Agenda Item 8
November 1, 2011
Action
MEMORANDUM
TO:
I
County Council
FROM:
~
Michael Faden, Senior Legislative Attorney
Go
Glenn Orlin, Deputy Council Staff Director
Action: Bill 26-11, Taxation
SUBJECT:
Development Impact Taxes - Payment
Government Operations and Fiscal Policy Committee recommendation: enact
with
amendments.
Bill 26-11, Taxation - Development Impact Taxes - Payment, sponsored by
Councilmember Riemer, Council President Ervin, and Councilmembers Berliner, Floreen,
Leventhal, Navarro, and Rice, was introduced on September 13, 2011. A public hearing was
held on October 4, and a Government Operations and Fiscal Policy Committee worksession was
held on October 24.
As introduced, Bill 26-11 would require the transportation and school development
impact taxes, and the associated transportation mitigation and school facilities payments, to be
paid before a use and occupancy permit is issued, rather than before a building permit is issued
as current law provides.
Hearing testimony
The County Chamber of Commerce and various representatives of
the building industry supported the Bill, arguing that deferring the impact tax payments will
reduce builders' carrying costs and ease their ability to secure financing (see selected testimony,
©31-34). They asserted that this will increase the likeliness that approved subdivisions will
proceed more quickly to realization, generating greater employment in the building and bui1ding­
support sectors and thus the County's overall economy. The only testimony opposing the Bill
was by Robert Dyer, who termed the Bill "corporate welfare" which lets developers profit at
taxpayers' expense. He argued that funds allocated to transportation and schools would be paid
more slowly, requiring needed projects to be deferred.
Experience elsewhere
Since the County first implemented impact taxes in 1986, they
have been collected just before the building permit is issued. All major Maryland jurisdictions
charge impact fees or taxes at building permit; 4 small counties charge it later, the latest being
 PDF to HTML - Convert PDF files to HTML files
Charles County, where they are paid in 10-year installments after occupancy permit (see list on
©27).1
According to Duncan Associates, a Florida firm that routinely surveys states and local
governments about their impact fee/tax programs, of the 28 states that have authorized local
governments to charge impact taxes, 14 require the charge at building permit, while 5 others
require it at certificate of occupancy: Arkansas, California, Illinois, New Hampshire, and Rhode
Island. In the Virginia jurisdictions that do not have impact taxes but rely on proffer zoning
instead, the proffer payments are made after final inspection and before certificate of occupancy.
The other 9 states allow their local governments to charge the tax or fee anytime during the
development process, from as early as subdivision approval to as late as certificate of occupancy.
Executive recommendations
On October 17 the County Executive transmitted detailed
comments on this Bill (see Executive memo, © 13-15). He recommended enactment of this Bill
with the following amendments:
• for single-family residential development,
defer payment
of impact taxes (and similar
Payments)
to the earlier of final inspection or
6
months after the building permit is
issued;
• for multi-family residential and non-residential development,
defer payment
of impact
taxes (and similar Payments)
to the earlier of final inspection or 12 months after the
building permit is issued;
• sunset the later payment dates in
2
years.
This would require the Council to enact
another bill in late 2013 to extend the deferrals or make them permanene and
• make the
Bill
an Expedited
Bill,
taking effect on December 1
(the Executive's memo
did not specify that date, but Executive staff told Council staff that they will need that
much time to get ready to implement it).
Revenue analysis
Council staff asked the Department of Permitting Services (DPS) to
estimate the average time between the issuance of building and occupancy permits for various
types of construction. The results ofDPS' analysis are reported in the OMB fiscal and economic
impact statement starting on © 16:
Single-family residential
Multi-family residential
Office
Retail
158 days
224 days
366 days
200 days
(about 5 months)
(about
7Yz
months)
(about 12 months)
(about
6Yz
months)
Finance Department staffs revenue loss/transfer projections for this Bill are based on
these time differentials, assuming that the Bill would take effect on February 1, 2012, 91 days
after its potential enactment in early November.
'Thanks to Scott Kennedy of the Office of Policy Analysis, Maryland Department of Legislative Services, for
compiling this information.
2This temporary 2-year deferral would also be consistent with other 2-year suspensions or extensions of other
building-related requirements, such as SRA 11-0 I, which extended for another 2 years the validity period of certain
adequate public facilities determinations and preliminary subdivision plans, effective April 1,2011.
2
 PDF to HTML - Convert PDF files to HTML files
After reviewing the initial fiscal impact statement, Council staff, working collaboratively
with OMB and Finance staff, identified some needed corrections and revisions, one of which was
to extend the analysis through FYI8, the end of the next Capital Improvements Program.
3
The
revenue projections in this packet, therefore, supersede those in the attached fiscal impact
statement.
This staff group ultimately asked Finance staff to produce several scenarios reflecting
possible modifications to this Bill, and the data for each scenario were vetted by the staff group.
Each scenario was compared to a Baseline representing no change in the current law.
In
total, 5
scenarios generated by Finance staff are;
Scenario 1: Bill 26-11 as introduced, assumed to take effect February 1, 2012, 91 days
after enactment in early November (©28).
Scenario 2: Scenario I with a 2-year sunset (©28).
Scenario 3: Scenario 1 as an expedited bill, effective November 1 (©29).
Scenario 4: Scenario 1 with a 6-month payment deferral for single-family residential
buildings and a l2-month deferral for multi-family residential and non-residential
buildings (©29).
Scenario 5: Scenario 1 with a 2-year sunset, an expedited bill effective December 1, and
with a 6-month payment deferral for single-family residential buildings and a 12­
month deferral for multi-family residential and non-residential buildings (©30).
This
scenario incorporates the Executive's recommendations.
The revenue forecasts were based on what could be referred to as "pure" revenue
projections: those based purely on the current forecasts of growth in each major land use sector,
the current impact tax rates with biennial inflation adjustments, and a factoring-down of
transportation impact tax revenue because of credits. The forecasts do not reflect the timing of
school facilities payments and transportation mitigation payments, which would also be affected
by this Bill, but these payments are relatively minor compared to impact taxes.
The forecasts also do not assume any additional growth in residential or non-residential
construction because of the delayed payments, although that is one of the sponsors' objectives.
All would agree that this is nearly impossible to estimate. OMB's October 4 transmittal noted
that, at least as of that time, the Executive Branch had not heard from any developer that
deferring the impact tax payment would make a difference as to whether a development project
would move forward, and they did not know of any statistical or empirical data, locally or
nationally, demonstrating that delaying tax payments would have a measurable effect.
Council staff is comfortable not including a "plug amount" of revenue for development
that might be generated or accelerated because of this measure, as long as everyone recognizes
that the revenue forecasts below are, in this way, slightly-to-moderately conservative. Logic
dictates that a version of this Bill would have to be enough of an incentive for at least a handful
lOne significant revised assumption is that the payment at occupancy permit would be governed by the impact tax
rate in effect at that time, rather than the rate in effect when the building permit was issued, if the rate was revised in
the meantime. As you know, under County Code §§52-57(g) and 52-90(t) the impact tax rates are revised every
odd-numbered year to reflect construction cost inflation or deflation. The Council can also increase or decrease the
rates by resolution at any time. This Bill does not affect the actual rates that will be charged. The Committee
redraft contains a provision (see
lines 9::!-93) which makes clear that the amount of tax paid is based on the rate
in effect when the tax is paid.
3
 PDF to HTML - Convert PDF files to HTML files
of developments to proceed to construction, even if their carrying costs are only reduced by a
few months.
The key results of this joint staff analysis are:
• This Bill as introduced would reduce projected impact tax revenue in the current fiscal
year (FY 12) by $12.3 million ($9.9 million for schools, $2.4 million for transportation),
and over the FY13-18 period by another $7.7 million ($6.1 millionfor schools, $1.1
million for transportation).
• One amendment -- adding a 2-year sunset date -- would render the bill virtually revenue
neutral by the end of FYI5. There is a slight net increase in revenue, because some
deferred payments would be made after a biennial inflation adjustment.
4
• A November I effective date would reduce the negative impact on revenue in FY12 by
about $4.8 million, since some permits issued this winter would reach the occupancy
(payment) stage before the end of the fiscal year, rather than in FYI3. This means, of
course, that the negative revenue impact in FY13 would be increased by about $4.8
million. Revenue in FY s 14-18 would not be affected by a different effective date.
• Setting the deferral period to no later than a time certain - 6 months after the building
permit is issued for single-family residential buildings, 12 months for everything else
would have nearly the same revenue impact as collecting the tax at occupancy permit.
• The Executive's recommendation, which includes all the individual changes mentioned
above (except that the Expedited Bill would take effect on December 1), would reduce
projected impact tax revenue in FY12 by $8.9 million ($7.1 million for schools, $1.8
million for transportation) and in FY13 by $3.6 million ($3.2 million for schools, $0.4
million for transportation), but these losses would be recouped in FYsI4-15.
These "pure" forecasts are a good way to estimate the Bill's fiscal impact on the County.
However, because of the year-to-year volatility of building activity and the unpredictability of
when transportation impact tax credits will be exercised, the actual impact tax revenue that
materializes is often very different than forecast. In several recent years, revenue from impact
taxes was overestimated, leading to the need to supplant impact tax revenue with General Fund
advances, which ultimately are reimbursed with funds that otherwise could be used for other
projects in the CIP. Starting with the Approved FY11-16 CIP, therefore, the Council initiated
the practice of conservatively estimating impact tax revenue. At CIP Reconciliation, if actual
revenue proves to be somewhat higher, the Council is able to program the additional amount.
The differences between the "pure" forecast for the baseline, Bill 26-11 as introduced, the
Bill with amendments proposed by the Executive, and the amounts actually programmed, are
shown below (in thousands of dollars):
4Finance Department staff was not asked for other sunset scenarios. However. a 3-year sunset would reach virtual
revenue neutrality at the end of FY 16. a 4-year sunset at the end of FY I7. and a 5-year sunset at the end of FY 18. In
each case there would be lower revenue in earlier years and commensurately larger revenue in the later years.
4
 PDF to HTML - Convert PDF files to HTML files
School impact tax
Baseline
Bill 26-1 I
Exec. rec. (2-yr. sunset)
Now programmed
I
I
FY12
FY13
14,291 14,960
4,369 15,826
7,145
i
11,711
14,480 10,890
FY12
3,156
789
1,410
6,743
FY14
16,824
14,985
18,031
11,520
• FY15
I
17,794
I
17,500
I
26,983
I
12,100
FY15
I
FY16
41
17,722
19,241
13,350
FY17
19,838
18,248
19,838
FY18
21,606
19,879
21,606
i
FY12-18
124,553
108,531
124,555
!
