GO Item2
February 25, 2013
Worksession
MEMORANDUM
TO:
FROM:
Government Operations and Fiscal Policy Committee
\{f
Michael Faden, Senior Legislative Attorney
'f\Glenn Orlin, Deputy Council Staff Director
SUBJECT:
Worksession:
Bill 39-11, Taxation - Development Impact Tax - Exemptions
Bill 39-11, Taxation - Development Impact Tax - Exemptions, sponsored by
Councilmembers Floreen and Rice and then-Council Vice President Navarro, was introduced on
December 6,2011. A public hearing was held on January 24,2012 (see testimony, ©17-24).
Bill 39-11 would exempt the market-rate rental dwelling units in any development which
consists of at least 25% affordable housing units from the transportation and school development
impact taxes.
Fiscal impact estimates
An OMB/Finance Department fiscal and economic impact statement (see ©5-14)
concluded that the exemption allowed under this Bill could result in an impact tax revenue loss
of as much as $56.7 million. Council staff believes that this estimate may be substantially
overstated because, among other reasons:
• it assumed that no transportation impact tax credits would be granted on account of the
housing built in specific areas with major transportation programs; and
• it appears not to take into account a provision in current law (County Code §52-90(d))
which reduces the school impact tax by 50% for any non-exempt dwelling unit located in
a development where at least 30% of the dwelling units are MPDU's or other affordable
units.
The OMB fiscal impact statement calculated that the impact tax revenue loss per added
affordable housing unit in selected areas would range from $38,525 to $446,227, and would
average $89,449. The breadth of these estimates suggests the difficulty of generating them. This
also assumes, as OMB noted, that this exemption will give developers sufficient incentive to
actually use it, about which Finance Department staff in the economic impact statement was
skeptical (see © 11-14).
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Council staff estimated the impact tax revenue loss from a hypothetical 100-unit 2­
bedroom garden apartment development, not located in an enterprise zone, in which the
developer would increase the number of MPDU's from 15% to 25% to take advantage of the
exemption in this Bill. We calculated the impact tax lost per each of the 10 added MPDU's, at
current impact tax rates, to be $163,744.
I
Issues and options
Hearing testimony
In their public hearing testimony, representatives of the Housing
Opportunities Commission, Maryland-National Capital Building Industry Association, and
Montgomery Housing Partnership all urged that the Bill be broadened to cover sale as well as
rental units. Attorney Jody Kline also urged that the Bill exempt productivity housing units in
non-residential zones. See testimony, ©17-24. Jim Humphrey of the County Civic Federation
opposed the Bill, suggesting that the Council revisit it when the County's fiscal situation
improves.
Balance
In staffs view, the central issue this Bill raises is how best to allocate scarce
County funds to promote affordable housing. The Draft 2012 Housing Policy, now before the
Planning, Housing, and Economic Development Committee, has action plans and
recommendations that support increased incentives, such as this Bill would provide. The Draft
Housing Policy says that the County should "explore financial and other incentives for high-rise
rental development to make the construction of MPDUs more feasible, especially for projects
providing more than the minimum number of MPDUs and for those providing units with more
bedrooms", and that the County should "create and design incentives that will lead to the
construction of well-located affordable rental housing." However, the Draft Housing Policy's
section on production goals estimates that the average County contribution to construct a unit of
new rental housing is about $40,000. We conclude that the likely cost per added unit under this
Bill, as explained above, along with the loss of revenue which the impact taxes allocate to other
specific uses, makes this exemption a less preferred approach.
Possible modifications
Some ways to more narrowly channel this kind of exemption, in
order to make it a more efficient use of County funds, could include:
Higher thresholds
Is 25% the optimal amount to trigger an impact tax exemption? HOC
and others that looked at this when this Bill was drafted noted that 25% was the highest the
exemption could go and still be likely that the numbers would work to move forward with a
development. HOC staff noted that the 25% ceiling came from "mission driven" developers. On
the other hand, in Bill 11-12 last year the Council selected 30% as the level of affordable housing
that was substantial enough to streamline the property disposition process, and DHCA is
generally looking for at least 30% affordable housing in projects that are being developed on
publicly owned land.
IThe calculation was: impact taxes per unit (school $11,358
+
transportation $7906 total impact tax/unit $19264) x
85 tax-forgiven units
==
$1,637,440 total impact tax revenue loss
110
added MPDU's
==
$163,744 revenue loss per
added MPDU.
2
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Publicly owned land
Should developments on publicly owned land be eligible for an
exemption? (Publicly-owned land, rather than only County-owned, would include, for example,
school or WMATA property.) The tax exemption probably should not apply to developments on
publicly owned land where the value of the land is part of a negotiated development agreement
that requires more than the minimum number of affordable housing units. Similarly, should
developments in the CR zone which receive extra density when they furnish more affordable
housing units also be eligible for this kind of exemption?
Dollar or unit limits
Should the law limit the number of units eligible for this exemption
each year, or the amount of County funds allocated, much like the current system to set the level
of payments in lieu of taxes (PILOTs)?
Applicability
Should this exemption, if enacted, only apply to developments that have
not already received preliminary subdivision approval or site plan approval? Developments that
have gone beyond those points arguably have already "made their pro forma's" and don't need
further County assistance.
Sunset
If
this exemption approach (or any variant of it) is used, should it be reviewed
after several years to see whether it has in fact accomplished its goals at a reasonable cost?
If this Committee is interested in pursuing one or more of these alternative approaches
and obtaining further fiscal impact estimates, Council and Executive branch staff can follow up
on them for the next worksession, tentatively scheduled for March 18.
This packet contains:
Bill 39-11
Legislative Request Report
Fiscal and economic impact statement
Current County impact tax rates
Public hearing testimony
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Circle #
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CORRECTED COPY
Bill No.
