statement to the Council describing the economic
impact of a bill before Council action; and
(2)
generally amend the law governing the consideration ofbills by the Council.
By adding
Montgomery County Code
Chapter 2, Administration
Article IV, Legislative Branch
Section [[2-8lA112-81B
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unaffected by bill.
The County Council for Montgomery County} Maryland approves the following Act:
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ExPEDITED BILL
No. 47-10
1
Sec. 1. Section [[2-S1A]] 2-S1B is added as follows:
[[2-S1Al] 2-S1B. Economic Impact Statements
2
3
4
ill
Definitions.
In this Section, the following words and phrases have the
following meanings:
5
Director
means the Director of the [[Office of Management and
Budget]] Department of Finance.
6
7
8
Economic impact
means an estimate of the costs and benefits to private
organizations and individuals in the County attributable to
S!
change in
the law.
9
10
(Q)
Economic impact statements.
The Director must submit
S!
statement to
the Council describing the economic impact, if any, of each bill under
consideration by the Council. The Director must submit
S!
separate
statement for each bill.
11
12
13
14
15
16
W
Time for submission.
submitted to the Council:
An
economIC impact statement should be
ill
no later than
1
days before the public hearing on each bill
17
18
19
introduced by the Council President at the request of the County
Executive; and
ill
no more than 21 days after
S!
bill sponsored
by
§;
Councilmember
is introduced.
20
21
If the Director is unable to submit the statement within the time required
by paragraph (2), the Director must notify the Council President in
writing of the delay, the reason for the delay, and the revised delivery
date. If the Council President finds that the reyised delivery date is
unreasonable, the Council President may set a . . different delivery
deadline.
22
23
24
25
26
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EXPEDITED BILL No. 47-10
27
28
@
Content
gf
economic impact statement.
statement must include:
Each economic impact
29
30
31
32
33
34
35
ill
ill
ill
the sources of information, assumptions, and methodologies
used;
£!
description of any variable that could affect economic impact
estimates;
the bill's positive or negative effect, if any, on employment,
spending, saving, investment, incomes, and property values in the
County; and
36
ill
if
£!
bill is likely to have no economic impact, why that is the case.
Council action on
£!
bill that is otherwise valid is not
37
38
W
Sec.
2.
Compliance.
invalid because of any failure to follow the requirements ofthis Section.
Expedited Effective Date.
39
40
41
42
The Council declares that this legislation is necessary for the immediate
protection of the public interest. This Act takes effect on the date on which it
becomes law.
43
44
Approved:
45
Nancy Floreen, President, County Council
Date
46
Approved:
47
Isiah Leggett, County Executive
Date
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LEGISLAriVE REQUEST REPORT
Administration
Expedited Bill
47-10
Legislative Branch - County Council -Economic Impact Statements
DESCRIPTION:
The Bill would require the Director of OMB to submit an economic
impact statement to the Council for each bill under consideration by
the Council. The Bill would also establish a timeline for submission
and the required content for the statement.
A complete economic impact statement is an important tool for the
Council to review in making public policy decisions necessary to
enact legislation. The Code does not currently require an economic
impact statement.
To enhance the information available to the Council when making
public policy decisions necessary to enact legislation.
OLO,OMB
To be requested.
To be requested.
To be requested.
To be researched.
Robert H. Drummer, Senior Legislative Attorney
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
NA
NA
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OFFICE OF MANAGEMENT AND BUDGET
Isiah Leggett
County Executive
Joseph F. Beach
Director
MEMORANDUM
September 17, 2010
TO:
FROM:
SUBJECT:
Nancy Floreen, President, County Council
Joseph F. Beach,
D~
Expedited BiU 47-10, Administration - Legislative Branch - County Council- Economic
Impact Statements (BIS)
The purpose ofthis memorandum is to transmit a fiscal and economic impact statement
to the Council on the subject legislation.
LEGISLATION SUMMARY
The Bill would require the Director ofthe Office ofManagement and Budget (OMB) to
submit an economic impact statement (BIS) to the Council for each bill under consideration by the .
Council. The Bill would also establish a timeline for submission and the required content for the
statement.
FISCAL SUMMARY
The County Code does not currently require an BIS for all legislation. However, as a
normal practice, an EIS is prepared for each bill and Executive Regulation before the County Council. This
bill would specifically state what the content of an EIS should be, and is modeled after a report from the
Office of Legislative Oversight which examined the Fiscal Impact Statement and EIS process.
The subject legislation will not cause an economic impact, but will increase Executive
Branch department workload and require additional resources to implement. The requirements in the
legislation regarding the specific content of each EIS will increase staff time needed to complete the EIS
and require development ofan economic model to analyze the economic impact of legislation. Specifically
the subject legislation requires, analysis of' 'the bill's positive or negative effect, if any, on employment,
spending, saving, investment, incomes, and property values in the County."