-
-
!
-
I
Transp.
1m
pact tax
I
Baseline
• Bill 26-11
I
Exec. rec. (2-yr. sunset)
I
Now programmed
I
!
FY13
I
FY14
3,194
3,444
3,441
I
3,066
2,839 . 3,811
4,373
I
4,980
!
3,131
44
5,231
3,697
4,120
I
4,410
FY16
22,938
21,066
22,938
17,760
...
I
FY16
3'495~97
FY17
FY18
3,727 • 3,969
3,361
3,573
3,727
3,968
FY12-18
24,681
20,705
24,683 •
-
FY17
23,565
21,609
I
23,565 •
!
-
FY18
25,573
23,453
25,574
-
FY12-18
149,234
129,236
149,237
Total impact tax
Baseline
Bill 26-11
r-=-­
Exec. rec. (2-yr. sunset)
Now programmed
FY13
i
FY12
I
17,446
I
18,154
5,158
I
19,267
8,555 • 14,550
I
21,223
I
15,263 •
!
FY14
FY15
20,268 . 21,289
18,050 20,631
21,842 32,214
15,600 16,220
-I
-
-
From these projections, we find that even the conservative assumption for FY12 is too
high: the Council programmed $21,223,000 in impact taxes this year, and only $17,446,000 is
anticipated with no change in the law. If Bill 26-11 as introduced is adopted, the result will be a
projected programming shortfall this fiscal year of $16,065,000. Under the Committee's
recommendation or the Executive's proposal there would be a shortfall of $12,668,000. The
shortfall could be made up with a combination of sources:
• The FY12 G.O. Bond reserve stands at $12,979,000. Whatever is taken from this amount
will not be available for supplemental appropriations for the balance of the fiscal year.
• The final FYll School Impact Tax revenues collected were about $14,398,000, this is
$2,438,000 higher than had been anticipated at CIP Reconciliation. The final FYll
Transportation Impact Tax revenues collected were about $4,637,000, this is $1,313,000
less
than had been anticipated at CIP Reconciliation. Thus there is a net additional
$1,125,000 available for programming in FYI2.
• Any balance left after using these two resources would have to be covered by either
deleting or deferring spending from FY12 or by infilling with cash advances from the
General Fund reserve.
For FY s 1 16, however, the aggregate impact tax revenue assumptions used in the CIP
are less in nearly every year than the revenue projected under the baseline, Bill 26-11 as
introduced, the Executive's proposal, or the Committee's recommendation. Therefore, no
currently programmed projects would need to be deferred in these years due to this bill. s
5However, some minor adjustments in the mix ofG.O. bonds and impact taxes in particular projects will be needed.
Note that the programmed amounts for the transportation impact tax are slightly
higher
than Bill 26-11 or the
Executive's recommendation in most years, while the programmed amounts for the school impact tax are well lower
than either option. The CIP will need to be amended to shift some G.O. bond offsets from school projects to
transportation projects. These shifts would not affect the total funding available for each project, but only the
mixture of those funds.
5
 PDF to HTML - Convert PDF files to HTML files
Committee recommendation (3-0): Enact the bill with the Executive's proposed
amendments, except sunset the Bill in 5 years rather than 2.
Doing so accomplishes the same
objectives as this Bill as introduced while giving the Council the option of revisiting this issue
when, hopefully, the building industry will have sufficiently recovered. Placing a time-certain
on the payments assures that impact tax revenue for school and transportation infrastructure is
not unduly delayed. Expediting the effective date to December 1 will move the potential positive
effects of this bill 2 months sooner while still giving DPS time to adjust its procedures.
6
The
Committee redraft on 1-11 includes these amendments.
The revenue impact over the FY12-18 period-in aggregate-is the same as the 2-year
sunset option (see Scenario 6, ©30). The difference is in the distribution of revenue over the last
4 years of the next CIP: about $10.3 million less revenue in FYI5, but $1.8 million more in
FYI6, $0.8 million more in FYI7, and $7.7 million more in FYI8 (as shown below, in thousands
of dollars):
I
Scho()l impact tax
1 Baseline
• Bill 26-11
I
Exec. rec. (2-i:f. sunset)
. GO rec. (5-yr. sunset)
1Now prografllmed .
FY12
I
FY13
I 14,291
i
14,960
4,369
i
15,826
I
7,145·11,711
I
7,145 11,711
14,480
I
10,890
i
I
!
FY16
FY14
FY15
16,824 • 17,7941 19,241
14,985 17,500
I
17,722
18,031 26,983 1 19,241
18,031 18,258
i
20,622
11,520 12,100 113,350
FY14
3,444
3,066
i
3,811
3,756
4,080 .
FY15
3,495
3,131
5,231
3,727
4,120
FY17
19,838
18,248
19,838
20,355
FY18
21,606
19,879
21,606
28,433
FY12-18
124,553
108,531
124,555
124,555
-
3,727
3,361
3,727
4.005
-
FY18
3,969
3,573
3,968
4,871
-
FY12-18
24,681
20,705
24,683
24,683
Transp. 1m pad tax
I
Baseline
!
Bill 26-11
i
Exec. rec. (2-yr. sunset)
I
GO rec. (5-yr. sunset)
i
I
~programmed
FY12
I
FY13
I
3,156 I 3,194
I
789
i
3,441
1,410
I
2,839
i
1,4]0
I
2,839
I
6,743
i
4,373
FY12
I
17,446
i
5,158
i
8,555 I
I
8,555!
21,223
I
FYI6=~FYI7
3,697
3,344
3,697
4,073
4,410
i
i
i
-
-
-
i
Total impact tax
~eline
!
Bill 26-1 ]
. Exec. rec. (2-yr. sunset)
GO rec. (5-yr. sunset)
Now programmed
FY15
FY13
1
FY14
1g, 154 • 20,268 21,289
19,267
I
18,050 . 20,631
14.550
I
21,842 32,214
i
14,550 . 21,788 21,985
15,263]15,600 16,220 .
FY17
I
FY18
FY12-18
FY16
149,234
22,938 23,565
i
25,573 .
129,236
21,066 • 21,609
I
23,453
149,237
22,938 23,565
!
25,574
149,237
24,695 24,360
I
33,305
i
17,760
-
-
- 1
The GO Committee's (as weI! as the Executive's) amendments result in a smaller
revenue shortfall in FYI2. This could be covered by a small unprogrammed surplus of FYl1
impact tax collections and a large portion of the FY12 G.O. Bond reserve, and thus avoid having
to dip into the General Fund reserve. This will leave a small balance in the G.O. Bond reserve
for the most critical supplemental appropriation requests.
amendments also address several technical payment issues raised by the County Attomey which are resolved
by the revised payment deadlines in the Executive's amendments. The critical fact assuring ultimate payment of the
tax is that, under County Code §5:::·50\j). the County r.as a lien or: any property for which the impact tax was not
paid when due, identical to the lien for nonpayment of property taxes.
6
These
6
 PDF to HTML - Convert PDF files to HTML files
This packet contains:
Bill 26-11 with Committee amendments
Legislative Request Report
Memo from County Executive
Fiscal Impact Statement
Economic impact a analysis
CIP funding details
Timing of payments in other Maryland jurisdictions
Revised fiscal impact scenarios
Selected testimony and correspondence
1
12
13
16
20
25
27
28
31
F:\LA WiBILLS\ 1126 Developmenllmpact Taxes-Payment\Action Memo.Doc
7
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. _ _ _ _ _
~:.....!...!.
Concerning: Taxation -
Development
Impact Tax - Payment
Revised: 10-27-11
Draft No. 5
Introduced:
September 13, 2011
Expires:
March 13, 2013
Enacted: _ _ _ _ _ _ _ _ __
Executive: _-::-_-::-____---:--­
Effective:
December 1.2011
Sunset Date: Decem ber 1. 2016
Ch.
Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Councilmember Riemer, Council President Ervin, and Councilmembers Berliner, Floreen,
Leventhal, Navarro, and Rice
AN EXPEDITED ACT
to:
(1)
temporarily require any development impact tax to be paid before a [[use and
occupancy permit is issued]] certain date;
(2)
temporarily require any transportation mitigation payment or school facilities
payment to be paid before a [[use and occupancy pennit is issued]] certain date; and
(3)
generally amend the law governing development impact taxes.
By amending
Montgomery County Code
Chapter 52, Taxation
Sections 52-47[[, 52-49,]]
94]]
52-50[[,52-51,52-54,52-55,52-56,52-59,52-89,52-93,52­
Boldface
Underlining
[Single boldface brackets]
Double underlinina
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deleted from existing law or the bill by amendment.
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act.'
 PDF to HTML - Convert PDF files to HTML files
EXPEDITED BILL
No.
26-11
1
Section 1. Sections 52-47[[, 52-49,]] and 52-50[[, 52-51, 52-54, 52-55, 52­
56,52-59,52-89,52-93, and 52-94]] are amended as follows:
52-47. Definitions.
In this Article the following terms have the following meanings:
2
3
4
5
6
7
8
9
10
11
*
*
*
Applicant
means the property owner, or duly designated agent of the property
owner, of land on which a [building] [[use and occupancy]] building permit
has been requested for development.
*
*
*
Development
means the carrying out of any building activity or the making of
any material change in the use of any structure or land which requires issuance
of a [building] [[use and occupancy]] building permit and:
(1)
(2)
Increases the number of dwelling units; or
Increases the gross floor area of nonresidential development.
12
13
14
15
16
Development impact tax
means a pro rata per unit or per square foot of gross
floor area tax imposed before a [building] [[use and occupancy]] building
permit is issued for development which is intended to defray a portion of the
costs associated with impact transportation improvements that are necessary to
accommodate the traffic generated by the development.
17
18
19
20
21
*
*
*
Property owner
means any person, group of persons, firm, corporation, or
other entity with a proprietary interest in the land on which a [building] [[use
and occupancy]] building permit has been requested.
22
23
24
*
*
*
25
Use and occupancy permit
means
f!
use and occupancy permit issued by the
Department of Permitting Services under Chapter
~
52-49. Imposition and applicability of development impact taxes.
(a)
A development impact tax must be imposed before a [building] [[use
@-t:\laW\biIlS\1126 development impact laxes-payment\1126 bill 5.doc
26
27
28
 PDF to HTML - Convert PDF files to HTML files
EXPEDITED BILL
No. 26-11
29
30
31
32
and occupancy]] building pennit
County.