39-11
Concerning: Taxation -
Development
Impact Tax - Exemptions
Draft No. _3_
Revised: 12-6-11
Introduced:
December 6, 2011
Expires:
June 6,2013
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _--:-:---_ _ _ _ _ __
Sunset Date:
--=-:.No=n:-=e,,:---:~
_ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Councilmembers Floreen, Rice and Council Vice President Navarro
AN
ACT to:
(1)
(2)
exempt certain market-rate dwelling units from certain development impact taxes;
and
generally amend the law governing development impact taxes.
By amending
Montgomery County Code
Chapter 52, Taxation
Sections 52-49 and 52-89
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law by original bill.
Deleted from 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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BILL NO.39-11
1
Section
1.
Sections 52-49 and 52-89 are amended as follows:
52-49.
Imposition and applicability of development impact taxes.
2
3
4
*
(g)
(1)
*
*
A development impact tax must not be imposed on:
any Moderately Priced Dwelling Unit built under Chapter 25A or
any similar program enacted by either Gaithersburg or Rockville,
(2)
any other dwelling unit built under a government regulation or
binding agreement that limits for at least 15 years the price or rent
charged for the unit in order to make the unit affordable to
households earning less than 60% of the area median income,
adjusted for family size;
(3)
any Personal Living Quarters unit built under Sec. 59-A-6.15,
which meets the price or rent eligibility standards for a
moderately priced dwelling unit under Chapter 25A;
(4) any dwelling unit in an Opportunity Housing Project built under
Sections 56-28 through 56-32, which meets the price or rent
eligibility standards for a moderately priced dwelling unit under
Chapter 25A;
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
ill
any non-exempt rental dwelling unit in
f!
development in which at
least 25% of the dwelling units are exempt under paragraph
ill
20
21
m
Q1
or
(11
or any combination of them; and
[(5)] (Q} any development located in an enterprise zone designated by
the State or in an area previously designated as an enterprise
zone.
22
23
24
25
*
52-89. Imposition and applicability of tax.
*
*
26
@-f:\laW\billS\1139 impact tax - exemptions - affordable housing\1139 bill 3.doc
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BILL NO.39-11
27
28
29
30
31
*
(C)
(1)
*
*
The tax under this Article must not be imposed on:
any Moderately Priced Dwelling Unit built under Chapter 25A
or any similar program enacted by either Gaithersburg or
Rockville,
(2)
any other dwelling unit built under a government regulation or
binding agreement that limits for at least 15 years the price or
rent charged for the unit in order to make the unit affordable to
households earning less than 60% of the area median income,
adjusted for family size;
(3)
any Personal Living Quarters unit built under Sec. 59-A-6.15,
which meets the price or rent eligibility standards for a
moderately priced dwelling unit under Chapter 25A;
(4)
any dwelling unit in an Opportunity Housing Project built under
Sections 56-28 through 56-32, which meets the price or rent
eligibility standards for a moderately priced dwelling unit under
Chapter 25A;
32
33
34
35
36
37
38
39
40
41
42
43
44
ill
any non-exempt rental dwelling unit in
~
development in which at
least 25% of the dwelling units are exempt under paragraph
ill
45
46
47
48
49
!11
Q1
or
ffi
or any combination of them; and
[(5)]
@
any development located in an enterprise zone designated by
the State or in an area previously designated as an enterprise
zone.
50
51
Approved:
*
*
*
52
Nancy Navarro, President, County Council
Date
@-f:\laWlbillS\1139 impact tax • exemptions - affordable housing\1139 bill 3.doc
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LEGISLATIVE REQUEST REPORT
Bill
39-11
Taxation
-
Development Impact Tax
-
Exemptions
DESCRIPTION:
Exempts the market-rate rental dwelling units in any development
which consists of at least 25% affordable housing units from the
transportation and school development impact taxes.
Need to encourage provision of affordable housing.
To create further incentives to increase the share of low- and
moderate-income housing in new deVelopments
Department of Permitting Services, Department of Housing and
Community Affairs, Planning Board
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
Impact taxes apply County-wide.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
Not applicable.
f:\law\bills\ 1139 impact tax - exemptions - affordable housing\legislative req
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Fiscal Impact Statement
Council Bill 39-11
Taxation - Development Impact Tax
~
Exemptions
1. Legislative Summary.
Bil139-11
would exempt the rental market-rate dwelling
~ts
in any housing development
which consists ofat least 25% affordable housing units from the transportation and school
development impact taxes they would otherwise have to pay.
2. An estimate of changes in County revenues and expenditures regardless of whether
the revenues or expenditures are assumed in the recommended or approved budget.
Includes source of information, assumptions, and methodologies used.
DPS examined several areas that have major rental housing projects in the pipeline and
that are assumed to be moving forward. This analysis assumes anticipated development
in three planning areas (Great Seneca Science Corridor (GSSC); White Flint; and Shady
Grove-County Service Park West (CSWP)) and projects the lost impact tax revenue if
all
potential
projects took advantage of the proposed bill.
p
otentialLos
tI
mpac
tT
ax
R
evenues un d er M axunum-
L
oss
Scenano
Additional Loss in
Master/Sector Total
Loss
in
Rental
MPDUs
Plan Area
Tr!llJ..SPOrtation
School
Units
ImI2actTaxes Im12act
Suoolied
Taxes
1,550
193
$10,728,442 $15,401,448
GSSC
408
3,266
N/A
$15,727,790
i
White Flint
1,114
33
$3,850,222
ICSPW
$11,062,692
635
Totals:
$14.578.664 $42.191.130
5..J90
Loss in
Cost 12er
Total
Additional
ImQact
MPDU
, Taxes
$26,129,890 $135,388
$15,727,790 $38,525
$14,912,914 $446,227
$56.770.594
S89M9
1
Under the above scenario, the additional 635 affordable units provided under the waiver
would result in $56.770.594
in
lost impact tax revenues at an average cost of$89,449 per
each additional MPDU constructed.