In
order to determine the
positive or negative effects on those variables, certain economic models must be available to analyze the
effects ofthe Bill on all ofthe variables. More specifically, the analytical framework that identifies and
measures the interactions and interdependences ofthe variables is crucial in the development ofeconomic
impact estimates. The development ofsuch a model is estimated to cost approximately $20,000 to $40,000
depending on the consultant selected to develop the model and the complexity and features of the economic
model.
On average over the past four years, the Council introduces and considers 40 bills per year.
It
is estimated that the requirements of this bill
will
add an additional six to eight hours per EIS
in
preparation and review time, which is approximately one-tenth of a workyear. The constrained timelines
Office
--_._--------------­
of the Director
101 Monroe Street, 14th Floor' Rockville, Maryland 20850 • 240-777-2800
www.montgomerycountymd.gov
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Nancy Floreen, President, County Council
September 17,2010
Page 2
for preparing and submitting an EIS will impact operations during peak workload times, as staff shift
assignments to meet the new deadlines, but
will
not require additional resources.
The following contributed to and concurred
with
this analysis: Alex Espinosa and John
Cuff, Office of Management and Budget; and David Platt, Department of Finance.
JFB:jc
c: Kathleen Boucher, Assistant Chief Administrative Officer
Dee Gonzalez, Office of the County Executive
Jennifer Barrett, Director, Department of Finance
David Platt, Department of Finance
Alex Espinosa, Office of Management and Budget
John Cuff, Office of Maoagement and Budget
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Testimony:
Expedited
Bill 43-10
Fiscal Impact Statements
&
Expedited
Bill 47-10
Economic Impact Statements
Good afternoon, I am Joseph Beach, Director of the Office of Management and Budget and I
am here to testify on behalf of County Executive 1siah Leggett in support of Expedited Bill 43-10
Fiscal Impact Statements and 47-10 Economic Impact Statements.
This legislation proposes to require the Executive to submit a fiscal and economic impact
statement for each bill before the COWlty Council and specities the content and required timeline for
submission for each statement. The subject legislation is submitted in response to the
recommendations of OLO Report 20
I
0-1
O.
The OLO report provided several findings and recommendations that would improve the
content, consistency, and timeliness of fiscal and economic impact statements.
Vlhile the Executive welcomed the
01.0
Report and supports this legislation we believe that
some amendments are necessary to: 1) clarify the required content so that future fiscal impact
statements adequately address the concerns identified in the OLO report; and 2) provide some
flexibility in the timeline for Council sponsored legislation when the complexity of legislation
requires extensive collaboration between OMB, Finance, and other departments to understand and
analyze the fiscal and economic impacts of the legislation.
In addition, because ofthe specific economic analysis required in Expedited Bill 47-10 we
believe there are some resource requirements to develop an economic model that would allow the
Department of Finance to efficiently provide the economic impact analysis required in the
legislation.
For most legislation we believe the three week timeframe is achievable. However, with
reduced staffing levels in OMB and other departments, the legislation'S required timeline for
submitting the fiscal impact statements may not be realistic especially during times of peak
workload in developing the operating or the capital budgets.
Page 1 of2
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Testimony:
Expedited Bill 43·10 Fiscal Impact Statements
&
Expedited
Bill 47·10
Economic Impact Statements
During the Committee worksession we \\-111 offer specific amendments to the legislation to
address these concerns.
Thank you for allowing me to comment on this important legislation. We look
fOIV/ard
to
working with the Management and Fiscal Policy Committee and the Council on this legislation.
Page
2
of2
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OFFICE OF MANAGEMENT AND BUDGET
Isiah Leggett
County Executive
Joseph F. Beach
Director
MEMORANDUM
September 23,2010
-0
:::r;
TO:
FROM:
SUBJECT:
Bob Drummer, Legislative Attorney
JosePhF.Beac~
~
c
'--'
Comments: Expedited Bi1l43-10 Fiscal Impact Statements and Expedited Bill 47-10
Economic Impact Statements
This memorandum is to provide the Council with comments and suggested amendments
for the subject legislation.
Expedited
Bill 43-10,
Administration - Legislative Branch - County Council- Fiscal Impact
Statements
1.
Timeframe and the sources of information, assumptions, and methodologies used (Lines 12-22).
Comment:
Depending on the legislation, Executive staff is sometimes dependent on non-government or
unpublished sources for information.