(b)
IS
issued for development in the
An
applicant for a [building] [[use and occupancYl1 building permit
must pay a development impact tax in the amount and manner provided
in this Article, unless a credit in the full amount of the applicable tax
applies under Section 52-55 or an appeal bond is posted under Section
52-56.
33
34
35
36
37
38
39
*
*
(b)
*
*
*
52-50. Collection of development impact taxes.
*
[Applicants] Each applicant for [building permits]
f!
[[use and
occupancy]] building pennit for development that is not exempt from
the development impact tax must supply to the Department of
Permitting Services for each requested [building] [[use and occupancyl1
building pennit:
(1)
The number and type of dwelling units for residential
development; and
(2)
The gross floor area and type of development for nonresidential
development.
The
applicant
must
submit
for
inspection
relevant
support
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
documentation as the Department requires.
(c)
The Department of Permitting Services must not issue a [building] [[use
and occupancy]] building pennit for development that is not exempt
from the development impact tax unless:
(1)
(2)
the applicant has paid the applicable development impact tax;
the applicant is entitled to a credit under Section 52-55 in the
amount ofthe applicable development impact tax; or
(3)
an appeal has been taken and a bond or other surety posted under
8-f:\law\bil\S\1126 development impact taxes-payment\ 1126 bill 5.doc
 PDF to HTML - Convert PDF files to HTML files
!!!'!Qbl~~BILL
No.
26-11
57
58
59
60
61
62
63
64
Section 52-56.
(d)
When a person applies to a municipality in the County for a [building]
[[use and occupancyl1 building penn
it
for a building or dwelling unit,
the applicant must show that all payments due under this Section with
respect to the building or unit have been paid. The Director of Finance
must promptly refund any payment made for any building or part of a
building for which a [building] [[use and occupancyl1 building pennit is
not issued by the municipality.
65
66
*
(k)
*
*
If, within 10 years after a [building] [[use and occupancy]] building
pennit is issued, any person changes the use of all or part of a building
to a use for which a higher tax would have been due under this Article
when the [building] [[use and occupancYl1 building pennit was issued
(including a change from a status, use, or ownership that is exempt from
payment to a status, use, or ownership that is not so exempt), the owner
of the building must within 10 days after the change in status, use, or
ownership pay all additional taxes that would have been due if the
building or part of the building had originally been used as it is later
used. If the building owner does not pay any additional tax when due,
each later owner is liable for the tax, and any interest or penalty due,
until all taxes, interest, and penalties are paid.
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
ill
Notwithstanding any other provision of this Chapter, an applicant for a
building pennit need not pay any development impact tax,
Transportation Mitigation Payment. or School Facilities Payment due
until:
82
83
ill
if the building is a single-family detached or attached residential
building, the earlier of:
0f:\laW\billS\1126 development impact taxes-payment\1126
bill5.doc
 PDF to HTML - Convert PDF files to HTML files
EXPEDITED BILL
No. 26-11
84
CA)
the final inspection of the building by the Department of
Permitting Services: or
85
86
87
88
LID
ill
6 months after the building permit is issued: and
if the building is a multi-family residential or non-residential
development. the earlier of:
89
CA)
the final inspection of the building by the Department of
Permitting Services: or
90
91
92
93
LID
12 months after the building permit is issued.
The rate of the tax or Payment due is the rate in effect when the tax or
Payment is paid.
52-51. Calculation of development impact tax.
94
95
(a)
The Department of Permitting Services must calculate the amount of the
applicable development impact tax due for each [building] [[use and
occupancy]] building permit by:
(1)
determining the applicable impact tax district and whether the
permit is for development that is exempt from the tax under
Section 52-49(f);
(2)
verifying the number and type of dwelling units and the gross
floor area and type of nonresidential development for which each
[building] [[use and occupancy]] building permit is sought;
(3)
(4)
determining the applicable tax under Section 52-57; and
multiplying the applicable tax by:
(A)
(B)
the appropriate number of dwelling units; and
the gross floor area of nonresidential development.
96
97
98
99
100
101
102
103
104
105
106
107
108
109
(b)
If the development for which a [building] [[use and occupancy]]
building permit is sought contains a mix of uses, the Department must
@f:\laW\biIlS\1126 development impact taxes-payment\ 1126 bill S.doc
 PDF to HTML - Convert PDF files to HTML files
J::VD,=n'T,=n
BILL
No. 26-11
110
111
112
113
114
separately calculate the development impact tax due for each type of
development.
(c)
If the type of proposed development cannot be categorized under the
definitions of nonresidential and residential in Section 52-47, the
Department must use the rate assigned to the type of development
which generates the most similar traffic impact characteristics.
(d)
The Department must calculate the amount of the development impact
tax due under this Article in effect when the [building] [[use and
occupancy]] building permit application is submitted to the Department,
or before a [building] [[use and occupancy]] building permit is issued
by a municipality.
(e)
A [building] [[use and occupancy]] building permit application, or if the
property is located in a municipality with authority to issue [building]
[[use and occupancy]] building permits, a request to determine the
amount of the impact tax, must be resubmitted to the Department if the
applicant changes the project by:
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
(l)
(2)
(3)
increasing the number of dwelling units;
increasing the gross floor area of nonresidential development; or
changing the type of development so that the development impact
tax would be increased.
The Department must recalculate the development impact tax based on
the plans contained in the resubmitted [building] [[use and occupancy]]
building permit application.
52-54. Refunds.
(a)
Any person who has paid a development impact tax may apply for a
refund of the impact tax if:
(l)
the County has not appropriated the funds for impact
@f:\Iaw\billS\1126developmentimpact taxes-payment\1126 bill5.doc
 PDF to HTML - Convert PDF files to HTML files
EXPEDITED BILL
No.
26-11
137
138
139
transportation improvements of the types listed in Section 52-58,
or otherwise formally designated a specific improvement of a
type listed in Section 52-58 to receive funds, by the end of the
sixth fiscal year after the tax is collected;
(2)
the [building] [[use and occupancyl1 building permit has been
revoked or has lapsed because construction did not start; or
(3)
the project has been physically altered, resulting in a decrease in
the amount of impact tax due.
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
*
52-55. Credits.
(a)
(1)
*
*
A property owner is entitled to a credit if the owner, before July
I, 2002, entered into a participation agreement, or a similar·
agreement with the state or a municipality, the purpose of which
was to provide additional transportation capacity.
A property
owner is also entitled to a credit if the owner receives approval
before July I, 2002, of a subdivision plan, development plan, or
similar development approval by the County or a municipality
that requires the owner to build or contribute to a transportation
improvement that provides additional transportation capacity.
The Department of Transportation must calculate the credit. The
credit must equal the amount of any charge paid under the
participation agreement. The Department may give credit only
for [building) [[use and occupancYI1 building permit applications
for development on the site covered by the participation
agreement.
*
(b)
*
*
A property owner must receive a credit for constructing or contributing
to an improvement of the type listed in Section 52-58 if the
(2):\laW\billS\
1126
development impact taxes-payment\
1126
bill
5.doc
 PDF to HTML - Convert PDF files to HTML files
~~~BILL
No.
26-11
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
improvement
reduces
traffic
demand
or
provides
additional
transportation capacity. However, the Department must not certify a
credit for any improvement in the right-of-way of a State road, except a
transit or trip reduction program that operates on or relieves traffic on a
State road or an improvement to a State road that is included in a
memorandum of understanding between the County and either
Rockville or Gaithersburg.
(l)
If the property owner elects to make the improvement, the owner
must enter into an agreement with a municipality or the County,
or receIve a development approval based on making the
improvement, before any [building] [[use and occupancy]]
building permit is issued.
approval must contain:
(A)
(B)
the estimated cost of the improvement, ifknown then;
the dates or triggering actions to start and, if known then,
finish the improvement;
(C)
a requirement that the property owner complete the
improvement according to applicable municipal or County
standards; and
(D)
any other term or condition that the municipality or County
finds necessary.
(2)
The Department of Transportation must:
(A)
(B)
(C)
review the improvement plan;
verify costs and time schedules;
determine whether the improvement IS an impact
transportation improvement;
The agreement or development
l§)-f:llaW\billS\1126 development impact taxes-payment\1126 bill 5.doc
 PDF to HTML - Convert PDF files to HTML files
EXPEDITED BILL
No.
26-11
191
192
193
194
195
196
197
198
199
200
(D)
determine the amount of the credit for the improvement
that will apply to the development impact tax; and
(E)
certify the amount of the credit to the Department of
Permitting
Services before that
Department
or a
municipality issues any [building] [[use and occupancy]]
building permit.
*
52-56. Appeals.
*
*
After determination of the amount of the development impact tax or credit due,
an applicant for a [building] [[use and occupancy]] building permit or a property
owner may appeal to the Maryland Tax Court to the extent permitted by state law or,
if the Maryland Tax Court does not have jurisdiction, to the Circuit Court under the
~t1aryland
201
202
. 203
204
Rules of Procedure that regulate administrative appeals. If the appealing
party posts a bond or other sufficient surety satisfactory to the County Attorney in an
amount equal to the applicable development impact tax as calculated by the
Department of Permitting Services, the Department or municipality must issue the
[building] [[use and occupancy]] building permit if all other applicable conditions
have been satisfied. The filing of an appeal does not stay the collection of the
development impact tax until a bond or other surety satisfactory to the County
Attorney has been filed with the Department of Permitting Services.
52-59. Transportation Mitigation Payment.
205
206
207
208
209
210
211
212
(a)
In addition to the tax due under this Article, an applicant for a [building]
[[use and occupancy]] building permit for any building on which an
impact tax is imposed under this Article must pay to the Department of
Finance a Transportation Mitigation Payment if that building was
included in a preliminary plan of subdivision that was approved under
the Transportation Mitigation Payment provisions in the County
213
214
215
216
217
@f:\laW\billS\1126 development impact taxes-payment\1126 bill 5.doc
 PDF to HTML - Convert PDF files to HTML files
EXPEDITED BILL
No.
26-11
218
219
220
221
222
223
224
225
226
227
228
229
230
231
232
233
234
235
236
237
238
239
240
241
242
243
244
245
5:~-89.
Subdivision Staging Policy.
*
Imposition and applicability of tax.
*
*
(a)
An applicant for a [building] [[use and occupancYl1 building permit for
a residential development must pay a development impact tax for public
school improvements in the amount and manner provided in this Article
before a [building] [(use and occupancyl1 building permit is issued for
any residential development in the County unless:
(1)
a credit for the entire tax owed is allowed under Section 52-93; or
an appeal bond is posted under Section 52-56.
(2)
52-93. Credits.