See Attachment A for sources, assumptions, methodologies, additional scenarios, and
potential lost impact
tax
revenues projections.
3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
No additional expenditures are expected as a result ofthis bilL TIlustrative revenue
impacts are described above.
'Totallost impact
tax
revenues
divided
by
total additional MPDUs of 635 units.
1
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4.
An
actuarial analysis through the entire amortization period for each bill that would
affect retiree pension or group insurance costs.
Not applicable.
5.
Later actions that may affect future revenue and expenditures if the
bil1
authorizes
future spending.
Not applicable.
6. An estimate of the staff time needed to implement the bill.
No additional staff time is needed from
DHCA. DPS,
and Finance.
7.
An
explanation of how the addition of new staff responsibilities would alIect other
duties.
Not applicable.
8. An estimate of costs when an additional appropriation
is
needed.
Not applicable.
9. A description of any variable that could affect revenue and cost estimates.
Revenues (or lost impact tax revenues) may be affected by changes in the impact tax rate.
The quantity ofadditional MPDUs developers elect to build may also affect revenues (or
lost impact
tax
revenues).
10. Ranges of revenue or expenditures that are uncertain or difficult to project
The change
in
impact tax receipts is difficult to project. Impact tax revenues would vary,
depending on the number ofdevelopers that elect to build under this waiver.
Additionally, the market dictates whether projects will be condominium or rentals and it
is difficult to predict what future shifts will be.
If
expected development
in
different plan
areas changes from rental to fee simple sales, fewer projects would make use of the
provisions ofthis bilL
ll.1f a bill
is
likely to have no fiscal impact, why that is the case.
The fiscal impact ofthis bill is difficult to determine since it depends completely on the
number of developers who avail themselves of this credit. A number ofdevelopers have
indicated
it
is unlikely that the credit provides them with a sufficient incentive to build
additional MPDUs
(up
to the 25% required for the waiver).
If
that is the case, then
it
is unlikely this bill will result in a significant fiscal impact as it
will not achieve the stated goal ofthe legislation.
2
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12. Other fiscal impacts or comments.
Not applicable.
13. The following contributed to and concurred with this
analysis:
Rick Nelson. Department ofHousing and Community Affairs
Chris
Anderson, Department ofHousing and Community Affairs
Diane
Schwartz
Jones, Department ofPermitting Services
Reginald Jetter, Department ofPermitting Services
Mary Beck, Office ofManagement and Budget
Naeem
Mia, Office ofManagement and Budget
er
A.
es, Director
ofManagement and Budget
Date
)
3
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Attachment A-1
Sources of Information:
1. Montgomery County Department of Housing Affairs (DHCA)
2. Montgomery County Department of Permitting Services (DPS)
3. Master Plans/Sector Plans for housing projects in GSSCMP, White Flint. and CSPW
4. Lost impact tax revenues are calculated by DPS based on current impact
tax
rates
Assumptions:
1. Developers to build to 25% of all units (in all projects) as MPDU under the legislative waiver
2. All units/projects are assumed to be rental units
.
3. No transportation impact
tax
for White Flint Area (current law)
4. All projects in White Flint are high-rise
5. Number of units are based on current Master/Sector plans or units under development
Methodologies:
DPS calculated lost impact tax revenues using the current impact tax rates as applied to all current or
expected projects under development.
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.;!.
"I;'
Attachment A-2
Potential Lost I
-.-
--
tTaxRi
-".
----..,
--
der Different S
Pineline ofrecent
Potential Loss Potential Loss Potential Loss Potential
IPotential Cost
in
School·
in Total Im:Qact Additional loer Additional
OSSCMP ann1ications
in
I(
assumes develooer olans Transoortation Iml2S!ct
Taxe~
Ta!,es
MPDUs
MPDU
at minimum MPDUs)
Imnact Taxes
_ " , , , , _ .. A,,,·o.r
1480 mfd
units
(mid-rise)
1480 mfd units (high-rise)
1550 mfd
units
(mid-rise)
1550 mfd
units
(high-rise)
GSSC:VW Maximnm-loss
scenano
$10,238,270
$7,312,865
$10,728,442
$7,662,979
$14,708,61C
$6,235,425
$15,401,448
$6,533,955
$24,946,880
$13,548,290
$26~129,89C
I:
tential Loss
Potential Loss
1D
in School
Trans ortation Impact Taxes
Impact Taxes
r
$14,196,934
185
185
193
193
$134,848
$73,234
$135,388
$73,5591
otential
Loss
r0tondal r0tential
Cost
in
Total Impact Additional
~
Additional
Taxes
MPDUs
MPDU
1550 mfd units (mid-rise) 1
White Elint Sector Plan
(based on sketch plans)
$10,728,44~
$15,401,4481
$26,129,8901
1931
$135,388
Potential Loss Potential Loss
in School·
in
Transnortation Impact Taxes
Impact Taxes
N/A
Potential Loss Potential
Potential Cost
in Total Impact Additional per Additional
Taxes
MPDUs
MPDU
$15,727,790
408
$38,525
Potential
Cost
Der Additional
MPDU
3266 mfd units
$15,727,790
County Service Park West Potential Loss Potential Lo§s
in School
in..