In
that case, care must be taken on the reliability of such
information and the timeliness of the data. We agree that a complete fiscal and economic impact
statement is an important tool for the Council, and it is also important that the information provided by
non-government or unpublished sources is reliable and current. In order to ensure reliability ofthe
information and data, more time
may
be required to prepare the economic impact statement than specified
in Section 2-81A(c) to validate that information and data. Therefore, we recommend that upon receipt of
the Bill for analysis, Executive Staff will inform Council Staff if more time is required in preparation of
the economic impact statement to ensure reliability. We recommend amending this bill and EB 47-10 as
follows:
(c) Time for submission. A fiscal impact statement should be submitted to the Council:
(I) no later than 7 days before the public hearing on each bill introduced by the Council President at the
request ofthe County Executive; and
(2) no more than 21 days after a bill sponsored by a Councilmember is introduced;
(3) If Executive Branch staff need additional time to prepare the analysis they
will
notify the Council
President indicating when the fiscal impact statement will be submitted.
.
Office of the Director
101 Monroe Street, 14th Floor· Rockville, Maryland 20850 • 240-777-2800
www.montgomerycoulltymd.gov
(j)
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Bob Drummer, Legislative Attorney
September 23,2010
Page 2
2.
An
actuarial analysis through the entire amortization period for each bill that would affect retiree
pension or group insurance costs (Lines 28-30).
Comment: Depending on the availability of the Actuary and the complexity of the legislation this may
not be accomplished in the timeframe allotted in the bill. No amendment recommended except to the
time for submission noted above.
3. "later actions that may affect future revenue and expenditures if the bill authorizes future spending"
(Lines 31-32).
Comment: Suggest inserting "government between "later" and "actions" to clarify the specific action
that could impact revenues and expenditures.
4. an explanation of how the addition of new staff responsibilities would affect other duties (Lines 34-5).
Comment: This requirement assumes that a department can identify specifically where an department
would tend to pare back responsibilities in order to implement the bill, and it also assumes that a
department must make a judgment, before the legislation is discussed at the committee level, about what
responsibilities would go unmet as a result ofthe legislation. The specific management of this workload
should be left to the program managers. However, the FIS should indicate that this type of workload
management will have to take place and identify some potential programmatic impacts. Suggest inserting
"general" before explanation to indicate the level of detail required in the explanation.
Expedited Bill 47-10, Administration - Legislative Branch - County Council- Economic Impact
Statements
Section 2-81A(d) - Content of economic impact statement. Each economic impact statement must
include:
1.
Definitions. Director (Line 5)
Comment: The Department ofFinance is responsible for economic projections and preparing Economic
Impact Statements. Suggest eliminating "Office of Management and Budget" and adding "Department of
Finance". However, all EIS' will be combined with FIS' into one memorandum that will be submitted to
the Council. OMB and DOF will coordinate the preparation of the consolidated statement.
2. Time for submission (Lines 13-19) see above for recommended amendment.
3. A description of any variable that could affect economic impact estimates (Line 24-25).
Comment: Within any conceptual economic framework, a myriad of variables could affect economic
impact estimates. The first step should be to
identify
those variables that
directly
affect the economic
impact estimates, that is, the primfll)' economic effects and the basis for selecting that variable either
through previous economic impact studies or literature review. Once those variables have been identified,
then a description ofthat variable is the next logical step. No amendments recommended.
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Bob Drummer, Legislative Attorney
September 23, 2010
Page 3
4.
The Bill's positive or negative effect, if any, on employment, spending, saving, investment, incomes,
and
property values in the County (Line 26-28).
Comment:
In
order to determine the positive or negative effects on those variables, certain economic
models must be available to analyze the effects ofthe Bill on all of the variables. More specifically, the
analytical framework that identifies and measures the interactions and interdependences ofthe variables is
crucial in the development of economic impact estimates. The development of such a framework is
necessary to provide a complete economic impact statement that would be important to assist the County
Council in reaching a decision "necessary to enact legislation." For example, are there tradeoffs between
employment and investment, employment and
personal
saving, and spending and saving? Also do the
terms spending and saving refer to spending and saving by the County or the private sector as well?
These are conceptuaVdefmitional issues that require careful analysis to achieve the intent of the Bill.
As mentioned in the Executive branch testimony and the fiscal impact statement this
provision will require additional resources in the range of $20,000 to $40,000 to develop an economic
model that will allow the Department of Finance to efficiently provide the complex analysis proposed in
the legislation. No amendments recommended.
JBF:df
c: Jennifer Barrett, Director, Department of Finance
Kathleen Boucher, Assistant Chief Administrative Officer
Aron Trombka, Office of Legislative Oversight
David Platt, Chief Economist
Michael Coveyou, Department of Finance
@