*
*
(b)
*
*
*
*
If
the property owner elects to make a qualified improvement, the owner
must enter into an agreement with the Director of Permitting Services,
or receive a development approval based on making the improvement,
before any [building] [[use and occupancYl1 building permit is issued.
The agreement or development approval must contain:
(1)
the estimated cost of the improvement, ifknown then,
the dates or triggering actions to start and, if known then, finish
the improvement.
(2)
(3)
a requirement that the property owner complete the improvement
according to Montgomery County Public Schools standards, and
(4)
(c)
such other terms and conditions as MCPS finds necessary.
MCPS must:
(1)
(2)
(3)
review the improvement plan,
verify costs and time schedules,
determine whether the improvement
IS
a public school
@f:\laW\billS\1126 development impact taxes-payment\1126 bill 5.doc
 PDF to HTML - Convert PDF files to HTML files
EXPEDITED BILL
No.
26-11
246
247
248
249
250
251
252
253
254
255
256
257
258
259
260
261
262
263
264
265
266
267
268
269
270
271
272
improvement of the type listed in Section
52-91
(d),
(4)
(5)
determine the amount of the credit for the improvement, and
certify the amount of the credit to the Department of Permitting
Services before that Department or a municipality issues any
[building] [[use and occupancy]] building permit.
*
52-94. School Facilities Payment.
(a)
*
*
In addition to the tax due under this Article, an applicant for a [building]
[[use and occupancYl1 building permit for any building on which a tax is
imposed under this Article must pay to the Department of Finance a
School Facilities Payment if that building was included in a preliminary
plan of subdivision that was approved under the School Facilities
Payment provisions in the County Subdivision Staging Policy.
*
Section. 2.
l(~gislation
*
*
The Council declares that this
Expedited Effective date.
is necessary for the immediate protection of the public welfare. This Act
takes effect
[[91
days after it becomes law]] on December
1. 2011.
The payment
date for the development impact tax imposed under
Article~
VII and XII of Chapter
52,
as amended by Section 1 of this Act, applies to any building for which an
application for a [[use and occupancy]] building permit is filed on or after that date.
The payment date for the Transportation Mitigation Payment and School Facilities
Payment. imposed respectively under Section
52-59
and
52-94,
apply to any
Payment required on or after that date. [[However, an applicant need not pay the tax
before receiving a use and occupancy permit for development if the applicant paid
the tax before receiving a building permit for the same development.]]
Section 3. Expiration.
Section
52-50(1),
inserted by Section
1
oftllis Act,
e£illires
011
Dece;mber
11
2016.
@t\laW\bilIS\1126 development impact taxes-payment\1126 bill 5.doc
 PDF to HTML - Convert PDF files to HTML files
LEGISLATIVE REQUEST REPORT
Bill 26-11
Taxation
-
Development Impact Taxes
-
Payment
DESCRIPTION:
Requires any development impact tax, and the associated
transportation mitigation and school facilities payments, to be paid
before a use and occupancy permit is issued, rather than before a
building permit is issued.
Requiring impact taxes to be paid before a building permit is issued
can cause cash flow difficulties for builders since the payment comes
well before the building is sold or leased.
To mitigate cash flow hardships that builders encounter without
reducing impact tax payments to the County.
Department of Permitting Services, Department of Finance
To be requested.
To be requested.
To be requested.
To be researched.
Michael Faden, Senior Legislative Attorney, 240-777-7905; Glenn
Orlin, Deputy Council Staff Director, 240-777-7936
Taxes and payments apply County-wide.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSE1WHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
Not applicable.
@
f:\law\bills\1126 development impact taxes-payment\legislative request rei
 PDF to HTML - Convert PDF files to HTML files
OFFICE OF THE COUNTY EXECUTIVE
ROCK
VILLE, MARYLAND
208.50
Isiah Leggett
County Executive
MEMORANUM
October 17,2011
TO:
FROM:
SUBJECT:
Valerie Ervin, County Council President ")
Isiah Leggett, County Executive
~
~
~
Bill 26-11, Development Impact Taxes - Payment
As Council considers Bil126-11, Development Impact Taxes - Payment, I would
like to ensure that you are fully infonned regarding the potential consequences of the bill as it is
currently drafted. You have already received the Fiscal and Economic Impact Statement (FEIS)
prepared by my staff. I have attached a copy of that analysis to this memorandum.
In
2009, I requested introduction of Bill 4-09, Development Impact Taxes ­
Payment, which would have provided a temporary, modest impact
tax
payment deferral as part
of my economic relief package. The County Council at that time chose not to proceed with Bill
4-09. Bill 26-11 has some significant differences from the bill that I proposed two years ago.
These differences are critical and I believe should be made clear for your consideration.
Most importantly, I want to stress that the current fiscal situation is materially
different from where we were two years ago. We had all hoped that the economic recovery
would have begun by now and that the County's fiscal picture would be brighter. We also were
not confronted with potential downgrading of our bond ratings and therefore, were not focused
on reducing our general obligation debt service. And, we had not made the significant
reductions in the operating budget that we have had to make for the last three years, reducing
many programs, eliminating 10% of our workforce and requiring our employees to go without
pay increases. As the County Council considers Bill 26-11, I want to be sure that you are fully
aware of the immediate impact upon the County's cash flow and the significant differences in
circumstances from when you considered my proposal two years ago.
The attached PElS indicates that there are potentially significant fiscal
implications to the current bill that will make the development of an already difficult FY13-18
CIP even more difficult. \Vbile there may be some relatively minor adjustments to this analysis,
based on different assumptions, the FEIS suggests that in the first year and a half of the bill's
 PDF to HTML - Convert PDF files to HTML files
Valerie Ervin, President
October 17, 2011
Page 2 of3
implementation (FY 12 and FY 13), the County could lose as much as $17 million in impact tax
revenues for school and road construction. We are likely to be dealing with a very difficult fiscal
picture for the foreseeable future, and we must pare back the amount of General Obligation
bonds that we issue in order to comply with recently revised and approved fiscal policies .. We
have represented to the public and the rating agencies that we would adhere to these policies.
Therefore, it is important that Council understand that we will not be able to fund all of the many
worthy projects that are going to be requested, either by County Government departments or by
independent agencies such as Montgomery County Public Schools, Montgomery College and
Maryland-National Capital Park and Planning Commission.
A list of the road and school projects that are currently funded by the impact tax
revenue is shown in Attachments 3 and 4 of the FEIS. The Council will have to reprogram funds
jn FY12, FY13 or FY14 from other projects or programs in order to make up the revenue loss to
these projects. Alternatively, the Council may choose to delay these projects.
There are also several key differences between Bill 26-11 and Bill 4-09 that are
important to the Council's consideration.
As
originally proposed, Bill 4-09 required that a
deferral agreement be signed by the applicant at the time the building permlt is issued. This type
of agreement would have required the placement ofa lien on the property to protect the County
from non-payment of deferred taxes or the transfer of the property to another owner prior to
payment of the impact tax. There is no such protection for the County in the current legislation
other than the ability to deny the issuance of the use and occupancy permit if impact taxes are not
paid at that stage. This may trigger concerns as property sales approach settlement.
Furthermore, as outlined
in
the FElS, there are enough loopholes and unpredictability jn this
mechanism to cause concern about the collection of impact taxes. For these reasons, I urge the
Council
to
include some of the protections that were included in Bil14-09.
Bill 4-09 required payment at a time certain after the issuance of the building
permit. This provided for a definite time period within which the County would be assured of
payment. The open ended and unpredictable nature ofthe use and occupancy permit brings a
level ofuncertainty to a significant revenue stream that will make it more difficult to plan and
implement construction projects tied to the impact
tax.
For residential single family detached
and attached homes, I recommend that you amend Bi1l26-1l to require that the impact tax be
paid either six months after issuance of the building permit or at the time of final inspection
(which with residential properties usuaJly occurs shortly before the use and occupancy permit is
issued), whichever occurs first. For commercial properties and multi-family high-rise properties,
I recommend that you amend Bill 26-11 to require that the impact tax be paid either twelve
months after issuance of the building permit or at the time of finaJ inspection, whichever occurs
first. Payment as a condition of final inspection protects the County's ability to collect since the
County still has a clear leverage point with the builder.
Bill 4-09 would have sunset after 10 months, which Executive staff later agreed to
extend to two years. If that agreement had been implemented, Bill 4-09 would have allowed for
the deferral of impact tax payments for 12 months for any building with a permit issued within a
 PDF to HTML - Convert PDF files to HTML files
Valerie Ervin, President
October 17,2011
Page 3 of3
two year period. As a result, within three years after adoption of the bill, the County would have
recouped all revenues and the revenue stream would have gone back to nonnal. I recommend
that Bill 26-11 be amended so that it sunsets two years after enactment.
In
two years, if
warranted by the economic situation, the Council may repeal the sunset.
Finally, in order to mitigate the potential impact ofbuilders holding off on
seeking building permits until the effective date of this legislation,
I
urge the Council to make
Bil126-11 expedited legislation. The Department ofPennitting Services has seen that builders'
decisions are very much influenced by the commencement date oflegislation that is either
favorable or unfavorable to their cost of doing business. By making this expedited legislation,
the time period between enactment and implementation is minimized and, therefore, the
potentially negative effect on building permit activity is minimized.
I
appreciate your effort to assist me in the revitalization of the County's economy.
I
look forward to working with you to develop legislation that achieves your goals while also
preserving a critically important revenue stream.
Attachment
c;
Joseph Beach, Finance Director
Kathleen Boucher, ACAO
Jennifer Hughes, OMB Director
Arthur Holmes, DOT Director
Diane Jones, DPS Director
Steve Silverman, DED Director
 PDF to HTML - Convert PDF files to HTML files
OFFICE OF MANAGEMENT AND BUDGET
lsiah
Leggett
County Executive
Jennifer A. Hugbes
Director
MEMORANDUM
October 4, 2011
TO:
. Valerie
Erv~~nt,
County
Council
Jennifer
A.
~'B.
Director
Council Bill 26-11, Taxation- Development Impact
Taxes- Payment
FROM;
SUBJECf:
.
The purpose ofthis memorandum is to
transmit
a fiscal and economic impact statement
to the Council on the subject legislation.
.
LEGISLATION
SJJ:MMA.RX
Bi1l26-11 requires that any development impact
tax.
and the associated
transporta~on
mitigation and school facilities payments, be paid before a use and occupancy pennit is issued, ratherthan
before a building permit is issued.