Transnortation hnnact Taxes
Impact Taxes
1,114 mfd units
Potential Loss Potential
in Total Imnact Additional
Taxes
MPDUs
$3,850,222
$11,062,692
$14,912,914
33
$446,227
~
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Attachment A-3
Potential Lost Impact Tax Revenues under Maximum-Loss Scenario
Master/Sector ITotal MFD Potential Potentia] Loss Potential Loss Potential Loss
Additiona
)!L
in'School
in Total
~ans
~
IMPDUs
Transoortatio Im12act Taxes Imgact Taxes
tnImuact
Taxes
GSSCMP
1,550
3,266
193
408
$10,728,442
N/A
Potential
Costm:r
Additional
MPDU
$135,388
$38,525
$446,221
White Flint
Sector Plan
County
$15,401,448
$15,727,79U
$11,062,692
$26,129,890
$15,727,790
$14,912,914
$3,850,222
1,114
33
Service Park
'West
Totals:
5,930
635
$14,578,664
$42,191,930
$56,770,594
$89,449
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Economic Impact Statement
Counen BiI139-11, Taxation - Development Impact Tax - Exemptions
Background:
1.
This proposed legislation would exempt the market-rate dwelling units
in
any
development which consists ofat least 25% affordable housing units
fro~
the
transportation and school development impact taxes. The goal ofthe proposed
legislation is to create further incentives to increase the share oflow- and moderate­
income housing
in
the new development Specially, Bill 39-11 (Bill) exempts "any
non-exempt
rental
dwelling unit in a development
in
which
at
least 25% ofthe
.
dwelling units
are
exempt:»
The analysis that follows is
a
determination of whether a developer of rental property
would opt for the 25% exemption and is based on a number ofeconomic assumptions
and data sources.
~.
The sources ofinformation, assumptions, and methodologies used.
Sources:
Montgomery Department ofHousing and Community Affairs (OHCA)
National
Apartment
Association (www.naahq.org)
~'Determinants
of Operating Costs ofMultifamily Rental Housing". Jack
Goodman, Hartrey
Advisers.
December
18,
2003.
~ngineering
News Record
McGraw-Hill Dodge Local Construction
Metropolitan Regional Information System
Assumptions:
Current market
rental rates
for two high-rise developments (OHCA and
Finance) with
250
units each.
Current market rates for
MPDUs
(DHCA)
Developments are located in the General County transportation area to
employ the transportation impact
tax
rate for high-rise developments
Gross operating profit margin for rental units (www.naahg.org and
Goodman
article)
Methodologies:
Gross operating profit margin
is
derived from data provided
by
www.naahq.org and Goodman
article
by subtracting operating expenses
and
capital
expenditures per
u~it
from revenue per rental unit and dividing
the result into the revenue per rental unit to derive gross operating margin.
That result is used to calculate gross profit margin per unit.
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3. A description ofany variable
that
could affect
the
economic impact estimates.
a. Derivation of gross profit which is based on data based on a national survey
and mayor may not be truly reflective of
the
Washington Metropolitan
Area
or Montgomery COWlty.
b. Rental
rates
and MPDU rates
are
current rates and are not adjusted for
inflation.
4.
The Bill's positive or negative effect,
ifany
on employmen'4 spending, saving,
investment, incomes, and property values in the County.
The Bill could have an effect on the profitability of new rental development
However,
this
effect is based on the asswnptions listed above. Those assmnptions
include: gross profit margin, impact
tax
rates, and rental rates - both market and
MPDU.
Using data provided by DHCA, Finance selected two sample properties located in
the General County transportation impact
tax
district
and calculated the gross
profit margin (please see the tables, below).
Finance calculated
the
loss in
average annual gross profits
for a
U
new" rental
development assuming 25 percent and 12.5 percent For the two examples, Finance
calculated
an
average annual gross profit
of$2.6 million for the two properties providing
25
percent MPDUs, and slightly less than
$2.8
million for the two properties providing
12.5 percent MPDUs. The impact
tax
fees
are
estimated at $3,321,750 (250
*
$
13,287/tax per unit) for the entire project. However, gross profits are bigher than net
profits or net income, therefore the book profits for
the
two properties will
be
less than
the gross
profits. Second,
the gross
profits
are
calculated based on a national survey and
the
gross profit margin used in
this
analysis may not reflect the actual gross profit margin
for rental properties in Montgomery COWlty. While the exemption ofthe impact
taxes .
offset
the
Joss ofrevenues/profits, that amount
of
offset depends on
the
assumptions
listed above.
5.
If
a
Bill
is
likely
to have no economic impact, why is that the case?
Not applicable.
6. The following contributed to and concurred with this analysis: David Platt, Finance;
Mike Coveyou. Finance
Datd
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SAMPLE Project Initial Investment
t
Un!t
Col'I!~uction
Costs _______..... ___ .. __
Number
of
UnIts
i
L__
.
12.5% MPDUs!
25%
MDPUs
$J36~1
_____
j136.d~J
2501
250
TOTAL CONSTRUCTION COSTS
Development
Impact
Tax Per Unit ._-._.
--~----l-----
::Reslden~L~ShoolL_
......._.__._.____._.__
._!.~----.-.~.ML~
__._.__
.§8,47~
-Transportaion (General County
i
.____._.__.._.__.._._.. __.. .
~
. __._.__._.......l ......-..".
-·······..
·--1·--···..-·----··
..
-::::::1--
_.
$34,074,l~~~4t074J.!16
...
Subtot!L:..._.____._:._....._.__..._..... _ ..
1.
~
__
?!~_~?It
__.___..
_.$..!.~~!E
..._
Number of Units
I
250i
250
.
I
$48151$4815
TOTAL
DEVELQ~!!'I_~~TAX~.
__ "._. _•._. __
~","","-"",,,,,,-,,,,,,,~,,,,
It_....
~$.~.~!!J.~~~.
__....
~~~;g~1750
1
,
.....