FffiCALANDECONOMGCSU~Y
The Department ofFinance estimates
that
revenues collected in FY12 will
be
reduced
by
$13.4
million
from the
baseline
forecast
of$16.8
million for
both
transportation and school development
impact taxes. (Note: The revenue impacts for
the
transportation development impact
tax
exclude
Rockville and Gaithersburg and include residential and only office and retail categories for the non­
residential sector because these were the only data available from the Department ofPermitting Services
regarding number ofdays from issuance of
pennitto
issuance
of
use and
occupancy
permit.)
The Department of Finance estimates that revenues collected for
FY13
will
be
reduced
by
$3.8 million from a baseline forecast of $17.5 million. For FY12 and
FY13.
the total reduction in
revenues attributed to the enactment ofBill 26·11 is approximately $17.2 million. Most of
that
reduction .
occurs in FY12 and
is
based on the assumption
that
no permits will
be
issued between October 1,2011
and February 1, 2012 because those applying for the permits
will wait
until the new legislation takes
effect. This delay
is
likely to occur because the new legislation is more fmancialty beneficial and
the
time
between
the
issuance ofa building permit and the issuance ofthe occupancy and use permit span two
fiscal
years.
See
Attachment 1 for the Depanment of Finance's revenue impact summary.
Offtce
Df
the Director
101 Monroe Street, 14th Floor • Rockville,
Maryland
20850 • 240.777·2800
www:montgomerycollntymd.gov
montgomerycountymd.gov/311
240-773-3556 TTY
 PDF to HTML - Convert PDF files to HTML files
Valerie Ervin, President, County Council
October
4,
2011
Page 2
These estimates were based
on
the following assumptions:
1.
Information provided by County Council
staff
assumes that the bill
will
be enacted on February I,
2012. Based on this date, the Department ofFinance assumes that there
wiU
be no.permits issued
between October 1, 2011 and February 1, 2012.
As
a result ofthe time lag between October and
February, there could be no revenues collected over that five-month period.
2. The Department
of
Permitting Services provided the length ofdays between the issuance ofa
building
permit
and the
issuance
of
the
use and
occupancy permit
as
follows:
Residential (excluding multi-family units) ....... 158
~ays
Multifamily housing..........................................
224
days
Office ................................................................
366
days
Retail .................................................................200 days
The revenue loss would significantly affect impact tax funded school and transportation
projects
in
the Capital Improvements
Program
(eIP).
In
FY12, the estimated reduction in schools and
transportation impact taxes represents 77 and 34 percent, respectively, of the FY12 programmed impact
tax revenues. [Funding Detail by Revenue Source (CIP260P2) attachments 3 and 4] The Council would
have
three
options:
• In
order to keep the current impact tax funded projects on schedule, General Fund resources
would have to
be
advanced, which would negatively affect the County's cash flow.
• In
order to protect the General Fund, the impact tax funded projects could be modified, either by
delaying or
reducing
the scope of projects.
• Or the impact
tax
funded projects could
be
modified by replacing the impact
tax
revenues with
another funding source such as General Obligation Bonds. This option would also have negative
effects on other parts ofthe CIP as funds are shifted to
fill
the gap created by the deferred
revenue. At this point,
we
do not anticipate having
this
amount ofexcess
bonds
in
other projects
to transfer
to
schools and
transportation
projects, and our FY12 set
aside is
only
$12.97 million.
If
impact taxes are replaced with current revenue, there would be a negative impact on cash flow
and fund balance.
There are logistical issues with the proposed bill as well that could potentially increase
the
fiscal
impact ofthe proposed bill. Under Chapter 59 of the County's Zoning Code, there are several
situations where a use and occupancy permit
is
not required. These exceptions from the use and
occupancy permit or certificate requirement
do
not correspond to exemptions
ftotn
the impact
tax
and
could possibly create unintended additional or new exemptions from the
tax.
Additionally, since this bill also applies to residential properties, the possibility exists
that
this change conld create a collection issue. It is possible
that
families would be allowed to move into a
home before the use and occupancy
permit
was actually issued
and
the impact tax
was
paid. At that point
it becomes more difficnlt to col(ect the impact tax as the leverage over the builder, who is responsible
for
the payment
of
the impact
tax.,
would
be
eliminated.
@)
 PDF to HTML - Convert PDF files to HTML files
Valerie Ervin, President. County Council
October 4, 2011
Page 3
The
economic
impact of this bill
is
very difficult to quantify since it
would
rely
on
a
variety ofassumptions regarding the investment behavior of builders and developers out ofcontext of
the
realities of
the
current economic landscape. Anecdotally, the Executive Branch
has
not heard from the
building community, particularly commercial developers, that deferral of the collection of impact fees to
the time of use and occupancy
permit
would have an effect on a particular project's ability to move
forward, or otherwise effect the timing associated with launching a project. As you know, our
Department ofEconomic Development routinely works with builders and developers
to
ensure
iliat
obstacles to their projects are minimized. Additionally. the members of the building community that are
advocating for the deferral of these
payments
have not made Executive staff aware ofany statistical or
empirical data, from
either
a local or national perspective. which suggests that a delay in the payment of
required. impact taxes will pave the way for developments
to
be constructed.
The attached information (attachment 2)
from
the Department ofFinance'provides a
broad economic analysis ofthe current and projected Montgomery County real estate market
The folIowing contributed
to
and concurred
with
this analysis: Steve Silvennan,
Department ofEconomic Development, Adam. Damin, Office
of
Management and Budget,
Reginald T.letter. Department ofPermitting Senrices, David Platt, Department ofFi.r:lance, and
Michael Coveyou, Department ofFinance.
JAH::ad
Attachments
c: I<.athJeen'Boucher, Assistant ChiefAdministrative Officer
Lisa Austin, Offices of the County Executive
Arthur Holmes, Jr., Director, Department ofTransportation
Joseph F. Beach, Director, Department ofFinance
Diane Schwartz Jones. Director, Department ofPennitting Services
Steve
Si1verm~
Director, Department ofEconomic Development
Amy
Wilson, Office ofManagement and Budget
 PDF to HTML - Convert PDF files to HTML files
NOTE: (1) Non-Residential Transportion Impact Tax Include Office and Retai1 Only
®
 PDF to HTML - Convert PDF files to HTML files
ECONOMIC IMPACT ANALYSIS
BILL 26-11 TAXATION - DEVELOPMENT
IMPACT
TAXES
-PAYMEN:r
The purpose ofBill 26-11, Taxation - Development Impact Taxes - Payment, is
to reduce a builder's carrying costs and thus encourage new construction. The challenge
is
to determine the economic impact ofthe legislation,
i.e.,
how much new construction
activity would occur as a result of enacting Bill 26-11 (Bill). Council
staff
recognizes the
difficulty in estimating the net economic
impac~
to
the
County. As a backdrop,
this
economic impact analysis presents the
~urrent
status ofthe real estate market
in
Montgomery County that will assist in determining the net economic impact. This
analysis includes description ofsales of existing homes, average sales price of an existing
home,
residential construction both single family homes and multifamily residences,
and
an
analysis of construction costs.
new
Residential Real Estate Market
Based on sales of existing homes in Montgomery County through August, the
Department of Finance
(Finance)
estimates that sales
will
decrease
13.6
percent
in
calendar
yeax
2011. That decline follows an increase of 21.8 percent in 2009, largely
attributed
to
the federal fust-time home-buyers credit, and a modest 0.2 percent increase
in
2010.
Total Home Sales
Mon*gomery County
18,000
16,000
14,000
~
12,000
;;
10,000
fIl
<:)
....
~
8,000
6,000
4,000
2,000
0
2005
2006
2oo?
2008
2009
2010
2011 est.
Calen_r YeAr
SOURCES: Metropolitan
Regional
Information System. Inc.
.
Montgomety County Depar1:nJent ofFinance
However, average sales prices for existing homes are expected
to
increase 5.4
percent in 2011, based on data through August. That increase follows an increase of 1.7
percent in 2010 and decreases of 8,4 percent and 13.8 percent
in
2008 and 2009,
respectively.
,
®
 PDF to HTML - Convert PDF files to HTML files
i
Average Home Sales Price
Montgomery County
$600,000 . , . - - - - - - - - - - - - - - - - - - - - - - - - - . . ,
$Soo,OOO
;E
:: $400,000
:.0
$300,000
j
$200,000
$100,000
$0
2005
2006
2007
2008
Calendar Year
2009
2010
2011
est.
SOURCE:: Metropolitan Regional Information System. Inc.
, Montgomery County Department ofFinance
Based on both sales and price
data.
'the housing
marlret
in Montgomery County
continues to
remain
weak
in
2011 and the outlook for 2012 and beyond suggests
continued stress in the number of existing home sales with slight improvement
in
sales
prices.
'''.
Finally~
the amount of inventory ofeDsting homes for sale has remained fairly
constant between 2009 and 2011 - a four-month supply ofhomes for sale. That
inventory-to-sales ratio is below the peak ofa 7.5 month supply in 2008 but above the
ratio of a one-month supply during the housing boom between 2001 and 2005.
Construction Activity
The number ofnew
residential
construction
starts
(units) increased
in
fiscal year
'(FY)
2011 from 1,386 units to 2,275 units - an increase of 64.1 percent. However,
that
figure includes both single-family residential units and multi-family residential
units.
The number ofsingle-family units
started
FY2011 was nearly 700 compared to nearly
780 the year before. Over the past five fiscal years, the number ofnew single-family
units started average 833
per
year. That number is down significantly from an average of
3,000 units per year during the housing boom period between 2001 and 2006.
@
 PDF to HTML - Convert PDF files to HTML files
Number of New Residential
Starts [
for
Single~Family
Units
5.000 - , . . - - - - - - - - - - - - - - - - - - - - - - - - - . . . . ,
4,500
+ - - - - - - - - - - - - - - - - - - - - - . . .
~--__;
4,000
3,500
S
3,000
C
2,500
,
,
.'
::J
2,000
1,500
1.000
500
o
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Fiscal Year
SOI..IRCE:
I\ItGraw-HilI
Construction
The number ofnew multi-family units started exhibited much volatility over the
past
ten
years. From a peak of
3,565
units
in
fiscal year
2005
to a low of
440
units
in
fiscal year 2009, there exists no clear pattern, or construction cycle, ofconstruction starts
for multi-family housing
in
Montgomery County.
Number of New Residential
startsl
for
Multi-Family Units
4,000
-r-----------------~----------,
Ii
II
.!
+-------­
3,000
+ - - - - - - - ­
3,500
J!l
2,500
2,000
::J
1,500
1,000
500
'S
o
2002
2003
2004
2005
2006
2007
2006
2009
2010
2011
Fiscal Year
SOURCE: M::Graw
-Hill
Construction
The number ofnew non-residential construction starts (projects) increased
slightly from 80 projects in
FY2010
to
97 projects
in
FY2011.