~~
__ .•••••..,.._ _
.~
...... _
DEVElDPMENTIMPAcrTAX MPDU DEOUcnON
RATEj--U.50%!'--·--1-OO·-.o"o--%
__
,,,,,,,,,,,,,,,"""-"""'-'-~-I-"''''·'''-.'''-'~.'''''''''''''-.'''-'' q._~_;,,~~~;
DEVELOPMENT IMPAC:TTAX
---.--.-.-.~==.~=~~..
PAiD"
.
_ - -
-
..
---
..
-.-
.......
--.-.--.-~---.--..
.
_.
_
.........
~HMW
I
I
SV;;~-
INITIAL
!~X§Th4_E!4L~
.. ____.__
._~.
__.._._._... _..
_~~~~l!!!/~~.?j."
....
'-" . "
.--1---'2,906;531
'j--" .-
"'-"--0
-"'1'
"-~-""""'''-
f ...." .... ­ .......
$34.&?!l~.~~
.
...- .....-.-.... --....-.-..- ....---.-..- .........
=r-.-
t
I
__
...... ..
$13;951iiiiF·~Jli;700:910
i'--'~
10
Years
"
!
$27,914,070!
$25407820
I-=..:..::::~·--·-----·-----------r-----~-
r-----:.u.:..:::.:.l_·
~_;;_~===~--
20
_ _ _ _.,4'.. """"-..,-- .... - . . : -......
-'~.-
- ........ - -••. . - - - -.........
~
_ ..........
_-1,._.. __...\_ _... '
..
.~ ~
i§!r.s..=~=
__
.~~:~-=======~:=~:~=-+--·$5s:.ii8~i~oL==$50!~J:?IE.iQ.
. __
"..__....._,._.............._..__.. _ ...._..._.-1.. __...__......._.........
~_.,,
.
· . ·.·-.
·~:==~::::~=.=·.=-r=_$11.8_7_'1:_io_·~·_-·_
..
·-$38
t
l1_1._73Q
.1_ .' .....___._.....
"
,
30 Years
!
$83,742,2101
$76,223,460
1--_ _ _ _._ _ _ .._.:......._ _
.~._
..._ _ _..
._
_ _ ..._
........ ....
$11!t?44!_.____...
_$].1l..22.~
_~_
....""'...' ..: ..
-~
~ ~,o-"
............
_~_
...... _
..............,., ,- ......
~_
....
I
_"._ '-"'.
~
••
~,"
_ ...
",.... ' .. ",-,.
¥"'''''
•••,.......... _ ...._ . _
Total Rentfor Market Units
1
$U5,05Zi
$107188
'"~''''~
~_
...$.:lJlt±~~:
.. __... , ..........
$..~.!&.~
Two Bedroom
Units
:
i
-----.-- ........- - - - . --'-",'--- ._._.__ .__ .... -l-.•• " .....- .... - " - - ­
On~.Be<!r.2.<.:!!!I_~'!!.!L
.....--.-- -_ .•
~'-'---'--'-'---'-r'-
., ...... - ........ -­
....._.. ,,_._. .....
.r!?!~l..R.~tf9rMP.P!1~.I
.. '"''....... ..,..
_.$.g4~~_
.._.... . .... __
_
...$_~1J?t.
____ ' ' . . ._. _ . . _
.
................!.. _ ".. .
........
Total Rent for Market Units!
....".__ ...._
J9~JJ!!m.Vp.r
MfRY.;>-i-...".- "..........
~1;!.b!:!
.
!.!.L. "'. -.' ............
j.~~.!~~
.......
$172
0831
$147,500
Gross Profits!
$2 791,4071
$2 540,782
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~A!"t1!'tE .P~~ ~ntal
Rates_._..
..
~p'le
PrQ]ect
-+__.___
../
._~
-.--I---p.er
i
Market Rate Renj_,__MPDU
~~~!_
Month ___
p-"~r
M...<!!rt!L_.__
__
~._.~~
___.
$1,085
.L___
-efficiency.uEits (1/3
oftotalL
~mJ!~otal)
!
I
r--..
-~"---""-"-''''--~~-~--'''''''''~---'''''''''~---'.-~-'''''''------
__
.21171~.L
-two
room
!l/3·oftotal}
______
~1116~
---(·-------$23601--··--- $1.240
+ ____
$1.420\ ,,__,_._.,
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Department of Permitting Services
255 Rockville Pike, 2nd Floor
Rockville, MD 20850-4166
Phone: 311 in Montgomery County or 240-777-0311
Fax (240)-777-6262
http://montgomerycountymd.gov/permittingservicesl
New and Revised Impact Taxes Effective July 1, 2011
Pursuant to Chapter 52, Sections 57(e) and 90(e) of the Montgomery County Code (Development
Impact Tax for Transportation Improvements and Development Impact Tax for Public School
Improvements, respectively) the Director of Finance has adjusted the tax rates set under Sections
57(a) and 90(e). As prescribed by law, the Director must adjust the tax rates by the annual average
increase or decrease in a published construction cost index specified by regulation for the two most
recent calendar years. The Director must calculate the adjustment to the nearest multiple of 5 cents
for rates per square foot of gross floor area or one dollar for rates per dwelling unit. Based on the
change in the Engineering·News Record's Baltimore Construction Cost Index for calendar years 2009
and 2010, the existing rates were increased by a rate of S.S9 percent. The rates were adjusted to the
nearest 5 cents for rates calculated per square foot of gross floor area (GFA) or adjusted to the
nearest dollar for rates calculated per dwelling unit. Applicants for building permits for residential
developments filed on and after July 1, 2011, will be assessed the tax rates below:
Dwelling Type
SinQle-familv detached
• Single-famill attached
!