Over the past ten fiscal
years, non-residential construction can be divided into three distinct cycles:
FY2002·
@
 PDF to HTML - Convert PDF files to HTML files
FY2004, when an annual average rate of 343 projects
was
started.; FY2005-FY2009,
when an annual average rate of 145 projects was started, and FY201O-FY2011 when less
than 100 projects per year were started. Over the past three fiscal years, construction new
single-family units and new non-residential projects were at their lowest during the past
ten fiscal years.
This
dramatic slowdown
in
new construction reflected a weak demand
for new residential and non-residential property.
Number of New Non-Residential
Construction Starts
450T---------------------~----------------------------~
400
350
I
VI
300
250
200
150
100
50
o
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
·Flscal
Year
SOURce McGraw ·HlII
Construction
Construction Costs
Finally.
the Department ofFinance estimated the future construction costs using
the construction
cost
index developed by
Engineering
News
Record
for the Baltimore
region -
there
is no
index for
the
Washington
region.
Based on that estimation,
construction costs are expected
to
increase slightly above 3.00 percent
in
calendar 2011
and 2012. Those percentages.are down from the
435
percent in 2009 and
5.19
in 2010.
i
@
 PDF to HTML - Convert PDF files to HTML files
Percent Change in Construction Cost Index
(Baltimore MSA)
6.00%
6.00%
6
~
4.00%
3.00""
2.00%
1.00%
0.06%
0.00%
2008
J
2007
2008
2009
2010
2011
est.
2012
est.
Calendar Year
SOURCES:
Engineering
News
Record (2006-2010)
IVtontgomery County Department of FInance
(2011
est••
2012
est.)
Given this backdrop in residential
and
ooo-residential coostrnction, especially
during the past three fiscal yeats, the economic impact ofBil126-11 is difficult to
determine with
any
specificity. Ifthe demand for housing and non-residential property
in
Montgomery County improves. that improvement may not occur
in
the very near
term.
:1
:1
I
 PDF to HTML - Convert PDF files to HTML files
Funding Detaii
by
Revenue Source, iJepartmentiAgencyand Project
(SOOus;
Impact Tax
Thru
Pro}ed
Total
Ro~1e
Town
Center
SIlver Spl10g Tl'anslt Center
Rem.
fY10
FY10
6Yllar
Total
0
0
0
0
FY11·
!'Vi2
!'Vil
0
0
I)
FYi4
FY15
0
FY1G
Beyond
GYears
General
SelYfces
500434
5,782
509974
Sub-Total
1,802
7,584
988
5,782
0
5.782
988
0
1.802
1.802
C
a
0
0
0
0
0
0
0
0
(}
0
0
0
0
0
0
0
0
0
0
0
0
0
0
[)
Transportation
500100
500119
500151
500311
500401
500403
500516
GreelIcastle Road
Bethesda
Bikeway
and
PedeStrian
FacIJl1Ies
Woodlleld Road
extended
Montrose
PalkwayWest
Nellel Street Extended
Stringtown Road I:xtended
0
1.746
0
484
0
500
0
0
0
782
162
0
1.195
0
207
0
0
0
0
0
0
(l
17,568
1,195
5,199
16,917
651
-112
0
0
Q
112
5,199
2.985
0
1.195
0
(I
0
0
207.
4,553
1,215
0
0
0
0
I)
en
<=::)
I
....
at
500717
500719
500722
500724
500905
Father Hurley lliw.
Eldended
Montrose ParkWay
East
Chapman AYenuli Elctended
State Tnmsportatlon PNIIclpatiOll
WatJdos
MIl! Road
extended
Falls Road
East
SIde Hl'kerf Biker Palll
Malrcpolllan
2tanc:tl Trail
White
Frll1t
Trame
Ana(vsls
and
Millgatioll
Interaeci!on
and
Spot Improvemenls
3,192
12,894
5,386
717
0
0
0
0
0
0
0
0
256
0
0
5;006
0
0
0
0
(l
12,177
5.386
0
823
0
2.783
1.423
0
0
0
0
1,988
1.925
0
0
0
0
0
2,823
100
. 6.006
5,Zl1
2.330
685
100
0
3,143
2.330
685
100
0
0
0
0
0
0
0
0
()
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2,013
2.330
0
0
0
0
0
0
0
Q
0
0
1.130
0
2,134
0
501110
501202
0
0
117
0
Q
507017
5011000
509274
509321
SUbdlvtalon
Roads
Partk:ipation
Robey
Road
0
0
258
4,602
Norbeclc
Road
Extended
Faclllty P!8I1nlng-Transportation
North Bethesda Trail
Briggs
CI1aney
Road East
of
US 29
4.602
570
0
0
509337
509922
60004.2
509944
509954
SUb·Totel
1,895
44
337
174
337
917
211
0
743
0
0
0
0
1,281
0
0
0
0
0
0
0
0
161
0
0
I)
167
0
0
167
0
0
0
(I
67
0
0
0
0
a
660
0
0
0
0
621
\)
0
0
0
0
0
0
0
0
0
0
0
{}
0
0
0
0
0
0
0
0
0
0
0
VallEOy
Park
Drive
Germantown Road Extended
851
70.437
78.021
174
851
34.400
40,182
37
0
6.837
8,43&
27.266
27,266
0
0
3,540
3.640
0
0
6.743
6.743
0
0
4.373
4.373
0
0
4,0110
4,080
0
()
0
4.410
4,410
0
0
0
0
2,134
2,134
Revenue
$oUl'CQ
Total
4,120
4,120
CIPlfiOPl - Co1lllty CoundJ
Page
51
oi10fi
®--
------.--.---~.-----------.-
. ---.
..
- _._". . ---------­
 PDF to HTML - Convert PDF files to HTML files
Funding'Detaii by Revenue Source, Department/Agency and
Proj6~t
($OOOs)
Schoo/slrnpactTax
Thru
Project
Rem.
FY10
SYear
Total
FY11
Total
FY10
FYi2
FYi3
FV14
FV1S
FYi6
0
0
0
0
Beyond
6'
YellCtI
Public Schools
016505
016506
016519
016545
026503
ThCm1111 W.
Pyle
MS AddlUon
Wesltand MSAdditlon
Redland MS -ImproVements
Nonnwood High School
Seven
locbl
ES
AdditIonlModemizalkln
Travllah
ES
Addition
a
o
o
2.000
2.300
o
o
2,000
o
o
(1
o
o
o
o
o
o
o
I)
o
o
2,300
o
o
o
o
o
I)
o
o
o
o
2.300
026504
036503
056502
056503
056504
056516
066513
076501
075510
086500
086501
o
7,644
I
....
.roo
....
0'1
086502
096500
096501
096502
()96503
096504
096505
096506
OOS5C8
116503
116504
116506
Roscoe NIXES (Norlheas!CoosortiumES#16)
Belt1eStfa.che1lY Chase HS Addl1lon .
William B. Gibbs.
Jr.
ES {Clarksburg
#a}
Fields Road ES Addl!!on
MCPS AlfMlablllly ReconcIJlatlon
Schools Impact Tax SUbstitution
FalI$IDead E!S
Addition·
MOPS FlJndlng Reconclilation
East Sliver SpIlng SS
Addition
Takoma
Park
58 Addition
PooIeslilUe HS
labol8tory
Upgrades
and
Additlon
Brookhaven ES Addillon
Faldand ES Addition
Fox Chapel SS AddiHon
Hannony
HUls ES Ac1dllion
JacKson
Road ES Addllfon
Mootgom&ly
Knolls
ES
Addition
Rock
VJaw
li:S Addillon
Whetstone
Addition
Bradley
Hilla
ES
Addltlon
Clarksburg Clue-tar E8 (ClarlcabUrg VIllage SIte
7,644
o
3.344­
212
o
1,594
212
o
,0
1,750
o
o
(1
o
o
o
o
0'
o
o
o
o
o
o
o
o
I)
o
6.105
o
I)
o
o
o
o
I)
o
890
o
o
915
I)
o
o
915
o
o
I)
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
13
o
o
(I
o
o
o
o
o
o
(I
0
0
·0
o
o
o
o
o
o
o
o
o
o
o
o
I)
o
0
0
0
0
0,
o
o
(I
Q
o
o
o
o
o
o
o
o
o
o
o
o
Q
o
o
o
o
o
4,300
o
1.115
o
I)
o
1,175
o
a
2,404
2,467
o
o
o
o
o
o
o
o
2,404
o
2.381
o
o
o
2,467
o
o
·0
o
o
o
2,467
o
o
o
o
o
I)
I)
o
o
o
o
o
I)
I)
o
o
o
o
o
o
o
0
0
0
0
0
o
(I
o
o
0
(I
(I
o
(I
o
0"
es
4,309
550
. iOOD
2,000
2,000
2,000
o
o
o
o
o
o
o
898
1,315
17.763
o
o
o
,0
1,928
000
2,000
2,000
2,000
2,000
1,928
650
2.000
o
o
o
o
o
o
o
o
o
(I
o
G
0
0
0
0
o
(I
o
o
o
o
o
2,000
2,000
o
o
2,000
0
0
o
o
o
o
2,000
o
o
2,000
o
o
o
12.100
a
(I
o
o
o
o
o
o
"1)
116507
886536
916567
926515
Sub-Total
ClarksburgfOamascus MS (New)
Oarnestown ES
Addition
Future
ReplacementsfMOdemiZalions
Rehab/Reno.Of Closed
Scl1ool$.
RROCS
Current
Replacemen1sJModemlzallons
21,45()
2,000
(190
o
o
o
2,400
11,000
o
27.450
2,000
690
698
27,615
89,063
o
23.900
70.300
o
o
o
o
o
1,960
o
o
6,180
1.4,480
o
o
o
o
'f,ew
10.890
13,350
o
690
o
. 0
o
o
o
'0
0
0
0
Q
13.350
o
o
8,530
11,510
o
I)
12,100.
o
CIl'1.60Pl-
C011llty
Counel1
..
l"age
~6
oClOIJ
@-----
_
...
""._-
..
-"",---------.
 PDF to HTML - Convert PDF files to HTML files
Timing of Impact FeelTax Payments in Other Maryland Jurisdictions
Anne Arundel - "before the issuance of a building permit for the improvement, a mobile home park
construction permit, or a zoning certificate of use for a change of use" (Anne Arundel County Code,
§ 17-11-206)
Calvt:rt - at the time the building permit is issued, or for new residential construction or a change of use
to residential use, the excise tax can be paid in three installments, with the first installment paid at the
time the building permit is issued (Calvert County Code § 136-14)
Caroline - at the time the lot is initially sold or transferred (Caroline County Code §§166-36, 166-43)
Carroll - before a building permit may be issued (Carroll County Code § 102-6)
Charl.es - collected annually over a period of 10 years at level amortized payments of principal and
inten!st in the same manner as general ad valorem taxes unless otherwise provided by ordinance [first
assessed on the first property tax bill after the use and occupancy permit is issued] (MD Code,
Art
66B
§14.05(f); see also Charles County Code §249-5 )
Dorchester - at the same time a building permit is paid for (Dorchester County Code § 144-33)
development impact fees paid prior to the issuance of a building permit/zoning certificate
(Frederick County Code § 1-22-4); building excise tax - before the issuance of a building permit
(Frederick County Code §1-8-74)
Harford - at the time of application for a building permit (Harford County Code § 123-59)
Howard school facilities surcharge - at the time a building permit is issued (Howard County Code
§20.142); building excise tax at the same time a building permit is paid for (Howard County Code
§20.505)
Prince George's - school facilities surcharge - at the time a building permit is issued (PG County Code
§ 10-192.0 1); public safety surcharge at the time a building permit is issued (PG County Code § 10­
192.11)
Queen Anne's - either paid before issuance of building permit or zoning certificate or promissory note
executed obligating payment upon the earlier of (1) within 18 months of the issuance of the building
permit or zoning certificate or (2) the issuance ofthe certificate of occupancy (Queen Anne's County
Code §18:3-7)
St. Mary's
Talbot
condition of issuance of building permits (St. Mary's County Code §223-4.5)
Fred(~rick
-
before issuance of a building permit or zoning certificate (Talbot County Code §64-14)
before issuance of building permit (Washington County Building Excise Tax Ordinance
Washington
§5.01)
Wicomico - before issuance of a building permit or zoning certificate (Wicomico County Code § 130-9)
 PDF to HTML - Convert PDF files to HTML files
Scenario 1: Bill 26-11 as Introduced
FY12
School Impact Taxes
FYI3
$14,959,568
$15,826,231
$866,663
FYI4
$16,824,031
$14,984,806
($1,839,226)
FYI5
$17,794,337
$17,500,054
($294,283 )
FYI6
$19,241,175
$17,722,393
($1,518,782)
FYI7
$19,837,543
$18,248,351
($1,589,192)
FYI8
$21,605,645
$19,879,441
($ 1,726,204)
FY12 - 18
$124,552,915
$108,530,581
($16,022,334)
FY13 - 18
$110,262,299
$104,161,276
($6,101,023 )
Baseline
Estimated Revenues
Difference
Transpol'tlltion Impact Taxes
Baseline
Estimated Revenues
Difference
TOTAL
Baseline
Estimated
R~venllcs
Difference
FYI2-FYI3
$14,290,616
$4,369,305
($9,921,310)
$3,155,720
$788,930
($2,366,790)
$3,194,468
$3,441,109
$246,641
$3,443,852
$3,065,610
($378,243)
$3,495,037
$3,131,057
($363,980)
$3,696,892
$3,344,027
($352,865)
$3,727,076
$3,361,038
($366,039)
$3,967,962
$3,573,421
($394,541 )
$24,681,007
$20,705,190
($3,975,817)
$21,525,287
$19,916,260
($1,609,027)
$17,446,336
$5,158,236
($12,288,10 I)
$18,154,036
$19,267,340
$1,113,304
($11,174,797)
$20,267,884
$18,050,415
($2,217,469)
$21,289,374
$20,631, III
($658,263)
$22,938,067
$21,066,420
($1,871,647)
$23,564,619
$21,609,388
($1,955,230)
$25,573,607
$23,452,862
($2,120,745)
$149,233,923
$129,235,772
($19,998,151)
$ 131 ,787,586
$124,077,536
($7,710,050)
Scenario 2: Bill 26-11 with a 2-Year Sunset
FYI2
School Impact Taxes
Baseline
Estimated Revenues
Difference
Total Transportation Impact Taxes
Baseline
Estimated Revenues
Ditlerencc
TOTAL
Baseline
Estimated Revenues
Difterence
FYI2-FYI3
$14,290,616
$4,369,305
($9,921,310)
FY13
$14,959,568
$15,826,231
$866,663
FY14
$16,824,031
$17,494,737
$670,705
FYI5
$17,794,337
$26,180,444
$8,386,107
FY16
$19,241,175
$19,241,175
$0
FYI7
$19,837,543
$19,837,543
$0
FYI8
$21,605,645
$21,605,645
$0
FYI2 ­ 18
$124,552,915
$124,555,080
$2,165
FY 13 ­ 18
$110,262,299
$120,185,774
$9,923,475
$3,155,720
$788,930
($2,366,790)
$3,194,468
$3,441,109
$246,641
$3,443,852
$3,610,253
$166,401
$3,495,037
$5,450,581
$1,955,544
$3,696,892
$3,696,892
$0
$3,727,076
$3,727,076
$0
$3,967,962
$3,967,962
$0
$24,681,007
$24,682,802
$1,795
$21,525,287
$23,893,872
$2,368,585
$17,446,336
$5,158,236
($12,288,101)
$18,154,036
$19,267,340
$1,113,304
($11,174,797)
$20,267,884
$21,104,990
$837,106
$21,289,374
$31,631,024
$10,341,650
$22,938,067
$22,938,067
$0
$23,564,619
$23,564,619
$0
$25,573,607
$25,573,607
$0
$149,233,923
$149,237,882
$3,959
$131,787,586
$144,079,646
$12,292,060
®
 PDF to HTML - Convert PDF files to HTML files
Scenario 3: Bill 26-11 with a November 1,2011 Effective Date
FY12
Schoollmpaet Taxes
Baseline
Estimated Revenues
Difference
Transportation Impact Taxes
$14,290,616
$8,336,193
($5,954,423)
FYl3
$14,959,568
$11,898,477
($3,061,091)
FYI4
$16,824,031
$14,984,806
($1,839,226)
FYIS
$17,794,337
$17,500,054
($294,283)
f'Y16
$19,241,175
$17,722,393
($1,518,782)
FYI7
$19,837,543
$18,248,351
($1,589,192)
FYI8
$21,605,645
$19,879,441
($1,726,204)
FYI2 - 18
$124,552,915
$108,569,714
($15,983,201)
FY 13 - 18
$110,262,299
$100,233,522
($10,028,777)
Baseline
Estimated Revenues
Diftcrence
TOTAL
Baseiine
Estimated Revenues
Difference
FYI2-FYI3
$3,155,720
$1,617,067
($1,538,653 )
$3,194,468
$2,612,972
($581,496)
$3,443,852
$3,065,610
($378,243)
$3,495,037
$3,131,057
($363,980)
$3,696,892
$3,344,027
($352,865)
$3,727,076
$3,361,038
($366,039)
$3,967,962
$3,573,42 [
($394,54l)
$24,681,007
$20,705.190
($3,975,817)
$2 [,525,287
$19,088,123
($2,437,164 )
$17,446,336
$9,953,260
($7,493,077)
$18,154,036
$14,511 ,449
($3,642,587)
($11,135,664)
$20,267,884
$18,050,415
($2,217,469)
$21,289,374
$20,631, III
($658,263 )
$22,938,067
$21,066,420
($1,871,647)
$23,564,619
$21,609.3 88
($1,955,230)
$25,573,607
$23,452,862
($2,120,745)
$149,233,923
$129,274,905
($[9,959,018)
$131,787,586
$119,321,645
($12,465,941)
Scenario 4: Bill 26-11 with a 6-Year Deferral for Single-Family Residential and a 12-Month Deferral
for Multi-Family Residential and Non-Residential
FY12
School lmpact Taxes
Baseline
Estimated Revenues
Difference
Transportatioll Impact Taxes
Baseline
Estimated Revenues
Dif1ercnce
TOTAL
Baseline
Estimated Revenues
Difference
FYI2-FYI3
$14,290,616
$3,990,546
($10,300,070)
FYI3
$14,959,568
$15,070,600
$111,032
FYl4
$16,824,031
$14,632,642
($2,191,390)
FYIS
$17,794,337
$16,769,601
($ [,024,736)
FYI6
$19,241,175
$17,281,156
($1,960,020)
FYI7
$19,837,543
$17,804,812
($2,032,731)
FYI8
$21,605,645
$19,409,401
($2,196,244 )
FYI2 -18
$124,552,915
$104,958,758
($19,594,157)
FY 13 -18
$11 0,262,299
$100,968,212
($9,294,088)
$3,155,720
$788,930
($2,366,790)
$3,194,468
$3,176,955
($17,513)
$3,443,852
$3,378,081
($65,771 )
$3,495,037
$3,455,750
($39,287)
$3,696,892
$3,692,622
($4,270)
$3,727,076
$3,707,063
($20,013)
$3,967,962
$3,938,102
($29,860)
$24,681,007
$22,137,505
($2,543,503 )
$21,525,287
$21,348,575
($176,712)
$17,446,336
$4,779,476
($12,666,860)
$18,154,036
$18,247,555
$93,519
($12,573,341 )
$20,267,884
$18,010,723
($2,257,161)
$21,289,374
$20,225,351
($1,064,023)
$22,938,067
$20,973,778
($1,964,289)
$23,564,619
$21,511,875
($2,052,743 )
$25,573,607
$23,347,504
($2,226,103)
$149,233,923
$127,096,263
($22,137,660)
$131,787,586
$122,3 [6,786
($9,470,800)
~
\~)
 PDF to HTML - Convert PDF files to HTML files
Scenario 5: Bill 26-11 with a 2-Year Sunset, a December 1,2011 Effective Date"and 6-Year Deferral for Single-Family Residential
and a 12-Month Deferral for Multi-Family Residential and Non-Residential (Executive Recommendation)
FYI2
School Impacl Taxes
Baseline
Estimated Revenues
Diflercncc
TnmSllortation Impact Taxes
Baseline
Estimated Revenues
DitTerence
TOTAL
Basciine
Estimated Revenues
DitTerence
FYI2-FY13
$14,290,616
$7,145,308
($7,145,308)
FY13
$14,959,568
$11,710,932
($3,248,636)
FYI4
$16,824,031
$18,031,169
$1,207,138
FYI5
$17,794,337
$26,983,201
$9,188,864
FYI6
$19,241,175
$19,241,175
$0
FYI7
$19,837,543
$19,837,543
$0
FYI8
$21,605,645
$21,605,645
$0
I<'YI2 - 18
$124,552,915
$124,554,973
$2,058
FYI3 ­ 18
$110,262,299
$117,409,665
$7,147,366
$3,155,720
$1,410,033
($1,745,688)
$3.194,468
$2,838,901
($355,567)
$3,443,852
$3,810,980
$367,127
$3,495,037
$5,230,885
$1,735,848
$3,696,892
$3,696,892
$0
$3,727,076
$3,727,076
$0
$3,967,962
$3,967,962
$0
$24,681,007
$24,682,729
$1,722
$21,525,287
$23,272,696
$1,747,409
$17,446,336
$8,555,341
($8,890,996)
$18,154,036
$14,549,834
($3,604,203)
($12,495,198)
$20,267,884
$21,842,149
$1,574,265
$21,289,374
$32,214,087
$10,924,713
$22,938,067
$22,938,067
$0
$23,564,619
$23,564,619
$0
$25,573,607
$25,573,607
$0
$149,233,923
$149,237,702
$3,780
$131,787,586
$140,682,362
$8,894,775
Scenario 6: Bill 26-11 with a 5-Year Sunset, a December 1,2011 Effective Date, and 6-Year Deferral for Single-Family Residential
and a 12-Month Deferral for Multi-Family Residential and Non-Residential (GOFP Committee Recommendation)
FYI2
School Impact Taxes
Baseline
Estimated Revenues
Difterence
Transportatioll Impact Taxes
Baseline
Estimated Revenues
Dillercnce
TOTAL
Baseline
Estimated Revenues
Diflerence
FYI2·FY13
$14,290,616
$7,145,308
($7,145,308)
FY13
$14,959,568
$11,710,932
($3,248,636 )
FYI4
$16,824,031
$18,031,169
$1,207,138
FYI5
$17,794,337
$18,258,120
$463,783
FYI6
$19,241,175