Single Family house surcharge
Multifamill'
(exce~t
high-rise)
Hiah-rise
Multifamilv senior
Schoollm~act
Tax Per Dwelling Unit
$23,868
$17,970
~
per square foot of gross floor area that exceeds 3,500 square
et, to a maximum of 8,500sguare feet}
$11,358
$4,815
$0
In the event the school cluster has exceeded the 105% school program capacity, applicants will be
required to pay a per unit School Facilities payment.
Page 1 of 2 Revised
6/27/2011
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In
addition to the School Impact Tax, applicants for building permits in a residential development must
also pay the Transportation Impact Tax.
Building Type
• Single-Family detached residential (per dwelling unit)
• Single-Family attached residential (per dwelling unit)
Multifamily residential (Garden apartments) (per dwelling unit)
High-rise residential (per dwelling unit)
Multifamily-senior residential (per dwelling unit)
Office (per sq.
ft.
GFA)
Industrial (per sq.
ft.
GFA)
Bioscience facility (per sq.
ft.
GFA)
Retail (per sq.
ft.
GFA)
Place of worship (per sq.
ft.
GFA)
Private elementary and secondary school (per sq.
ft.
GFA)
Hospital (per sq.
ft.
GFA)
Social Service Agency
Other nonresidential (per sq.
ft.
GFA)
Metro
Station
$6,213
$5,084
$3,953
$2,824
$1,129
$5.65
$2.85
$0
$5.05
$0.35
$0.45
$0
$0
$2.85
Clarksburg
$18,638
$15,250
$11,860
$8,472
$3,388
$13.60
$6.75
$0
$12.20
$0.80
$1.20
$0
$0
$6.75
General
$12,425
$10,166
$7,906
$5,687
$2,259
$11.30
$5.65
$0
$10.15
$0.60
$0.95
$0
$0
$5.65
Page 2 of 2 Revised
6/27/2011
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Bill 39-11, Taxation - Development Impact Tax - Exemptions
Housing Opportunities Commission Public Hearing Testimony
January 24,2012
Good afternoon. I am Sally Roman, Vice-Chair of the Housing Opportunities Commission.
First, HOC wants to thank the sponsors of Bill 39-11, Councilmembers Floreen, Rice and
Navarro. Clearly we need new ideas to generate development of more housing affordable to
the families who work in Montgomery County. We commend the sponsors forthis approach
which exempts entire multi-family, rental developments from development impact taxes if at
least 25% of the units are MPDUs or otherwise exempt under current law.
HOC's Real Estate Development Division has run the numbers on some hypothetical
development scenarios, and this is what we found. We estimate that exempting all units,
affordable and market, from impact taxes breaks even in developments offour-story buildings ­
stick built - in Metro and non-Metro areas, with 25% affordable units. What we mean is that
the return is essentially the same for the developer as it would be with a comparably sized and
located development with the standard MPDU allotment of 12.5%.
HOC believes that this incentive will have a welcome impact on developers motivated to add to
the county's affordable housing inventory such as HOC and the non-profit developers.
Inasmuch as the numbers seem to indicate that the developments would break even with 25%
MPDU-like units, it might well also provide an incentive for market rate developers.
My fellow Commissioners and I would like to suggest an amendment to the bill. We would like
to see its benefits available to multi-family developments that are for sale, as well to those that
are rental.
Again, we appreciate the sponsors' developing this idea and introducing Bill No. 39-11.We look
forward to working with the committee as the Council continues to address it.
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MARYLAND-NATIONAL CAPITAL BUILDING INDUSTRY ASSOCIATION
1738 Elton Road,
Sult~
200, Silwr Spring. Maryland 20903
Ph: (301) 445·5400; Fax: (301)445.5499
Email: commun!catloDS@mncblaorg
W~b:
WI/IW
mncbla ore
BUnniNG HOMES
(R£AllHG HllGHBOAMOOOS
Testimony (Revised)
Maryland National Capital Building Industry Association
Bill 39-11, Impact Taxes
January 24, 2012
The Building Industry supports efforts to increase affordable housing in the County, including Bill 39-11
to eliminate Impact Taxes for rental communities for communities that provide an increased percentage
of MPDUs. This is an important step in promoting affordable housing. However, we recommend
changes that can help improve the effectiveness of this program and can expand affordable housing
even more.
The concept of allowing impact tax exemptions for an increase in MPDUs overcomes one of the major
obstacles to building affordable housing in the County. Every new home comes with the financial
burden of over $30,000 in Impact Taxes in addition to development costs, land costs, application fees
and approval fees. This bill overcomes the obstacle for affordable housing in two ways, it increases the
supply of MPDUs within a community and it reduces the costs and price of market rate rental
apartments substantially. We strongly support a program that will eliminate or reduce the Impact Tax
burden on new housing through a builder meeting the necessary public goal of increasing housing for
low and moderate income households.
Rentals: High and Low Rise
Based on our calculations and feedback from builders of multi-family rental communities, the current
proposals for a requirement of 25% MPDU to eliminate Impact Tax payments for rental communities
fails to offset the MPDU subsidy for high rise multi-family buildings given the high cost of construction,
the cost of structured parking and the loss of market rents. For some low rise rental multi-family
construction, the 25% requirement can be met but only under ideal and unrealistic conditions. We
therefore recommend that the Council remand the bill to staff and for staff to work with the industry to
determine an appropriate MPDU requirement f9r multifamily. Initial analysis indicates that the MPDU
requirement for low rise rental apartments needs to be between 15-20% and that high rise apartments
may not work at any percentage.
For-Sale Housing
The opportunity to provide affordable housing in the County can be enhanced by including for-sale
housing in the equation. Currently a limited number of MPDUs are produced annually with sale prices in
the mid $100s. The lowest priced market rate housing in the County is priced in the upper $200's and is
likely to increase substantially should the market turn around. Therefore, there remains a gap today
between the mid $100s and the upper $200s. We urge that the Council consider two programs to help
expand the number of MPDUs and help fill the gap between the MPDUs and the market rate homes.
First, we urge that Bill 39-11 be expanded to include for-sale new housing communities (subdivisions)at
a 20% MPDU requirement. Communities that commit to 20% MPDUs would be exempt from all Impact
Taxes for the entire residential community. This would include high rise and low rise condominium
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buildings, single family attached communities, single family detached communities and mixed
residential communities. We see no reason to limit affordable housing efforts to rental housing.
The second approach we propose is to exempt individual houses from Impact Taxes if the applicant
commits to sell the home for below $275,000 adjusted annually to reflect changes in the Consumer
Price Index for Urban areas. We propose further that the optional Moderate Price Home Incentive
Program be limited to buyers who currently live or work in the County and affirm that they intend to
purchase the home as their primary residence.
The need for affordable and moderate priced homes in the County is both intuitive and supported by
the data. We refer to the excellent study by Stephen Fuller and the George Mason University Center for
Regional Analysis. Even the recent articled by Roger lewis on the loss of Affordable Housing highlights
the difficulty in providing housing for our middle and low income families. Clearly the future of
economic development hinges on the ability of the County to retain and attract moderate wage earners
and the younger, skilled labor force. While these outcomes may be intuitive and obvious, the less
obvious advantages of an increase in affordable and moderate price housing include the following:
• Moderate price home ownership starts the path of building household equity
• Mixing affordable and moderate priced homes in single family communities solidifies
the sense of community and improves overall school achievement for low and moderate
income households
• Moderate priced homes serves the market for "move-down" empty nester households
• Affordable and Moderate priced homes provide housing for single heads of household,
divorced households and young starter families.
legitimate questions opponents may ask concerning these proposals involve the apparent "loss of
impact tax revenue." However, we contend that the loss is a phantom loss in that these taxes would
not be collected in the first place, that without these two programs, the subdivisions and the individual
housing would not otherwise be built. Clearly, if they were readily in the market, there would be no
need for the programs.
lastly, we urge the Council to reconsider the MPDU time period and deed restriction and reduce the
time back to 20 years (total) for the for-sale and 30 years (total) for rental MPDU. Under current
conditions and likely for some time, the resale market offers competition for the MPDU seller and
builders are finding it more difficult to sell the MPDU. Buyers balance the opportunity to buy a new
MPDU with the resale restrictions versus a resale home with no restrictions. For rental units, the 99
year restriction seriously erodes the resale value of the apartment complex and affects the amount
banks are willing to lend against the complex. Reducing the time frame for the deed restrictions can
help build stable communities, help owners build equity and encourage more home construction,
especially rental buildings.
In conclusion, Montgomery County has by far the highest impact fee in the State of Maryland. There is
an existing and projected deficiency in affordable housing for low and moderate income household,
according to Park and Planning. The larger the household the greater the need for affordable housing
options which supports are recommendation to include for sale housing in this proposal.
Nationwide studies have shown that impact fee place an unfair burden on lower income households.
The resultant Montgomery County impact fees policy creates a situation in which many new residents of
the County are paying more than 30% oftheir household income for housing.
®
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Although this proposal will may not improve housing affordable countywide, it will improve the
affordability of many hundreds of new residents.
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% of Persons with Homeowner Cost> 30% of Income
Poolesville
<If.
01 Homeowners spending>
3091.
of lUi income on housing
18·
22.99
~-.-~.--------------------------------------
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4
lIdol/ogitlg Growt!l: The
~·se
o/De1'l!loplllfllt Impact Fees
alld BlIilding
L.W/Sf
Taxfs
ill Jlary'lol1d
Exhibit 2
County Development
Impact
FeeslExcise Tax Rates
£mrn:tt
Anne Arundel
Calvert
Caroline
3
Carroll
Charles
Dorchester
4
Frederic0
Harford
Howard°
Montgomery7
Prince George's8
Queen Anne's
St. Mary's
Talbot
9
Washington
to
Wicomico
TY"pe
Impact Fee
Excise
Tax
Excise Tax
Impact Fee
Excise Tax
Excise Tax
Both
Impact Fee
Excise Tax
Excise Tax
Excise Tax
Impact Fee
Impact Fee
Impact Fee
Excise Tax
Impact Fee
FY 2007
$4,781
12,950
5,000
6,836
10,859
3,671
11,595
7,442
See note
14,283
19,361
6,606
4,500
5,347
13,000
5,231
FeelRate
Per Dwelling
l
FY2008
$4,904
12,950
5,000
6,836
11,400
3,671
13,121
8,269
See note
31,105
19,864
$3.93/sq.
ft.
4,500
5,513
13,000
5,231
FY2009
$1,759
2
12,950
5,000
6,836
11,598
3,671
13,733
8,269
See note
31,105
20,638
$4.05/sq.
ft.
4,500
5,684
$3.oo/sq.
ft.
5,231
I
Rates listed are generally those applicable to single-family detached dwellings and are per dwelling unless
otherwise indicated.
2
Rate for a 1,500-1,599 square foot residential unit ironl January 1, 2009 through December
3t
2010. Residential
rates vary by the square footage of a unit and increase in 2010 and 2011.
1
A $750 development excise tax for agricu!turalland preservation
is
also imposed
on
single-family residential lots
created by subdivision in a
"rural
district."
4
A
slightly higher rate, $3,765 per dwelling, applies outside of the Cambridge and Hurlock areas.
5
The rates shown only reflect the public school and librarr impact fee total. The roads tax (unchanged for
all
three
fiscal years) is SO.IO/sq.
ft.
or $0.25/sq.
ft.