$20,621,745
$1,380,570
I<'YI7
$19,837,543
$20,354,578
$517,036
I<'YI8
$21,605,645
$28,433,121
$6,827,476
FYI2 ­ 18
$124,552,915
$124,554,973
$2,058
FYI3
18
$3,155,720
$1,410,033
($1,745,688)
$3,194,468
$2,838,901
($355,567)
$3,443,852
$3,756,440
$312,587
$3,495,037
$3,727,176
$232,139
$3,696,892
$4,073,152
$376,261
$3,727,076
$4,005,530
$278,454
$3,967,962
$4,871,497
$903,536
$24,681,007
$24,682,729
$1,722
$17,446,336
$8,555,341
($8,890,996)
$18,154,036
$14,549,834
($3,604,203)
($12,495,198)
$20,267,884
$21,787,608
$1,519,725
$21,289,374
$21,985,296
$695,922
$22,938,067
$24,694,897
$1,756,830
$23,564,619
$24,360,108
$795,490
$25,573,607
$33,304,618
$7,731,011
$149,233,923
$149,237,702
$3,780
$110,262,299
$117,409,665
$7,147,366
$0
$0
$21,525,287
$23,272,696
$1,747,409
$0
$0
$131,787,586
$140,682,362
$8,894,775
®
 PDF to HTML - Convert PDF files to HTML files
sum:
460
I
3 BETHESDA METRO CENTER
I
BETHESDA, MD 20814-5367
I
TEL 301.986.1300
I
ATTORNEYS
VWJW.lERCHEARlY.COM
Testimony of William Kominers
Bi1l26-11
(October 4, 2011)
Good afternoon President Ervin and members of the Council, my name is Bill
Kominers. I am attorney with the law firm of Lerch, Early & Brewer in Bethesda and I
am here to speak strongly in support of Bill 26-11. This Bill makes good economic
sense. The sponsor and co-sponsors are to be commended for being proactive in
enhancing the opportunity for construction with its jobs, and occupancy with its
benefits to homeowners and businesses.
I have some brief comments about the benefits of this Bill.
1.
The Bill better fulfills the intent of the Impact Tax by having that tax
collected at the time that the impacts are likely to occur. At the time a building permit
is issued, no impact is created. Only when a building, home, or apartment is occupied
does actual, physical impact occur to the road network or school system. Correlating
the payment of the Impact Tax with the real time implementation of the impact is more
appropriate and better fulfills the underlying justification for the Impact Tax.
2.
Delay in the payment of the Impact Tax will likely allow more approved
building projects to proceed. This is because the shift in time of payment of the Impact
Tax reduces the upfront cost and thereby allows greater borrowing to be used for the
actual implementation of a project. This significantly increases a builder's ability to
secure construction financing and proceed with a project.
3.
This greater ability to finance projects will increase the likelihood of
payments of the Impact Tax later on (at the time of occupancy), because the project
will actually be able to go forward. Without this shift in time of payment, many more
projects will not be able to proceed at all. No project at all means no Impact Tax at all.
Bill 26-11 will increase the opportunity for the County to collect a greater amount of
Impact Tax revenue.
4.
This time shift in payment of Impact Tax has a very positive and
desirable affect on non-residential and multi-family construction. Because of the
lengthy construction time for these projects, the benefit in the eventual cost of the
product to the ultimate consumer is even greater than with shorter term construction. A
construction period range of 18+ months means that the cost ofthe up front Impact Tax
1113740.4
08908.001
 PDF to HTML - Convert PDF files to HTML files
ATTORNEYS
must be financed for that much longer. This results in a higher cost of borrowing and a
higher cost of the ultimate product in the form of higher rents, and sales prices.
Delaying the Impact Tax until the time of occupancy ameliorates this difficulty by
incurring the cost at the time that there is revenue with which it may be paid.
5.
Payment of the Impact Tax is assured with this Bill. Non-residential and
multi-family buildings have always required a certificate of occupancy. This was an
easy step by which to track the payment of the Impact Tax and to ensure that payment
is made prior to the utilization of the structure. In recent years, the County has created
a requirement for an occupancy certificate for one family residential. This can now
provide a similar tracking mechanism for payment of tax. Therefore, there is now no
impediment to the ability to assure that the tax is paid before the building is used.
6.
The result of the Bill will be a simple one-time delay in the revenue
stream, with very little, if any, long-term adverse effect. In 2009, the County Executive
proposed Bill 4-09, providing for a similar twelve month deferral of Impact Taxes as a
part of his II-point stimulus package. That Bill did not move forward at that time. Bill
26-11 should move forward quickly.
Summary. This Bill sends a very positive message to the State and the Country
about Montgomery County and your efforts to address the current economic conditions.
With this Bill, Montgomery County proactively addresses a problem for a suffering
industry. The result will be to encourage and facilitate both the creation of jobs, and
the creation of homes and offices and businesses
--
this will have a long term benefit to
the County. In addition, the Bill supports the underlying principle of the Impact Tax,
by connecting the payment of the tax to the creation of the actual impact. This supports
the philosophy of fairness in Montgomery County and better supports the reasoning
behind the Impact Tax as a whole.
I urge you to act quickly to enact this Bill.
It
does what it needs to do.
Thank you for your consideration. I am happy to answer any questions that you
might have.
1113740.4
08908001
 PDF to HTML - Convert PDF files to HTML files
Testimony on Bill 26-11- Impact Tax payment
Bob Spalding, Development Director
Miller and Smith
October 4, 2011
We want to thank the Councilmembers for introducing the bill. Bill 4-09 was
requested by the Executive, but struggled when there was no easy way to ensure
payment before occupancy permits. DPS' implementation of an occupancy permit
in April creates the easy way to ensure payment after building permit.
The concept of paying a tax at a fair time is not a foreign concept. The vast
majority of Montgomery County residents pay their County income tax through
payroll withholding. We pay the gas tax when we buy a gallon of gas and not years
of gas tax when we buy a car.
As the bill recognizes, the occupancy permit is the fair time for the impact tax to be
collected because it is at the time of the impact. The occupancy permit is the
closest point to when the impact occurs. Making the payment at a fair time should
be reason enough for the change. However, there are real benefits to the County
and the taxpayers.
The current payment at building permit is large direct cost for the taxpayer but is a
very small opportunity cost for the County. The impact taxes are typically paid
from a construction revolver in our loans. The revolver is replenished by sales
proceeds. By moving the impact tax payment to occupancy permit, it reduces the
amount of time that we are paying interest on the impact tax. More importantly, it
frees up the loan capacity to build houses at a faster pace.
In a townhome neighborhood, if we get seven building permits at a time, we pay a
total of$233,540 ($33,220 per home) in impact taxes. Ifwe complete the homes
in four months, we pay another $3,448 at 4.5% in interest. This reduces our cash
available to build homes and pay workers for four months by $236,988. In a
struggling business climate where cash-on-hand is critical, the proposed change
helps. Virginia passed a similar bill for proffer payments in the entire
Commonwealth in March and it has been helping our recovery there.
The proposal also helps the County in a counterintuitive way by accelerating total
revenue payments after a brief lag. Moving the impact tax payment decreases
interest income a small amount but can generate a greater return. This bill
succeeds if only one more townhome in the whole County receives an occupancy
permit each year.
1
 PDF to HTML - Convert PDF files to HTML files
The County earned 0.22% on its investments last year. If the County is projected to
receive $16 million impact tax and the average delay in payment is six months, this
equals $17,600 in interest. If just one new townhome pays its $33,220 in impact
taxes one year early, the County has more impact tax money than it does under the
current system.
Some say that this change will delay CIP projects. However, the County's FY10
Comprehensive Annual Financial Report
states that the County already has a
mechanism to avoid such delays. On page 82 it states that the General Fund loans
CIP projects funds to "cover construction payments, due primarily to the timing of
reimbursements from Federal, State and other agencies, and to lag time between
programming and collection of certain impact taxes." This intemalloan is repaid
by the impact tax payments.
The impact tax already is a prepayment for County services. On a $300,000
townhome in Clarksburg, the $33,220 in impact taxes equals eleven and a half
years of County property tax ($2,877/year) that a homeowner pays to live in a
$300,000 existing or resale townhome. This is an opportunity to make the
prepayment of taxes fairer.
While we are focused on impact taxes, I noticed that the code-required annual
reporting of impact tax revenue isn't included in the Comprehensive Annual
Financial Report. The impact tax annual reports do not appear to be available on­
line.
It
seems odd that the impact taxes are not part of the comprehensive report. A
more comprehensive picture would be presented if the annual report includes a list
of credits for transportation improvements that are being provided by the private
sector to meet the goal of increased transportation capacity.
Thank you for proposing this bill and the opportunity to comment. We support it
and look forward to its passage.
2