(depending on the square footage), with the first 700 square feet not
ta:'ted.
6
Roads tax is S4QO for the first 500 sq.
ft.
and $0.90/sq.
ft.
($O.SS/sq.
ft.
in fiscal 2003 and $O.SO{sq.
ft.
in fiscal
2007) foe square footage
in
excess of 500 sq. ft. School surcharge
is
S1.l4/sq.
ft.
(Sl.09fsq. ft.
in
tiscal2008 and
S1.07/sq.
ft.
in tiscal2OO7).
7
Fiscal 2008 and 2009 amounts represent $10,649 for transportation and $20,456 for schools, effective December 1,
2007. Fiscal 2007 amount represents $5,819 for transportation and SS,464 for schools (these amounts were
moderately increased at the beginning of fisca12008, prior to
the
December 1, 2007 increase.) The school excise tax
is increased by $2 for each square foot between 3,500 and 8,500 gcoss squace feet
(refl~ting
a change effective
Dece.\l1ber
1,
2007). Different tcansportation
rates
apply
in
the Metro Station and Clarksburg impact tax districts.
8
Fisc.al2009 amount represents $14,019 for school facilities and $6,619 for public safety. A lower school facilities
rate ($8,177 in fiscal 2009) applies inside the beln"lo-ay and a lower public safety rate ($2,207
in
fiscal 2009) applies
inside the «developed tier" as defined in the 2002 Prince George's County Approved General Plan.
9
A
lower rate ($4,912 in fiscal 2009) applies to "in-town" development.
10
In fiscal 2007 and 2008. the rate for
a
nouapartment, residential ch"'elling less than 1,500 sq.
ft.
in area was
Sl.oo/sq.
ft.
Source: Department of Legislative Services
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SUMMARY OF
FINDINGS
FINDING ONE:
THERE IS
AN
EXISTING AND
PROJECTEDDEFICfENCY IN
AFFORDABLE HOUSING FOR LOW AND MODERATE INCOME HOUSEHOLDS
There is currently not enough housing priced affordably for households earning less than
$90,000
per
year. Those households earning the most (greater than
$150,000
annually) have an excess supply of
affordable housing. This finding indicates that households are paying greater than 30% of their
household income on housing; living in smaHer than idea! units {greater than two persons per bedroom};
. or could not afford to purchase their home today.
·Summaty of Demand and Supply Imbalance (2005)
Annual Household Income
Affordable Monthly Housing
Cost
Number of Units
Demanded
Number Supplied Number Supplied Sufficiency/
(Owner Occupied) (Renter Occupied) (Deficiency)
Less than $30,000
$30,000 to $59,999
$60,000 to $89,999
$90,000 to $119,000
$120
to
$149;000
$150,000 and above
Less than $749.
$750 to $1,499
$1,500 to $2,249
$2,250 to $2,999
$3,000 to $3,749
$3,750 and above
39,942
77,926
68,196
57,585
36,099
67,251
619
8,325
48,337
64,790
47,083
93,296
12,510
59,940
13,680
2,340
900
630
(26,813)
(9,661)
(6,179)
9,545
11,884
26,676
The housing supply shortage for households earning low to moderate incomes is only expected to
'
.
' .
worsen overthe next 20+ years. There is a slight amount of excess supplyantidpatedfor households
earning under
$60,000.
This is due to the large number of rental multifamily units projected to be built
between
2005
and
2030.
The majority of multifamily units have monthly rents ranging from
$750 ­
$1,499.
The excess supply will be qukklyabsorbed bythe bordering cohorts (households earning less
than
$30
1
000
and hou5eholdsearning between
$60,000
and
$89,999.
Summary of Demand and Supplylmbaiance (2030)
Affordable Monthly Housing
Cost
Number of Units
Demanded
Number Supplied Number Supplied Sufficiency/
(Owner Occupied) (Renter Occupied) (Deficiency)
Annual Household Income
less than $30,000
$30,000 to $59,999
$60,000 to $89,999
$90,000 to $119,000
$120 to $149,000
$150,000 and above
Less than $749
$750 to $1,499
$1,500 to $2,249
$2.250 to $2,999
$3,000 to $3,749
$3,750 and above
50,7!)7
99,104.
86,729
73,234
45,909
85,527
1,491
12,465
52,631
75,304
60,197
105,701
19,478 .
93,327
21,300
3,643
1,401
981
(29,S28)
6,688
(12,799)
5,713
15,689
21,156
2
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MAJOR POINTS PRESENTED
IN TESTIMONY BY
JODYKLINE
ON BILL 39-11
24 JANUARY 2012
• Exemption from impact fees is a dramatic incentive to create affordable housing.
• The universe of affordable housing programs that could benefit from such an incentive is not
limited to the Moderate Priced Dwelling Unit program.
• The County encourages redevelopment of under utilized commercially or industrially zoned
land with multi-family residential uses.
• "Productivity Housing" (a special exception use in commercial, employment and industrial
zones) is one of the few programs available to accomplish the planning goal of introducing
residential uses on non-residentially zoned property.
• Productivity housing is an option available in non-residential zones for projects that provide
350/0
ofthe units at productivity housing rates.
• By regulation, DHCA establishes productivity housing rental rates at 75%
of the area-wide median income (adjusted for family size).
• The burden of implementing this program is borne out by the fact that there is only
ONE
productivity housing project in all of Montgomery County since the creation of the program
twenty-five
(+1-)
years ago.
• Extending the scope of Bill 39-11 to include "productivity housing" would have the
following public benefits:
• Increase the amount of affordable housing in the County.
• Reduce the impediments to implementing the program.
• Encourage more mixed-use development.